Journal Mhs 2
Journal Mhs 2
www.emeraldinsight.com/0309-0566.htm
EJM
40,5/6 Consumer-based brand equity
and country-of-origin
relationships
696
Some empirical evidence
Received February 2005
Revised August 2005
Ravi Pappu
University of Queensland, Brisbane, Australia
Pascale G. Quester
University of Adelaide, Adelaide, Australia, and
Ray W. Cooksey
University of New England, Armidale, Australia
Abstract
Purpose – The objective of the present research is to examine the impact of the country of origin of a
brand on its consumer-based equity.
Design/methodology/approach – Brand equity was conceptualized in this paper as a combination
of brand awareness, brand associations, perceived quality and attitudinal brand loyalty. A doubly
multivariate design was incorporated in a structured questionnaire to collect data via mall intercepts
in an Australian capital city.
Findings – Multivariate analysis of variance of the data indicated that consumer-based brand equity
varied according to the country of origin of the brand and product category. This impact of country of
origin on brand equity occurred where consumers perceived substantive differences between the
countries in terms of their product category-country associations.
Research limitations/implications – An important direction for future research would be to
examine how the consumer-based equity of a brand would be affected, if the country of origin were
changed from a country with weaker association with the product category to a country with strong
association with the product category. The results would be useful to MNCs contemplating
international manufacturing.
Practical implications – Marketing managers operating in the international context must identify
the sources of brand equity, and understand the importance of incorporating country of origin into
their brand equity measurement. Further, the results suggest that, when a brand offers a variety of
product categories, brand managers should monitor and track the brand’s consumer-based equity for
each product category.
Originality/value – The present study is one of the first to empirically examine and confirm the
impact of country of origin on the consumer-based equity of a brand.
Keywords Brand awareness, Brand equity, Brand loyalty, Quality, Country of origin, Australia
Paper type Research paper
The authors gratefully acknowledge the financial support of the Faculty of Economics, Business
European Journal of Marketing
Vol. 40 No. 5/6, 2006 and Law, University of New England, provided in the form of a Faculty Internal Research Grant
pp. 696-717 awarded to the first author, which provided the necessary funding for this research. The authors
q Emerald Group Publishing Limited
0309-0566
would also like to thank the two anonymous reviewers for their detailed and insightful
DOI 10.1108/03090560610657903 comments on an earlier draft of this article.
Introduction Country-of-origin
Brand equity is considered a key indicator of the state of health of a brand, and its relationships
monitoring is believed to be an essential step in effective brand management (Aaker,
1991, 1992). Both researchers (e.g. Shocker et al., 1994) and practitioners (e.g. Biel, 1992)
have argued for the importance of understanding the concept of brand equity. Country
of origin is another important variable influencing consumer perceptions of brands
(Hulland, 1999) and brand images (Ahmed et al., 2002). In the present study, consistent 697
with the definition offered by Thakor and Katsanis (1997, pp. 79-80), country of origin
is defined as “the country in which the product is made”[1]. The impact of country of
origin on consumer perceptions or evaluations of products is called the “country of
origin effect” (Samiee, 1994). Researchers have suggested that country of origin effects
may impact the equity of certain brands (e.g. Thakor and Katsanis, 1997). For example,
Aaker (1991) and Keller (1993) both argued that country of origin could affect a brand’s
equity by generating secondary associations for the brand. Indeed, even a
foreign-sounding name is known to affect a brand’s equity (Leclerc et al., 1994).
Increasingly, and for a variety of reasons, brands from one country are being made
available to consumers in other countries (Shocker et al., 1994). In such instances,
international marketers need to understand the sources of the equity of their brands.
Some researchers have realized this and advocate extending the international
consumer research scope to include brand equity (Wang, 1996). For example,
measurement of brand equity across international boundaries is essential if brand
managers are “to manage and control brand equity effectively” (Shocker et al., 1994,
p. 156).
There is prolific research in both the areas of country of origin effects and brand
equity. However, brand equity remains a complex phenomenon in the international
context (Onkvisit and Shaw, 1989). Brand equity has been conceptualized as a
multidimensional construct (e.g. Aaker, 1991), and the impact of country of origin on
some of its components (e.g. perceived quality) has been widely researched in the
marketing literature (see Chao, 1998). However, no empirical research to date has
evaluated how country of origin may affect brand equity. This paper aims to fill this
gap in the international context. More specifically, this research aims to develop a
better understanding of the effect of country of origin on brand equity.
700
Figure 1.
A model of
country-of-origin effects
on consumer-based brand
equity
brand image when made in countries such as the former USSR/Poland/Hungary. This
discussion leads to the following general hypothesis:
H1. In a given product category, the consumer-based equity of a brand varies
significantly according to the country of origin of the brand.
Given that consumer-based brand equity is conceptualized as a four-dimensional
construct, this general hypothesis can be subdivided into more micro-related
predictions. However, no hypothesis was made in the present study regarding the
impact of the country of origin on the brand awareness component of consumer-based
brand equity, since it would be difficult to manipulate experimentally consumers’ Country-of-origin
mindset with respect to brand awareness. For example, asking consumers if they were relationships
aware of the brand Honda (without providing the country of origin), to test for their
brand awareness level and then to respond to the hypothetical case of a product
carrying the brand Honda but made in the USA (or some other country) would create
demand artefacts. In addition, consumers are known to associate a brand with its home
country even when the country of origin information is not made available to them. 701
On the other hand, a brand could generate and leverage secondary associations
from an array of entities. For example, people, places and events could be linked to a
brand (Keller, 1993) and generate secondary associations. According to Aaker (1991),
country of origin associations are one such type of consumers’ brand associations.
Similarly, Keller (1993) argued that consumers’ country of origin associations serve as
secondary associations to their brand associations. Brand associations are supposed to
contribute to brand equity when consumers are aware of the brand and hold “strong,
favorable and unique brand associations” in their minds (Keller, 1999, p. 2). Rossiter
and Percy (1987) suggested that secondary associations should be emphasized in
marketing communications based upon consumers’ awareness, beliefs and attitudes of
the concerned people, places or events. The inference is that favorable secondary
associations are beneficial to the brands. Keller (1993) also argued that favorable
associations contribute to the equity of a brand. If consumers’ country of origin
associations serve as secondary associations, they should influence brand associations,
and therefore brand equity, leading to the following hypothesis:
H1a. In a given product category, brand associations vary significantly according
to the country of origin of the brand.
A number of researchers have established that country of origin influences perception
of quality of products (e.g. Heslop et al., 1987; Kaynak and Cavusgil, 1983). Perceived
quality (Zeithaml, 1988) is a key dimension of brand equity (Aaker, 1991), believed to
enhance the value of the brand by providing consumers with a reason to buy. We
hypothesize that country of origin information affects the perceived quality of
products. That is, consumers are likely to hold favorable perceptions of the quality of a
brand when the brand is known to originate from countries with a strong association
with the product category compared to when the brand is known to originate from
countries with weaker association with the product category. We expect that the
perceived quality levels of a brand will vary by the country of origin of the brand. That
is, the perceived quality level of Ericsson made in Sweden is likely to be higher than the
perceived quality level of Ericsson made in Mexico or Hungary, for the product
category “mobile phones”. Furthermore, consumers’ perception of the quality of
products is known to be product-category specific (Kaynak and Cavusgil, 1983). Hence,
our third hypothesis can be stated as follows:
H1b. In a given product category, perceived quality varies significantly according
to the country of origin of the brand.
The extant literature does not provide much insight into the relationship between
country of origin and brand loyalty. However, we argue that country of origin could
affect the brand loyalty component of a brand’s equity. Brand loyalty in the present
study is defined as consumers’ intention to buy a brand as a primary choice.
EJM Consumers may prefer a brand based partly on its country of origin. This might be
40,5/6 because consumers have experienced, or are convinced about, either the features or
attributes or benefits offered by the brand (e.g. Nike) originating from the particular
country (USA). Therefore, it can be argued that, similar to brand loyalty, consumers
may exhibit country loyalty. Moreover, country of origin effects in one product category
are known to transfer to new product categories offered from the same country
702 (Agarwal and Sikri, 1996). It is hypothesized, therefore, that country of origin affects
consumers’ loyalty towards a brand.
H1c. In a given product category, brand loyalty varies significantly according to
the country of origin of the brand.
Furthermore, consumers’ product category-country associations are believed to
moderate the effect of the country of origin on consumer-based brand equity
dimensions. For example, the consumer-based equity of a brand made in a country
with strong product category-country associations (e.g. car/Germany) is likely to be
substantially higher than that for the same brand made in a country with weaker
product category-country associations (e.g. car/Mexico), in cases where consumers
perceive substantive differences between the two countries in terms of their product
category-country associations. The empirical study designed to examine the proposed
model is described in the next section of this paper.
Method
Research design and procedures
A cross-sectional mall intercept survey was used to collect the data. A total of 672
responses was collected through systematic sampling from a busy shopping mall in an
Australian state capital city. The questionnaire used as the data collection instrument
included an experimental design. A doubly multivariate design was employed for
examining the differences in consumer-based brand equity across three different
countries of origin. The model was tested using two product categories: cars and
televisions. That is, country of origin (three levels) and product category (two levels)
were the two between-subjects factors and brand name (three levels) was the
within-subjects factor: the three levels were nested within each product category (i.e.
Toyota, Mitsubishi and Suzuki were nested within cars; Sony, Toshiba and Hitachi
were nested within televisions). The unit of analysis was the individual consumer.
Since country-of-origin perceptions are known to vary by consumers’ home country,
we needed respondents who were born in Australia or who had lived in Australia for a
considerable period of time. The population was defined as “people in the age group of
18 to 70 who were born in Australia or who have stayed in Australia for more than one
year and have used products in the relevant category (televisions or cars)”. All
respondents had used products in the category they were exposed to (televisions or
cars). The majority of the sample (92.5 percent) had lived in Australia for five or more
years and met this condition, with more than 82 percent of the sample living in
Australia for 15 or more years.
Of the 672 completed questionnaires obtained, 75 were found to be incomplete and
consequently discarded. Of the remaining 597 questionnaires, a further 58 were from
respondents not born in Australia or who had not lived in Australia for at least one
year. These respondents were also eliminated from the analysis, yielding a final sample Country-of-origin
of 539. relationships
Data collection instrument and measures
The survey questionnaire included three sections. Section one of the questionnaire
comprised two questions, aimed at capturing respondents’ product category-country
associations. Respondents were asked to list the names of (a maximum of six) countries 703
that came to their mind when they thought of a given product category (cars or
televisions). Respondents had the option to say that no countries came to their mind
when thinking of the given product category. The order in which the respondents listed
the countries was used as the basis for computing a product category-country
association (PCCA) rating for each of the countries mentioned by the respondents. The
countries were then ranked, based on their PCCA rating.
Section two of the questionnaire included items measuring various dimensions of
consumer-based brand equity, namely brand awareness, brand associations, perceived
quality and brand loyalty (see the Appendix). Measures for brand equity used in the
present study were compiled from the literature (e.g. Aaker, 1991, 1996, 1997; Yoo et al.,
2000; Yoo and Donthu, 2001). For example, aided recall and unaided recall were used as
measures for brand awareness. Brand personality (e.g. sincerity and excitement) and
organizational associations (e.g. liking and trust) were used as the measures for brand
associations. That is, one of the questions required respondents to rate the statement “I
trust brand X”, on a scale of 1 to 11. Measures for perceived quality were adapted from
Aaker (1991). For example, respondents were asked to rate the statement “Brand X is
reliable”, on a scale of 1 to 11. Measures for attitudinal brand loyalty were also adapted
from the literature. For example, respondents were asked to rate the statement “Brand
X would be my first choice” on a scale of 1 to 11. These measures had been empirically
tested and employed in earlier studies (e.g. Cobb-Walgren et al., 1995; Yoo and Donthu,
2001). Each item had the verbal anchors “strongly disagree” and “strongly agree” for
the 1 and 11 scale points.
Demographic questions (e.g. respondent age, gender, country of birth and length of
stay in Australia) were included in section three of the questionnaire. To improve
readability and understanding, the questionnaire was pre-tested using a judgment
sample of actual consumers, and was subsequently revised. Three different versions of
the questionnaire (one for each of the three countries) were designed for each of the
product categories included in the study. For a given product category, questions in all
sections were identical in each of the three versions of the questionnaire, except for the
section on brand equity. Each respondent completed only one version of the
questionnaire.
Dependent variables
The four consumer-based brand equity dimensions served as the dependent variables.
Confirmatory factor analysis (CFA), used to establish the dimensionality of
consumer-based brand equity, supported the hypothesized four-dimensional
model[2]. The multi-dimensional consumer-based brand equity construct exhibited
convergent, discriminant and construct validity. The parameter estimates of the
measurement model showed that all indicator variables loaded their hypothesized
factors (e.g. consumer-based brand equity dimensions) in a statistically significant
EJM manner (p , 0:05), indicating convergent validity. Furthermore, each of the constructs
40,5/6 exceeded the suggested level of 0.70 for reliability for both cars and televisions. All the
constructs also exceeded the suggested level of 0.50 for variance extracted in the
selected product categories of cars and televisions.
Discriminant validity of each pair of constructs was tested for all the six brands.
First, each pair of constructs were analyzed by standard confirmatory factor analytic
704 procedures. The standard model was then compared to a second model in which the
correlation between the two factors was fixed at 1.0 and their relationship with other
variables was constrained to be equal. The results indicated that the four constructs
exhibited discriminant validity.
We then compared consumers’ purchase intention towards a brand and the equity
consumers associated with the same brand to examine construct validity. Previous
researchers (e.g. Cobb-Walgren et al., 1995; Yoo and Donthu, 2001) observed that
consumer purchase intention and brand equity are positively associated. The
correlation between consumer-based brand equity and consumer purchase intention
was moderate (Toyota 0.37; Mitsubishi 0.48; Suzuki 0.46; Sony 0.39; Toshiba 0.43; and
Hitachi 0.51) but significant (p , 0:001) for all the six brands included in the study,
demonstrating construct validity.
Analysis procedures
It was important to understand the extent to which respondents associated the selected
countries and the selected brands with the car and television product categories. The
associative strength of respondents’ product category-country associations was
measured using the “naming method” suggested by Fazio (1987, 1990). The “naming
method” involved presenting subjects with the name of the product category label (e.g.
cars/televisions) and asking them to recall the names of countries.
The principal objective of the present research was to examine consumer-based
equity differences of brands made in different countries. Differences in
consumer-based brand equity were analyzed by country of origin of the brand and
product category using a doubly multivariate repeated-measures multivariate analysis
of variance (MANOVA). The MANOVA used the four consumer-based equity
variables (brand awareness, brand associations, perceived quality and brand loyalty),
which were computed by averaging the scores of the items loading onto them, as the
dependent variables. Country of origin and product category were the independent
variables used in the MANOVA.
The data were checked, and all the assumptions (e.g. equality of
variance-covariance matrices, normality, linearity and absence of multicollinearity)
of MANOVA were met and in all cases, the cell sizes (see Table I) were well above the
minimum recommended size[3]. A requirement for MANOVA is that the dependent
variables be correlated. Bartlett’s test of sphericity (Hair et al., 1998) indicated that
Country of origin
Product category Japan China Malaysia Total
Table I.
MANOVA results: Television 77 91 86 254
between-subjects factors Car 96 85 104 285
cell sizes Total 173 176 190 539
MANOVA was appropriate for analyzing the data (Bartlett’s x 2(9) ¼ 2,078.23; Country-of-origin
p , 0:001) and that the assumption of equality of variance-covariance matrices was relationships
satisfied. The Box’s test was not significant at the 0.001 level. A lower level of
significance was used as per advice from Hair et al. (1998).
Results of MANOVA
The results of all multivariate hypothesis tests associated with the experimental design
are summarized in Table II. Several statistically significant results were obtained.
The two-way multivariate interaction between country of origin and product
category was not significant at p , 0:05 indicating that differences in consumer-based
brand equity of brands based on their country-of-origin were not significant across the
two product categories. However, Table II shows that the multivariate main effect for
country of origin was significant, indicating differences in the set of consumer-based
brand equity dimensions among the three different countries (the mean vectors for the
brand equity dimensions for each of the three countries of origin are shown in
Table III). Hypothesis H1 was therefore supported. The results show that the
dependent variables, the set of four consumer-based brand equity variables, vary
according to the country of origin of the brand. However, the multivariate main effect
for the country of origin accounted for just a small (3 percent) percentage of the
variance in the dependent variables.
Univariate F-tests (see Table III), conducted as a consequence of the significant
multivariate country of origin main effect, showed that each of the consumer-based
brand equity dimensions (brand associations, perceived quality and brand loyalty)
varied significantly with the country-of-origin of the brand, supporting hypotheses
H1a, H1b and H1c.
Hypothesis
Between-subjects effect Wilks’ l Exact F df Error df p MVh 2 a
Country of origin
Brand awareness 3.96 (2, 533) 0.020 * * 0.015 1.64 (0.80) 1.55 (0.80) 1.50 (0.80)
Brand associations 8.66 (2, 533) 0.001 * 0.031 6.54 (2.28) 5.89 (2.22) 5.77 (2.28)
706 Perceived quality 12.02 (2, 533) , 0.001 * 0.043 7.19 (2.18) 6.33 (2.30) 6.32 (2.24)
Brand loyalty 4.60 (2, 533) 0.010 * * 0.017 5.87 (2.87) 5.02 (2.67) 4.98 (2.77)
Mean (SD)
Cars TVs
Product category
Brand awareness 7.70 (1, 533) 0.006 * 0.014 1.62 (0.76) 1.50 (0.77)
Brand associations 10.83 (1, 533) 0.001 * 0.020 5.81 (2.35) 6.33 (2.14)
Perceived quality 9.79 (1, 533) 0.002 * 0.018 6.38 (2.36) 6.86 (2.12)
Table III. Brand loyalty 10.19 (1, 533) 0.001 * 0.019 5.05 (2.84) 5.53 (2.63)
MANOVA results:
univariate tests – Note: Figures in parentheses are standard deviations; *deemed significant at the 0.01 level; * *deemed
between-subjects effects significant at the 0.05 level
Managerial implications
The results indicate that country of origin is an important variable which can affect the
equity of a brand. Marketing managers operating in the international context must
identify the sources of brand equity, and understand the importance of incorporating
country of origin into their brand equity measurement. In addition, they will have to
estimate the influence of the country of origin of the brand, while tracking or
estimating brand equity in the host country. The present research addressed the above
two issues in the international context. First, brand equity was measured for a
particular product category. Second, the impact of country of origin on the dimensions
of brand equity was investigated. Overall, in the face of the increased significance
EJM attached to branding and measurement of brand equity, it is important for marketers to
understand the influence of country of origin on the equity of their brand. To the best
40,5/6 of the authors’ knowledge, this research is one of the first studies integrating and
testing empirically two important areas of marketing, namely brand equity and
country of origin effects. Notably, the present study used a sample of actual consumers,
and therefore its findings are more open to generalization than most previous research
710 often based on student samples (e.g. Johansson et al., 1985; Ettenson et al., 1988).
The results of the study have implications for multinational production, marketing
communications, global branding, brand equity measurement and positioning
decisions. Traditionally, the availability of cheap labor has driven multinationals to
move their production to other countries, without much consideration for issues such
as the extent to which consumers associate the product category with the country in
question. For example, Nike had shifted shoe manufacturing to China, a country not
very strongly associated with the product category (athletic shoes). Companies base
their sourcing decisions on “comparative advantage or cost differentials” often
ignoring the effect of such decision in terms of country image (Jaffe and Nebenzahl,
2001, p. 21). A particularly important implication of the present study is that such
moves could adversely influence the consumer-based equity of brands in some product
categories. Our results suggest that marketing managers considering offshore
manufacturing/sourcing options should carefully weigh cost considerations with the
risk of the possible erosion of brand equity. Marketing managers will also need to
examine consumers’ “product-category” associations in target countries.
Further, our results suggest that when making overseas manufacturing decisions,
Japanese automobile/television manufacturers would be better off selecting China
compared to Malaysia as a manufacturing location. The results have implications for
Australian importers of the brands Sony, Toshiba and Hitachi (televisions) and
Toyota, Mitsubishi and Suzuki (cars). Our findings suggest that Australian importers
(in the product categories of cars and televisions) would be better off importing these
brands from Japan, rather than from China or Malaysia, and selecting brands made in
China compared to Malaysian ones.
In addition, our results have implications for marketing communications. For the
country of origin of the brand to contribute to its consumer-based equity, consumers
need to strongly associate the country of origin with the product category in question.
Marketing managers will have to consider this when designing their marketing
communication strategy. Managers will not only need to focus on developing a favorable
image for the country of origin of the brand but must also work toward developing
strong “country-product category” associations in the target consumers’ minds.
Furthermore, our results indicated that country of origin affects all four dimensions
of consumer-based brand equity. Brand managers will have to take country of origin
into consideration in their global branding decisions and to manage the dimensions of
consumer-based brand equity more effectively. For example, “brand associations”
must be managed in such a way that the brand’s country-of-origin effects contribute to
the overall equity of the brand. Leveraging secondary associations is an important way
of building a brand’s equity (Aaker, 1989; Keller, 1998) and the results of the present
study could help brand managers by suggesting the countries of origin from which
they could leverage secondary associations for a brand.
Finally, our results confirmed our hypothesis that consumer-based brand equity is
product-category specific. When a brand (e.g. Sony) offers a variety of product
categories (e.g. video tapes, televisions), brand managers should monitor and track the Country-of-origin
brand’s consumer-based equity for each product category. That is, higher brand equity
in one product category does not necessarily mean similarly high brand equity levels in
relationships
other product categories.
Notes
1. The authors were aware that different terms were used in the literature to refer to the
country where a product is produced, such as country of production (e.g. Nebenzahl and
Jaffe, 1996), country of manufacture (e.g. Amonini et al., 1999; Samiee, 1994) and country of
origin (e.g. Maheswaran, 1994; Thakor and Katsanis, 1997).
2. Details of confirmatory factor analysis used to measure consumer-based brand equity and
results of brand name within product category effects were not included in this paper
because of space constraints, but can be provided upon request from the first author.
3. MANOVA requires a minimum cell size of 20 (Hair et al., 1998).
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EJM Appendix
40,5/6
Dimension measure
Brand awareness (Aaker, 1991)
Unaided recall
716 X1. Asked for the name of the brand (product category is mentioned)
Aided recall
X2. Which of the brands are you aware of? (names of the brands provided)
X3. Which of the following brands have you used before? (brand recognition, based on aided
recall, names of the brands were provided)
Brand associations
Brand personality (Aaker, 1997)
X4. It is appropriate to describe the products offered by brand X as “up-market”
X5. It is appropriate to describe the products offered by brand X as “tough”