The influence of perceived brand barriers and overestimation of the brand
distinctiveness on the development of a market orientation among Dutch
startups
Master thesis
MSc in Business Administration – Marketing Name: Samantha Voorneveld
Student number: 11412186 Version: 2
Date: 16 August 2018
Thesis supervisor: Drs. Jorge Labadie Second assessor: Drs. Roger Pruppers
Statement or originality
This document is written by Samantha Voorneveld who declares to take full responsibility for the contents of this document. I declare that the text and the work presented in this document is original and that no sources other than those mentioned in the text and its references have been used in creating it. The Faculty of Economics and Business is responsible solely for the
Table of Contents
1. Introduction ... 1
1.1 Motive for writing ... 1
1.1.1 Introduction of the phenomenon ... 1
1.1.2 Gap ... 4 1.1.3 Conceptual framework ... 4 1.2 Problem definition ... 5 1.2.1 Problem statement ... 5 1.2.2 Research question ... 6 1.2.3 Sub-questions ... 6
1.2.4 Delimitations of the study ... 6
1.3 Contribution ... 8
1.3.1 Theoretical contribution ... 8
1.3.2 Managerial contribution ... 9
1.4 Structure of the thesis ... 9
2. Brand positioning ... 10
2.1 Marketing strategy ... 10
2.2 Positioning ... 10
2.3 Frame of reference ... 11
2.4.1 Definition of a startup ... 12
2.4.2 Positioning for startups ... 13
3. Brand orientation ... 14
3.1 Brand identity ... 14
3.2 Brand orientation ... 15
3.3 Perceived brand barriers ... 16
3.4 Brand distinctiveness ... 18
3.5 The pitfall of overestimating brand distinctiveness ... 19
4. Market orientation ... 21
4.1 Market orientation ... 21
4.2 Product orientation ... 23
5. Conceptual framework and hypotheses ... 24
5.1 Hypotheses development ... 24
5.1.1 The relationship between perceived brand barriers and brand orientation ... 24
5.1.2 The role of perceived brand distinctiveness in the relationship between perceived brand barriers and brand orientation ... 25
5.1.3 The relationship between brand orientation and market orientation... 26
5.1.4 The relationship between perceived brand distinctiveness and market orientation ... 27
5.1.6 The role of actual brand distinctiveness in the relationship between market orientation
and business performance ... 28
5.2 Conceptual framework ... 29
6. Research method ... 29
6.1 Design and procedure ... 29
6.2 Operationalization and measurements ... 31
6.2.1 Measurements of perceived brand barriers, perceived brand distinctiveness, brand orientation, and business performance ... 31
6.2.2 Measurements of market orientation... 32
6.3 Respondents ... 33 6.3.1 Sample characteristics ... 33 6.3.2 Sampling method ... 34 7. Results ... 36 7.1 Sample characteristics ... 36 7.2 Data preparation ... 37
7.2.1 Perceived brand barriers (PBB) ... 38
7.2.2 Perceived brand distinctiveness (PBD) ... 39
7.2.3 Brand orientation (BO) ... 40
7.2.4 Market orientation (MO) ... 40
7.2.6 Business performance (BP) ... 41
7.2.7 Correlation matrix ... 42
7.3 Hypotheses testing ... 43
7.3.1 The relationship between perceived brand barriers (PBB) and brand orientation (BO) and the mediating role of perceived brand distinctiveness (PBD)... 44
7.3.2 The relationship between brand orientation (BO) and market orientation (MO) and between perceived brand distinctiveness (PBD) and market orientation (MO) ... 46
7.3.3 The relationship between market orientation (MO) and business performance (BP) and the moderating role of actual brand distinctiveness (ABD) ... 48
7.4 Additional analyses ... 50
7.4.1 The relationship between PBD and ABD ... 50
7.4.2 The relationship between PBB and (the components of) MO ... 51
7.5 Overview of the results ... 54
8. Discussion and conclusion ... 56
8.1 General discussion ... 56
8.1.1 The relationship between perceived brand barriers (PBB) and brand orientation (BO) and the mediating role of perceived brand distinctiveness (PBD)... 57
8.1.2 The relationship between brand orientation (BO) and market orientation (MO) and between perceived brand distinctiveness (PBD) and market orientation (MO) ... 59
8.1.3 The relationship between market orientation (MO) and business performance (BP) and the moderating role of actual brand distinctiveness (ABD) ... 60
8.1.4 Additional analyses ... 61
8.2 Implications ... 64
8.2.1 Theoretical implications ... 64
8.2.2 Practical implications ... 65
8.3 Conclusion ... 68
8.3.1 The answer to the research question ... 69
8.3.2 The answers to the sub-questions ... 69
8.4 Limitations and future research ... 71
References ... 74
Appendix ... 81
Literature review ... 81
Research method ... 82
ABSTRACT
Startups are booming. However, only a very small group achieves the success they are dreaming of. Only 5% to 10% of the Dutch startups becomes successful. The most common reason for failure among startups is the lack of market orientation. This reason is contradictory as a lot of knowledge is available for startups to develop this market orientation. Therefore, this research aims to provide insight into possible explanations of this lack of market orientation. The belonging research question reads: “What is the role of perceived brand barriers and (perceived) brand distinctiveness in explaining the lack of market orientation of Dutch startups? And to what extent does the overestimation of brand distinctiveness by these startups seem to be of
influence?” This question is answered by testing the influence of perceived brand barriers, the development of a brand orientation and the (overestimation of) brand distinctiveness with the use of a cross-sectional survey in which 43 Dutch startups participated. A significant negative direct relationship between perceived brand barriers and market orientation was found. It has become clear that the most common perceived brand barrier is startups prioritizing short-term business over branding. In addition, I found a significant positive direct relationship between perceived brand distinctiveness and market orientation. Indeed, a startup needs to attribute value to and work on their brand distinctiveness in order to be able to shape consumer preferences. However, I did find that the startups scored their brand distinctiveness significantly higher than the market did, meaning that startups are possibly incapable of realistically judging their own brand distinctiveness and are therefore hindered in the development of an actual distinctive brand, which is needed for a strong market orientation and, consequently, a high business performance. This lacking capability of realistically judging the brand distinctiveness is therefore eventually, in addition to the high perceived brand barriers, a newly proven reason for many Dutch startups eventually failing due to a lack of market orientation.
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1. Introduction
This chapter will introduce the thesis subject and will elaborate on its importance.
Additionally, it provides insight into existing literature and current market practices. Finally, the research question, sub-questions, limitations, and contribution are discussed in this chapter.
1.1 Motive for writing
1.1.1 Introduction of the phenomenon
Startups are booming (Bort, 2017). However, only a very small group achieves the success they are dreaming of. To illustrate, on a yearly basis, over 200 startups are founded in The Netherlands and only 5% to 10% of them grow out to become a successful company (Jongkind, 2015). The other 90% either remains small or goes bankrupt. The most common reason for failure among startups is the lack of market need (42%) (CB Insights, 2016). On top of that, another 14% fails because of badly executed marketing practices. According to author Steven Blank, startup expert and developer of The Customer Development Methodology, the typical model of forcing your product to the market is no longer viable. In addition, he states that only startups with a market orientation can achieve a good business performance in terms of revenue, growth, and profit (Blank, 2013). Therefore, it is important to perform a thorough market investigation in advance and for a startup to have a clear view of what it wants to be, for whom and how it will succeed in the face of competition (Jackson, 2014).
The importance of a market orientation instead of a product orientation is not only emphasized from a theoretical perspective, but also from a practical point of view. Emil Bielski, Head of Business Development at Maxus (a sub-company of the world’s largest media
investment company GroupM) confirms that market-driven businesses are the absolute winners when it comes to growth, compared to companies who are only focused on their product and do
2 not look at the market needs (Mosmans, 2016). The importance of a market orientation in order to achieve a better business performance is therefore seemingly obvious.
The concept of market orientation is directly connected and a condition for the
development of a strong positioning of the brand. Marketing guru Kotler defines positioning as “the act of designing the company’s offerings end image to occupy a distinctive place in the mind of the target market” (Kotler, 2009, p. 361). When developing a positioning, it is, amongst others, important to look at the market the company wants to compete in and how it wants to be perceived in this market when being compared to other suppliers. This is how a frame of
reference is formed (Keller, 2015).
An important condition for creating a strong positioning is that the brand should already possess a certain identity (Labadie, 2018). According to previous research, a strong brand identity results in customer loyalty and growth of a firm (Ghodeswar, 2008). This is done by developing the customers’ trust, with a brand identity that is well understood and experienced by them. Also, Aaker (1996) stresses that, amongst others, the brand uniqueness is a central notion of the essence and identity of a brand. So on the other hand, it may be clear that, if you do not know who you are as a company and therefore lack a strong identity, it is impossible to clearly communicate why others should invest in the company or purchase from it, let alone determine your place in the competitive landscape (Jackson, 2014). In short, without a certain brand identity, there is a lack of reference.
When the brand is centrally positioned within an organization, there is a developed brand orientation within the firm (Wong & Merrilees, 2005). Brand-oriented firms, in general, have a strong awareness of their marketing positioning, brand distinctiveness, and competitive
3 innovation are the two most important factors to influence brand performance. This, in turn, has an effect on financial performance” (Wong & Merrilees, 2008, p. 379). Therefore, brand
orientation has a positive influence on the relative firm performance and growth when compared to less brand-oriented firms.
Startups can develop a clear brand identity, a strong brand and market orientation and, consequently, a robust positioning with the use of the available marketing related literature. The concept of marketing thought has existed for a century and the marketing literature dedicated explicitly to startups has also started to grow (Sheth & Parvatiyar, 1995; Blank, 2013; Labadie, 2018). The reason that a large number of startups fail due to a lack of market orientation therefore seems like a contradiction, as a lot of knowledge is available to develop this market orientation. The question then however remains why almost half of the startups still fail due to a lack of market orientation.
According to Wong and Merrilees (2005), the explanation of the lack of a market
orientation can be found in the mind of the startup owner. For example, in the form of perceived brand barriers where the startup owner experiences barriers such as time and money with a lack of brand orientation, and therefore also a lack of market orientation, as a result (Wong & Merrilees, 2005). Another important reason why startups fail can be due to the fact that they overestimate themselves (Bree, 2017). According to various authors, failing startups overestimate their distinctiveness and the added value of their product or service as in reality perceived by the consumer. As a result, they also overestimate the market demand for their product or service (Keswiel, 2016; Rabobank, 2017; Salminen & Teixeira, 2012). The overestimation of these factors could indicate that startups believe that they have done their homework well and have a very distinctive brand, whilst they are actually overestimating this, which results in a lower
4 business performance since the consumer does not see the brand and its offer as valuable and distinctive (Bree, 2017). This research aims to provide a scientific insight into the explanation of why startups fail due to a lack of market orientation and a low business performance. This is done by focusing on the influence of perceived brand barriers, the development of a brand orientation and the (overestimation of) brand distinctiveness.
1.1.2 Gap
Although much is known about marketing positioning literature and the specific marketing literature for startups is growing, it is currently unknown why startups still have difficulties establishing a market orientation and consequently increase their business performance.
1.1.3 Conceptual framework
In the previous sections, important concepts that hold a connection to the establishment of a market orientation and its corresponding effect on business performance have been discussed. Based on this, the first two variables that will be researched are the perceived brand barriers and the degree to which startups attribute value to and work on their brand distinctiveness, which is called perceived brand distinctiveness. Furthermore, the level of brand orientation and the development of a market orientation with the related business performance have been included. Lastly, brand distinctiveness is taken into account once more as a variable within this research, but this time judged from the perspective of the consumer. In the end, a strong positioning means that the consumer sees the brand and what it offers as valuable and distinctive (Keller, 1993). Because of this, this form of brand distinctiveness (not as thought of by the startups themselves, but as how they are actually judged by the market) is taken into account in this research as ‘actual brand distinctiveness’. Thus, to be clear, brand distinctiveness is mentioned twice in this research.
5 Once as perceived brand distinctiveness, which indicates the degree to which the startup
attributes value to and works on developing the brand distinctiveness, and once more as actual brand distinctiveness, which indicates how the market judges the brand distinctiveness. When the perceived brand distinctiveness by the startup is higher than the actual brand distinctiveness, there is a case of overestimation of the brand distinctiveness by the startup.
The research will focus on finding within which antecedent the cause of the mentioned problem lies. Figure 1. illustrates the relationships between the discussed variables. At the end of the literature review, I will elaborate on this framework and integrate the hypotheses.
Figure 1. Conceptual framework.
1.2 Problem definition
1.2.1 Problem statement
While the need for a market orientation is becoming more and more evident, it is remarkable that still a lot of startups fail due to a lack of a market orientation and consequently suffer from a bad business performance. This research will focus on investigating why startups have difficulties positioning themselves in a market-oriented way and experience difficulties in acquiring a good business performance. The variables as mentioned in the previous section will be used to discover the essence of the problem (Figure 1.).
6 1.2.2 Research question
The aforementioned problem statement can be translated into the following research question: “What is the role of perceived brand barriers and (perceived) brand distinctiveness in explaining the lack of market orientation of Dutch startups? And to what extent does the
overestimation of brand distinctiveness by these startups seem to be of influence?”
1.2.3 Sub-questions
The following sub-questions result from the discussed variables and the research question stated above:
1. Which brand barriers do startups perceive and to what extent?
2. What is the influence of the level of perceived brand distinctiveness on the level of brand orientation?
3. How important is the brand for startups, and consequently, to which extent are they brand-oriented?
4. How does the level of brand orientation influence the level of market orientation? 5. To what extent has the perceived brand distinctiveness a direct influence on the
development of a market orientation?
6. To what extent is a market orientation related to business performance?
7. How is the actual brand distinctiveness of the startups perceived by the consumer and how does this relate to the business performance of the startups?
1.2.4 Delimitations of the study
Previous research has already looked at the effects of market and brand orientation on business performance (Reijonen et al..2012; Wong & Merrilees, 2005). These researches confirm that having a strong brand and market orientation has a positive effect on business performance.
7 Furthermore, Wong and Merrilees (2005) researched the relationship between perceived brand barriers, perceived brand distinctiveness, and brand orientation.
This research builds on these existing studies by researching the effects that all the different variables have combined on each other, but also by adding the role of overestimation of brand distinctiveness. In total, this research therefore contributes to explaining the phenomenon where a lot of startups fail due to a lack of market orientation, by both combining two existing models but also by introducing two new possible relationships, namely the direct effect of
perceived brand distinctiveness on market orientation and a moderating effect of the actual brand distinctiveness on the direct relationship between market orientation and business performance.
This research will be limited to the aforementioned variables because I believe that these variables have a logical connection from a literary point of view. Within the field of marketing, these variables have an effect on business performance and are connected to having a market-oriented positioning (Wong & Merrilees, 2005). It is possible to extend the research with more variables that, for example, come prior to the current variables, such as how startups gather marketing knowledge and what kinds. However, the research would then become too big for the given timeframe. Besides, the current design focusses on marketing and positioning rather than shifting to gathering knowledge per se. Finally, the aforementioned studies by Wong and
Merrilees (2005, 2008) and Reijonen et al. (2012) were conducted internationally. However, this research will be limited to Dutch startups only in order to apply a focus and keep the required theoretical and practical research at a manageable level. Of course, those who are interested could add on to this research in the future by repeating it for other countries.
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1.3 Contribution
1.3.1 Theoretical contribution
Marketing literature for startups has begun to expand in the past few years and research on the effects of market orientation for this specific group has been performed (Reijonen, et al., 2012). Despite the available literature and other tools that assist in composing a strong
positioning and magnifying the (marketing) performance, it seems that in practice startups do not always know how or want to implement this knowledge, for example, because of perceived barriers, such as limitations on financial or human resources, lack of time or the underestimation of the importance of marketing (CB Insights, 2016; Wong & Merrilees, 2005). The perceived brand barriers and their indirect effect on the development of a market orientation are therefore included as a variable in this research because this could possibly explain why startups have a weak brand and market orientation.
Likewise, previous research has already looked at the effects of the different variables on business performance. Moreover, Wong and Merrilees (2005) already looked at the influence of perceived brand barriers and perceived brand distinctiveness on the level of brand orientation. However, the underlying connections between these variables and the development of a market orientation in order to explain their full relationship has not been researched yet. Nonetheless, scientifically proving these (in)direct relationships is of added value in confirming the cause as to why startups experience difficulties in developing a market orientation. Furthermore, this
research searches for more possible explanations by zooming in on the part of perceived brand distinctiveness and the gap with the actual brand distinctiveness in the eyes of the market with the aim of explaining why 90% of Dutch startups do not grow or even goes bankrupt due to a bad business performance.
9 Hence, this research has implications at a theoretical level as it provides an understanding of what causes that startups experience difficulties creating a strong positioning and eventually adopting a market orientation which results in a high business performance. Clearly, there must be a reason why startups still experience these difficulties, despite the available knowledge and emphasized importance of a good positioning. This research aims to provide insight into possible explanations of this occurrence by researching the relationship between two existing models and by adding new possible influences of (overestimation of) brand distinctiveness.
1.3.2 Managerial contribution
The results of the research are useful for marketing consultants, owners of startups and those considering starting a business because it contributes in creating awareness and resolving the problems around developing the essential market orientation and corresponding strong positioning. This will ultimately contribute to a better business performance for Dutch startups and therefore the percentage of successful startups in the Netherlands may ultimately grow, which contributes to a healthier startup climate in the Netherlands.
1.4 Structure of the thesis
The structure of this thesis is as follows: after forming an overall image of the thesis subject in this introduction, the following literature review will further elaborate on the theoretical foundation of the research. Concepts regarding marketing positioning will be
explained and connections between the different variables will be made. Afterwards, the research design and method will be reviewed, followed by the analysis of the results. In the subsequent chapter, the implications of the research will be discussed elaborately and the research question will be answered. In addition to discussing the final contribution, further suggestions for research will be provided as well. Finally, the thesis will end with an overall conclusion.
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2. Brand positioning
From this chapter onwards, I will provide the theoretical background of the variables as discussed in chapter 1. In order to acquire a proper image of the cohesion between the whole, I will first discuss a part of the basic principles of marketing strategy, such as positioning. Forming a strong positioning is, as described in the previous chapter, one of the main subjects of this research. The second part of this chapter narrows down to positioning literature specifically for startups.
2.1 Marketing strategy
Marketing strategy is defined as “the organization’s integrated pattern of decisions that specify its crucial choices concerning products, markets, marketing activities and marketing resources in the creation, communication and/or delivery of products/services that offer value to customers in exchanges with the organization and thereby enables the organization to achieve specific objectives” (Varadarajan, 2010, p. 119). In short, marketing strategy revolves around the creation and delivery of value (Venetis, 2017). According to Kotler (2009), the essence of
marketing strategy is the process of Segmenting, Targeting and Positioning (STP), also referred to as the value proposition. Once the market has been segmented and a target market is chosen, the next step is to choose what you want to be to the target market. This is where positioning comes in (Agarwal, 2015).
2.2 Positioning
“Positioning is the act of designing the company’s offerings end image to occupy a distinctive place in the mind of the target market” (Kotler, 2009, p. 361). Nowadays, consumers are being flooded with commercial advertisements (Media Dynamics Inc., 2014). To illustrate, according to the study performed by Media Dynamics Inc. (2014), the average American adult is
11 confronted with commercial advertisements 362 times a day on average. However, only 153 of these advertisements are actively noticed by consumers. In order to stand out, become actively noticed and shape consumer’s preferences, an appealing brand positioning is very important in order to claim a preferred position over competing brands in the mind of the consumer (Keller, 1993). This position is based on a network of associations within the brain of the target group and results in thoughts, feelings, and behavior when consumers are confronted with an appearance of a brand (van Leeuwen, 2000). A good example of a firm with a strong positioning strategy is McDonald's; upon seeing the big yellow M, consumers are triggered to think of fast food.
Elaborating on positioning, literature provides a few main criteria for a good positioning. A good positioning must be relevant, unique, clear, credible, attainable and sustainable (Venetis, 2017). Additionally, a correctly executed brand positioning strategy has a direct influence on consumer loyalty, consumer-based brand equity and the willingness to purchase a brand (The Branding Journal, 2016). However, a bad positioning (i.e. not sufficiently differentiating from rival’s brands), carries a serious risk of harming the perceived positioning, which eventually leads to a decline in sales (Fuchs & Diamantopoulos, 2010).
2.3 Frame of reference
Besides the different criteria that a positioning should meet, there are also several
different strategies to position a brand. Nonetheless, a sound competitive positioning incorporates three important components in the customer value proposition: points of parity, points of
difference and a frame of reference (Keller, 2015). “Points of difference are strong, favorable, unique brand associations that drive customers' behavior; points of parity are those associations where the brand 'breaks even' with competitors” (Hutt & Speh, 2012, p. 176). Lastly, a frame of reference defines the market you want to compete in (Keller, 2015).
12 Having a clear frame of reference is important in order to determine the positioning
strategy. When posing the frame of reference, the competitors are determined based on the desired position in the mind of consumersby your distribution position and by pricing (Venetis, 2017). In practice, specifying the frame of reference can be hard due to the many different choices. In this stage, having a clear view from who you want to be as a company is very important.
2.4 Brand positioning for startups
2.4.1 Definition of a startup
A general definition for startups has not yet been widely agreed upon (Kamer van Koophandel, 2018). Despite this, it is however generally agreed upon that a startup is often a young company with a large growth potential (not older than three years old), run by a small group of entrepreneurs, from which the starting point is an innovative and scalable idea that disrupts the market, but does not yet have a turnover of millions (RTL Z, 2015; Keswiel, 2016). Moreover, a startup is often financed by investors or through crowdfunding. (Innovatie Site, 2017).
Because of this fairly unclear definition of a startup, it is hard to define the exact number of startups in the Netherlands. According to the Rabobank (2016), there were approximately 400 startups in the Netherlands in 2015. The ING Economic Bureau states that this number grows by approximately 200 each year, of which only 5% to 10% proves to be successful. (Mosmans, 2016). The other 90% to 95% either remains small or goes bankrupt. Furthermore, according to a research performed by StartupJuncture in collaboration with the Dutch Ministry of Economics, most startups in 2017 operated in the software sector (11%), followed by the e-commerce (10%) and travel sectors (9%) (Mensink, 2018).
13 2.4.2 Positioning for startups
Over the last few years, the amount of marketing literature focused explicitly on startups has been slowly but steadily growing. Despite this, it is very important for startups to properly position themselves (Labadie, 2018). Consciously thinking about a strong positioning helps startups to gain insight into the added value of the product or service, become brand- and market-oriented and to focus on the purpose of the firm in general (Mosmans, 2016). As the business concept of most startups generally only exists in the thoughts of the entrepreneurs themselves, a well-thought-out positioning can assist in emotionally connecting employees and customers to the startup and to increase loyalty (Rode & Vallaster, 2005).
In addition to specifying the idea, a startup also needs to establish a business structure. In contradiction to corporates, startups often have a less solid structure and also often have less experience, money, knowledge, and resources (Rode & Vallaster, 2005). The advantage of this is that it makes them very flexible in choosing a positioning and building the desired associations (Labadie, 2018). However, the disadvantage is that the act of positioning itself can be a long journey and has to be started from scratch. Especially when the startup brings a new idea to a not yet existing market, it is a challenge to convince their (potential) customers to even just try their product or service, certainly without a physical product (Parker, 2017).This again supports the claim that having a positioning is necessary because this shows the customers what you have to offer and why they need it. Additionally, when other firms arise in the market, the company is in need of a solid positioning to make sure that the customers remain loyal to them (Agarwal, 2016). These findings are also supported by Steven Blank (2013). According to him, a lot of high-profile product launches were unsuccessful because the entrepreneurs mismatched the positioning of their startup with the market they were entering, or simply lacked the knowledge to develop a
14 strong positioning. He therefore believes that when entering a new market with a new product, a firm should focus on selling their vision and sell the problem that the product or service solves. In order to establish this, it is important to develop a brand orientation within the organization.
3. Brand orientation
This is the second chapter of the total theoretical framework. As mentioned in the closing section of the previous chapter, it is important to form a brand orientation within the organization. In order to acquire a strong brand orientation, it is important to establish a strong brand identity (Ghodeswar, 2008). When this identity is strongly woven into the organization’s way of thinking, a brand orientation is created. In addition to the brand orientation, this chapter also discusses relevant concepts that can influence this, such as perceived brand barriers and perceived brand distinctiveness. Additionally, this chapter also discusses the overestimation of the brand distinctiveness.
3.1 Brand identity
It is important for a brand to have a clear view of who they want to be, for whom, and in relation to who (Jackson, 2014). Consequently, it is very important to establish a brand identity. “A brand identity is based on a thorough understanding of the firm’s customers, competitors, and business environment and helps to focus on points of differentiation that offer a sustainable competitive advantage to the firm” (Ghodeswar, 2008, p. 4).
Brand identity is assembled from two parts; a core identity and the extended identity (Ghodeswar, 2008). The core identity is a brand’s essence, which remains stable even when the brand branches out to other products and/or markets. The core identity in general is focused on product attributes, service, user profile, store ambiance and product performance. The extended identity emphasizes brand personality, relationships, and strong symbol associations.
15 When a company is able to present a cohesive, relevant and distinctive brand identity, it can create a preference in the mind of the target consumers (Keller, 1993). This identity also adds value to their products and/or services, which might even cause them being able to charge a higher price for their products (Schmitt & Simonson, 1997). Furthermore, a strong brand identity helps the customer develop trust and therefore helps in building customer loyalty and ultimately achieving firm growth (Ghodeswar, 2008). Therefore it may be clear that, if you do not know who you are as a company and consequently lack a strong identity, it is impossible to clearly communicate why others should invest in the company or purchase from it, let alone determine your place in the competitive landscape (Jackson, 2014). In short, without a certain brand identity, there is a lack of reference.
3.2 Brand orientation
Brand orientation can be defined as “an approach in which the processes of the
organization revolve around the creation, development, and protection of the brand identity in an ongoing interaction with target customers with the aim of achieving lasting competitive
advantages in the form of brands” (Urde, 1999, p. 117). Hence, the level of brand orientation can be examined by the position and importance of a brand and its identity as an essential part of the firm’s business activities in order to create distinctiveness (Wong & Merrilees, 2005).
Additionally, research has supported that a brand orientation has a very strong direct positive influence on a firm’s brand performance, which in turn has a direct effect on financial
performance (Merrilees & Wong, 2008).
According to another research performed by Wong and Merrilees (2005), the degree of brand orientation within an organization can be divided into three levels. The illustration of the categorization can be found in the appendix (Figure 2.). The three levels are minimalistic brand
16 orientation, embryonic brand orientation, and integrated brand orientation. A minimalistic brand-orientated firm has a low level of brand orientation and is mostly focussed on the short term, usually a day to day approach, and therefore not very focused on branding. In addition, the minimalistic level of brand orientation is linked to a weak brand distinctiveness. The embryonic brand-oriented firm has a bigger focus on marketing and competitive advantage. However, the brand strategy is still fairly implicit at these type of firms. The integrated brand-oriented firm is the most aware of their positioning, brand distinctiveness, and competitive advantage. The higher the level of brand orientation, the better the brand-marketing performance, which is defined as the result of how well a branding strategy performs in achieving a competitive advantage over competing firms.
The believe that the degree of brand orientation influences the relative performance of a firm is also supported by Reijonen, et al. (2012), who found that growing firms are much more brand-oriented than stable or declining firms, and are also more oriented to customers and inter-functional coordination (these terms will be further discussed in chapter 4). According to Wong and Merrilees (2005; 2008), this brand orientation is driven by perceived brand barriers and perceived brand distinctiveness. The sections hereafter will further elaborate on these two drivers of brand orientation and the phenomenon of overestimating the brand distinctiveness by startups.
3.3 Perceived brand barriers
Wong and Merrilees (2005) name perceived brand barriers as one of the main constructs of a brand strategy. Perceived brand barriers refer to “the obstacles that hinder firms to carry out business activities based on the brand. These obstacles are mainly the limitations on financial resources, human resources and time. The unavailability of these resources forces firms to concentrate on what they can do best in daily operations. This short-term focus becomes an
17 obstacle for them developing a long-term branding strategy” (Wong & Merrilees, 2005, p. 158). In short, these firms perceive that they do not have enough time, knowledge or (financial)
resources to conduct branding activities and typically perceive such investments as costs instead.
These perceived brand barriers pose a problem for the development of the brand because successful branding requires resources, efforts, believes, knowledge and, to a certain degree, money (Merrilees & Wong, 2008). These barriers therefore actually stand in the way of the development of a brand orientation. A follow-up study carried out by Wong and Merrilees (2008) confirms that branding is not considered as essential to a firm’s strategy by startups and thus, that brand barriers are perceived. “They are more concerned about getting a dollar today than
devoting resources to a branding campaign” (Merrilees & Wong, 2008, p. 375). The same study shows that 86% of the respondents (n = 403) perceive high or moderately high brand barriers. Finally, their research confirms, just like in 2005, that perceived brand barriers have a negative effect on brand orientation and ultimately on business performance (Merrilees & Wong, 2008).
Other findings that confirm this, come from Khawaja and Gundala (2014), who have discovered, during a study amongst startups in Dubai, that only half of the startups incorporate the distinctiveness of the brand in their overall strategy. Out of the companies that chose not to do so, almost half of them indicate that they lack the knowledge to do this. This research therefore confirms that certain barriers are perceived which slow down brand
development. In order to improve this, companies need to recognize the perceived brand barriers in order to make progress towards becoming more brand-oriented (Merrilees & Wong, 2008). This requires a change of mindset, where people believe in the importance of branding and consider this as an investment rather than an uncertain cost item (Messikomer, 1987; Harris, 1996).
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3.4 Brand distinctiveness
Brand distinctiveness in general incorporates emphasizing the brand’s unique features and qualities in order to be perceived as unique and desirable by target consumers and therefore plays a significant role in brand management (Khawaja & Gundala, 2014). For example, “a brand can be a means of identification that guarantees consistency of offerings with a consequence of becoming a shortcut in decision-making in the long run” (Merrilees & Wong, 2008, p. 374). Without a distinctive brand, firms run the risk of being seen as a commodity (McQuiston, 2004).
Wong and Merrilees (2005) provide perceived brand distinctiveness and perceived brand barriers as antecedents of brand orientation. They state that it is important to have a distinctive brand and low barriers in order to achieve a strong brand orientation, and eventually a strong brand performance. This is confirmed in their experiment, where they show that companies who are more brand-orientated and perform better, are also characterized by a larger brand
distinctiveness and vice versa (Wong & Merrilees, 2005). The research of Ojasalo et al. (2008) confirms this as well, as they found that brand distinctiveness, perceived brand barriers, brand orientation and brand marketing performance are important determinants for building a strong brand.
An important side note here is that Wong and Merrilees (2005) look at brand
distinctiveness from the startups’ perspective and mostly focus on the degree to which startups put effort into it. They therefore measure brand distinctiveness with use of self-reporting by the startups. To prevent confusion between this form of brand distinctiveness and brand
distinctiveness as judged by the market (the actual brand distinctiveness); brand distinctiveness as defined by Wong and Merrilees (2005) will be referred to as perceived brand distinctiveness in this research.
19 Moreover, Aaker (1996) also stresses the importance of distinctiveness for a strong brand. However, he looks at brand distinctiveness from a market perspective. He states that by
positioning the unique advantages of the brand in the right way, one can claim a distinctive place in the mind of the customer and create brand preference. Therefore, a strong and distinctive brand offers firms an advantage with which they can stand out from the crowd and outperform their competitors (Aaker, 1996; Wong & Merrilees, 2005). In order to build this distinctive brand, Keller (1993) names the creation of brand awareness as one of the most important steps. “Brand awareness relates to the likelihood that a brand name will come to mind and the ease with which it does so” (Keller, 1993, p. 3). Brand awareness can be divided into recall and recognition of the brand. Brand recall shows if a consumer is capable of recalling a brand’s name spontaneously (Keller, 1993). “Brand recognition relates to consumers' ability to confirm prior exposure to the brand when given the brand as a cue” (Keller, 1993, p. 3). Brand recall and brand recognition are important because the consumer must be able to correctly think of your brand when they need to. In order to get the consumer to memorize your brand, it has to be distinctive (Keller, 1993). A common pitfall however is the fact that startups are inclined to overestimate their brand distinctiveness (Bree, 2017; Keswiel, 2016; Rabobank, 2017; Salminen & Teixeira, 2012).
3.5 The pitfall of overestimating brand distinctiveness
A strong and distinctive brand is important in order to stand out from the crowd and generate an advantage over competitors (Aaker, 1996). However, multiple studies prove that startups are quickly inclined to overestimate their distinctiveness and added value of their product or service, and therefore the market demand for this product or service (Keswiel, 2016;
Rabobank, 2017; Salminen & Teixeira, 2012). This means that startups tend to overestimate their degree of distinctiveness and added value in comparison to their competitors from the consumers’
20 point of view. This results in a gap between the degree to which the entrepreneur believes the brand to be distinctive (perceived brand distinctiveness) and how the market judges this in reality (actual brand distinctiveness), where in the worst case scenario the market considers the brand to be totally indistinctive whilst the entrepreneur believes it to be one of a kind. This, in turn, results in a disappointing business performance in the form of a low turnover and the absence of growth (Keswiel, 2016; Rabobank, 2017). This situation mostly occurs for startups with a nice-to-have product rather than with those who actually solve a problem with their entirely new must-have product, because the value proposition of the latter is often much stronger in the eyes of investors and potential clients (Keswiel, 2016).
According to Tony de Bree (2017), CEO of Fintech Startup Partners and author, the cause lies with the personality of the startup owner. He claims startups have been failing for over 30 years by overestimating themselves and that this is caused by a too optimistic and unrealistic entrepreneur that insufficiently does his homework and is incapable of gathering the right people around him in order to launch a solid business idea of which customers will actually see the added value (Bree, 2017).
Salminen and Teixeira (2012) in their research also found that startups overestimate themselves and their value proposition in relation to the market. According to their findings, the value proposition as perceived by the customer differed from the way it was intended by the startup. Moreover, they also confirmed that startup founders overestimated the benefits of the product and the general interest of the market. According to Salminen and Teixeira (2012), this can be traced back to the fact that startups have difficulties in targeting and therefore want to be everything for everyone and therefore insufficiently emphasize their distinctiveness and benefit for a focused group of people. This way, they end up serving no one as they are considered to not add value for anyone is specific. Salminen and Teixeira (2012) therefore consider a solution to be
21 that founders should be forced to think as potential customers and to refine the value proposition, so that they realize how they are viewed in comparison to other providers “as founders have a tendency to overstate differences with competing offers. They perceive existing differences as greater than what they appear to be for “outsiders”. If “outsiders”, or customers, do not share the perception of founders, there may also be a gap of perceived utilities, so that founders perceive the product very useful but customers are reluctant to find the same utility (despite understanding both the features and differences to competitors)” (Salminen & Teixeira, 2012, p. 6). Overall, the mentioned authors all emphasize the importance of a startup doing their
homework and critically looking at themselves, the competitive landscape and how they are perceived by the consumer in order to prevent lagging growth and a low turnover.
4. Market orientation
In this final chapter of the theoretical framework, the last variable, market orientation, is discussed. According to Narver and Slater (1998), there are two different types of orientation; a product orientation and a market orientation. In order to get a better understanding of what a market orientation entails, a product orientation is also briefly discussed for context.
4.1 Market orientation
In order to acquire a successful brand strategy and to develop a competitive advantage, a market orientation is vital (Narver & Slater, 1994). Firms are considered to be market-oriented when the culture within the firm is solely committed to creating superior customer value by observing market trends and developments closely (Narver & Slater, 1994).So, market-oriented firms are mostly focused on what happens outside the firm. This is also referred to as an outside-in approach, as these firms tend to focus on what is happenoutside-ing outside-in the market and then play outside-into this (Wit & Meyer, 2010). Just like an integrated brand-oriented firm, a market-oriented firm is
22 strongly aware of the positioning, brand distinctiveness, and competitive advantage. This
connects to the previous chapter, as a strong awareness of how the brand is perceived by the consumer is necessary in order to successfully develop an advantage over competitors.
The degree of market orientation within a firm is measured by three elements: customer orientation, competitor orientation, and inter-functional coordination (Narver & Slater, 1990). Customer orientation can be defined as having sufficient understanding of the firm’s target buyers, in order to create superior value for them in both long- and short-term. (Narver & Slater, 1990). Competitor orientation refers to the seller understanding the short-term strengths and weaknesses and the long-term capabilities as well as the strategies of the current and potential key competitors (Aaker, 1988; Day & Wensley, 1988; Porter, 1980, 1985). The final element, inter-functional coordination, entitles that all functions within the company are focused on, and contribute to, providing superior customer value. This is also tied closely to both customer and competitor orientation (Narver & Slater, 1990).
Furthermore, previous research suggests that having a market orientation provides small businesses with a potential competitive advantage in comparison to their larger competitors (Keskin, 2006; Reijonen et al., 2012). This is because small businesses are better able to respond to their customer’s needs in a more flexible way, mainly due to their size (Keskin, 2006).
Additionally, these findings are correspondent with other research results, which show that small customer-oriented companies are more likely to be profitable than small firms that are less customer-oriented (Appiah-Adu & Singh, 1998).
23
4.2 Product orientation
In contradiction to being market-oriented, a product-orientated firm is focused solely on the features of the product or service itself. Contradictive to the outside-in approach, this inside-out approach is characterized by a focus on the own firm and the own product (Wit & Meyer, 2010). The internally driven strategy mainly revolves around the faith in the own firm, idea or product and lacks looking at the environment. As these companies are very focused on their daily business practices and not very focused on the market needs and competition, these companies are typically also not very actively working on claiming a strong and distinctive place in the mind of the consumer, and are therefore also little brand-oriented (Wong & Merrilees, 2008).
Only until the end of the 1990’s, organizations changed their traditional assumptions and realized that producing high-quality products no longer meant that they would be profitable by default. This old business model (also commonly referred to as product orientation), quickly became fruitless as customers became more demanding and their needs became more complex (Kokemuller, 2007). In the years following up to the introduction of marketing orientation, this new type of orientation has been growing in popularity for brands looking for consumer attention and brand loyalty. Nowadays, companies solely having a product focus, and therefore are not looking at what is happening in the market, hardly succeed (Venetis, 2017; Moré, 2012). This is also supported by the fact that42% of startups fails because there appears to be no market need and 14% fails because of a bad marketing strategy (CB Insights, 2016). The aforementioned research of Reijonen et al. (2012) indicated a lack of market orientation at small firms as well, as they also found that especially the level of competitor orientation (an element of market
orientation) is often low with small companies, even though this is an important factor when positioning a firm in the market.
24 Also according to startup expert and author Steven Blank (2013), the typical model of forcing your product to the market is no longer viable and only startups with a market orientation can achieve a good business performance. Blank’s idea is also supported by Emil Bielski (2016), Head of Business Development at Maxus Global, who confirms that market-driven businesses are the absolute winners when it comes to growth compared to companies who are only focused on their product and do not look at the market needs.
5. Conceptual framework and hypotheses
Now that the theoretical background has been discussed and all variables have been explained, this chapter builds on the conceptual framework (as discussed in the first chapter) with the addition of hypotheses.
5.1 Hypotheses development
5.1.1 The relationship between perceived brand barriers and brand orientation
According to research performed by Wong and Merrilees (2005), perceived brand barriers and perceived brand distinctiveness form antecedents for the level of brand orientation (see Figure 3. in the appendix for their conceptual model). Starting with the perceived brand barriers, Wong and Merrilees (2008) show that perceived brand barriers pose a problem for the
development of the brand, because the investment of resources, efforts, believes, knowledge and, to a certain degree, money is required for successful branding. These barriers, according to them, block the development of a brand orientation and therefore have a direct negative effect on the level of brand orientation. So, excluding the presence or absence of a distinctive brand, perceived brand barriers on their own could cause a lack of effort in investment in the brand, which also may result in a low brand orientation. In addition, the research of Khawaja and Gundala (2014) shows that, out of the startups researched by them, approximately half of them are not
25 consciously working on brand management and that again half of that group is not doing so because of perceived brand barriers. Based on this, I propose the following hypothesis:
H1: There is a direct negative relationship between perceived brand barriers and brand orientation, so that higher (lower) perceived brand barriers lead to a weaker (stronger) brand orientation.
5.1.2 The role of perceived brand distinctiveness in the relationship between perceived brand barriers and brand orientation
In addition to the possible direct effect of perceived brand barriers on brand orientation, perceived brand barriers may also have an indirect influence on brand orientation through perceived brand distinctiveness. According to Wong and Merrilees (2005), brand barriers can be the cause of firms under-investing in building the distinctiveness of their brand, which also leads to a weak brand orientation. Therefore, perceived brand distinctiveness is included in this study as a mediator, as high brand barriers may lead to the startup spending less attention to the creation of a distinctive brand, which in turn leads to a lower level of brand orientation. Thus, perceived brand distinctiveness has an important role in ‘explaining’ the effect of perceived brand barriers on the level of brand orientation. Additionally, Wong and Merrilees (2005) found in a qualitative study that companies with low perceived brand barriers and a highly distinctive brand have a high level of brand orientation and vice versa: when a lot of brand barriers are perceived and insufficient attention has been paid to a distinctive brand, the level of brand orientation is low. The research of Ojasalo et al. (2008) confirms this as well, as they found that high perceived brand distinctiveness, low perceived brand barriers, a strong brand orientation and a high
26 In addition, Aaker (1996) also stresses the importance of brand distinctiveness for a strong brand. He states that a strong and distinctive brand offers firms an advantage with which they can stand out from the crowd and outperform their competitors. So, when the strategy does indeed revolve around the development of a strong and distinctive brand, this translates into the development of brand orientation. Therefore, looking at the influence of perceived brand barriers and perceived brand distinctiveness on the development of brand orientation, I propose the following hypothesis:
H2: Perceived brand distinctiveness mediates the relationship between perceived brand barriers and brand orientation (H1), so that higher (lower) perceived brand barriers lead to a lower (higher) perceived brand distinctiveness, which in turn leads to a weaker (stronger) brand orientation.
5.1.3 The relationship between brand orientation and market orientation
According to Reijonen et al. (2012), the degree to which a company is brand-oriented has an influence on the development of a market orientation. According to Wong and Merrilees (2005), highly brand-oriented firms are the most aware of their positioning and focus on the development of a strong brand identity in the long run. Therefore, these companies are more aware of their surroundings and as a result, more likely to be market-oriented than the firms that are not brand-orientated and mostly focus on short-term business management (Narver & Slater, 1994). Having said this, I propose the following hypothesis:
H3: There is a direct positive relationship between brand orientation and market orientation, so that a stronger brand orientation leads to a stronger market orientation.
27 5.1.4 The relationship between perceived brand distinctiveness and market orientation
Aaker (1996) emphasizes the importance of a strong proposition and strong positioning in the heads of the consumer because this contributes to the development of a competitive
advantage. Narver & Slater (1994) in turn agree that a strong awareness of the positioning and a high degree of working on brand distinctiveness are a must in order to develop a market
orientation. According to them, market-oriented companies focus on creating distinctive value and pay close attention to the market demand and the competition. Perceived brand
distinctiveness therefore appears to have a direct positive relationship with the development of a market orientation, precisely because focussing on the perceived brand distinctiveness plays an important role in the development of a market orientation. Therefore, I state the following hypothesis:
H4: There is a direct positive relationship between perceived brand distinctiveness and market orientation, so that higher perceived brand distinctiveness leads to a stronger market orientation.
5.1.5 The relationship between market orientation and business performance
According to author Steven Blank, only startups with a market orientation instead of a product orientation can achieve a good business performance in terms of revenue, growth, and profit (Blank, 2013). Also, Emil Bielski, Head of Business Development at Maxus, confirms that market-driven businesses are the absolute winners when it comes to growth, compared to
companies who are only focused on their product and do not look at the market needs (Mosmans, 2016). Finally, researches performed by Reijonen et al. (2012) and Wong and Merrilees (2005; 2008) also confirm that having a strong brand orientation and market orientation have a positive effect on business performance. Hence, I state the following hypothesis:
28 H5: There is a direct positive relationship between market orientation and business
performance, so that a stronger market orientation leads to a higher business performance.
5.1.6 The role of actual brand distinctiveness in the relationship between market orientation and business performance
Multiple studies show that startups are inclined to overestimate their distinctiveness and the added value of their product or service, and therefore also the market demand of their product or service (Keswiel, 2016; Rabobank, 2017; Salminen & Teixeira, 2012). Salminen and Teixeira (2012) state that “founders have a tendency to overstate differences with competing offers. They perceive existing differences as greater than what they appear to be for “outsiders”. If
“outsiders”, or customers, do not share the perception of founders, there may also be a gap of perceived utilities, so that founders perceive the product very useful but customers are reluctant to find the same utility (despite understanding both the features and differences to competitors) (Salminen & Teixeira, 2012, p. 6). This results in a gap between the degree to which the
entrepreneur believes the brand to be distinctive (perceived brand distinctiveness) and how the market judges this in reality (actual brand distinctiveness). When this gap becomes too big, this results in a disappointing business performance in the shape of a lower turnover and a lack of growth (Keswiel, 2016; Rabobank, 2017).
Hence, if a startup believes to have done its homework well by looking at the market and therefore has a certain level of market orientation, but the market does not see the same benefit and distinctiveness, then this will still lead to a lower business performance compared to when the market does agree that the brand and its products/services are distinctive and of added value. Therefore, the actual brand distinctiveness possibly has a reinforcing effect on the relationship between market orientation and business performance. So, I state the following hypothesis:
29 H6: The actual brand distinctiveness moderates the relationship between market
orientation and business performance (H5), so that when the actual brand distinctiveness is low (high), business performance is lower (higher) compared to when the actual brand distinctiveness is high (low).
5.2 Conceptual framework
Integrating the hypotheses described above into the conceptual framework as proposed in subsection 1.1.3, results in the following final version of the conceptual framework:
Figure 4. The final conceptual framework.
6. Research method
Now that the theoretical foundation has been developed and hypotheses have been stated, this chapter will cover the research methodology used. This chapter will outline the research design, procedure, and the sampling procedure as well as the operationalization of the constructs.
6.1 Design and procedure
Theory showed that startups are often not market-oriented and are overestimating their brand distinctiveness (Bree, 2017; CB Insights, 2016; Keswiel, 2016; Rabobank, 2017; Salminen & Teixeira, 2012). Since I am interested in explaining the cause of this phenomenon, I have used a deductive research with an explanatory aim. Elaborating on available theory, hypotheses have
30 been formed which are tested with a quantitative study based on an online cross-sectional survey which I conducted among Dutch startups using Qualtrics and an additional short questionnaire that I held face-to-face with consumers. The questionnaire amongst startups measured the perceived brand barriers, perceived brand distinctiveness, brand orientation, market orientation, and business performance with the use of self-reporting. Furthermore, the actual brand
distinctiveness was measured using the short questionnaire that I held with consumers. I will further elaborate on the used measuring methods in the following section.
Because the final questionnaire for the startups consisted of 52 items, I have chosen to divide and send the questionnaire out in two parts because it otherwise would have been a very long questionnaire, which could lower the response rate. I started by sending out the first part of the questionnaire (consisting of the 15 items regarding background information, perceived brand barriers and perceived brand distinctiveness), followed by a reminder after two weeks. A week after this, I sent out the second part of the questionnaire to the share of the startups that responded to the first part, followed by another reminder after two weeks. The respondents were primarily assessed based on their score on the validated 7 point Likert-scale developed by Wong and Merrilees (2008).
Furthermore, when approaching the respondents, I clearly communicated the relevance of the research and emphasized that the questionnaire consisted of two parts in order to ensure that the respondents properly understood the research. In addition, since I was doing an internship with my thesis supervisor as a branding consultant, I raffled my personal advice among
respondents in the form of a quick scan of their branding practices, complemented with specific tips to improve their brand orientation, as an incentive to participate in my research. This incentive was communicated when approaching the respondents and in the introduction letter of
31 both questionnaires, which were made in Qualtrics and distributed online. Finally, I approached six consumers personally and asked them to participate in the short questionnaire regarding the actual brand distinctiveness of the different startups in my sample. All six agreed to do so.
Lastly, despite that I was able to trace back the individual response during the research, all results are reported anonymously so that readers of the research are not able to find out which startups have participated and what their individual scores on the different variables were.
6.2 Operationalization and measurements
The variables were mainly measured with a 7 point Likert-scale (completely disagree – completely agree). The scales being used are validated during previous studies in order to ensure construct validity. Only the four open questions asked at the very end of the first questionnaire for the startups are not validated, but are only included for background information.
6.2.1 Measurements of perceived brand barriers, perceived brand distinctiveness, brand orientation, and business performance
Considering the fact that Wong and Merrilees (2008) have already researched the perceived brand barriers, perceived brand distinctiveness, brand orientation, and business performance, I used their scale to test these variables for consistency matters. More specific, I used 23 items in total from Merrilees, B., & Wong, H. Y. (2008). The performance benefits of being brand-orientated. Journal of Product & Brand Management, 17(6), 373-383. The degree of the perceived brand barriers (Cronbach’s alpha of 0.86) was measured using 5 items and
perceived brand distinctiveness (Cronbach’s alpha of 0.83) was measured using 5 items. Brand orientation (Cronbach’s alpha of 0.94) was measured using 8 items from this scale as well. To prevent bias, I added a short definition of brand orientation before the concerning items in order to avoid confusion about the meaning of this concept. In addition, I have added the assessment
32 tool of Bresciani and Eppler (2010) as the final item for brand orientation in order to get a clearer picture of the brand building practices of the respondent. Lastly, business performance is
measured using 5 items from the previously mentioned scale of Wong and Merrilees (2008) (Cronbach’s alpha of 0.83).
6.2.2 Measurements of market orientation
Market orientation (Narver & Slater, 1994) in turn consists of customer orientation, competitor orientation, and inter-functional coordination and was measured using the 23 items from Deng, S., & Dart, J. (1994). Measuring Market Orientation: A Multi-factor, Multi-item Approach. Journal of Marketing Management, 10, 725-742 (Cronbach’s alpha of 0.80). Here, the measurements can be divided as follows: customer orientation was measured using 11 items from this scale, competitor orientation consisted of 6 items and inter-functional coordination was measured using 6 items.
6.2.3 Measurements of actual brand distinctiveness
According to Keller (1993), brand recall and brand recognition are important parameters for measuring brand awareness. Also, Aaker (1996) acknowledges the measuring of brand recall and recognition as a measurement of brand awareness and actual brand distinctiveness. If a brand is very distinctive, it is more memorable and the consumer is therefore better able to
spontaneously recall it (Keller, 1993). As this method is accepted in literature, and because self-reporting on brand distinctiveness possibly provides biased results as in overestimation (Bree, 2017; Keswiel, 2016; Rabobank, 2017; Salminen & Teixeira, 2012), I have decided to measure the actual brand distinctiveness based on recall and recognition. I did this by showing a diverse panel (n=6), consisting of branding experts and regular consumers, a poster with the logos (or just the brand name if there was no logo) of the respondents. After one minute, I removed the
33 poster and asked each panel member individually (so that they cannot help each other) to recall the names of the startups they have just seen. I purposely showed all logos/brand names at once, because consumers are in reality also continuously confronted with several brands at once and thus this provides a good image of the memorability and distinctiveness of the logos/brand names in reality (Media Dynamics Inc., 2014).
When someone was able to recall the brand name spontaneously, this brand received a point. In order to measure recognition, I showed the panel members a second poster with the same logos, but in a different order and with logos of other random companies mixed in-between, with the question which logos they recognized. Again, when the brand of a respondent was pointed out, it gained a point. Eventually, every respondent ended up with a score between 0 and 6 on recall and a score between 0 to 6 on recognition. I chose to maintain a score between 0 and 6 because the results would be comparable to the result of a 7-point Likert scale, as this exists from 6 points as well, from an absolute point of view. The average score on recall and recognition then determined the value for the actual brand distinctiveness. The (anonymized) scorecard (Table 1.) can be found in the appendix.
6.3 Respondents
6.3.1 Sample characteristics
The population of this research consists of Dutch startups. Even though a fixed definition for startups has not yet been widely agreed upon, a startup is often described as a young company (not older than three years), run by a small group of entrepreneurs, with an innovative and
scalable idea, but does not yet have a turnover of millions (RTL Z, 2015; Keswiel, 2016; Kamer van Koophandel, 2018). I retained these characteristics for selecting the respondents. Because a fixed definition is missing, determining the size of the population was also difficult. In 2015, the
