MSc in Business Administration – Marketing Track
The Fairtrade label’s influence on a firm’s customer equity and its drivers,
and the moderating role of nationality and the consumer’s perception of firms’
ethical behavior
Name: Moni Tram Bich Le Student number: 11089563
Supervisor: dhr. drs. ing. A.C.J. (Antoon) Meulemans
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Statement of originality
This document is written by Tram Bich Le 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 supervision of completion of the work, not for the contents.
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Abstract
Corporate Social Responsibility (CSR) has an increasing importance in companies’ marketing strategy due to the emergence of consumers’ consciousness in ethical issues. Company’s engagement in CSR affects not only the image of the company, but also consumers’ perception of its product. To gain further understanding about the effect of a CSR initiative, an empirical study was conducted by using the customer equity framework of Rust, Zeithaml, & Lemon (2000). The data was collected through experimental survey design where at the end 168 responses were recorded for the analysis. The Fairtrade label from Fairtrade Labelling Organization International was applied on a commercial brand (Lipton) to explore the effect of a CSR initiative. The main aim of the study is to examine the effect of the ethical label on the commercial brand’s customer equity and to explore the moderating effect of the importance of firms’ ethical behavior for consumers and the individual’s nationality. The nationality of the participants in the study was also used to examine its influence on the importance of firms’ ethical behavior. The One-way ANOVA test showed that the Fairtrade label had a significant positive effect on Lipton’s customer equity and its drivers (value, brand and retention equity). The analysis of the moderating variables revealed that only moderate or lower level of importance of firms’ ethical behavior had a positive moderating effect on the relationship between the ethical label and Lipton’s customer equity drivers. However, individuals’ nationality failed to moderate this customer equity relationship and did not have an influence on the level of importance of firms’ ethics. The findings contribute to the application of the customer equity framework and give further understanding about the effect of a CSR initiative on firms’ marketing strategy and consumers’ product evaluation.
Keywords: customer equity framework; ethical consumerism; fair trade; corporate social responsibility
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Table of content
1. Introduction ... 6
2. Literature Review ... 9
2.1. Customer equity ... 9
2.2. Drivers of customer equity ... 10
2.2.1. Value equity ... 10
2.2.2. Brand equity ... 11
2.2.3. Retention equity ... 12
2.3. Marketing strategy in relation to customer equity ... 13
2.4. Ethical consumerism ... 14
2.5. Good corporate citizen... 17
2.6. Fair trade ... 18
2.6.1. Goal of fair trade ... 19
2.6.2. Fair trade in mainstream consumption – Fairtrade label ... 20
2.7. Research gap & Research question ... 22
3. Conceptual Model and Hypotheses ... 23
3.1. Fair trade products and customer equity ... 23
3.1.1. Value equity ... 24
3.1.2. Brand equity ... 25
3.1.3. Retention equity ... 28
3.1.4. Evaluation of the customer equity ... 29
3.2. Companies participation in fair trade ... 30
3.3. The influence of nationality ... 31
3.4. Conceptual model ... 32
4. Research Design ... 33
4.1. Procedure ... 33
4.2. Sample ... 33
4.3. Measures ... 34
5. Data Analysis and Results ... 37
5.1. Data analysis ... 37
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5.2.1. Tea consumption ... 38
5.2.2. Fair trade product consumption ... 39
5.2.3. Descriptive statistics... 39
5.2.4. One-way ANOVA test – Comparing the customer equity drivers ... 43
5.2.5. Customer equity ... 46
5.2.6. Importance of firms’ ethical behavior ... 49
5.2.7. The influence of nationality ... 52
6. Discussion ... 56
6.1. Theoretical implications ... 59
6.2. Limitations ... 62
6.3. Direction for future research ... 63
6.4. Practical implications ... 64
6.5. Conclusion ... 65
References ... 66
Appendix ... 70
Index of figures Figure 1: Fairtrade label ... 21
Figure 2: Conceptual Model ... 32
Figure 3: Comparison of Customer Equity Means of the Two Products ... 43
Figure 4: Relative Importance of Customer Equity Drivers at Tea Products ... 46
Figure 5: Importance - Performance Map: Fairtrade vs non-Fairtrade Lipton tea ... 47
Index of tables Table 1: Means, Standard Deviations, Correlations of the non-Fairtrade Lipton tea ... 40
Table 2: Means, Standard Deviations, Correlations of the Fairtrade Lipton tea ... 41
Table 3: One-way ANOVA test of Lipton tea’s Value Equity ... 44
Table 4: One-way ANOVA test of Lipton tea’s Brand Equity ... 45
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Table 6: Respondents' Choice between the Normal and Fairtrade Lipton tea ... 48
Table 7: The Moderating Effect of Importance of Firms’ Ethics on Value Equity ... 49
Table 8: The Moderating Effect of Importance of Firms’ Ethics on Brand Equity ... 50
Table 9: The Moderating Effect of Importance of Firms’ Ethics on Retention Equity ... 51
Table 10: The Moderating Effect of Nationality on Value Equity ... 53
Table 11: The Moderating Effect of Nationality on Brand Equity ... 54
Table 12: The Moderating Effect of Nationality on Retention Equity ... 55
Table 13: Regression Analysis of the Cultural Dimensions ... 55
Index of appendices Appendix A Survey 1: Non-Fairtrade experimental condition ... 70
6 1. Introduction
Today the customer became the main focus of the strategy due the shift from the old economy to the new economy (Rust, Zeithaml, & Lemon, 2000, p.: 5) where customer profitability defines the financial sustainability of the firm. This shift led to the development of the customer equity framework which now dominates firms’ marketing strategy. The drivers of customer equity – value, brand and retention/relationship equity – provide managers a road map to create an effective marketing strategy (Rust, Zeithaml, & Lemon, 2000, p.: 162.).
Beside the change in firms’ strategy practices, there has also been a change in consumers’ expectations from companies. Since the 1990s, consumers became more sensitive to environmental sustainability and social responsibility (Mackenzie, 1990), and a new consumer group, called ethical consumers emerged who are also concerned about the ‘people’ aspect of the manufacturing process (Strong, 1996; Bird & Hughes, 1997; Doane, 2001), namely the producers in the developing countries. The emergence of ethical consumerism put a pressure on companies to adjust their business activities according to ethical considerations and increased the number of companies that engage in this type of Corporate Social Responsibility (CSR) which led to the transformation of the traditional marketplace (Doane, 2001). During the shifts in the marketplace, the societal marketing concept (Schwartz, 1971) has developed which promotes that business can be profitable and socially responsible at the same time (Abratt & Sacks, 1988). Studies have appeared that highlight the positive influence of CSR on both the company’s image and consumers’ evaluation of its product (Smith, 2003; Chernev & Blair, 2015). For this reason, CSR should not be neglected in the formation of a marketing strategy since it can affect any aspect of the firm’s business.
This study is based on the notion that a company’s participation in CSR activities positively influences not only the image of the company, but also consumers’ evaluation of its product. To
7 conduct this research, the customer equity framework of Rust, Zeithaml, & Lemon (2000) will be used since it is a widely recognized tool to measure the efficiency of today’s firms’ marketing strategy and could be implemented to examine the effect of a CSR activity on consumers’ perception of a firm’s product. For the purpose of this research, an ethical label, namely the Fairtrade label of Fairtrade Labelling Organization International will be used to examine the effect of a CSR initiative on a firm’s customer equity, since it is a growing and world-wide known social movement (Fairtrade International, n.d.), and consumers also have increasing interest toward fair trade products (Raynolds, 2000; Renard, 2003; Pelsmacker, et al., 2006; Pelsmacker & Janssens, 2007). To measure the label’s influence on a firm’s customer equity, a commercial brand, Lipton will be used.
The study will address the following research questions: To what extent does the Fairtrade label on a product increase a firm’s customer equity and change the relative importance of its drivers? How the consumer’s nationality and perception of firms’ ethical behavior moderate this customer equity relationship? Does nationality have an influence on the level of importance of firms’ ethics? To test the effect of nationality, the scores of Hofstede’s six cultural dimensions will be applied (The Hofstede Centre, n.d.). Experimental survey design will be used to collect data for this empirical study and the recorded data will be analyzed by quantitative research methods.
The findings of this study aim to contribute to the extant literature about the application of the customer equity framework in order to analyze and improve companies’ marketing strategy. Furthermore, in the customer equity framework of Rust, et al. (2000), firms’ ethics is classified as the sub-driver of brand equity, however, there is a high potential that it influences more aspects of the marketing strategy and may affect also the firm’s value and retention equity.
In the literature review the following concepts will be addressed: firstly, the structure of the customer equity framework and its relation to companies’ marketing strategy, secondly, the
8 emergence of the consumer group called ethical consumers and its influence on companies’ business practice, finally, the fair trade movement will be presented and its effect on mainstream consumption. The conceptual model and hypotheses will be drawn by combining the literature in the context of fair trade. Finally, the collected data from the survey will be analyzed to test the conceptual model, and the results will be discussed in detail at the final chapter of this study where limitations and suggestions for future research will also be presented.
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2. Literature Review
2.1. Customer equity
The historical trends during the years have led to several economic changes in the business world and brought the customer as the focus of the management practices rather than the firm’s product (Rust, Zeithaml, & Lemon, 2000, p.: 5.). The Old Economy focused on the transaction of products and the management of brand equity which was defined as the main source of profitability. The main goal of the firm was to attract as many customers as possible by improving the brand equity. Due to the changes in the economy and culture, this view became obsolete and the management practices have shifted to customer orientation which is defined as the New Economy. Customer focus has evoked new approaches in the firm’s strategic management and instead of brand equity, customer equity started to lead the direction of firms’ decision making where customer profitability defines the long-term sustainability of the company. They realized that the firm’s customer base is the one that provides a stable and reliable source of future revenues (Rust, Zeithaml, & Lemon, 2000, p.: 7.).
The customer equity framework is organized around the long lasting relationship with the customer. Instead of customer attraction, customer retention defines the strategy because the longer the customer’s relationship with the firm, the less the retention costs for each of them, therefore the customer lifetime value (CLV) will be higher (Gupta & Zeithaml, 2006). For this reason, customer retention is a key driver of CLV and the firm’s financial performance. Customer lifetime value is a metric defined as “the present value of the future cash flows attributed to the customer relationship” (Gupta & Zeithaml, 2006, p. 724.), this metric measures the lifetime value of the individual customers of the firm. Furthermore, by managing the customer as a strategic asset, it
10 will increase the customer value of the firm (Gupta, et al., 2004), which also determines the value of the firm itself (Ahmad & Buttle, 2001).
Customer equity as a financial metric can be defined as “the total of the discounted lifetime values summed over all of the firm’s current and potential customers” (Rust, et al., 2004, p. 110.). Furthermore, managing customer equity properly is a key driver of profitability (Hogan, et al., 2002). The customer equity management approach focuses the firm’s effort on increasing the CLV of individual customers to maximize customer equity. In today’s management practices customer equity is viewed as a basis to create a strategic framework that leads to more powerful, customer-oriented marketing programs that are financially accountable and measurable (Rust, et al., 2001).
2.2. Drivers of customer equity
Customer equity (CE) has three drivers: value equity, brand equity and relationship/retention equity (Rust, et al., 2000, p. 8). The drivers can be seen as strategic investment categories and important factors to measure the return on marketing investment (Rust, et al., 2004). Marketing investments can improve the drivers of CE that would lead to increased levels of customer attraction and retention which may eventually increase the firm’s overall CLV and CE. The three drivers and their role in the customer equity framework will be described below.
2.2.1. Value equity
Value equity (VE) is defined as “the customer’s objective assessment of the utility of a brand, based on perceptions of what is given up for what is received” (Rust, et al., 2000, p. 68.). The drivers of value equity are quality, price and convenience. Price can influence VE by low-price strategy in a price-sensitive segment or creating discounts and sales for a certain time period. Quality is defined by what the customer perceives of the product which is formed through four main components: the physical product, the service product, service delivery and the service
11 environment (Rust, et al., 2000, p. 75.). The quality of the physical product is mainly about the tangible feature of a specific good, the service product is related to the type of service the product is designed for to be delivered, the service delivery is the process by which a company delivers on its promises, and the service environment is the surrounding in which the service takes place. Finally, the convenience component of VE is influenced by the location, the ease of use, and the availability of the product.
VE has greater role in the overall customer equity of the firm when there are or can be differences between competing products, for example through patent protection or unique resources; the purchase of the product requires a complex decision process, e.g. at major durable or electronic products; in B2B purchases; when the product or service is innovative, e.g. smart phones; and when the firm frequently recycles its products in the maturity stage of the life cycle, e.g. high quality beauty products (Rust, et al., 2000, p. 72.)
2.2.2. Brand equity
Brand equity (BE) is defined as “customer’s subjective and intangible assessment of the brand, above and beyond its objectively perceived value” (Rust, et al., 2000, p. 81.). The definition of brand equity from the customer’s perspective is defined as “the differential effect of brand knowledge in consumer response to the marketing of a brand” (Keller, 1993, p. 8.). The brand differentiates the firm’s product in the consumer’s mind and creates added value for the product itself.
The drivers of BE are customer brand awareness, customer attitude toward the brand and customer perception of brand ethics (Rust, et al., 2000, p. 87.). BE has greater weight in the overall CE when the product involves low-involvement purchases with simple decision processes, for instance at consumer packaged goods where it is difficult for consumers to choose according to the
12 quality among many similar products; the product is highly visible to others, e.g. prestigious products; the experiences associated with the product can be passed from one individual or generation to the next, e.g. baby care products; or when there is difficulty in evaluating the quality of the product before purchase, e.g. hotels.
To build customer-based brand equity, it is required to create a brand which has favorable, strong and unique brand associations (Keller, 2001). These associations would help the establishment of the brand meaning in consumers’ mind which then forms consumers’ attitude toward the brand. Finally, if the customer has favorable attitude toward the brand, it may create an active and intense loyalty relationship between the brand and the customer. In order to elicit the right associations from customers about the brand to build brand equity, one of the strategy that marketers can use is to transfer associations indirectly to the brand by linking it to another person, place or thing, which are called secondary associations (Keller, 2005), for example, by supporting a good cause, the associations from the cause such as ‘ethical’ or ‘caring’ could be transferred to the brand in the mind of the consumer. Later the study will illustrate the process of the secondary association transfer and its capability to improve brand equity.
2.2.3. Retention equity
Retention equity (RE) is defined as “customer’s tendency to stick with the brand, above and beyond objective and subjective assessment of the brand” (Rust, et al., 2000, p. 95.). RE is a glue that makes a customer stick to the firm. However, when measuring and developing strategies to increase retention equity, the type of the product category also has to be considered since it influences the nature of brand loyalty that consumers have with the product (Rundle-Thiele & Bennett, 2001). Therefore, the products can be classified into three groups based on the market type: consumable goods markets (including fast-moving consumer goods (FMCG)), durable goods market and
13 service markets. The consumable goods market is characterized by multi-brand purchasing and behavioral loyalty; in the durable goods market consumers are more loyal to a certain brand therefore attitudinal loyalty is more intense; finally, the service market is also characterized by attitudinal loyalty since there is high involvement and risk like in the previous group, thus consumers tend to stick to a sole brand. As it can be seen, the type of the product category elicits different types of loyalty from consumers, for this reason, these aspects have to be considered when analyzing a firm’s retention equity.
2.3. Marketing strategy in relation to customer equity
Before making the investment, managers have to analyze the drivers of customer equity of the firm’s product. It gives them insights about the position of its product/service compared to the competitors and also about the main drivers of the industry or product category (Rust, Zeithaml, & Lemon, 2000, p.: 163.). Different driver(s) can dominate according to the product category or industry where the firm operates in. For instance, in the consumable goods category where involvement is low and consumers can switch easily between products, brand equity has higher importance in profitability because the brand is functioning as a sign for consumers that help them differentiate among offers to make the right decision. On the other hand, in the durable electronic product category, value equity may have greater role in profitability because consumers have to make a complex, high involvement purchase decision to buy the best price-quality offer for long-term usage. As the examples illustrate it, managers have to tailor the strategy according to the main driver(s) of the firm’s customer equity in the certain product category to maximize the long-term customer profitability.
After analyzing the main driver of the product, companies can apply different strategies to manage and improve its most important driver(s) to increase the firm’s customer base (Rust,
14 Zeithaml, & Lemon, 2000, p.: 67.). For instance, to improve a product’s value equity, the firm can invest more in R&D to develop a new or its current feature to make its quality more distinctive; or if brand equity is the most important driver, then the firm can create marketing campaigns to increase brand awareness or participate in CSR activities to positively improve consumers’ attitude toward the brand. The successful improvement in a product’s important CE driver(s) will increase the value of the product for customers which then positively influences their loyalty intentions and the company’s future sales (Vogel, et al., 2008).
In this research, the focus is on the customer equity of consumer packaged goods. This product category is characterized by habitual behavior during product purchase because these products require only low involvement in consumers’ decision making (East, 1997), therefore it is more important to drive brand equity in order to differentiate the product from competitors and increase a firm’s customer profitability.
Ethical consumerism will be introduced in the next chapter, where consumers’ product choice is driven by ethical considerations. The evolving awareness of consumers put a pressure on companies to incorporate ethical practices in their business which also became a new way to fulfill CSR objectives (Witkowski, 2005).
2.4. Ethical consumerism
At the beginning of the 1990s a new type of consumer emerged, called ‘green consumer’ who feels responsible for other people, animals and nature, and pays more attention on the effects of consumption (Mackenzie, 1990). These consumers are more conscious and require higher degree of transparency from companies and their activity, and they want to know information about the source of the food, how it is produced and distributed, and their impacts. Green consumers avoid products that endanger the health of the consumer and others, cause significant damage in the
15 environment during the process of production, use or disposal; and cruel to animals (Elkington & Hailes, 1989). Later on, people also became concerned of the condition of worker communities in the developing countries which gave a rise to the consumer group called ‘ethical consumer’. The ethical consumer incorporates all the principles of green consumerism, but is also concerned about the ‘people’ aspect of the manufacturing process (Strong, 1996). Strong (1996, p. 5.) defines ethical consumerism as a buying behavior that “reflects a concern with the problems of the developing countries, where producers are paid low wages and live in poor conditions” therefore this consumer group buys products from companies that reflect the right values and morals toward this issue.
Bird and Hughes (1997) divide ethical consumers into three groups: ethical consumers, semi ethical consumers and selfish consumers. The authors described the first group as primarily motivated by moral values who would make trade-offs between the benefits of the traditional product and the product with ethical characteristics, this means that this consumer group is willing to pay a premium price even only for charity. The second group focuses more on the quality and the brand of the product and considers the ethical benefits as a bonus, however, they can often be persuaded to buy ethical products. The third group contains the selfish consumers who cannot be easily persuaded to buy ethical products and their buying behavior is motivated by price and quality concerns.
The drivers of ethical consumer behavior are also need to be mentioned. Shaw and Shiu (2002) identified two drivers: ethical obligation and self-identity which they included in the theory of planned behavior model to predict the purchase intention of ethical consumers and their attitude toward fair trade products. Consumers driven by ethical obligation purchase ethical products because they are guided by a sense of obligation to others, therefore they want to provide fair price for the producers. For some consumers ethical issues can also become part of their self-identity,
16 which leads them to purchase more of these products. Overall, their findings revealed that today’s consumers are less self-centered and they are also influenced by moral considerations.
Besides the evolving number of caring consumers of the 1990s, Strong (1996) also indicated other factors that led to the growth of ethical consumerism: pressure group support, media interest, increasing corporate responsibility, increasing supplier power (worker communities of the developing countries are more like partners due to the cooperative instead of competitive trading practices), higher quality and performance of alternative products, and the wider availability of alternative products. The pressure group support of NGOs, like the WFTO (World Fair Trade Organization) and Fairtrade International, has increased public awareness toward ethical issues and also put a pressure on companies to implement more ethical practices in their business. The activities of these pressure groups resulted later in higher media interest, and ethical issues became regular topics in media reports and television documentaries which also helped spreading the word of ethical concerns. Furthermore, many companies started to acknowledge the importance of supporting ethical issues and give more information for consumers about the environmental impact of their products. As a result, consumers became better informed which increased their demand for further information about the product they are purchasing. Companies also started to produce higher quality alternative products to be a good or better equivalent for normal products in order to attract more consumers to ethical products and increase their popularity. Later on, these products became widely available in stores and ethical issues became an important aspect of consumers’ purchase decision. All of these factors described by Strong (1996) led to the growth of ethical consumerism and influenced many companies to conduct their business practices more ethically.
Doane (2001) defines ethical purchase as a product that: a) is aligned with a particular ethical issue which can be human rights, animal welfare or the environment, b) gives consumers a choice between one product and an ethical alternative, c) reflects individual choice rather than a corporate
17 decision. The growing number of ethical consumers has increased significantly the market share of ethical consumption which then transformed the traditional marketplace (Doane, 2001)
2.5. Good corporate citizen
The growth of ethical consumerism highly influenced companies’ role in the society. Today’s consumers have high demand for companies to be a good corporate citizen who besides their main business, also support the society by participating in Corporate Social Responsibility (CSR) activities. The societal marketing concept emerged in the beginning of the 1970s (Schwartz, 1971) which supports the idea that business can be profitable and socially responsible at the same time (Abratt & Sacks, 1988).
Companies with good CSR reputation are able to elicit trust in customers who are interested in buying ethical products (Smith, 2003), mostly where trust is crucial in determining the consumer’s choice (Castaldo, et al., 2009). For example, there are many similar brands among consumer packaged goods, therefore trust toward a brand in this product category can highly influence consumers’ final choice. Besides eliciting trust, a firm’s CSR activity also affects the company’s image and the perception of its product. The firm’s CSR reputation creates positive spillover (halo) effect that will positively influence not only the image of the company, but also the perceived performance of the company’s product, mostly if the firm’s CSR is motivated by benevolence rather than self-interest (Chernev & Blair, 2015).
On the other hand, consumers also place increasing importance on firms’ ethical behavior which exerts influence on their purchasing behavior. The study of Creyer (1997) showed that the importance placed on the ethicality of firms’ behavior predicted consumers’ willingness to reward (by paying more for its product) or punish the company. Therefore, a company as a good corporate
18 citizen can gain great advantage not only for the society, but also for itself which may be a great incentive for companies to participate in CSR.
In the next chapter, the fair trade movement is going to be introduced which has become one of the most widely spread CSR initiative among companies due to the evolving awareness from the consumer’s side (Strong, 1996).
2.6. Fair trade
Fair trade is a global movement that has changed the structure of today’s international trade to a more just and equal direction where besides economic profitability, the welfare of the producers also has a greater concern. The beginning of the fair trade movement dates back to the 1960s and 1970s (Moore, 2004). During that time many Southern Fair Trade Organizations were established and created link to new organizations in the North. These relationships were based on partnership, dialogue, transparency and respect (World Fair Trade Organization, 2004) which opened a new direction in the international trade practices, therefore it was also called “alternative trade”. The word ‘alternative’ indicated that it operates under different set of values compared to traditional trade where the well-being of people and the preservation of nature is the main priority and profitability only has secondary importance (Renard, 2003).
The first formal fair trade shop that sold hand craft and other products of poor communities from the South was opened in the USA in 1958. The first trace of fair trade in Europe dates back to the late 1950s when Oxfam UK started to sell crafts made by Chinese refugees and later they created the first Fair Trade Organization in 1964 (World Fair Trade Organization, 2004). Following this event, similar initiatives took place in the Netherlands where the Fair Trade Original importing organization was established in 1967.
19 The European Fair Trade Association (EFTA) was formed in 1987, which holds together and supports the work of the 11 largest importing fair trade organizations in Europe. EFTA now is part of the World Fair Trade Organization (WFTO) which was founded in 1989 in the Netherlands (World Fair Trade Organization, 2004). WFTO is functioning as a global network of organizations representing the fair trade supply chain. It provides credibility and identity by the international guarantee system, supports connection and knowledge transfer among its members and spreads the values of the fair trade movement. Today the international Fairtrade system includes three producer networks, 25 Fairtrade organizations, Fairtrade International, and FLOCERT, the independent certification body of the global Fairtrade system (Fairtrade International, n.d.).
2.6.1. Goal of fair trade
The main principle of the fair trade movement is to change the unfair structure of international trade by promoting sustainable development and justice. The objective of the movement is to support and improve the life of farming and worker communities and to protect the environment in which they live and work by the protection of workers’ rights, the payment of the Fairtrade Minimum Price and an additional Fairtrade Premium to invest in business or community projects (World Fair Trade Organization, 2004).
The fair trade movement links the producers in the South with consumers in the North and one of the most powerful alternative trade initiatives in agriculture (Raynolds, 2000). The followers of the movement criticize the injustices inherent in the world economy and want to transform the trade with these communities into a vehicle of sustainable development. Since its foundation, it became widespread in the United Stated, Europe and other developed countries. The essence of the movement is “Trade, not Aid” by which they emphasize the equitable trade relations with the
20 South. Back then the North benefited from all the profit and only a small portion of it was transferred back as a development aid to the producers (World Fair Trade Organization, 2004).
The dispersion of the movement was also driven by the consumers who became more aware of the working conditions in the developing countries, mostly due to the increased level of information from the media (Strong, 1996). The rise of ethical consumerism has changed the structure of the marketplace and put a pressure on companies to adjust their practices regarding the demand of this new type of consumer group (Doane, 2001).
2.6.2. Fair trade in mainstream consumption – Fairtrade label
At the beginning, fair trade products were sold only in specialty stores, but as the interest started to grow toward these products, they started to appear in regular supermarkets and became more available for everyday consumption (Raynolds, 2000). In the late 1980s, European fair trade organizations began labeling fair trade products to facilitate their entry to the mainstream food market. Three fair trade labels were introduced successfully in different part of Europe: TransFair, Max Havelaar and Fair Trade Mark. These labels became united under the umbrella NGO, called Fairtrade Labelling Organization International (FLO), also called Fairtrade International that aimed to harmonize the fair trade standards of the different labeling practices and to create a single fair trade market. Today Fairtrade International is the organization that coordinates Fairtrade labelling at an international level. They set the international Fairtrade standards, organize support for producers around the world, develop the global Fairtrade strategy, and promote trade justice internationally (Fairtrade International, n.d.). In addition, they created standards for both producers of the developing countries and companies who market Fairtrade products.
Since consumers have become more sophisticated in their decision making due to the higher amount of available information, they place higher value on products with accurate information and clear labeling (Mackenzie, 1990). For this reason, good information quality about fair trade
21 and the clear labeling system provided by Fairtrade International aimed to increase consumers’ positive attitude toward these products which may eventually increase their purchase intention (Pelsmacker et al., 2006; Pelsmacker & Janssens, 2007). The introduction of the unified label helped to increase the visibility and credibility of fair trade products among consumers and differentiate them from conventional products (Fairtrade International, n.d.).
The FAIRTRADE label is the most globally recognized symbol of the international Fairtrade system which appears on products that meet the internationally-agreed social, environmental and economic Fairtrade Standards (Fairtrade International, n.d.). It is a registered trademark, owned and licensed by Fairtrade Labelling Organization International (FLO). The
mark can be found on over 27,000 products around the globe including food and drinks, cotton and clothing, jewelry made from Fairtrade gold and other precious metals. Many of the listed products are available in mainstream supermarkets to make it more easily accessible for consumers.
The introduction of the unified label by Fairtrade International increased significantly the sales of fair trade products, mostly due to their widespread appearance in supermarkets (Fairtrade International, n.d.). Even if the consumer wants to support the small producing communities, it required a lot of effort from them just to purchase few of these products in specialty stores. For this reason, to reach a greater audience, it was necessary to make them available in large distribution channels where consumers normally shop to make these products part of their buying habit (Renard, 2003). According to the annual report of Fairtrade International, the global sales of Fairtrade products reach €5.9 billion last year which is a 10% increase compared to 2013 (Fairtrade International, n.d.). In 2013 the annual sales was €5.5 billion which is a 14.6% growth compared to the sales in 2012. These numbers also support the aforementioned increasing worldwide
22 popularity of Fairtrade products. For this reason, Fairtrade, as a CSR initiative, can have a high potential to drive not only brand equity, but also the value and retention equity of the firm.
2.7. Research gap & Research question
Research gap
There are many articles that examine the importance of customer equity in the marketing strategy and the relationship of the three customer equity drivers but little research has been done in the context of CSR, especially in the context of fair trade, and how an ethical label influences the drivers of the firm’s customer equity in the consumer packaged goods category.
It has been found that firms’ ethical behavior is becoming important for consumers and they would reward companies that follow ethical practices (Creyer, 1997). However, it is worth conducting further research about how the importance of firms’ ethics influences consumers’ perception of a firm’s ethical product in the context of customer equity and its drivers. Furthermore, individuals’ nationality may also has an influence on the product evaluation and the level of importance of firms’ ethics for consumers, therefore it will be included in the conceptual model. The research may also give companies a better understanding about the impact of ethical labels and give them suggestions regarding its application.
Research questions: To what extent does the Fairtrade label on a product increase a firm’s
customer equity and change the relative importance of its drivers, and how consumers’ nationality and perception of firms’ ethical behavior moderates this customer equity relationship? Does nationality have an influence on the level of importance of firms’ ethics for consumers?
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3. Conceptual Model and Hypotheses
The analysis of the Fairtrade label’s effect on a firm’s customer equity is focused on consumer packaged goods that are available in supermarkets. First, the main potential customer equity driver of fair trade products will be identified then each driver will be analyzed separately to form hypotheses in order to build up the conceptual model. Individuals’ nationality and the level of importance of firms’ ethical behavior for consumers will be identified as a moderator. Furthermore, the influence of individuals’ nationality on the level of importance of firms’ ethics will also be examined. To analyze the influence of nationality, the study of Hofstede’s cultural dimensions was used (Hofstede, 1980). After the formation of each hypothesis, the conceptual model will be presented.
3.1. Fair trade products and customer equity
Most of the Fairtrade products in supermarkets are part of everyday consumption like chocolate, coffee, tea and so forth. These are frequently purchased packaged goods that require low-involvement from consumers in their purchase decision (Rust, Zeithaml, & Lemon, 2000, p.: 86.). Furthermore, there are many similar choices available within one category, therefore it is a better decision to focus on brand equity (BE) to increase consumers’ profitability. With better BE, firms can differentiate their products from their competitors and make them more visible for consumers to attract their attention (Keller, 2001). For the aforementioned reasons, it can be concluded that brand equity has the main driver role that primarily influences consumers’ decision and the customer equity of Fairtrade consumer packaged goods. However, there is also a great possibility that the Fairtrade label would positively affect not only the brand equity, but also the value and retention equity.
24 3.1.1. Value equity
When consumers purchase packaged goods, all of the three components of value equity: product quality, reasonable price and easy accessibility are determining their choice in different weight according to the buyer’s taste and preference.
In case of Fairtrade products, it was shown that the main motivation for consumers to purchase ethical products is to benefit the world’s poor (Bowes & Croft, 2007), therefore value equity has only a smaller driver role since consumers don’t buy the product primarily because of its good quality. However, there were studies that showed that the fair trade initiative itself will not convince consumers to purchase a product unless it shows similar or better value equity components as the product’s conventional counterparts (Ferran & Grunert, 2007; Meijers & Dam, 2012), or support other ethical concerns as well at the same time, for example by being organic (Connolly & Shaw, 2006).
The findings of Ferran and Grunert (2007) highlight the importance of fair trade products’ quality. They examined the purchasing motives of fair trade coffee buyers among French consumers where they found that consumers’ buying behavior is not only determined by the fair trade character of the product but also its taste in order to give satisfaction during consumption. According to their findings, consumers are buying fair trade products to satisfy their individual need by purchasing a good product while being socially responsible at the same time, therefore fair trade influences consumer choice mainly if the product also has good quality features.
The study of Meijers and Dam (2012) has similar findings regarding other value equity factors in determining consumer choice. They conducted research about sustainable food purchase among Dutch consumers where they found that the most successful fair trade products have relatively good quality beside the sustainable factor and are also easily accessible for consumers to
25 purchase. This implies that Fairtrade has more added value on products with relatively good quality and accessibility, and sustainability alone has weaker influence.
Many consumers are willing to pay a higher price for ethical products which is considered as a reward for the company’s ethical behavior according to the results of the research conducted by Creyer (1997). However, the higher price may mainly signal fairer wages for the laborers and not necessarily the better quality, therefore lower price premium is more attractive for consumers in case of fair trade products (Herpen, et al., 2012). This means that consumers will have higher incentive to act ethically due to the reasonable amount of sacrifice. A study showed that consumers are generally willing to pay 10% more for Fairtrade products (De Pelsmacker, et al., 2005). When there is no price premium for fair trade, consumers may assign better price-quality to the ethical product, thus for the same price, consumers would choose the fair trade product instead of the normal one (Pelsmacker et al., 2006).
We can conclude that even if value equity does not have a significant driver role, firms cannot neglect the good price-quality component of their Fairtrade products to make them attractive for consumers. However, the Fairtrade label may affect positively the price-quality perception of the product, therefore the first hypothesis is based on that the application of the Fairtrade label will increase a brand’s value equity which means that consumers will assign better value for the ethical product compared to its normal counterpart.
H1: The Fairtrade label increases the product’s value equity compared to the same product without
the label.
3.1.2. Brand equity
There are three elements that drive Brand equity: customer brand awareness, customer attitude toward the brand and customer perception of brand ethics (Rust, Zeithaml, & Lemon, 2000, p.:
26 87.). In this research the focus is on the influence of a commercial brand’s CSR activity on its customer equity where Fairtrade is the CSR initiative. The brand equity of the commercial brand will be analyzed in the context of Fairtrade.
When a company decides to participate in fair trade, they can cooperate with NGOs to use their recognized fair trade label, and one of these is the label of Fairtrade Labelling Organization International (Fairtrade International, n.d.). During the cooperation, the label of the NGO is displayed on the commercial brand’s product that is sourced through fair trade. This cooperation in the marketing strategy perspective is defined as co-branding that is a long-term brand alliance strategy in which one product is branded and identified simultaneously by two brands (Helmig, et al., 2008). If we define this co-branding in CSR perspective and look at the types of collaborations with nonprofits, we can identify it as ‘business-nonprofit partnership’ or ‘social alliance’ which is a long-term symmetrical relationship that requires active involvement from both parties and transfer of resources in order to address collaboratively a social issue (Seitanidi & Ryan, 2007). The brand alliance with the Fairtrade label is advantageous for both the commercial brand and the ethical labeling organization (Sénéchal, et al., 2014), for this reason, the two brands together would result in higher brand equity than separately.
The brand recognition and awareness of the commercial brand could be assumed as high, mostly if it is a well-known brand, due to its wide customer base and availability. The recognition of the Fairtrade label is also above average since it advocates a cause that involves important environmental and social concerns, in addition, this is the most credible and worldwide recognized fair trade label (Fairtrade International, n.d.). For this reason, the combination of the Fairtrade label and the commercial brand would result in increased brand awareness and beneficial consequences for both sides. The nonprofit organization could use the customer base of the commercial brand to reach a broader audience in order to raise awareness and credibility for the fair trade movement.
27 Furthermore, a commercial brand may have better financial stability to invest extra time and money for the cause which would set good example for other companies and help the spread of this ethical trading practice among them. On the other hand, the brand can be also acknowledged as a good corporate citizen by consumers after the alliance which would generate more positive associations about the company and increase its popularity.
The commercial brand could highly benefit from the positive association transfer from the Fairtrade label that may positively improve the second driver of brand equity, which is consumer attitude toward the brand. The Fairtrade in this context is considered as an indirect or secondary association that can be used as a way to build a firm’s brand equity (Keller, 2005). The alliance can help the firm leveraging the secondary associations of the good cause to the brand which then would upgrade the brand’s associative network positively. Associations from the Fairtrade label can be for example: responsible, honest, benevolent or just. However, it is also possible that the label signals associations related to better quality, taste or value. Furthermore, the effect of secondary associations on consumers’ product evaluation is more likely if they lack the motivation or the ability to judge it on a deeper level (Keller, 2005), for this reason, these additional associations can be highly beneficial for consumer packaged goods where consumer purchase behavior is mainly characterized by low involvement. Therefore, through the favorable secondary association transfer, Fairtrade can increase consumers’ attitude and trust toward the product which may convince them to consider the product as a good choice.
By participating in the fair trade movement, companies can reflect their values regarding social responsibility which can be, for example equality in the world society, fairness, decreasing poverty and so forth. The values showed by the firm may help consumers to relate to the brand and form deeper connection with it (Chernev & Blair, 2015), therefore firms’ ethical behavior is unneglectable. The values signaled through the Fairtrade label can be good indicators for
28 consumers about the commercial brand’s ethical concerns. It is need to be mentioned that the firm’s ethical behavior drives the image of the company and its product only if it’s motivated by benevolence rather than self-interest (Chernev & Blair, 2015). The active engagement in the fair trade movement can be considered as a benevolent motive, since it requires greater amount of resources from the company to implement the new practice in its strategy and operational processes (Seitanidi & Ryan, 2007), therefore only a highly devoted company will consider to invest in the cause. For this reason, commitment toward fair trade would be appreciated by consumers. Furthermore, if these values represented by the firm are also important for the customer and in line with their own values, then it will positively influence customer perception of brand ethics, the third important driver of brand equity (Rust, Zeithaml, & Lemon, 2000, p.: 91.).
Regarding the assumptions about the effect of the Fairtrade label on brand equity based on the previous argumentations, the second hypothesis can be formed which states that the Fairtrade label will improve the overall brand equity of the product.
H2: The Fairtrade label increases the product’s overall brand equity compared to the same
product without the label. 3.1.3. Retention equity
Brand loyalty works differently according to the type of the product category. It can be classified into three groups based on the market type: consumable goods markets (including FMCG), durable goods market and service markets (Rundle-Thiele & Bennett, 2001). Fair trade products in supermarkets, which are the focus of this research, are part of the first, consumable goods market. This market is characterized by divided loyalty which means that consumers have frequent brand switching behavior. Furthermore, consumable markets are more defined by behavioral rather than attitudinal loyalty which is the outcome of the habitual behavior during product purchase (East,
29 1997). However, it is possible to break the habitual nature of the purchase by adding new or innovative feature to the product so the consumer would more likely engage in the decision making (Rundle-Thiele & Bennett, 2001). According to this, participation in fair trade can be the feature that triggers greater involvement from consumers which may lead to more frequent repurchase behavior toward Fairtrade products.
Because of the high switching and low involvement characteristics of the consumable markets, behavioral measures are appropriate for predicting future brand loyalty levels (Rundle-Thiele & Bennett, 2001). For this reason, we can measure the influence of the Fairtrade label on the product’s retention equity by examining consumers’ purchase frequency. Finally, the third hypothesis can be formed which states that the Fairtrade label will improve a firm’s retention equity by increasing consumers’ tendency to repurchase the product.
H3: The Fairtrade label increases the product’s retention equity compared to the same product
without the label.
3.1.4. Evaluation of the customer equity
The evaluation of the firm’s customer equity after the introduction of the fair trade label is based on the evaluation of the three drivers of CE. After examining the three main drivers and their sub-drivers separately in the context of the Fairtrade label, brand equity was identified as the main driver for customer equity (Rust, Zeithaml, & Lemon, 2000, p.: 86.). Since there is high similarity between packaged consumer goods, the brand would be the sign that signals difference for consumers to help them make their purchase decision. The Fairtrade label may add value to the commercial brand which would attract more customers to the product. Value equity can also be improved in a lower extent by the Fairtrade label, so consumers may assign better price-quality to the product. Higher value and brand equity may lead to increased retention equity which would be
30 exhibited in more frequent repurchase of the product. Overall, a firm’s commitment toward fair trade would improve its customer equity by increasing the performance of its customer equity drivers and attracting more customers to the product which may contribute to the firm’s long-term profitability. Therefore, the hypothesis can be formed about the positive effect of the Fairtrade label on a firm’s customer equity through improving each drivers of CE and attracting more customers to the product.
H4: The Fairtrade label increases the firm’s customer equity through improving its CE drivers and
attracting more customers to the product.
3.2. Companies participation in fair trade
The new, ethical consumer group provided the main driver behind the growth of the fair trade market (Raynolds, 2002). They put a pressure on companies to involve ethical practices in their business strategy. Therefore, many companies have decided to participate in the fair trade movement where besides the good cause, the movement also gave them a new way to fulfill corporate social responsibility objectives which opened a new direction in the marketing management practices (Witkowski, 2005).
A firm’s CSR activity influences not only the image of the company, but also the consumer’s perception of its product (Chernev & Blair, 2015). Since fair trade has become an important issue for many consumers, they are rewarding ethical companies who produce goods in a socially and environmentally-friendly way (Doane, 2001) by purchasing more fair trade products, being more loyal or showing more positive attitude toward the company (Castaldo, et al., 2009). Therefore, it can be implied that the Fairtrade label may positively influence the perception of a firm’s product which then improves the value, brand and retention equity of the company. These factors would drive then the firm’s customer equity and lead to better long-term customer profitability.
31 It can be seen that firms’ ethical behavior has become more and more important for consumers which influence their purchase behavior as well. The findings of Creyer (1997) demonstrated that the level of importance of firms’ ethical behavior predicted consumers’ willingness to reward or punish the company. This may imply that the effect of a company’s participation in fair trade on the customer equity drivers can be moderated by the level of importance of firms’ ethical behavior for consumers. If it is not or less important for them, then they would value the product with the Fairtrade label less, therefore the label may fail to drive the firm’s customer equity. On the other hand, if firms’ ethical behavior is really important for them, then they would evaluate the Fairtrade product as a better choice compared to the product without the label, thus the customer equity of the firm would be increased through the ethical label. According these assumptions, the hypothesis can be formed about the moderating effect of the level of importance of firms’ ethical behavior for consumers on a firm’s customer equity drivers.
H5: The importance of firms’ ethical behavior for consumers moderates the effect of the Fairtrade
label on the firm’s customer equity, and the effect is stronger for higher level of importance of firms’ ethics.
3.3. The influence of nationality
Hofstede describes culture as “the collective programming of the mind which distinguishes the members of one human group from another” (Hofstede, 1980, p.: 25.). The society of a country as a complete human group shares common traits as part of their culture which differentiate them from other countries’ society. Culture itself has the ability to influence individual behavior of the members, therefore it also may have an impact on their consumer behavior and how they treat social responsibility issues. Subsequently, consumers can evaluate ethical products and show different patterns of attitude toward companies’ ethical behavior according to their country of
32 origin. The effect of nationality can be analyzed on Hofstede’s six cultural dimensions which are power distance, individualism, masculinity, uncertainty avoidance, long term orientation and indulgence (The Hofstede Centre, n.d.). According to the aforementioned assumptions, two hypotheses are formed regarding that consumers’ country of origin can moderate the effect of the Fairtrade label on a firm’s customer equity and influence the level of importance of firms’ ethics for them.
H6: The consumer’s nationality moderates the effect of the Fairtrade label on the firm’s customer
equity.
H7: The consumer’s nationality influences the moderating effect of the importance of firms’ ethical
behavior for consumers.
3.4. Conceptual Model
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4. Research Design
4.1. Procedure
This is an explanatory, quantitative research that will be carried out by using cross-sectional experimental survey design. A firm’s customer equity (CE) can be best measured from the consumer’s perspective, therefore the answers through the survey will give a good statistical basis to answer the research question. Two surveys are created to measure the change in customer equity and will be assigned to the respondents in an evenly randomized way. One of the surveys will measure the customer equity of a normal product, the other one will measure the customer equity of the same product with the Fairtrade label. The chosen product is Lipton rooibos tea because it is a worldwide known brand, owned by Unilever, therefore the research can better test the influence of the Fairtrade label on a commercial brand. Both questionnaires also contained questions regarding how important firms’ ethical behavior is for the respondent to measure one of the moderator of the conceptual model. At the end, respondents had to answers general questions regarding their nationality, age, gender, education and employment.
The non-probability, convenience sampling technique was used for data collection since the population of this study is not restricted to a certain group, instead, the more diverse the population, the better it is. The survey was only available in English and distributed through online channels: Facebook and e-mail. Respondents filled out the survey anonymously, moreover, the data collected through the survey was treated confidentially and only used for the purpose of this research. The data collection period was 2 weeks.
4.2. Sample
Eventually 168 responses were recorded, 84 responses per each questionnaire. The final sample of the first survey that measures the customer equity of the normal Lipton tea, consists of 27 men and 57 women (67.9% of the sample), among which 64 students (76.2%), 13 working part-time and 7
34 working full-time. Most of the participants own a higher educational degree (94%), which is a bachelor, master’s or higher level. Higher percentage of the respondents in the age range 18-25 (68 people, 81%), 15 respondents are in the 26-34 and 1 respondent in the 35-54 age group. 72 out of 84 (85%) respondents have a European nationality and there are some nationalities from Asia, Middle-East, Africa and South America. Regarding their country of residence, 95% reside in a European country, where 58.3% are staying in the Netherlands.
The final sample of the second survey, which measures the customer equity of the Fairtrade Lipton tea, consists of 34 men and 50 women (59.5%). In this sample there are 64 students (76.2%), 13 full-time employer and 7 part-time employer. Most of the respondents obtained a bachelor, masters or higher degree (86.9%). Majority of the respondents are in the 18-25 age range (75%), 23.8% in the 26-34 age group and only 1 person in the 35-54 group. 73 out of 84 (86.9%) have a European nationality, and there are some nationalities from the United States, South America and Asia. Similar to the first survey group, 95% resides in a European country, where 56% accounts for the Netherlands.
4.3. Measures
In the questionnaire, Lipton rooibos tea will be used as a tool to measure the influence of the Fairtrade label on a firm’s customer equity (CE). One survey will measure the CE of the normal Lipton rooibos tea, the other one will measure the CE of the same product with the Fairtrade label. There will be an illustration of the tea in both cases. Both surveys with the questions can be found in the appendix.
The main driver of tea consumption. The first block of both questionnaires is the same and includes questions regarding preferences about tea consumption. The purpose of this part is to examine how much role each driver (value, brand and retention equity) plays among tea products that may help to describe the measured CE of Lipton tea with and without the label. In this section,
35 the respondent has to rate the aspects about value, brand and loyalty on a 7-point Likert scale. Furthermore, there are two questions at the end of the block which ask about the tea drinking habit of the respondent. The questions of this block are created in cooperation with my supervisor.
Customer Equity. To measure the drivers of customer equity for both products, scales of related, peer reviewed literatures were used. The adapted measures were all measured on a validated 7-point Likert scale, ranging from strongly disagree (1) to strongly agree (7). The meaning of the two end is modified according to the statement.
Value equity is measured by using 3 items of the scale developed by De Pelsmacker et al. (2006) adopted by Kim, Lee, & Park (2010) to measure fair trade product beliefs that resulted in a Cronbach’s alfa of 0.83. The 3 items include aspects of quality, taste and well-being. In addition, 1 item of Rust, Zeithaml, & Lemon (2000) is used to measure the driver role of price. The subject of the evaluation was modified according to the condition. Examples include in the Fairtrade condition: “Quality perception of Fairtrade Lipton rooibos tea” and “The price of Fairtrade Lipton rooibos tea matches the overall perceived quality”.
Brand equity will be measured by using 3 items of the scale developed by Washburn & Plank (2002) adopted by Holehonnur et al. (2009) to measure overall brand equity. Cronbach’s alfa of this scale is 0.92. The scale included “It makes sense to buy Lipton tea instead of any other brand, even if they are the same”, “Even if another brand has same feature as Lipton, I would prefer to buy Lipton” and “If there is another brand as good as Lipton, I prefer to buy Lipton”.
Retention equity will be measured according to purchase intention by using 2 items of the scale developed by Dodds, Monroe & Dhruv (1991) adopted by Holehonnur et al. (2009.) with Cronbach’s alfa of 0.94. The subject of the items was modified according to the condition. Items include: “The likelihood of purchasing this product is” and “The probability that I would consider buying the product is”.
36 Consumer’s perception of firms’ ethical behavior will be measured by using 10 items of the scale developed by Creyer (1997) that measured the importance of firms’ ethical behavior for consumers. Cronbach’s alfa of this scale is 0.91. Two of the items are counter-indicative. Examples include “I really care whether the companies whose products I buy have a reputation for unethical behavior” and “It really pleases me to find out that a firm I buy from has acted ethically”.
In addition, both surveys include questions regarding habit of Fairtrade product purchase. Examples include “Have you ever purchased fair trade products?” and “What type of fair trade products have you purchased?”. These questions are created in cooperation with my supervisor.
Nationality. To test the effect of nationality, each country will be scored according to Hofstede’s six cultural dimensions based on the data of the Hofstede Centre.
37
5. Data Analysis and Results
5.1. Data analysis
The data obtained through the questionnaire was analyzed with IBM’s Statistical Package for Social Sciences version 22. The counter-indicative items were re-coded and 30 partially completed responses were eliminated since they had many questions without an answer.
Scale reliability is viewed in the two surveys separately. Cronbach’s alfa coefficients indicate that the instruments are reliable. The values are in the non-Fairtrade Lipton tea condition: 0.90 for the Importance of Firms’ Ethical Behavior, 0.79 for Value Equity, 0.88 for Brand Equity and 0.96 for Retention Equity. The Cronbach’s alfa values in the Fairtrade Lipton tea condition: 0.92 for the Importance of Firms’ Ethical Behavior, 0.704 for Value Equity, 0.83 for Brand Equity and 0.88 for Retention Equity. Each of the scale has high reliability since all Cronbach’s alfa coefficients were above 0.70. Furthermore, no changes has made to the existing item compositions because none of the items would substantially affect reliability if they were deleted.
Normality check was performed for each scale item in both conditions. In the normal Lipton tea condition, the data for each item is normally distributed. In the Fairtrade tea condition, two outliers were identified but none of them were removed because they not significantly affect the analysis. The response values for “Importance of buying the same tea brand all the time” have positive skewness because most of the values are concentrated in the negative side of the scale, which means that it is really not that important for the respondents. The response values for the “Quality perception of Fairtrade Lipton rooibos tea” have positive kurtosis because respondents rated it highly, mostly with 5 or 6, which means that they value highly this tea.
Correlation analyses are used for testing the strength of the relationships that exit between the different variables of the model. The control variables in the model are: nationality, country of
38 residence, age, gender, level of education and type of employment. Bivariate correlations were used to create the correlation matrix.
Scale means were computed for each scale variables and then means related to the customer equity of the two types of Lipton tea were being compared by using One-way ANOVA to test the significance of Fairtrade label’s effect on the examined commercial brand’s customer equity drivers. In order to test the moderating effect of Importance of Firms’ Ethics and Nationality, the Process macro written by Andrew F. Hayes for SPSS was used. Before the analysis, the different nationalities were transformed into scores according to Hofstede’s six cultural dimensions (The Hofstede Centre, n.d.). Furthermore, these scores were also used for the regression analysis to examine the linear relation between the respondent’s nationality and the level of importance of firms’ ethical behavior for consumers.
5.2. Results
5.2.1. Tea consumption
The tea drinking habit of the respondents was measured in both conditions. In the non-Fairtrade group 52.4% of respondents usually buy or drink the same tea brand and 42.9% is not sticking to a specific brand. In the Fairtrade group, 46.4 % was in the first group, and 40.5% doesn’t have a preference regarding tea brand. In both groups a higher percentage of people usually buy or drink the same tea brand that may prove the habitual nature of tea consumption. Only a small proportion (first group: 4.8%; second group: 13.1%) of respondents don’t drink tea.
Furthermore, the brand awareness and purchase of tea brands were also measured. The question was related to which tea brand does the respondent usually buy or drink. In both groups, the Lipton brand was the most frequently mentioned tea brand which is followed by Pickwick. In
