Consumer Value Co-Creation of Luxury Brands -

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Consumer Value Co-Creation of Luxury

Brands

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An empirical analysis of the influence of value

co-creation through social media on brand loyalty

Kristina Marx

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Master Dissertation

Submitted to gain admission to

Dual Masters Award in Advanced International Business and Management at University of Groningen and Dual Masters Award in Advanced International

Business Management and Marketing at Newcastle University

Consumer Value Co-Creation of Luxury

Brands

-

An empirical analysis of the influence of value

co-creation through social media on brand loyalty

Author: Kristina Marx

Program Name: DDM Advanced International Business Management and Marketing

Institutions: University of Groningen and Newcastle University

Student ID RUG: s2918005 Student ID NUBS: 150688075

E-Mail: k.marx@student.rug.nl

Supervisors: Mr. Dr. Raffaele Filieri Mr. Dr. Melih Astarlioglu

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Statutory Declaration

I assure, that this dissertation is a result of my personal work and that no other than the indicated aids have been used for its completion.

Furthermore, I assure that all quotations and statements that have been inferred literally or in a general manner from published or unpublished writings are marked as such. Beyond this, I assure that the work has not been used, neither completely nor in parts, to pass any previous examination.

Stuttgart,

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[I]

Abstract

Studies on value co-creation always theoretically emphasize its positive influence on brand attachment and brand loyalty, but only few analyzed these relationships empirically. Especially not in a wider context of the value co-creation process of luxury brands on social media platforms. The purpose of this study is to obtain a better understanding of value co-creation outcomes and their interrelations, and to assess if value co-creation on the social networking site Facebook contributes to brand equity, by influencing brand loyalty positively. Therefore, a quantitative research strategy with a descriptive cross-sectional design was chosen. Based on profound literature review, recognizing online brand engagement as a valid and measurable representative of value co-creation, a theoretical model was constructed, positioning online engagement in the wider context of its antecedents and outcomes. Subsequently, this construct was tested empirically for luxury brands and their value co-creation activities on Facebook. The research is based on brand-hosted Facebook communities of luxury brands which were analyzed under the aspects of consumer engagement, its antecedents, namely the motivation to engage, and its possible outcomes, brand loyalty, brand attitude, brand attachment and brand trust. In order to assess this, a self-administered questionnaire was designed targeting all consumers above 18 years with a Facebook account who at least liked one luxury brand.

The findings provide significant support of the positive influence of value co-creation directly on brand loyalty and through the two intermediates brand trust and brand attachment. Facebook resulted to be, therefore, an effective value co-creation platform for luxury brands to boost brand loyalty of their consumers, who are motivated by entertaining and social-influencing aspects to engage with them on Facebook. The results of this dissertation aimed at helping theorists and brand communicators of luxury brands to better understand capabilities of the value co-creation concept in a social networking site context. By analyzing value co-co-creation, its antecedents and outcomes empirically, the theoretically stated relationship between value co-creation, brand loyalty and brand attachment can be stated as valid for luxury brands on Facebook.

Keywords: Value Co-Creation; Online Brand Engagement; Social Networking

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Acknowledgements

I would like to use the opportunity to thank everyone who supported me on my journey toward the Double Master Degree in Advanced International Business Management and Marketing at the University of Groningen and the Newcastle University. In particular, I would like to thank my two supervisors Dr. Raffaele Filieri, who supported me from the Newcastle University side, and Dr. Melih Astarlioglu, who advised me from the University of Groningen side. Both have been very helpful by providing constructive feedback and motivating me to continuously enhance my dissertation. Further gratitude goes out to my two proof-readers Kyron Schimmel and Sandra Rostek who were a great help and support for my work.

I would like to especially thank my family, my boyfriend and friends who have always been there for me. Thank you for your support, advise, help, willingness to listen, and most importantly, for all the encouraging words that kept me going throughout the study years. As John F. Kennedy once said: “We must find time to

stop and thank the people who make a difference in our lives”. Therefore, thank

you for making such a difference in my life!

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Abbreviations

α Asymptotic Significance Level

DV Dependent Variable

EFA Exploratory Factor Analysis G-D Logic Goods-Dominant Logic

H Hypothesis

ICT Information and Communication Technology

IV Independent Variable

KMO Kaiser-Meyer-Olkin Measure of Sampling Adequacy

NPD New Product Development

OBE Online Brand Engagement

SD Standard Deviation

S-D Logic Service-Dominant Logic

SNS Social Networking Sites

RQ Research Question

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Table Index

Table 2.1: Attributes of Luxury Brands ... 6

Table 2.2: Examples of Successful VCC Implementations ... 16

Table 3.1: Motivations to Engage with Luxury Brands on Facebook ... 24

Table 3.2: Summary of all Hypotheses ... 28

Table 4.1: Overview of Constructs and Adapted Scales ... 31

Table 5.1: Percentage of Nationalities Represented in Sample by Continent ... 37

Table 5.2: Rotation Decision ... 38

Table 5.3: Summary of EFA for all Items ... 38

Table 5.4: Overview of Constructs and Corresponding Scale Reliability ... 39

Table 5.5: Descriptive Statistics for Interval Data ... 40

Table 5.6: Descriptive Statistics of Online Brand Engagement Items ... 41

Table 5.7: Checking Assumptions for Normality and Homoscedasticity ... 42

Table 5.8: Output Summary of Linear Regressions ... 43

Table 5.9: Summary of all Linear Equations Resulting from the Regressions ... 45

Table 5.10: Overview of Hypotheses Outcomes ... 46

Table 6.1: Overview of Motivations for Engaging with Luxury Brands ... 47

Figure Index

Figure 2.1: Overview of the Personal Luxury Goods Categories ... 8

Figure 3.1: Conceptual Model ... 28

Figure 5.1: Relation between Gender and Activity of Following a Brand ... 36

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1 Introduction

“[..] times have changed. The focus is shifting away from tangibles and toward intangibles, such as skills, information, and knowledge, and toward interactivity

and connectivity and ongoing relationship.” (Vargo & Lusch, 2004, p. 15)

Companies are facing continuous changes in their operating environment to which they have to adapt. Such can be globalization, advances in information and communication technologies (ICTs) and the increasing social media popularity, or consumers’ evolving product expectations. All named changes lead to challenges, of which the biggest one is the increased consumer empowerment. It incorporates consumers’ desires to actively participate in the brand’s value creation process (Fernandes & Remelhe, 2016), instead of being passive brand value recipients, as being common in the traditional value creation approach. Increased connectivity, empowerment due to the ease of information access, and the focus on experiential elements (Bertini, 2015) change the way consumers communicate and see their relationships with brands (Prahalad & Ramaswamy, 2004b). Rather than relying on traditional, one-directional media such as TV, radio or magazines, consumers prefer bi-directional communication (Filieri, 2013) by interacting with brands, among others, through social networking sites (SNS) (Mangold & Faulds, 2009). Not only the change in consumer’s role is challenging today’s brands, but also the need for competitive advantages linked to increasing competition, demanding new ways “to

attract customers and retain [their] loyalty” (Garcia-Haro, Martinez-Ruiz, &

Canas, 2015, p. 99). To survive in the highly dynamic and knowledge-intense market (Rowley, Kupiec-Teahan, & Leeming, 2007), companies have to move away from their “traditional way of thinking” (Prahalad & Ramaswamy, 2004b). This way corresponds to a company-centric value creation approach, where firms autonomously create value for, rather than with their consumer (Prahalad & Ramaswamy, 2004a). Moreover, achievement of competitive advantage is also based on intangible variables such as consumer trust and loyalty (Garcia-Haro et al., 2015) originating from strong consumer-brand relationships (Fernandes & Remelhe, 2016). Importance of intangible variables is also emphasized by Vargo and Lusch (2004) in the citation above.

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Saarjärvi, Kannan, & Kuusela, 2013). Reasons for this are its ability to tackle the faced challenges and being “one of the most accessible competitive advantages” (Garcia-Haro et al., 2015, p. 99). Over the years, this also caught the attention of several companies and researchers. Even if one might think that literature on VCC is meanwhile saturated, the 264 journals published over the last three years display a still ongoing interest in and relevance of this concept. This concept considers consumers as an integrated part of brand value creation. By allowing firms to “listen

to the consumer through personalized interaction” and to focus on experience

creation, they are able to stand out from their competitors (Prahalad & Ramaswamy, 2004b, pp. 7-8). Literature within consumer VCC used to focus only on service sectors (Prahalad & Ramaswamy, 2004a, 2004b; Cossío-Silva et al., 2016), but over time researchers also recognized the relevance of VCC processes within brands and products (Van Dijk, Antonides, & Schillewaert, 2014; Kao et al., 2016). Through VCC, companies aim firstly at closing a brand-consumer communication gap. Secondly, they seek to increase their brand value by providing consumers with a

“social, interactive and creative experience” (Bertini, 2015) through consumer

touch points throughout their value chain. Existence of multiple touch points indicates a high VCC construct complexity, emphasizing the importance of consumer-brand connections (Dretsch & Kirmani, 2016).

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high perceived value so that consumers are willing to pay a higher price. By offering their consumers an intangible set of emotions and dreams next to the actual tangible products, luxury brands strive for making them feel unique and extraordinary (Bastien and Kapferer, 2013). Nevertheless, brand owners are experiencing challenges in form of consumers’ perceived lack of value for compensating the high prices of luxury goods (Tynan et al., 2010). Current luxury consumers are more experience-oriented (Hermanns & Marwitz, 2008), making them less reliant on only the brand name in their purchase decision making process (Parkash, 2012). This change results in a decreasing brand loyalty and brand commitment (Euromonitor, 2014). Online VCC could be the matching strategy to tackle such challenges due to its ability to enhance brand loyalty by strengthening consumer-brand relationships. Even if the importance of this concept for luxury consumer-brands is high, there is a lack of empirical studies in the luxury brand VCC area (Choi, Ko, & Kim, 2016). Only little knowledge still exists not only within VCC on social media (Azar et al., 2016), but also within its outcomes (Cossío-Silva et al., 2016). Although many researchers point out the positive influence VCC has on brand loyalty, few analyzed its influence empirically (Luo, Zhang, & Liu, 2015), which is necessary for claiming this relationship as valid (Bryman & Bell, 2015). Moreover, to the author’s knowledge, none analyzed this in a wider construct of VCC processes on social media including antecedents and outcomes in the luxury brand context. As research results could vary when VCC is researched among different settings and contexts (Banyte & Dovaliene, 2014), a separate analyzes of the luxury goods industry is required.

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engagement in the wider context of its antecedents and outcomes. Subsequently, this construct was tested empirically for luxury brands and their VCC activity on Facebook. This dissertation aims at answering the following research questions (RQ):

RQ1: What are consumers’ motivations to engage with luxury brands on Facebook?

RQ2: Which motivations are positively influencing OBE with a luxury brand on Facebook?

RQ3: How does OBE on Facebook influence brand trust, brand attachment, brand loyalty and brand attitude?

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2 Theoretical Background

2.1 Luxury Brand

As the topic of this dissertation is the online VCC process within luxury brands, it is essential to discuss what one understands under this term and why value is essential especially in this industry. Hence, a definition for ‘luxury brands’ and an analysis of the luxury goods market is provided. The importance of value for luxury brands concludes this chapter.

2.1.1 Definition of Luxury Brand

Much disagreement exists in literature about what the term ‘luxury’ stands for. Increasing (Chevalier & Mazzalovo, 2012) and loose usage of the word in different contexts resulted in an unclear defined term. Luxury has its origin in the Latin word ‘luxus’, meaning ‘abundance’ and ‘sumptuous enjoyment’ (Ricca & Robins, 2012). Earlier, this word was used in a rather negative context (Dubois et al., 2001), whereas nowadays consumers perceive luxury products and services as attractive and privileged (Chevalier & Mazzalovo, 2012). Luxury can also be subjective by depending on a person’s situation and perspective (Bastien & Kapferer, 2013), making it difficult to settle with one unique definition (Chevalier & Mazzalovo, 2012). Nevertheless, this dissertation is based on the definition of Bastien & Kapferer (2013), regarding luxury within a product category as a “non-necessity

made desirable”1_{by the economic environment with the “essence […] to sell a}

dream of exception” as this summarizes all characteristics best (Bastien &

Kapferer, 2013, p. 27).

A luxury brand is even more difficult to define (Miller & Mills, 2012). Nevertheless, it can be said that a luxury brand is closely linked to its core product and needs to have a luxurious product portfolio. Heine (2012) defines those as

“products [that] have more than necessary and ordinary characteristics compared to other products of their category which includes [..] high [..] price, rarity, extraordinariness, and symbolic meaning” (Heine, 2012, p. 55). Connecting to this

definition, Heine (2012) explains that “luxury brands are regarded as images in

the minds of consumers that comprise [the above mentioned] associations […]”

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(Heine, 2012, p. 62). The term ‘brand’ itself is defined as being “timeless and

unique” and a “sum of all feelings, perceptions and experiences a person has as a result of contact with a company and its products […]” (Okonkwo, 2007, p. 103).

Jevons (2007) additionally emphasizes the importance of value creation and differentiation by defining a brand as a “tangible or intangible concept that uniquely

identifies an offering, providing symbolic communication of functionality and differentiation, and in doing so sustainably influences the value offered” (Jevons,

2007, p. 1157). Due to the association of luxury brands with their core products and with this its product characteristics, the brand can extend its brand portfolio with non-luxury products and still keep its luxurious brand image (Heine, 2012). According to Dubois et al. (2001) and Heine (2012) this kind of image is gained when at least the brand’s core products contain six attributes, as presented in Table 2.1.

Moreover, Miller & Mills (2012) conclude that consumers’ luxurious brand perception depends additionally on the level of innovation, creativity and uniqueness the brand delivers (Miller & Mills, 2012). Consumers identify luxury brands as being fashionable, stylish (Ko & Megehee, 2012), status-seeking and the solution for people in pursuit for uniqueness (Kastanakis & Balabanis, 2012). Some people purchase them for self-monitoring goals that are the exhibition of social standards or self-expression of individuality (Bian & Forsythe, 2012), others do it for personal pleasure. Summarized, luxury brands are “consumer assessment[s]

that a brand symbolizes prestige” (Miller & Mills, 2012, p. 1474).

Attribute Meaning

High Price The brand offers products that belong to the highest price category among their product category.

High Quality The brand’s product will be rather repaired than disposed in case of damage.

Rarity The brand’s products are limited and are difficult to purchase due to an exclusive production.

Aesthetic The brand and its products embodies a sense sparking experience for the customer.

Heritage The brand has traditional roots and keeps a steady brand presence in form of a recognizable design and brand symbols (Nueno & Quelch, 1998).

Superfluousness Intangible and situational utility is more important than the functionality of the brand’s product (Kapferer & Bastien, 2009a).

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The total value of the luxury industry, including luxury hospitality, high-end transportation2_{, design furniture and high-end food and beverages}3_{, was estimated}

by Bain & Company in 2013 to €800 billion (Kapferer, 2015). Increasing global wealth and, hence, spending positively influences luxury industry growth (Wiedmann & Hennigs, 2013). The market value of personal luxury goods alone rose from €80 billion in 1995 to €253 billion in 2015 (Statista, 2016). Literature presents the following reasons for this: (1) globalization and emerging affluent market segments4 (Chow et al., 2001), (2) international travel expansion (Kastanakis & Balabanis, 2012) and (3) growing middle class (Wiedmann & Hennigs, 2013). Nevertheless, in 2016 this growth slowed down because of changes in consumer behavior and economic environment (Deloitte, 2016) which is further elaborated in chapter 2.1.3. The luxury goods industry consists of several sectors of which the biggest ones are luxury cars, luxury hospitality and personal luxury goods, accounting for 80% of the total luxury market. The latter is also seen as the

“core of the core luxury” (D’Arpizio et al., 2015, p. 1) and is the focus of this

dissertation.

The personal luxury industry consists of the following four main categories, as displayed in Figure 2.1: apparel (Bain & Company, 2014a) and footwear (Deloitte, 2016) consisting of couture and ready-to-wear (Fionda & Moore, 2009), accessories that include leather goods such as bags and wallets and eyewear (Deloitte, 2016), hard luxury5_{and beauty}6_{(Hines & Bruce, 2007). The categories apparel and}

accessories are being accumulated by scholars to the term ‘fashion’ (Bastien & Kapferer, 2013; Fionda & Moore, 2009). Most companies in the luxury industry7

are placed within the apparel and footwear (38 out of 100) and hard luxury category (29 out of 100). Hereby, eleven companies are situated in the multi luxury goods sector due to their high variety of brands covering different product categories, such as the three top 10 companies LVMH8, Richemont and Kering (Appendix C). Fashion brands are, with a market share of 54%, within the personal luxury goods

2_{Includes cars, yachts, jets and cruises (Bain & Company, 2014b).} 3_{Beverages include wine and spirits.}

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(Bain & Company, 2014a), the most profitable and fast growing segment (Berthon et al. 2009).

Luxury brands, especially from the fashion sector, have an significant influence on society and economical environment. They are seen as the leaders for the rest of the world within the marketing sector, as being representatives for best packaging, product design and merchandizing (Okonkwo, 2007). Nowadays, an increasing amount of people get caught by exactly this influence. “Luxury […] is an obsession

of today’s consumer society” which means that there is an increasing demand from

the middle class (Wiedmann & Hennigs, 2013, p. 5). To serve this growing target group, luxury brands launch more accessible products such as accessories or fragrances starting at lower price points (Okonkwo, 2007). This change is called ‘democratization of luxury’ (Bastien & Kapferer, 2013) and reflects in the increasing amount of ‘affordable luxury brands’ such as Michael Kors (Deloitte, 2016). This again intensifies the competitive environment and makes differentiation for luxury brands even more essential.

2.1.3 Importance of Value for Luxury Brands

By purchasing luxury products, consumers aim at improving their standing in society through the accumulation and showing off wealth (Han et al., 2010). While conventional brands sell in first place tangible products, luxury brands sell an intangible set of emotions and dreams to make the consumer feel unique and

Personal

Luxury Goods

Fashion Apparel and Footwear Ready to wear Couture Accessories Eyewear Belts Bags and wallets Hard Luxury Jewellery Watches Beauty Fragrances Cosmetics

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extraordinary (Bastien & Kapferer, 2013). This requires a different approach in order to reach the target group with marketing communications means. Factors such as heritage, creator’s image, global reputation and emotional appeal (Hines & Bruce, 2007), distinguish a luxury brand from an ordinary brand and have, therefore, influence on the corporate- and marketing strategy. Due to the higher price level, the consumer value has to be higher, more emotional and personal than in the case of, for example, Fast Moving Consumer Goods.9 Tynan et al. (2010) discovered that luxury goods consumers seek utilitarian value in form of high quality and perceive luxury brands that approach symbolic, experience and relational value types as differential compared to other brands (Tynan, McKechnie, & Chhuon, 2010). This underlines the special position and high importance of value for the success of luxury brands.

Luxury brands operate in a continuously changing environment, facing changes in economic markets and consumers’ consumption behavior which led to a growth slow-down in 2016 (Deloitte, 2016). Consequently, successful navigation (D’Arpizio et al., 2015) and the need for attention on the value, which luxury goods are providing their consumers with, is required. There are several reasons named for the declining growth. Firstly, the decline in oil prices resulted in weak economic growth in main oil exporting countries such as Russia which is, next to China, an important luxury brand market due to the high luxury goods consumption rate (Deloitte, 2016). Secondly, luxury goods consumers perceive a lack of fit between the high prices and the real value that those goods provide them with, making them question the overall value proposition of luxury brands (Tynan et al., 2010). This perception is strengthened by high connectivity and information transparency which increases consumers’ value awareness and price-consciousness. Additionally, consumers become less likely to simply rely on the ‘trusted’ brand name itself (Parkash, 2012) which leads to decreasing brand loyalty (Euromonitor, 2014). Thus, luxury brands depend on the provision of sufficient value for satisfying their consumers’ needs and expectations (D’Arpizio et al., 2015) and for maintaining long-term relations with the potential to result in brand loyalty (Luo et al., 2015). Value is defined as the “result of an implicit negotiation between the

individual consumer and the firm” (Prahalad & Ramaswamy, 2004b, p. 7).

9_{Fast Moving Consumer Goods are goods which leave quickly the shelf of a retail shop. Those can}

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According to Gilbreath (2010), value is only created when customers perceive that the brand is offering them products corresponding to their needs and expectations (Gilbreath, 2010) and consequently, decide to use those products (Vargo, Maglio, & Akaka, 2008). This makes value an essential element of brand success (Choi et al., 2016).

Deloitte (2016) and D’Arpizio et al. (2015) confirm the importance of value for luxury brands by stating three main strategic opportunities for them to focus on the upcoming years. Firstly, luxury brands should consider to rethink their luxury market value proposition in order to build trust, credibility and aspiration for luxury products and connect more to their consumers across several touchpoints. Secondly, they should pay attention to millennials, as their consumption behavior differs highly from the earlier generations, and find new ways of engaging with this generation. Lastly, careful control of investments due to slowing growth, and focus on digital tools are suggested for a competitive advantage (D’Arpizio et al., 2015; Deloitte, 2016). Nowadays, consumers request additional value next to the product which results in a need for a competitive advantage to differentiate on the highly competitive luxury goods market. Distinction and perception of sufficient value cannot be achieved with “classical marketing, [as it] is the surest way to fail in the

luxury business” (Kapferer & Bastien, 2009b). High level of competition coupled

with a focus on digital communication, changing luxury consumption habits and attitudes toward traditional forms of communication (Leuteritz et al., 2008), require forward-looking strategies (Ko, Phau, & Aiello, 2016). Such should include innovative customer experiences and close interactions (Choi et al., 2016) in order to be able to listen to and engage with consumers and to create sufficient value for staying competitive (Kapferer & Bastien, 2009b). A relatively new concept of VCC, by Gilbreath (2010) also referred to as ‘meaningful marketing’10, offers luxury brands such a competitive advantage. It corresponds to a “mind-set shift that

will make [brands] relevant to today’s consumers, […] [by] shift[ing] from ‘telling

and selling’ to building relationships”11_{(Gilbreath, 2010, p. 1). Importantly, it}

offers luxury companies new opportunities to create more value by involving their consumers as active partners in two-sided interactions (Tynan et al., 2010).

10_{Marketing is meaningful when it “adds value to people’s lives, whether or not they immediately}

buy what you’re selling” (Gilbreath, 2010, p. 3).

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2.2 Value Co-Creation Paradigm

As VCC has the ability of providing luxury brands with a competitive advantage by connecting with consumers, this concept is further elaborated on in this chapter. First, the definition of VCC and the development toward this concept and VCC through social media are clarified. Lastly, its utilization within luxury brands and link to brand loyalty are discussed.

2.2.1 Definition of Value Co-Creation

The importance of VCC got confirmed by several researchers (Prahalad & Ramaswamy, 2000, 2004a, 2004b; Vargo & Lusch, 2004; Füller & Matzler, 2007) and firms12_{over the years (Kao et al., 2016). Nevertheless, literature about VCC is}

thematically widely spread, providing multiple approaches and applications, but lacking conceptual clarity. This leads to fragmented and differing definitions, and understanding of this concept (Saarjärvi et al., 2013). Martínez-Cañas et al. (2016) emphasize that this concept still lacks a “united basis for development” (Martínez-Cañas et al., 2016, p. 4). A possible reason is the diversity of value types being created for consumers and companies (representing the ‘value’ in VCC), actors (‘Co-‘) and processes (‘creation’) that can be involved in a VCC process. The definition, consequently, depends on the components of the ‘value co-creation’ process, which corresponds to the context in which VCC is analyzed (Saarjärvi et al., 2013). Nevertheless, some researchers made an attempt at clarifying its meaning. Ramaswamy (2009) defines VCC as an “process by which products,

services, and experiences are developed jointly by companies and their

stakeholders, opening up a whole new world of value“ (Ramaswamy, 2009, p.

11). He emphasizes the cooperation aspect and the possibility of value achievement. Ind and Coates (2013) add the aspects of interactions and insight-gaining by defining VCC as an “opportunity for on-going interaction” enabling the organization to “generate in return the insight that can be derived from [..]

engagement” (Ind & Coates, 2013, p. 92). Hajli (2016) adapts his definition to the

online context of social media and brand communities by defining VCC as a

“consumer activity in the production of value through social interaction in a platform developed independently by consumers or via an organization’s hosted

12_{Most of the Interbrand’s 100 Best Global Brands are involved in VCC such as Apple, Coca-Cola,}

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community”, hereby “shifting from the traditional strategy for the value creation for customers to a new strategy of value creation with customers“ (Hajli, 2016, p.

36). Dretsch and Kirmani (2016) see VCC in the context of a brand as a

“collaboration between consumer and marketers to shape brand meaning”. The

focus lays here on developing the brand and learning from the consumers’ experiences, rather than developing the product behind the brand itself, within the new product development (NPD) process, in collaboration with the consumers (Dretsch & Kirmani, 2016, p. 135). This process is referred to by researchers as mass customization13 (Coates et al., 2009), design (Piller et al., 2005), co-production14 (Lusch & Vargo, 2006), crowdsourcing (Zwass, 2010) or open innovation15 (Chesbrough, 2003; Filieri, 2013; Füller, Hutter, & Faullant, 2011). Thus, VCC incorporates many aspects apart from innovation and occurs “whenever

consumers interact with companies or products and thereby have an active role in the shaping of their experience and ultimately value perception” (Coates et al.,

2009, p. 5). Due to a high amount of definitions in literature, an illustration on the most relevant definitions was included in Appendix B1.

This dissertation focuses on VCC in luxury brand communities on the SNS Facebook. Its focus is not on the innovative aspect where VCC is discussed within NPD, but rather on exchange of knowledge, skills and experiences in form of product or service feedbacks, recommendations and idea sharing. Examples of such exchanges are Nike’s platform Nike+ for sharing running experience or Burberry’s community ‘artofthetrench’ for exchanging trench coat style ideas. Within this dissertation VCC is understood as an ongoing process (Fernandes & Remelhe, 2016) only occurring when two or more parties are involved in a bi-directional interaction (Ramaswamy, 2009; Choi et al., 2016) considering both the provider and the consumer as value co-creators (Lusch & Vargo, 2006). In the context of brand communities on SNS, not only the brand can exchange knowledge and experiences with the consumer, but this exchange can also take place between consumers themselves. Hence, value is created for all parties involved in the social interaction through the exchange of knowledge and skills (Vargo & Lusch, 2004)

13_{An example of mass-customization is Nike ID, where customers can change the color of the shoe}

design online (Coates et al., 2009).

14_{An example of co-design or co-production: Threadless, Lego Rebrick (Coates et al., 2009).} 15_{An example of crowdsourcing or innovation is the platform eYeka where brands such as Unilever}

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via community platforms on SNS such as Facebook, hosted by the brand itself (Hajli, 2016). This exchange of knowledge requires active, spontaneous and voluntary consumer participation, not limited by a selection of predetermined options (Jaakkola & Alexander, 2014) as it is the case within mass-customization. This participation, also referred to as engagement (Ind & Coates, 2013), allows consumers to share their thoughts and experiences with the brand. In return, the brand can learn from their knowledge and adapt their value propositions, which leads to a shaping of the ultimate value perception (Coates et al., 2009).

Literature names VCC in the context of different approaches (Saarjärvi et al., 2013; Alves, Fernandes, & Raposo, 2016). The first and originally presented approach is the service-dominant logic (S-D logic) (Vargo & Lusch, 2004, 2008; Prahalad & Ramaswamy, 2000, 2004a, 2004b; Payne et al., 2009) which this dissertation further elaborates on in chapter 2.2.2. Secondly, the service-science approach looks at VCC from a macro perspective involving complete service systems16 (Vargo et al., 2008). Thirdly, the service-logic sees value creation as an activity performed by one actor, the consumer, excluding with this the collaboration aspect. Further, many-to-many marketing considers the relevance of customer networks and a diversity of actors for the VCC process (Gummesson, 2007). Consumer-culture theory positions VCC within a social context and NPD focuses on its innovative aspect. Lastly, post-modern marketing perspective stresses the interventionist role of consumers in the design and provision of resources for the market (Saarjärvi et al., 2013; Alves, Fernandes, & Raposo, 2016). An extended explanation of these approaches can be consulted in Appendix B2. This dissertation acknowledges the existence of those approaches and is, therefore, positioned within the originally presented approach of the S-D logic and many-to-many marketing, in order to stress the network aspect of social media. As the concept of VCC is relatively new, the following part presents its development.

2.2.2 From Product-Centric Approach to Value Co-Creation

The concept of co-creating value developed after the year 2000, while until the late 1990s companies followed the goods-dominant logic (G-D logic) (Prahalad & Ramaswamy, 2000). The latter logic follows a traditional model, where value is

16_{“A service system is an arrangement of resources (including people, technology, information,}

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seen as something embedded in the tangible product during the production process, created within the firm’s value chain. Hereby, intangible products or services are rather seen as production aid (Vargo & Lusch, 2004). The role of firms and customers is strictly separated into producer, the creator of value, and consumer, the recipient of value, excluding the consumer completely from the value creation process (Prahalad & Ramaswamy, 2004b). The company decides upon the required value for the consumer and incorporates it in their products which are exchanged on the market for money (Prahalad & Ramaswamy, 2004a; Vargo et al., 2008). This reflects on the communication being characterized as one-way, flowing from the firm to the market (Vargo & Lusch, 2004). A direct comparison of the G-D logic and the new VCC approach following S-D logic was included in Appendix B3. The shift from G-D logic toward the VCC concept originated in a change of

consumer’s role and corporate challenges. Due to globalization, advancement in

ICT and internet, and the increase of popularity of social media platforms, the “role

of consumers has changed substantially” (Martínez-Cañas et al., 2016, p. 1).

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competition (Bruhn, 2009a) and similarity of the product features increased (Bruhn, 2009b). This made differentiation based on communication and maintenance of customer relationships crucial (Banyte & Dovaliene, 2014). Thirdly, this kind of differentiation increased usage of traditional communication means as they record many years of success. Unfortunately, next to becoming costly, they became less effective over time (Bolton & Saxena-Iyer, 2009). Consumers react to this overstimulation by conventional advertising (Okonkwo, 2007) with commercial avoidance, named ‘zapping’ (Jakobs, 2009). Additionally, lacking information asymmetry toward consumers and decreasing costs for ICT (Füller et al., 2009) displayed a need of alternative communication means such as social media. This represents the last challenge for firms, the importance of online presence, especially on social media. Benson-Armer et al. (2015) presented technological advancements which firms will need to take into consideration in the next 15 years. Those are increase of mobile phone owners by 2030, representing 75% of the world population who will have internet access, and an increase in importance of social media for consumer consumption. To face the presented challenges five areas of consideration are suggested: (1) achieving competitive advantage, (2) engagement of consumers in dialogues, (3) meet consumers’ expectation by providing ‘seamless’ omni-channel experience (4) focus on relationship building and (5) ensure enough consumer-brand interaction opportunities (Benson-Armer et al., 2015). Concluding, the changing consumer role coupled with corporate challenges make it impossible for companies to keep on acting autonomously along their value chain as value can only be created with consumers’ engagement (Prahalad & Ramaswamy, 2004a). Thus, changes are needed where firms shift away from the G-D logic toward the new concept of VCC.

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consumers leave their role as solely value recipients and move toward a central role in VCC process (Kao et al., 2016), namely provider of value in dependence of own experience (Coates et al., 2009). The firm becomes, therefore, a value proposer and VCC facilitator (Payne, Storbacka, & Frow, 2008) rather than the single value creator, as in G-D logic. Within the S-D logic, marketing is seen as a social process with interaction as key aspect. As a result, in the new concept, value is created in collaboration, meaning through dialogues and interactions with consumers throughout a multiplicity of touch points along the firm’s value chain (Payne et al., 2009). The firm applies its knowledge and resources to production and branding of the products, while consumers complement this with their knowledge and skills from their daily product usage (Vargo et al., 2008). Through such bi-directional communication (Vargo & Lusch, 2004) the firm, firstly, learns about its consumers’ emotions, feelings and expectations. Secondly, it is able to adapt interactively its offering to dynamic needs (Füller & Matzler, 2007) by combining gained knowledge with own resources (Kao et al., 2016). The interaction quality decides upon the perceived experience uniqueness and lastly upon the achieved differentiation and competitive advantage (Prahalad & Ramaswamy, 2004b), therefore the product and market success of the company. Out of these reasons, VCC should not be ignored by those companies who want to succeed (Coates et al., 2009). Examples of companies which successfully implemented the VCC concept are displayed in Table 2.2.

VCC provides companies with several advantages such as (1) the ability to address real needs through dialogues and provide customer-centered products (Füller & Matzler, 2007), (2) increase in consumer trust (Füller et al., 2009), (3) strengthened ties with consumers (Füller, 2010; Hsieh & Chang, 2016), (4) positive brand

Company VCC Activity

Nike Put a sensor in their shoes to record the running behavior and provided a platform

(Nike+) for exchanging those experiences.

Apple Physical stores are designed for consumer engagement in order to learn and not to

sell (Ramaswamy, 2008).

LEGO Factory Gives opportunity to design own block model online.

Unilever Involves customers in problem solving decisions regarding packaging or

advertisement (Coates et al., 2009).

Calvin Klein

In 2016 the brand started again the successful campaign on Instagram #mycalvins. Hereby consumers can share their experience with Calvin Klein underwear by posting a picture of them wearing it in a special situation.

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attitude and increased brand loyalty (Kao et al., 2016), (5) productivity gains due to higher efficiency, (6) a higher fit between product and needs, and, hence, (7) an increase in product value (Hoyer et al., 2010), brand competitiveness (Hsieh & Chang, 2016) and profit (Hyseni, 2015). In order to be able to gain from those advantages it is important to provide consumers with platforms to engage in dialogues with the brands (Ramaswamy, 2008). The content of those platforms should be transparent, easily accessible (Prahalad & Ramaswamy, 2004b) and should have a personal relevance for the consumer and the company in order for the conversations to be meaningful for VCC (Tynan et al., 2010; Prahalad & Ramaswamy, 2004b). Such platforms can be social media platforms, or more precise SNS such as Facebook, on which not only consumer-brand, but also consumer-consumer relationships are possible (Kao et al., 2016). Following the many-to-many approach to VCC, consumer networks can enrich dialogues and interactions, increasing with this their quality and capability of achieving competitive advantage through differentiation (Martini, Massa, & Testa, 2014).

2.2.3 Value Co-Creation on Social Media

The popularity of social media, also called Web 2.0, grew over the past years (Matikainen, 2015) especially as a VCC supporting platform (Kao et al., 2016) providing brands with an opportunity of an unbeatable competitive advantage (Bughin, 2015). Social media “is a group of internet-based applications” (Kaplan & Haenlein, 2010, p. 61), enabling a two-way communication platform in form of

“activities and behaviors among communities of people who gather online to share information, [experience], knowledge, and opinions” (Safko & Brake, 2009, p. 6).

Brands make use of this tool often for experience co-creation (Martini, Massa, & Testa, 2012) by connecting individuals and enabling them to engage with the brand and among each other in real-time (Erdogmus & Cicek, 2012). The term ‘social media’ is, due to its definition, seen as an umbrella term for many user-based platforms (Matikainen, 2015) and can be divided into five categories. Those are blogs (Tumblr), SNS (Facebook, Twitter), content communities (Youtube), e-forums (4chan) and content aggregators17 (Flipboard) (Constantinides & Fountain, 2008). Mangold and Faulds (2009) add collaborative websites (Wikipedia), virtual

17_{“A website or program that collects related items of content and displays them or links to them.”}

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worlds (Second Life) and commerce communities (eBay) to those categories. This dissertation further analyzes the SNS category on the example of Facebook due to its ability of allowing content generation and sharing (Mangold & Faulds, 2009), and providing access to engaged consumers. Moreover, Facebook connects consumers and drives close interactions (Kao et al., 2016), enabling relationship creation.

SNS allow brands to engage with their consumers (Tsimonis & Dimitriadis, 2014) and are able to do the following: (1) understand unmet consumer needs and recognize quality short-comes of current products due to, in real-time, shared opinion, in form of likes or posts, ideas and experience (Hoyer et al., 2010); (2) inform consumers about current campaigns and receive immediate reactions to them; (3) provide immediate advice in case of customer service issues (Tsimonis & Dimitriadis, 2014) and (4) expand their consumer base through consumer’s post sharing with their social network (Tsai & Men, 2013). Further, SNS offer additional advantages useful for the brand to increase sales, revenue and obtain a competitive advantage through a successful VCC. Firstly, it is cost-effective (Hajli, 2016) as investments in traditional market research and marketing can be decreased (Filieri, 2013). Secondly, it has a wider geographically-dispersed (eYeka, 2012) customer reach compared to traditional communication tools (Sawhney, Verona, & Prandelli, 2005). Moreover, as not seen as an invasive tool, SNS can bring brands and consumers closer together supporting two-sided dialogues (Dretsch & Kirmani, 2016) which can result in brand loyalty (Erdogmus & Cicek, 2012). Lastly, SNS are not time-restraint, allowing for continuous interaction at any moment, and provide a high information transparency for the brand and the consumer (Kaplan & Haenlein, 2010). Brands are represented on SNS through brand communities, which many global luxury brands meanwhile already initiated (Dhaoui, 2014). Such communities are defined as a “group of consumers with a shared enthusiasm for a

certain brand […], with members who engage jointly in the group action to […] express mutual feelings and commitment’’ (Luo et al., 2015, p. 493). They are a

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Brand communities on Facebook are utilized by several brands due to its high popularity and usage (Buckle, 2016a), and its non-commercial environment enhancing sociability and connectivity among parties (Kaplan & Haenlein, 2010). An average of 130 friends per user (Jackson, 2011), globally 1.89 hours spent per day and a rate of one in three internet users accessing social networks when in search for brand information (Globalwebindex, 2016), make Facebook a suitable VCC platform. With the focus of this dissertation being luxury brands, the next chapter presents the importance of VCC on Facebook brand communities for such brands.

2.2.4 Value Co-Creation of Luxury Brands

Social media has not always been seen as a useful communication tool by luxury brands (Heine & Berghaus, 2014). Nevertheless, after facing advances in ICT and changing consumer needs and purchase behaviors, they started to recognize the crucial part that social media can play in their brand communication strategies (Dall'Olmo Riley & Lacroix, 2003). Several global luxury brands such as Chanel, Louis Vuitton, D&G18, HUGO BOSS and Burberry have a major presence on social media, especially on SNS. Burberry created its own brand community19 in order to connect with their consumers in a non-commercial setting. D&G considers social media as a direct feedback tool and Louis Vuitton, Chanel and HUGO BOSS share with consumers in their Facebook brand community, among others, broadcasts of their latest fashion shows (Kim & Ko, 2012). The internet is for luxury brands in first place, different than for conventional brands, a communication rather than a transaction tool as luxury goods are experience and not only search goods (Dall'Olmo Riley & Lacroix, 2003). Reasons for such experience- or value-seeking can be put down to the six attributes of luxury brands, namely high price, high quality, rarity, aesthetic, heritage and superfluousness. These make the luxury market a value-added industry, in need of experience, interaction and consumer-brand relationships to stimulate their desire for luxury consumer-brands (Kim & Ko, 2012) and turn them into loyal consumers. Consequently, social media enables luxury brands to achieve both (Ko et al., 2016) and provides them with insights about what consumers need and think20 (Cuccureddu, 2011). Moreover, SNS are used by more

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than one-third of all internet users to stay updated about and in touch with a brand by following their brand communities on Facebook. According to Mander (2016) 37% of all Facebook members follow their brands on Facebook (Mander, 2016). With a total of 1.71 billion active users (Facebook, 2016), this results in almost 633 million followers, excluding their personal social networks of potential consumers not yet following a brand.

Choi et al. (2016) regard VCC as especially important for luxury brands to be successful and to stay competitive (Choi et al., 2016), due to its aspects of interactivity and relationship building (Dall'Olmo Riley & Lacroix, 2003). With decreasing consumer loyalty (Euromonitor, 2014), increasing competition, changing luxury consumption habits influencing consumer perception and experience (Ko et al., 2016), and increasing importance of ICT, luxury brands started to realize that they cannot rely anymore only on their brand symbols and names (Kim & Ko, 2012). They have to start to create value and experiences with their consumers to differentiate themselves from the uprising competition. Two of the most crucial reasons for the increased need for VCC are the shift of the luxury path-to-purchase, hence luxury consumer behavior, and decreasing loyalty. Firstly, information transparency and high connectivity lead to a change in how consumers research and buy products. Consumers increasingly do not only want a personalized experience, but even a higher involvement in the product or service creation. The upcoming consumption generation of millennials21 demand an even higher orientation toward the VCC concept due to the significant difference to previous generations in terms of experience, value and communication preferences (Deloitte, 2016). The most important difference lays in the lower brand loyalty, which is the second reason why VCC is crucial for luxury brands. Increasing competition, changing preferences (as mentioned above) and the lack of perceived fit between high price and gained value make an establishment of solid bonds with consumers necessary (Kim & Ko, 2012). Especially online VCC on SNS are known for their ability to create feelings of connection between consumers and the brand (Choi et al., 2016). In order for those feelings to develop, consumer engagement with the luxury brand and other members of the online brand community is essential as in such a way, consumers provide information based on which brands can “develop

21_{Millennials are people born between 1980 and 2000 (Goldman Sachs, 2016) and who are, thus,}

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differentiated, desired and difficult to copy aspects of their brand experience”

(Tynan et al., 2010, p. 1160). Only then, desired experiences, hence value can be co-created and consumer-brand relationships strengthened, resulting in brand loyalty, which is described as the “highest possible level of relationship” (Egan, 2008, p. 54).

2.2.5 Importance of Brand Loyalty

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3 Conceptual Framework

Based on the presented theoretical background, a clear relation between VCC and brand loyalty was established, especially the importance of online VCC through SNS for luxury brands. As presented in chapter 2.2.2, VCC can lead to increased brand trust, strengthened ties with consumers and a positive brand attitude, implying with this, intermediate variables between the relation of VCC and its outcome, brand loyalty. Hence, indicating the existence of a bigger model scope of the online VCC process. In order to answer the RQs stated in the introduction, testable hypotheses are presented. Those were based on the theoretical background complemented with additional literature review on the variables brand trust, brand attachment, brand attitude and brand loyalty. The presentation of a conceptual model connecting all variables closes this chapter.

3.1 Hypotheses Development

VCC itself is difficult to measure as it is an ongoing process, a sum of several ongoing interactions over a longer period of time. Therefore, researchers utilized in preceding literature online brand engagement (OBE) as a reliable representative and measure of online brand VCC (Dretsch & Kirmani, 2016; Suh & Yi, 2006). Engagement as a concept is situated within relationship marketing and is able to explain consumers’ behavior toward a brand beyond purchase, standing for consumer-brand interaction experiences (Hollebeek, 2011). Lusch and Vargo (2006) confirm the ability to use engagement as a VCC measure by saying that

“interactive consumer experiences co-created with other actors can be interpreted as the act of ‘engaging’” (Brodie et al., 2013, p. 106). Concluding, OBE was

utilized as a variable in the conceptual model and the analysis, and both, VCC and OBE, were used interchangeably.

The term ‘engagement’ differs from the often interchangeably used term (Wolf-Wendel et al., 2009) ‘involvement’ through the cooperation aspect of ‘doing with’ instead of simply ‘doing’. Brodie et al. (2011) define consumer engagement as “a

strategic imperative for generating enhanced corporate performance, including sales growth, superior competitive advantage and profitability” (Brodie et al.,

2011, p. 252). Sashi (2012) adds that consumer engagement focuses on

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and responding to intelligence regarding customer needs and seeks to build trust and commitment in relationships with customers” (Sashi, 2012, p. 267). Hereby,

brand engagement does not limit only to actual purchase (Van Doorn, et al., 2010), but also includes positive word-of-mouth in form of recommendations and reviews (Kumar, et al., 2010), commenting, reading and liking of posts or brand community pages itself, searching for information, viewing pictures and videos, participating in competitions or online surveys (Le Roux & Maree, 2016), and sharing of brand information (Dretsch & Kirmani, 2016). Tsai and Men (2013) divide the named activities in two categories, namely consuming and the rather active one, contributing. Consuming involves reading posts and viewing pictures, videos, whereas contributing incorporates activities such as sharing of post, commenting or recommending (Tsai & Men, 2013). All those activities strengthen the relationship with the brand (Fernandes & Remelhe, 2016). Van Doorn et al. (2010) add an aspect to the definition of engagement that “customer engagement behaviours […] that

have a brand or a firm focus, beyond purchase, [may be] resulting from motivational drivers” (Van Doorn, et al., 2010, p. 254), emphasizing with this the

need of motivators as antecedents for successful brand engagement and providing a complete model of the online VCC process. This aspect got re-established by Greve (2014) and Chae and Ko (2016). Brand engagement involves consumer resources in the form of time, and psychological participation efforts (Hoyer et al., 2010). Due to the requirement of active and voluntary consumer participation on SNS for successful VCC, consumers need motivational incentives to engage with brands and to invest their resources. Concluding, consumers are driven by a set of motivators when voluntarily deciding to engage with brands (Chae & Ko, 2016). Consequently, a positive relation of those motivators with OBE is assumed.

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six motivators and consumers’ expected outcome when being motivated by them is presented in Table 3.1.

Luxury brands offer an intangible set of emotions next to the actual tangible product to make their consumers feel unique (Bastien & Kapferer, 2013). Consumers in return purchase them for self-monitoring goals or for personal pleasure (Bian & Forsythe, 2012). Concluding, luxury brand consumers have strong emotional connections to luxury brands and their products, ‘Brand Self-Connection’ is, thus, relevant for the analyzed context and needs to be added. The following hypothesis (H) is derived:

H1: The motivators (1) social influence, (2) search for information, (3)

entertainment, (4) trust, (5) reward and (6) brand self-connection have a positive influence on OBE on Facebook luxury brand pages.

Literature states that engagement is crucial within VCC processes in order to lead to positive outcomes for the consumer and the brand (Martínez-Cañas et al., 2016). One of such outcomes could be a positive brand attitude. Fishbein and Ajzen (1975) define attitude as “a learned predisposition to respond in a consistently

favorable or unfavorable manner with respect to a given object” (Fishbein &

Ajzen, 1975, p. 6). Such predisposition is a sum of positive and negative evaluations developing over time and resulting from product and brand experiences or provided brand information through communication channels such as TV, magazines or social media (Lien & Cao, 2014). It is said that encounters are the most important element of VCC processes. They represent a place or platform where “learning and

communication interactions between brands and [its] customers take place”,

Motivation Expected Outcome

Social Influence Share common passion and experience, and achieve recognition and

appreciation among members of the brand page.

Search for Information

Obtain brand-related information (e.g. campiagns, events, trends, new products)

Entertainment Spend time in a fun and enjoyable way.

Trust Obtain information through reliable and credible source.

Reward Expectation of receiving monetary- and non-monetary benefits through the

activity.

Brand Self-ConnectionPerceived fit between personal identity and brand's values and attributes,

making the brand and its activities appealing to the consumer.

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consequently enabling VCC. An encounter example is digital marketing in social media. Concluding, a Facebook brand community can be seen as an encounter, as in such, the brand interacts with their consumers by providing them with brand information and in return learning about their needs, expectations and concerns (Choi et al., 2016, pp. 1-2). Payne et al. (2009) state that encounters have the potential to change the mental representation of the brand in consumer minds (Payne et al., 2009), hence what the consumer thinks about a brand. Kao et al. (2016) also name positive brand attitude as one of the possible positive outcomes of VCC on social media (Kao et al., 2016). So do Schivinski and Dabrowski (2014), by recognizing the positive influence of user-generated Facebook content on brand attitude, adding in return its positive influence on brand equity (Schivinski & Dabrowski, 2014). Moreover, according to Chaudhuri and Holbrook (2001), Kuvykaite and Piligrimiene (2014), and Oliver (1999), the more positive associations are connected with the brand, the stronger is the brand loyalty. This supports the relationship of brand attitude and brand loyalty and the following is assumed:

H2: Brand engagement on Facebook brand pages of luxury brands

influences brand attitude positively.

H3: Positive brand attitude toward luxury brands has a positive influence

on brand loyalty.

A second direct positive outcome of VCC on social media could be brand loyalty. Kuvykaite & Piligrimiene (2014) state that the conceptual model of brand engagement consists, next to the engagement influencing factors, out of brand equity dimensions (Kuvykaite & Piligrimiene, 2014). Greve (2014) defines brand loyalty as “a deeply held commitment to re-buy or re-patronize a preferred product

or service consistently in the future, thereby causing same brand set purchase”

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mouth can directly be influenced (Bolton & Saxena-Iyer, 2009). Luo et al. (2015), Choi et al. (2016) and Greve (2014) all confirm the direct influence of engagement on brand loyalty, whereby Greve (2014) specifically mentions the positive influence of OBE on brand loyalty. Lastly, Banyte and Dovaliene (2014) explain that loyal consumers are more likely to engage even more with the brand as their participation capability and interest in “greater benefit from maintaining long-term

relationship” increases (Banyte & Dovaliene, 2014, p. 487). This indicates a

reciprocal relation between OBE and brand loyalty. The following is assumed for luxury brands:

influences brand loyalty positively.

H5: Brand loyalty positively influences brand engagement on Facebook

brand pages of luxury brands.

A third positive VCC outcome on social media could be brand trust. Morgan and Hunt (1994) define trust as “willingness to rely on an exchange partner in whom

one has confidence” (Morgan & Hunt, 1994, p. 23). Several studies confirmed that

consumer VCC processes increase consumer’s trust toward the brand in community settings (Hollebeck, 2011; Brodie et al., 2013). Moreover, Rajah et al. (2008) and Banyte and Dovaliene (2014) assume that engagement has an influence on trust which can again strengthen the consumer-brand relationship (Rajah, Marshall, & Nam, 2008; Banyte & Dovaliene, 2014). Trust itself is achieved through information-rich and emotional interaction, which is provided when engaging in brand communities allowing brand-consumer and consumer-consumer interactions (Luo et al., 2015). This again, enables the establishment of long-term relationships (Füller et al., 2009). The relationship strength, which represents a “psychological

state of consumer brand relationship focusing on individual consumer’s experience”, can be measured through brand attachment (Hsieh & Chang, 2016,

p. 13). Park et al. (2010) define brand attachment as, “…the strength of the bond

connecting the brand with the self” (Park et al., 2010, p. 2). Based on this, the

following hypotheses are formed:

positively influences brand trust.

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The last stated direct VCC outcome on social media within this dissertation could be brand attachment. Social media is known for its capability of enabling relationship building, by intensifying dialogues and interaction among consumers themselves and with the brand, and providing with this more dynamic connections (Kao et al., 2016). Hence, as OBE is “the heart of interactive consumer–brand

relationships” (Hsieh & Chang, 2016, p. 15) and is seen as a vehicle for building

and strengthening relationships (Fernandes & Remelhe, 2016), the following is hypothesized:

H8: OBE has a positive influence on brand attachment.

High brand attachment has many advantages which are, among others, new customer acquisition and customer retention (Payne et al., 2009). Within a brand community, consumers can develop a sense of community belonging deriving from their membership and, therefore, affective brand bonds. This can be seen as brand attachment which, in return, increases the likelihood of participation in the VCC activities offered within the brand community (Zhou et al., 2012; Zaglia, 2013, Kao et al., 2016). The following is hypothesized:

H9: Brand attachment positively influences brand engagement on Facebook

brand pages of luxury brands.

Strengthened ties in form of strong consumer-brand-consumer relationship bonds can also boost consumer loyalty (Luo et al., 2015; Hsieh & Chang, 2016; Egan, 2008). As additionally brand attachment is seen as a predictor of brand commitment in form of brand loyalty (Thomson, MacInnis, & Park, 2005), the following is assumed:

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3.2 Conceptual Model

Resulting from the literature review and hypotheses development a conceptual model, representing the relationship between OBE, representative for VCC, and brand loyalty, is designed. This model compliments the relationship with antecedents and outcomes of OBE, including their interrelations, all leading to brand loyalty. The described model is depicted in Figure 3.1 and a summary of the formulated hypotheses can be viewed in Table 3.2.

Hypothesis Independent Variable Dependent Variable Expected

H1 Social Influence/ Search for Information/

Entertainment/ Trust/ Reward/ Brand Self-Connection OBE +

H2 OBE Brand Attitude +

H3 Brand Attitude Brand Loyalty +

H4 OBE Brand Loyalty +

H5 Brand Loyalty OBE +

H6 OBE Brand Trust +

H7 Brand Trust Brand Attachment +

H8 OBE Brand Attachment +

H9 Brand Attachment OBE +

H10 Brand Attachment Brand Loyalty +

Motivation for Brand Engagement Online Brand Engagement (OBE) Brand Loyalty Brand Attachment Brand Trust Brand Attitude H1 H2 H3 H4 H5 H6 H7 H8 H9 H10 Social Influence Search for Information

Entertainment Trust Reward Brand-Self Connection

Figure 3.1: Conceptual Model

Consumer Value Co-Creation of Luxury Brands -

Consumer Value Co-Creation of Luxury

Brands

-

An empirical analysis of the influence of value

co-creation through social media on brand loyalty

Kristina Marx

Consumer Value Co-Creation of Luxury

Brands

-

An empirical analysis of the influence of value

co-creation through social media on brand loyalty

Statutory Declaration

Abstract

Acknowledgements

Table of Contents

Abbreviations

Table Index

Figure Index

1 Introduction

2 Theoretical Background

2.1 Luxury Brand

Personal

Luxury Goods

2.2 Value Co-Creation Paradigm

3 Conceptual Framework

3.1 Hypotheses Development

3.2 Conceptual Model