The importance of a brand name for Dutch professional service companies based on rational thought: An empirical research

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The importance of a brand name for Dutch professional

service companies based on rational thought:

An empirical research

Master Thesis

By

John Hoogland

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The importance of a brand name for Dutch professional

service companies based on rational thought:

An empirical research

Master thesis

By

John Hoogland

University of Groningen Faculty Business and Economy

MSc BA Marketing Management

MSC25121750011

Jan van Goyenstraat 34 7944VP Meppel

(06) 20114085

J.Hoogland.2@student.rug.nl S1750011

Supervisors: Drs. J. (Hans) Berger & dr. K.J. Alsem External supervisor: Aart van den Hoorn

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Management summary

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study revealed that, in a Dutch professional service market, there are more factors of importance in decision making, namely price, the employees (contacts within the company, flexibility, availability) and completed similar assignments. Test results showed that there are three important pillars for succeeding in a professional service market: (1) provide prove that your company delivers high quality services; (2) provide prove that your company has capable employees and/or; (3) provide prove that your company has the right (lowest) price or good value-in-use. Also we wanted to find variables with a predictive value for the most important factors. This information could contribute to a better use of company data since you then know the general preferences of a certain group in relations to their most important factor. For example, this study revealed that large sized companies tend to greater appreciation of contacts within the company over expected quality. Also, when a company has already made use of improvement courses it is more likely they would greater appreciate flexibility of the employees instead of expected quality. In total we found four categorical and seven interval variables with a predictive value attached to them.

The customer based brand equity itself was calculated by combining scores on three separate constructs, namely brand awareness, brand image and brand loyalty, each with their own indicators. Basically four general conclusions can be drawn here: (1) Bedaux is not a well known brand outside its client base; (2) not even all clients of Bedaux recognized the brand name Bedaux; (3) brand image had mediocre scores, either indicating that the respondents do not have enough brand knowledge or its clients indeed find that likely quality, likely functionality and the brand name Bedaux itself are mediocre; (4) there are clients who think they are loyal, when in fact there is only one client who would actually choose Bedaux over its competitors. Furthermore we calculated a CBBE score which serves as a simple tool to get a quick overview of your progress throughout the years. You can easily discover a trend or direction of your CBBE score, instead of following three different directions for each construct. The final CBBE score for Bedaux was 0,539 (on a scale of 0-1). Based on the construct scores and their individual indicators and based upon the most important factors in decision making we believe that there are three improvement routes for Bedaux: (1) provide prove that your company delivers high quality services; (2) provide prove that your company has capable employees; (3) provide prove that you deliver a better value-in-use than your competitors. Focusing on lowest price offerings is not recommended since respondents rated Bedaux’s price as the same or higher than competitors, thus offering a good value-in-use would be more sensible.

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Preface

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In the introduction the company Bedaux and the question which lead to this thesis will briefly be discussed. Also you will find a problem statement accompanied with several hypothesizes to tackle the ‘issues’ discussed throughout this thesis. Furthermore the scientific and practical relevance for this thesis are discussed. At the end a chapter overview of the thesis will be given.

1.1 Short company introduction

Bedaux is a small company with four partners, one office manager and some associates who lend their services when Bedaux needs more manpower. Bedaux is a consultant agency that specifically targets companies that want to improve the way they work. In general, Bedaux specializes in process improvements and continuous change management (Kaizen-philosophy). They offer a variety of training and support programs regarding these main issues. For example, Bedaux coaches companies how to direct continuous change management, conduct force field analysis, how to implement lean management and how to get things done. Moreover, they do not only practice continuous change management on a company level, but they also include the whole supply chain. Bedaux operates in Belgium, Germany and (mostly) the Netherlands and has a long list of current and previous employers. The companies they work with are very different in size as well as in the area of expertise. To illustrate, the list contains 6 companies that appear in the Fortune 500 as well as much smaller companies. Furthermore, Bedaux has a so called ‘Kaizen Gebruikers Groep’ (KGG), which roughly translated means ‘Kaizen user group’. This group started in 1998 and found its origin in Belgium and the Netherlands. Its members are companies that actively practice continuous improvement (Kaizen) in the Netherlands and Belgium. During the meetings an active role on their side is also expected. To elaborate, every year there are four companies that welcome employees of other companies for a visit (divided over different periods in that year). With the help of Bedaux, the host arranges a process walk through and kaizen related assignments. The goal, among others, is to learn from each other by gaining different insights, develop new ideas, and keep each other focused and stay up-to-date regarding Kaizen/continuous improvement.

1.2 Background problem

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sufficient brand knowledge. With the help of customer based brand equity and the importance of a brand name an answer to both questions (worth the fee / sufficient brand knowledge) will be presented. Moreover, an analysis on the importance of a brand name in the professional service company in general will be done, as for the importance in decision making of other factors like expected quality, price etc. This will help determine the importance of a brand name in a professional service context.

1.3 Problem statement and Hypothesizes

In order to translate the organizations specific problem to a more general problem statement we need to look at the basic elements concerning the problem mentioned above. The importance of a brand name is the general topic we need to address here as well as customer based brand equity. Overall, this thesis has several goals/aims. These aims are transformed into relevant questions which will be answered in this thesis. These aims are summed up below:

1) How do we calculate a Customer Based Brand Equity Score (CBBE score) for Bedaux? 1.a) do the customers of Bedaux have sufficient brand knowledge?

1.b) are the customers of Bedaux loyal?

2) What is the importance of a brand name in a Dutch professional service market based on rational thought?

3) What are the most important variables in decision making for a professional service company?

4) Can we predict the possibility that someone chooses a certain factor that is most important for his company?

5) Is the brand name Bedaux worth 2% of the annual turnover?

Problem statement for practical part – relates to questions 1 and 5.

The problem statement for the practical part is ‘how to conduct a proper Customer Bases Brand Equity (CBBE) analysis in order to gain insight in the brand knowledge and brand loyalty of Bedaux’s customers’. This is more extensively discussed in paragraph 2.1 – 2.3. Whether the brand name is worth the annual fee of 2% is also a practical issue. Advice will be based upon results from the first 4 questions and sub questions named above.

Hypothesizes for scientific part – relates to questions 2, 3 and 4.

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H1: The brand name importance has a stronger relation with expected quality and financial means to rectify failure than with price, contacts in the company, flexibility of the employees, history of the company (origin), contacts with the company in the past, handled former similar projects, breadth of the offered services, depth of the offered services and accessibility of the employees.

H2: The brand name importance is associated with expected quality;

H3: The brand name importance is associated with expected financial means to rectify failure; H4: The brand name importance is associated with price;

H5: The brand name importance is associated with contacts in the company; H6: The brand name importance is associated with flexibility of the employees; H7: The brand name importance is associated with history of the company (origin); H8: The brand name importance is associated with contacts with the company in the past; H9: The brand name importance is associated with handled former similar projects; H10: The brand name importance is associated with breadth of the offered services; H11: The brand name importance is associated with depth of the offered services; H12: The brand name importance is associated with accessibility of the employees.

Furthermore the question rises, which of these variables mentioned in the hypothesizes (expected quality, price etc.) are most important in decision making in a professional service market?

Also we want to predict the possibility that someone chooses a certain factor that is most important for his company.

1.4 Scientific and practical relevance

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As said earlier in this paragraph, a brand name is an important aspect, or is even considered as a critical part of a brand (Aaker, 1992). For instance, a brand name plays a part in creating brand equity, together with a logo or symbol supported by the integration of brand identities in marketing programs (Keller, 1991). However, for smaller sized businesses in mature markets is hard to build a strong brand with a strong brand name. There are competitors that offer similar services, and there are endless possibilities to communicate with your target audience (Kohli, 2005). For these smaller professional service companies it is often true that their brand name isn’t as well known as other, leading brand names. Turning your unknown brand name to a well known brand name is very difficult, but what do you actually gain? Keller and Lehman (2006) note that well-known brands provide a role in reducing risk. They say that well known brands signal quality (both in terms of mean and variance) and having more financial means to rectify failure. These signals lead to an increased confidence in decision making, and thus will result in more ´sales´ and a positive influence on brand equity. Keller and Lehman (2006) also noticed a gap between research on customer based brand equity and the current literature concerning the impact of increased confidence. Therefore, this research will measure to what extent increased confidence in decision making (reflected by expected quality and financial means) is a key or even critical factor for professional service companies and also assess the impact it has on brands. Finding out whether or not this increased confidence is an important factor in the professional service market could be of value for these smaller professional service companies. These smaller companies often lack a well-known brand name and thus often lack the ability to make use of this increased confidence in decision making. Whether or not this represents a major of minor problem for your company will be determent.

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influences on a decision are not easily measured by online surveys. Rational decision making is, since respondents can take all the time they need before answering (difficult) questions.

When all questions have been answered the final, critical question for the company Bedaux can be answered: is the brand name ‘Bedaux’ worth a fee of 2% of the annual turnover? The decision will be based on: (1) the Customer Based Brand Equity, which is measured by brand awareness and brand loyalty (2) the importance of a brand name on increased confidence in decision making, measured by the association between a brand name and expected quality and financial means and (3) the most important factors in decision making.

To summarize, the scientific value of this thesis is best described as following: this thesis evaluates and quantifies the value of a brand name for a Dutch professional service company based on rational thought. The practical value of this thesis is best described as following: this thesis provides insight in Bedaux’s Customer Based Brand Equity, provides advice on the annual fee issue and provide predictor variables for a better use of company data.

1.5 Structure of the thesis

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2. Theoretical Framework

This thesis has a main focus on the value of brands in service companies and most of its measurable, often intangible assets. All theory discussed in this chapter will help professional (B2B) companies, who offer services instead of products, evaluate their brand (name) on different (but also closely related) aspects. A big difference between offering services and products is that service companies often have little or no physical products, this should be taken into account when constructing the framework. Thus the final survey questions will also be aimed at measuring service aspects instead of products (for example measuring quality of the service and service functionality, whether or not they made us of services like training, external management and improvement courses etc.). For the practical part of this thesis, a brand equity score will be calculated for a brand. In order to evaluate the brand name and brand equity, we determined which constructs we need to measure. We want to know what the value of a brand name for a company is, or in other words the equity of a brand. In this theoretical framework we will first discus several constructs of brand equity. The Customer Based Brand Equity score (CBBE score) is a product of three constructs. It is not a conceptual model which needs to be tested. A CBBE score will simply be calculated by combining all three construct scores. The exact procedure and how to deal with the different measurement scales is explained in paragraph 3.2.4. Furthermore, in paragraph 2.4 we will focus on the importance of a brand name for professional service companies. We will discuss a brand name’s signaling effects (expected quality and expected financial means to rectify failure), but also some other possible factors of importance for decision making in a professional Dutch service market. Moreover, we will address the issue of predicting the most important variable for a certain type of client. We will end this theoretical chapter with a conceptual model on all relations discussed in paragraph 2.4.

2.1 Aspects of Brand equity

We can distinguish brand value, or brand equity in three different ways. According to the research Keller and Lehmann (2006) did, these different perspectives are:

1. Customer based

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cognitive and behavioral brand equity at the individual consumer level through a consumer survey. In other words, a customer survey is held for calculating the equity of a brand.

2. Company based

Keller and Lehman (2006) define company based brand equity, in economic terms, as: brand equity can be seen as the degree of “market inefficiency” that the firm is able to capture with its brands. In other words, due to the brand name a company can capture more market share and communicate more effectively. You can also consider a brand name as an investment opportunity, and the benefits you gain as an increase in market share and/or communicate more effectively. Furthermore, these “market inefficiency” can also lead to asking price premiums by leading brands. Also, well known brands are often seen as companies having high quality products and services. Yoo and Donthu (2001) speak of firm based measures, collected by financial market, accounting, and store-level scanner data without contacting consumers.

3. Financial based

When we take a look at financial based brand equity, we focus on a financial level. Here we look at brands as assets, which can be placed on a balance sheet of a company. This is particularly useful to know for buying and selling purposes. Brand equity is defined as the incremental cash flows which accrue to branded products over unbranded products. The estimation technique extracts the value of brand equity from the value of the firm's other assets (Simon and Sullivan 1993). When you measure this regularly, you can see whether your brand value increases, decreases or stays the same after negative or positive influences.

So when you want to know the impact of a brand name on a customer, either positive or negative, you can measure the customer based brand equity. When you want a more financial approach of brand equity the company- and financial-based brand equity perspective are in order. These different perspectives make clear that there are more ways than one to define and measure brand equity. In this thesis we will only focus on the customer based brand equity, as mentioned earlier in the introduction. The company- and financial-based brand equity part does not lie within the scope of this research since we want to know the clients brand perception. To this end we need contact with these clients. The company- and financial-based brand equity calculate a brand equity score without contacting clients and does not measure the perceptions of the clients.

2.2 Customer Based Brand Equity: brand knowledge

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Keller (1993) as a brand node that consists in memory and to which a variety of associations are linked. Brand knowledge consists of brand awareness and brand image, and they can be separated even further. Below we will discuss these aspects of brand knowledge into greater detail.

2.2.1 Brand awareness

For the part on brand awareness and its underlying dimensions, the definitions of Keller (1993) are used. Brand awareness relates to the strength of the brand node or trace in memory, as reflected by consumer’s ability to identify the brand under different conditions. Increased brand awareness increases the likelihood that the brand will be a member of the consideration set. When your brand is part of the consideration set your company could be chosen to do business with. However, when your brand is not part of the consideration set your company will never be chosen. As a company you probably want 100% brand awareness in your market, however, this is not easily achieved by smaller sized businesses, and not even by most (if not nearly all) larger sized businesses. However, if your brand name has little brand awareness, you need actively search for clients, which can be quite difficult. In order to measure brand awareness we need to take a look at brand recognition and brand recall.

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2.2.2 Brand Image

We will begin this paragraph with an introduction to brand image by defining the meaning of brand image and its related aspects. Keller (1993) defines brand image as perceptions about a brand as reflected by the brand associations held in consumer memory. Brand associations are the other informational nodes linked to the brand node in memory and contain the meaning of the brand for consumers. The amount of information regarding brand associations can be classified into three different categories, namely attributes, benefits, and attitudes.

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usage imagery can also produce brand personality attributes. Measuring these attributes can give you an insight in emotions or feelings evoked by the brand. For the Netherlands (and 8 other European countries) a brand personality for a brand has the following dimensions; activity, responsibility, aggressiveness, simplicity and emotionality (Geuens, Weijters, de Wulf 2009). However, we deal with other businesses, not with consumers. The question is; are these brand personality attributes also relevant for the B2B service markets? For sole traders it could be, because they themselves ‘are’ their business, but for bigger clients you often have to deal with DMU’s (Decision Making Units), who each have their own composition. These DMU in ‘larger’ companies are often not as emotionally attached to the company as a sole trader and his business, and they most likely do not make decisions based on similar personalities they share with a brand.

Brand benefits is defined by Keller (1993) as the personal value consumers attach to the product or service attributes, or in other words, what consumers think the product or service can do for them. In a B2B service market you can ask customers what they think the functional benefits are, for example problem removal or avoidance. They usually relate to product-related attributes, so to the ingredients needed to perform.

The last category we discuss is brand attitude, which is the consumers overall evaluation of a brand. There are a couple of reasons why the overall brand attitude is a method to use with caution. For starters, studies have shown that when people lack the motivation or ability to evaluate a service, they may use signals or extrinsic cues to determine the quality. Using these simple heuristics and decision rules make decision making more easy Petty et al. (1983). Furthermore, Keller (1993) also speaks of evaluative consistency. This happens when consumers infer the favorability of a brand attribute or benefit on the basis of their overall brand attitude or their evaluation of some other perceived attribute or benefit. For measuring the overall brand attitude, the expectancy-value model (EVT) is often used (Keller 1993, Percy and Elliott 2004). However, this model will not be used in this thesis.

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2.3 Customer Based Brand Equity: brand loyalty

In the overview of customer based brand equity by Keller (1993) a dimension that could be useful for professional service companies was missing. This dimension is called brand loyalty. Yoo and Donthu (2001) define this dimension as following: ‘it is the tendency to be loyal to a focal brand, which is demonstrated by the intention to buy the brand as a primary choice’. In this research however, it is defined as: the tendency to be loyal to a focal brand, which is demonstrated by the intention to make use of the brands services as a primary choice’. By measuring the brand loyalty of your customers you know how likely it is that they will choose your company whenever they require the service again. It is obvious that the value of a brand rises when they have a large group of loyal customers. When you do not have a loyal group of customers, you need to constantly search for new customers, which is often expensive. Also a company that invests in your company (money, time) creates an exit barrier for itself, which makes switching more difficult (Narayandas 2005). When you want to measure loyalty you can ask your customers whether your company would be the first choice, or whether they consider themselves loyal to your company. Furthermore, Reichheld (2003) claims that his Net Promoter Score (NPS score) replaces all measures of customer satisfaction and retention. The NPS score has only one simple question; “How likely is it that you would recommend company x to your family, friends and colleagues”, rated on a scale of 1-10. For a score of 1 to 6 you get a negative score of 1 point, for 9/10 a positive score of 1 point and 7/8 are neutral. The ones who score a nine or ten are promoters who will recommend your company to others and are loyal (Reichheld, 2003).

2.4 Brand name and other important variables in a Dutch professional service market

In paragraph 2.1 – 2.3 a theoretical analysis concerning the brand equity of a brand was made. In these paragraphs we discussed several constructs that should be measured in order to gain insight in customer based brand equity. The customer based brand equity score for a particular brand can now be measured, since the three constructs (awareness, image and loyalty) were also established. Measuring customer based brand equity provides more insight in how your customers see and value your brand. However, it does not provide insight in how important a brand name really is for decision making in a professional service market. This theoretical chapter will provide insight in the importance of a brand name for decision making in a professional service market.

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‘financial means to rectify failure’ are associated. Also, these two variables will be measured for importance in decision making, as well as several other variables. These other possible variables of influence on decision making have to be determined, which we will do now.

2.4.1 Brand name and its signaling effects

The role between a brand name and its signaling effects (quality and financial means) has yet to be determined for the professional service market. Thus, there are three variables of interest:

o expected quality of the services ;

o expected financial means to rectify failure;

o brand name.

But, are these two signaling effects, created by a brand name, the only factors of importance in a professional service market or could there also be others? We want to test if brand name importance is associated with not only expected quality and financial means, but also with other possible important aspects for a professional service company. We thus need to examine other variables that could be of influence in a professional service market. Several variables of interest were found for a professional service market.

Price

There are several studies that showed that leading brands can command larger price differences (Simon 1979, Agrawal 1996, Park and Srinivasan 1994, Sethuraman 1996) and are more immune to price increases (Sivakumar and Raj 1997). In other words, a well known leading brand can charge higher prices than unknown brands. Whether price is also an important factor in decision making for professional service markets needs to be determined. In any case, the importance of price in a professional service market should not be underestimated and thus it is a variable that should be tested.

Employees

For a professional service company your employees and employee encounters are valuable assets. These encounters customers have with employees of a company co-determine the quality of the services offered (Bitner et. al. 1990). Therefore the variable employees in a professional service market should be tested for importance in decision making. We separated the variable employees in three separate items:

o contacts within the company;

o availability of the employees;

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The importance for contacts within the company could be considered as one item. However, since we entered a time where everything should have been done yesterday and where everyone is expected to be flexible, two items were added. These are the availability of the employees, which relates to whether or not the employees can assist you on time and flexibility of the employees, which relates to the employees ability to adjust.

History of a company, its origin

In a professional service market you have to compete with other companies in the market. Globalization ensured that the origin of your competitors do not always lie within the same country. Therefore the actual history of a company (where does it originally come from) could play a role in a professional service company. For instance, Pappu et al. (2007) already showed that there was a significant association between consumer-based equity and the macro and micro images of the country of origin of a brand. Thus the history of the company (the origin itself) will also be measured for importance in decision making in a professional service market.

Events in the past

When you have a problem or challenge you may treat this event as entirely new because it has never happened before. However, Gilovich (1981) stated that we often do not treat it as such, since we often like to link these challenges to past events or decisions. Thus a potentially ‘new’ problem or challenge is guided by previous decisions, contacts, solutions etc. Therefore the contacts with a company in the past are also relevant for professional service companies. Moreover, the way previous problems or challenges were tackled could also influence future decision making. We thus have two additional variables of importance:

o contact with the company in the past;

o completed similar assignments.

Offered services

Roth (1992) brings up the struggle between a depth strategy (focus on 1 customer need) and a breadth strategy (focusing on more than 1 need). He states that depth strategies outperform breadth strategies, although there are also conditions under which breadth strategies perform just as well. Whether these conclusions on offering one tailored service or multiple ones are also applicable at the professional service market has yet to be determined. We will use the terms breadth and depth of the offered services to determine the importance on decision making in professional service companies. The following variables are added:

o breadth of the offered services;

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We now have twelve variables that we will measure. These variables are displayed below.

o

Brand name Price

o

Flexibility of the employees History of the company (origin)

o

Availability of the employees Completed similar assignments Expected quality of the services Breadth of the offered services Depth of the offered services Contact with the company in the past Expected financial means to rectify failure Contacts within the company

We want to test if the importance of a brand name correlates with expected quality of the services and expected financial means to rectify failure. However, there are more possible factors of importance in a professional service context. The relation of brand name importance with these other factors (see above) will also be tested. A high correlation between brand name importance and expected quality and expected financial means to rectify failure is expected (suggested by Keller and Lehman 2006). We need to test the following hypothesis in order to measure the associations a brand name has on each of these variables:

(H1) The brand name importance has a stronger relation with expected quality and financial means to rectify failure than with price, contacts in the company, flexibility of the employees, history of the company (origin), contacts with the company in the past, handled former similar projects, breadth of the offered services, depth of the offered services and accessibility of the employees.

However, we are also interested in the relation between brand name importance and the other variables separately. Moreover since we need these results for answering H1. So in addition to the first hypothesis we create 11 more. The relation a brand name has with each variable separately is tested by the following hypothesizes:

(H2) The brand name importance is associated with expected quality;

(H3) The brand name importance is associated with expected financial means to rectify failure; (H4) The brand name importance is associated with price;

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These hypothesizes can have several implications. The ideas behind the expected and non expected correlations (hypothesizes) are made clear by an example: We expect that the importance of a brand name correlates with the importance of expected quality. When there is a correlation between these two, a relation exists. There is no distinction made between a positive or negative relation because this requires more data, however research (Keller and Lehman 2006) indicates that this relation should be positive. This relation could mean: (1) negative, when a brand name is not important, expected quality is important, or (2) positive, when a brand name is important expected quality is important too. Keller and Lehman (2006) discovered a positive correlation between a brand name and expected quality. However, is this also true for rational decision making, or can respondents separate expected quality and brand name importance? To put is differently, can you separate the importance of a brand name and expected financial means in rational decision making? This actually goes for all hypothesizes: do the respondents rationally separate the importance of a brand name and expected financial means to rectify failure, or price, etc. Results will provide information on the relation between a brand name and other variables. In particular, when a relation exists they are based on rational thought. When there is no relationship the emotional aspect could play a vital role.

2.4.2 Influence on decision making

We know that Keller and Lehman (2006) state that a well known brand name signals both expected financial means to rectify failure and expected quality. These two variables influence your decision making in a positive way: it increases your confidence. However, we also found several other possible factors of importance for a professional service company. We still have to determine if these two factors Keller and Lehman described are also important for professional service companies and whether or not there are other, perhaps more important factors that influence decision making. In other words, are the two factors Keller and Lehman described the most important factors in decision making for Dutch professional service companies?

2.4.3 Predictions

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to a better use of company data since you know the general wishes of a certain group. In paragraph 3.2.7 you can read more on the explaining variables and the methods used.

2.5 Conceptual Model

A global overview of the relations that exist between the importance of a brand name and the (possible) factors of importance for decision making in a professional service market has been given below for explanatory reasons. This conceptual model (figure 1) provides insight in all relations that were discussed in paragraph 2.4 (and sub paragraphs). We will briefly clarify the associations in figure 1. There is a positive association expected between a brand name importance and expected financial means to rectify failure / expected quality based on research of Keller and Lehman (2006). Whether or not a brand name is associated with the other possible factors of influence has yet to be determined.

Keller and Lehman (2006) also noticed that expected financial means to rectify failure and expected quality lead to increased confidence in decision making. This relation is not tested in this thesis. We did test if the variables of increased confidence in decision making, expected financial means and -quality, are important in decision making for the Dutch professional service market. We also tested the importance of the other factors on this decision making. There are no ‘+’ or ‘-’ signs leading to or leading from the textbox ‘other possible factors of influence’ in figure 1 since these are currently unknown. Tests will prove which variables have a significant relation (either positive or negative) with ‘brand name’ and ‘deciding to do business’.

Figure 1: Conceptual model: Influences on decision making

* Factors of ‘possible’ influence in decision making are: price, contacts in the company, flexibility of the employees, history of the company (origin), contacts with the company in the past, handled former similar projects, breadth of the offered services, depth of the offered services, accessibility of the employees.

** Deciding whether or not to do business with a Dutch professional service company

Expected financial means to rectify Expected quality brand name importance Increased confidence in decision making

Other ‘possible’ factors of influence*

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3. Research design

In this chapter detailed information about the samples taken and the data collection methods will be addressed in paragraph 3.1. Paragraph 3.2 will discuss how the data analysis is preformed.

3.1 Data collection

There were two surveys held on 2 independent samples. The populations, the way of sampling, the number of respondents needed and procedure for obtaining respondents will be discussed below.

Goal population

In order to gain insight in the brand knowledge and brand loyalty of Bedaux’s contacts, a survey was held under former and recent contacts. The goal population is (former) contacts of Bedaux.

The other sample needs to reflect the market Bedaux currently operates in. Most customers of Bedaux are SME’s (small and medium sized enterprises) and are operating in all sorts of different markets. So the goal population mostly contains businesses from the SME sector (approximately 85%), without any market specification. In order to check if the sample fulfills these demands we need numbers on staff headcount and turnover ceiling. Both staff headcount and turnover ceiling determine whether a company is a SME (small and medium sized enterprise). When a company exceeds the boundaries of a medium-sized company it is a large-size company. In Table 1 an overview of this data is given. The original question answered by the respondents was initially an open ended question. The results were later on categorized according the standards in table 1. The following question was

asked: ‘finally, please fill in some company data’

o Number of employees?

o Average yearly turnover?

The answers were later on recoded into different

variables. Employee headcount from 0-250 were recoded into the category ‘SME’ and all headcounts higher than 250 were recoded into the category ‘large sized businesses’. For the answers on the turnover the same method was applied. Companies with a turnover up to 50 million were recoded into the category ‘SME’. All amounts above 50 million were recoded into the category ‘large sized businesses’. All the results were cross tabulated, which resulted in 85 SME’s (see appendix A). This is sufficient enough considering the fact that the sample size is 107 (so 91% falls into the SME category).

Table 1: defining SME and Large-sized companies

Enterprise category Headcount Turnover

Large >250 > 50 million

medium-sized < 250 ≤ € 50 million

small < 50 ≤ € 10 million

micro < 10 ≤ € 2 million

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Sample origin

There are two samples drawn. One sample was drawn from a contact list of Bedaux, which will be referred to as ‘sample Bedaux’. The other sample, which needs to reflect the market, is obtained with the assistance of an online panel (http://www.studentenonderzoek.com). Therefore this sample will be referred to as ´sample panel´.

Sample size

The sample size for Bedaux’s survey (brand knowledge and brand loyalty) has not been established in advance. All 58 contacts on the list Bedaux provided were approached. The total number of respondents needed for the online panel was calculated with a maximum margin of error of 10%, an α of 5%, and a population of 786.000. In total we need at least 95 respondents (see appendix G, part 2).

Type of sample

For the contact´s of Bedaux a selective sample was drawn. It is important that the former contacts of Bedaux are recent enough so that they could remember Bedaux well enough in order to participate in this research concerning brand knowledge and brand loyalty. Therefore, a selection was made by the partners of Bedaux who to contact. To check if the contacts of Bedaux were indeed recent contacts we made use of the question: When (which year) was the last time you or your company made use of the services of Bedaux? The frequency distribution showed that a total of 71,4% of the contacts answered 2008 or even more recent. For contacts not older that 2004 a score of 95,2% was obtained (see appendix B for entire frequency list). We can conclude that the respondents are recent enough for participation in the survey. For the online panel, a random selection was made (online).

Survey procedure

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is not unthinkable that the working hours could be reduced before the age of 60). Second, all of the respondents have jobs or are entrepreneurs since this research is aimed at professional service companies. When respondents are not currently employed they could be in between jobs, are unable to work or never had a job in the first place. To prevent the latter two (unable to work/never had a job), only working respondents were allowed to proceed with the questionnaire. Finally, all respondents are highly educated, indicating they have a higher vocational education or academic background. Higher educated people often obtain higher positions in organizations, given them more power for decision making (for instance deciding whether or not to do business with a company). Therefore the opinion of a higher educated respondent is considered more valuable for this research (even though this theory might not be true for all respondents).

Number of respondents

All data was checked for missing values. When something was missing or when a list was incomplete the respondents were deleted. The entire contact list of Bedaux, after selection, was called and resulted in 45 out of 58 contacts that agreed to participate. However, only 33 actually completed the survey, even after another reminder. The online panel delivered 107 respondents who filled in the survey correctly.

For obtaining insight in the perceptions and loyalty of Bedaux’s clients we will only use the survey obtained from the contact list of Bedaux, since they can give insight in the brand knowledge and brand loyalty of Bedaux’s (former) contacts. The number of respondents that were allowed to answer questions related to these constructs is 21 (out of 33). These 21 respondents actually did business with Bedaux and/or gained information about Bedaux (see appendix E). This separation was made in order to get accurate answers instead of educated guesses from respondents who never did business with Bedaux. For the hypothesizes/questions related to the importance and associations of a brand name, most important factors in decision making and predictions a combination of the two surveys will be used. Since this concerns the professional service market in general, and not only a single brand or brand name, a larger sample is desirable. To this end we combined the results of both surveys concerning the question: ‘Some aspect could be considered critical before choosing a company you want to do business with. To which degree do you consider the aspects described below of critical importance?’, and ‘Choose the most important factor for you and your company (only 1 answer possible)’.

Combining test results (panel and contacts Bedaux)

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aspects described below of critical importance?’, rated on a scale of 1-5 (1= not important at all / 5= of critical importance). Combining these results would give a more reliable output. However, combining these results would give a disproportionate number of Bedaux respondents. Therefore we need to test whether or not we can combine the two groups obtained in two different surveys. Since we have data on two groups with (originally) ordinal data, we will use Kendall’s Tau-b to see if there is a difference between the groups or not. The following hypothesis is used:

H0= groups are equal H1= groups are not equal

p > 0,01 p ≤ 0,01

If test results show that Kendall’s Tau-b is significant (α equals 0,01 or is lower than 0,01) we must reject the H0 hypothesis. If it is not significant (α higher than 0,01) we can assume H0 is true, which means we can combine the results of the two groups. Each aspect will be tested separately in order to see if the two groups are equal on all variables. For example, the variable price is rated by a panel and by the contacts from Bedaux. Those two results on price will be tested for equality. All aspects that were tested are: price, contacts in the company, flexibility of the employees, history of the company (origin), contacts with the company in the past, handled former similar projects, breadth of the offered services, depth of the offered services, accessibility of the employees, expected quality, expected financial means to rectify failure and brand name. All results were higher that the α of 0,01 (see appendix F), so we can accept H0 and reject H1. The groups are considered equal and thus we can combine the two surveys regarding this question. This brings our total number of respondents to 140. This number is sufficiently large enough with a margin of error of 8,25 and an α of 5%, calculated for a population of 786.000 (see appendix G).

3.2 Data analysis

3.2.1 Measuring brand awareness

As mentioned earlier in paragraph 2.2.1, brand awareness relates to the strength of the brand node or trace in memory, as reflected by consumer’s ability to identify the brand under different conditions (Keller 1993). For brand recognition, the simplest way is just asking whether or not they recognize brand x. Keller describes brand recognition as a correct discrimination of brand as having previously seen or heard. So the indicator for brand awareness is:

o Have you ever heard of a company named Bedaux?

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since this is a customer based survey, only the respondents from Bedaux (33 respondents) will be used to measure brand awareness. It is expected that all relations of Bedaux know the brand name Bedaux. Moreover, since the expected scores are positive (answered yes), they have a big influence on the final CBBE score. Therefore the panel scores on brand awareness will be used to assess the impact and consequence the variable brand awareness has on the CBBE score. The number of respondents for the panel is 107. We will use the answers of these 107 panel respondents as an indicator for the awareness of the brand Bedaux outside its client base. The panel score will not be used for calculating the CBBE score, since we are only interested in a CBBE score for Bedaux’s clients.

Correct indicators Brand Awareness?

The questions for all three constructs (Awareness, Image and Loyalty) will be tested for internal consistence reliability. A Cronbach’s Alpha test is the appropriate measure to do this (Malhotra 2007, 5th edition, p.285). This way we check whether different questions measure the same construct. However, brand awareness only has one indicator, which is: have you ever heard of a company named Bedaux? Thus a Cronbach’s Alpha test is not applicable here since we need two or more variables.

Before continuing with brand image and later on brand loyalty, the dataset for both the panel and contacts were filtered. Only contacts and panel members who did business with Bedaux or gained information about Bedaux were allowed to answer the questions about brand image and brand loyalty, since they possess the ‘knowledge’ to answer the questions. The question: ‘Have you ever done business with, and/or gained information about Bedaux?’ was used as a filter. Shockingly, only 21 out of 33 respondents (contacts of Bedaux) answered yes, for the panel this number was zero (Bedaux is not a nationwide well-known brand), see appendix E. An explanation was given by the partners of Bedaux. Apparently their contacts were not always aware of the fact that they were in business with a partner of Bedaux (poorly communicated). The partners were also hired by other companies as representatives of that company and did not use their own company name Bedaux or forgot to mention it.

3.2.2 Measuring brand image

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superiority, rated on a 5-point Likert scale (1= totally disagree / 5= totally agree), the following questions are used as indicators for brand image:

o The Services quality Bedaux offers is likely to be extremely high;

o The services Bedaux offers are likely to be extremely functional.

Furthermore, to get this overall excellence or superiority in perspective (in relation to competitors), respondents were asked to rate the following 2 statements on a scale of 1-5 (1= totally disagree / 5= totally agree):

o Bedaux is one of the leading brands in the market;

o Bedaux is the most well known brand in the market.

The last question provides information on the price perception, thus whether or not Bedaux has an expensive, cheap or ‘in between’ image. It is rated on a 3-point scale (1= lower than most competitors, 2= about the same as most competitors, 3= Higher than most competitors.):

o In comparison to the competition, how would you rate the price of Bedaux’s services?

Correct indicators Brand image?

We want to see if we need all questions, and whether or not the construct is internally consistent and reliable. A Cronbach’s Alpha is preformed for all five questions combined. The test showed that the overall model has a reliability of 0,775 (appendix H). Since a value of 0,6 or lower indicates an internal consistence reliability which is unsatisfactory (Malhotra 2007, 5th edition, p.285), we can conclude this model is good. In other words, it is highly likeable that these five questions measure the construct brand image.

3.2.3 Measuring brand loyalty

Yoo and Donthu (2001) described brand loyalty as the tendency to be loyal to a focal brand, which is demonstrated by the intention to make use of the brands services as a primary choice. Their indicators for brand loyalty were used to measure brand loyalty. All were rated on a scale of 1-5 (1= totally disagree / 5= totally agree):

o I consider myself loyal to Bedaux;

o Bedaux would be my first choice;

o I probably would not use services of other companies when Bedaux is available.

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questions, but here it will be use to complement brand loyalty. Whether it actually does complement the other three measures mentioned above needs to be determined. Reichheld’s question is:

o I would recommend Bedaux to my friends, family and colleagues.

Correct indicators Brand loyalty?

We conducted the same test we used for the construct brand image in order to check the internal consistency reliability (Cronbach’s Alpha). A high correlation between both constructs is expected because Reichheld claims that it replaces the other (in this case three) measures for brand Loyalty. This expectation has been proven right. When we compute the Cronbach’s Alpha for the four indicators above, we get a score of 0,882, which is really good (see appendix I). This indicates that it is highly likable that these four questions measure the construct brand loyalty. In table 2 all constructs, its variables and scales are summarized.

3.2.4 Measuring the customer based brand equity score

A question which still needs to be answered is ‘how do we calculate a Customer based brand Equity score?’. Based on literature covered in the paragraphs 2.1-2.3, a CBBE score will be calculated with the help of three constructs: (1) brand awareness; (2) brand image; and (3) brand loyalty. Each construct is measured by its own determinants. Brand awareness has one, brand image has five and brand loyalty has four determinants. These determinants are questions that were asked in a

Table 2: constructs of CBBE

Construct How to measure the construct Scale

Brand awareness • Have you ever heard of a company named Bedaux? Nominal, rated from

1-2

Brand image • The Service quality Bedaux offers is likely to be extremely high.

• The services Bedaux offers are likely to be extremely functional.

• Bedaux is one of the leading brands in the market.

• Bedaux is the most well known brand in the market.

• In comparison to the competition, how would you rate the price of Bedaux’s services?

Al interval,

Rated on a scale of 1-5 Only for rating Bedaux’s price; scale 1-3

Brand loyalty • I consider myself loyal to Bedaux.

• Bedaux would be my first choice.

• I probably would not use services of other companies when Bedaux is available.

• I would recommend Bedaux to my friends, family and colleagues.

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customer based survey and are listed in table 2. The CBBE score will be used as a simple tool to get a quick overview of your progress throughout the years. You can easily discover a trend or direction of your CBBE score, instead of following three different directions for each construct. Compare it with the NPS score of Reichheld (2003): based on one number (NPS score) one can easily see its course during several measurement moments. When a company wants to improve its CBBE score it needs to measure this accordingly. Besides scores on the constructs and its determinants we get one clarifying number. When you want to go into greater detail you can always use the construct scores.

For all three constructs a mean will be calculated. However, not all determinants were rated on a 5-point Likert scale. The question ‘Have you ever heard of a company named Bedaux?’ was measured with 2 possible outcomes, yes or no. Also, the question ‘I would recommend Bedaux to my friends, family and colleagues’ was rated on a 10-point Likert scale. Furthermore, the question ‘in comparison to the competition, how would you rate the price of Bedaux’s services’ was measured on a scale of 1-3. All other questions were rated on a 5 point Likert scale. Unfortunately standardizing the outcome doesn’t work, since we then get a mean of 0 for all variables, constructs and CBBE score. Since we do not intend to use these scores for further data analysis, a mean score of 0 is useless since we cannot draw any conclusions from it. We are only interested in mean scores on the three constructs in order to calculate a CBBE score (overall score for the brand Bedaux on all three constructs). In order to get a CBBE score we have to add up all tree construct scores and divide this number by three (see equation at the end of this paragraph). We will use a method proposed by dr. M.E. Timmerman (University of Groningen, department psychometrical and statistical techniques) and retract the score for a variable with 1 and divide this by the number of possible scores minus 1. To get things in perspective:

For variables on a scale of 1-10: (score of respondent on variable x-1) / 9 For variables on a scale of 1-5: (score of respondent on variable x-1) / 4 For variables on a scale of 1-3: (score of respondent on variable x-1) / 2 For variables on a scale of 1-2: (score of respondent on variable x-1) / 1

With this method we get scores that all lie between 0 and 1. A score of 0 stands for an extremely negative reaction and a score of 1 stands for an extremely positive reaction. Off course we will probably not see scores that extreme since this requires that all respondents give the exact same extreme answer on a question. For the CBBE score we have to add up all transformed scores (which lie between 0 and 1) and divide them by the total number of ratings:

Transf. scores brand awareness + transf. scores brand image + transf. scores brand loyalty

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3.2.5 Brand name and its signaling effects

In the paragraph 2.4 we discussed the importance of a brand name on decision making in a Dutch professional service market. We also determined which factors could be important for this decision making. This lead to 12 hypothesizes we wanted to test. Our first hypothesis tests the idea Keller and Lehman (2006) have about the relation between the importance of a brand name, quality and financial means to rectify failure:

(H1) The brand name importance has a stronger relation with expected quality and financial means to rectify failure than with price, contacts in the company, flexibility of the employees, history of the company (origin), contacts with the company in the past, handled former similar projects, breadth of the offered services, depth of the offered services and accessibility of the employees.

Whether or not the relation between a brand name and these two variables is stronger that the other nine will have to be determined by regression analysis. The outcomes of the hypothesizes 2 – 12 will help determine the rejection or acceptation of hypothesis 1. In these hypothesizes (2-12) the relation brand name importance has with all eleven variables is tested. All significant relations will be filtered. When this proves to be unsuccessful for answering hypothesis 1, the strength of the relationships is tested. When there are several significant relationships, the strength of the relationship will allow us to determine the most influential. The influence brand name importance has on the other variables is tested by regression. Since the importance of a brand name is the independent variable, we have 11 dependent variables. The hypothesizes H2-H12 are displayed below once again.

The variable ‘brand name importance’ is associated with: (H2) expected quality; (H3) expected financial means to rectify failure; (H4) price; (H5) contacts in the company; (H6) flexibility of the employees; (H7) history of the company – origin; (H8) contacts with the company in the past; (H9) handled former similar projects; (H10) breadth of the offered services; (H11) depth of the offered services; (H12) accessibility of the employees.

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important a brand name is. When results indicate that the importance of a brand name is high, we known that a brand name is important for rational decision making. When results indicate otherwise, it could mean that the strength of a brand name lies within the emotional cues attached to it and not within the rational decision making process.

There are two steps we have to perform in order to get significant results that lead to either rejecting or accepting the hypothesizes given above (H1 tm H12):

1. A linear regression is performed with a forward selection method.

Instead of doing 11 separate linear regressions, with brand name importance as an independent variable, a different approach is taken. In order to select the variables that have a significant relation with brand name importance a linear regression is performed combined with a forward selection method. This method filters significant from non significant variables one at a time (Malhotra 2007, 5th edition, p.560). Since we only want to know whether there is a significant relation between brand name importance and each of the other 11 factors it is not harmful that we reverse the dependent and independent variable. Moreover, the forward selection method ensures that the relation of the dependent and independent variables are checked for significance separately. Below the dependent and independent variables are given:

• The dependent variable (for measuring purposes) = brand name importance.

• The independent variables (for measuring purposes) = expected quality, expected financial means to rectify failure, price, contacts in the company, flexibility of the employees, history of the company (origin), contacts with the company in the past, handled former similar projects, breadth of the offered services, depth of the offered services, accessibility of the employees.

2. A One – way multivariate analysis of covariance is applied on the significant variables.

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3.2.6 Influences on decision making

In total, 140 respondents rated 12 variables on a scale of importance (1 to 5) for decision making. These respondents were also asked to choose the most important factor for their company. We will use frequency scores on this last question to determine the ranking of most important factors according to the respondents. Furthermore, we will check these scores with the mean scores of importance in decision making. When we notice any discrepancies the results are discarded. For example, let’s say that respondents chose price as the most important factor. In this example the mean score of price could be 2 (measured on a scale of 1-5), which means that the respondents do not find price important when making a decision whether or not to do business with a company. When the mean scores on the variables differ from the frequency results they are not useful because they lose credibility. Below the relevant questions are displayed:

• Some aspects could be considered critical before choosing a company you want to do business with. To which degree do you consider the aspects described below of critical importance? Rated on a scale of 1-5: brand name, expected quality, expected financial means to rectify failure, price, contacts in the company, flexibility of the employees, history of the company (origin), contacts with the company in the past, handled former similar projects, breadth of the offered services, depth of the offered services, accessibility of the employees.

• Choose the most important factor for you and your company (only 1 answer possible). Nominal answers are: brand name, expected quality, expected financial means to rectify failure, price, contacts in the company, flexibility of the employees, history of the company (origin), contacts with the company in the past, handled former similar projects, breadth of the offered services, depth of the offered services, accessibility of the employees.

3.2.7 Predictions

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a variable (for example price) also leads to pointing out this variable as the most important one in the decision making process. The importance is clarified with an example of possible outcomes for the variable price. A possible outcome is: the higher the importance rating for price the more likely it becomes that the company sees price as the most important factor in decision making. So when your potential client indicates that he is really focused on price it is wise to adapt to these wishes, instead of ignoring it or put focus on other (perhaps stronger/more competitive) aspects. Alternatively, the relation between the importance rating for price and choosing price as the most important criteria could be missing. Here you do not have to direct most of your attention to price because the decision making process has (an)other variable(s) of importance. We have the following data available:

• The dependent variable is categorical. Respondents had to choose the most important factor in decision making 12 nominal answers (brand name, expected quality, expected financial means to rectify failure, price, contacts in the company, flexibility of the employees, history of the company (origin), contacts with the company in the past, handled former similar projects, breadth of the offered services, depth of the offered services, accessibility of the employees).

• Factors which are categorical:

o Whether the respondent belongs to an SME or large company;

o Whether the respondent(s) (company) made use of training;

o Whether the respondent(s) (company) made use of external management;

o Whether the respondent(s) (company) made use of improvement courses.

• Covariates are considered continuous, they are 12 variables rated on a scale of importance from 1 to 5 (see first bullet point for all 12 variables names).

In table 3 we summarized the hypothesizes, their measurement levels and which tests will be used.

Table 3: measurement and test levels for brand name

Hypothesis Question regarding Measurement level Test used in SPSS

H1 – H12 Aspects of critical importance* . Interval Linear regression with a

forward selection method and a MANCOVA. Influence s on decision making

Aspects of critical importance*,

Choosing the most important variable for decision making.

Nominal (most important variable) and Interval (aspects of critical importance)

Frequency scores and Mean.

Predictions Aspects of critical importance*, Choosing the most important variable for decision making, respondent is from SME or large company, did his company made use of training / external management / improvement courses.

Interval (aspects of critical importance), all other are nominal.

Multinomial logistic regression.

*Aspects of critical importance are: brand name, expected quality, expected financial means to rectify failure, price, contacts in the company, flexibility of the employees, history

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4. Results

4.1 Construct and CBBE scores

In paragraph 3.2.1 – 3.2.3 we established how the three constructs (awareness, image and loyalty) are measured. Furthermore, to get a CBBE score for Bedaux a formula was created: we have to add up all transformed scores of each construct (which lie between 0 and 1) and divide them by the total number of ratings. However we will first discuss the outcomes for each construct separately. These mean scores on the measured variables provide more insight in a construct compared to only providing a mean score of a construct. Finally the CBBE score is calculated.

Brand awareness

For the construct brand awareness one variable was measured: ‘Have you ever heard of a company named Bedaux?’. There were only two answers possible, yes or no. We calculated a mean that lies between 0 and 1 for the contacts of Bedaux and for the panel. We expected to see a high mean for contacts of Bedaux and a lower mean for the panel. The actual difference between the scores was missing until now. In table

4 we can see the mean scores for both (also see appendix M for more detailed information on the mean scores)

(* see appendix j for more on frequencies and percentages)

We can see an enormous gap between the two mean scores on brand awareness. Only two ‘panel respondents’ recognized the brand name Bedaux, however they were never business partners (see appendix j). Six respondents from Bedaux indicated that they never heard of the brand name Bedaux. Apparently Bedaux’s contacts were not always aware of the fact that they were in business with a partner of Bedaux (poorly communicated). The partners were also hired by other companies as representatives of that company and did not use their own company name Bedaux. The mean score on the construct brand awareness is used to calculate the CBBE score. However, we note that the CBBE score is based only on contacts of Bedaux. This has a big impact on the value of the CBBE score since it is a rather high value (0,818). The CBBE score can only be used to assess the brand awareness, brand image and brand loyalty of Bedaux’s own contacts. We did calculate a mean score for panel brand awareness. This allows us to see how well known the brand Bedaux is outside its client base. However, the CBBE score for non customers cannot be calculated since there were no respondents that could evaluate Bedaux and its services. It is also not wise to estimate scores for the

Table 4: mean scores and frequencies on brand awareness indicator

Survey Mean Frequencies*

Yes No

Contacts Bedaux 0,818 27 6

The importance of a brand name for Dutch professional service companies based on rational thought: An empirical research

The importance of a brand name for Dutch professional

service companies based on rational thought:

An empirical research

Master Thesis

By

John Hoogland

The importance of a brand name for Dutch professional

service companies based on rational thought:

An empirical research

Master thesis

By

John Hoogland

MSC25121750011

Table of contents

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