BRAND EQUITY IN INTERNATIONAL NONPROFIT ORGANIZATIONS: A SYSTEM DYNAMICS APPROACH NATHALIE KATRINA LAIDLER-KYLANDER

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1 BRAND EQUITY IN INTERNATIONAL NONPROFIT ORGANIZATIONS: A SYSTEM DYNAMICS APPROACH A Thesis Presented to the Faculty of the Fletcher School by NATHALIE KATRINA LAIDLER-KYLANDER In partial fulfillment of the requirements for the Degree of Doctor of Philosophy April, 2007 Dissertation Committee: Dr. BERNARD SIMONIN, chair Dr. JOHN HAMMOCK Dr. PETER WALKER

2 UMI Number: UMI Microform Copyright 2007 by ProQuest Information and Learning Company. All rights reserved. This microform edition is protected against unauthorized copying under Title 17, United States Code. ProQuest Information and Learning Company 300 North Zeeb Road P.O. Box 1346 Ann Arbor, MI

3 NATHALIE LAIDLER-KYLANDER 21 Mt. Pleasant St. Winchester MA (781) EDUCATION PhD, Fletcher School, Tufts University, (expected) April 2007 MBA, Harvard Business School, 1992 BSc Honors degree in Biochemistry, Imperial College, London University, 1987 PUBLICATIONS Books John Quelch and Nathalie Laidler-Kylander, The New Global Brands, Managing Non-Government Organizations in the 21st Century, Thompson South Western 2005 Articles Nathalie Laidler-Kylander, Bernard Simonin and John Quelch, Building and Valuing Global Brands in the Nonprofit Sector, Nonprofit Management and Leadership, Vol 17, No 3, 2007 John A. Quelch, James E. Austin, and Nathalie Laidler-Kylander, Mining Gold in Not-For-Profit Brands, Harvard Business Review, April 2004 Case Studies WWF, John Quelch and Nathalie Laidler, Harvard Business School, Case (2003) The BRAC and Aarong Commercial Brands, John Quelch and Nathalie Laidler, Harvard Business School, Case (2003) BRAC, John Quelch and Nathalie Laidler, Harvard Business School, Case (2003) Habitat For Humanity International: Brand Valuation, John Quelch and Nathalie Laidler, Harvard Business School, Case (2003) CARE USA, John Quelch and Nathalie Laidler, Harvard Business School, Case (2003) Amnesty International, John Quelch and Nathalie Laidler, Harvard Business School, Case (2003) Building Brand Equity in International Nonprofit Organizations

4 ACCION International, John Quelch and Nathalie Laidler, Harvard Business School, Case (2003) International Federation of the Red Cross and Red Crescent Societies, John Quelch and Nathalie Laidler, Harvard Business School, Case (2003) Médecins Sans Frontières, John Quelch and Nathalie Laidler, Harvard Business School, Case (2002) UNICEF, John Quelch and Nathalie Laidler, Harvard Business School, Case (2002) Gallo Rice, John Quelch and Nathalie Laidler, Harvard Buisness School, Case (1993) Pechazur, John Quelch and Nathalie Laidler, Harvard Business School, Case (1993) Colgate-Palmolive Co.: The Precision Toothbrush, John Quelch and Nathalie Laidler, Harvard Business School, Case (1993) Bajaj Auto Ltd., John Quelch and Nathalie Laidler, Harvard Business School, Case (1993) Harlequin Romances Poland (A), John Quelch and Nathalie Laidler, Harvard Business School, Case (1993) Mary Kay Cosmetics: Asian Market Entry, John Quelch and Nathalie Laidler, Harvard Business School, Case (1993) Bausch & Lomb: Regional Organization, John Quelch and Nathalie Laidler, Harvard Business School, Case (1992) TEACHING EXPERIENCE Adjunct Lecturer of International Marketing, Fletcher School, Tufts University, 2005 Developed, directed and taught graduate level, case study based International Marketing course Teaching Assistant to Prof. Bernard Simonin. Fletcher School, Tufts University, Lectured on branding and brand building and taught several case studies over three consecutive years Building Brand Equity in International Nonprofit Organizations

5 Guest Lecturer. Fletcher School, Tufts University, Invited to lecture on branding in both graduate and undergraduate courses Research Associate & Teaching Assistant to Prof. John Quelch, Harvard Business School, 2003 Graded oral participation and mid-term exams, for a first year MBA course. Researched and wrote ten case studies. Research Associate to Prof. Quelch, Harvard Business School, Researched and wrote seven international marketing case studies and assisted in the development of a second-year MBA International Marketing course. OTHER PROFESSIONAL EXPERIENCE Medtronic Inc., Global Marketing Director, Heart Failure, Business Development Director, Atrial Fibrillation, Cardiovascular Account Manager, Business Development Manager, France Marketing Analyst, Belgium Instrumentation Laboratory, Marketing Manager, Customer Services United Nations Development Program, 2001 Economic Analyst, Dakar, Senegal Medecins Sans Frontieres, Country Coordinator, Yerevan, Armenia Braxton Associates, Management Consultants, Research Associate, London, UK GRANTS AND AWARDS American Marketing Association Foundation, Nonprofit Travel Grant, 2006 Fletcher PhD Conference Fund Award, 2006 Dean s Discretionary Fund Award, 2005 and 2006 Goldsmith Fellowship, 2001 Full Tuition Fellowship, Harvard Business School, 2001 and 2002 University Colors Award, 1986 PROFESSIONAL MEMBERSHIPS American Marketing Association System Dynamics Society Building Brand Equity in International Nonprofit Organizations

6 ABSTRACT While nonprofit organizations and their brands are growing in importance and stature, these organizations display surprisingly limited brand management activities. This is partly due to the fact that no explicit brand equity models exist specifically for nonprofit organizations. The aim of this research is to build a formal model of brand equity for international nonprofit organizations engaged in development, advocacy and relief work, using a combination of a system dynamics approach and grounded theory development. Based on in-depth field work in five organizations (Care, Oxfam, and World Vision, Amnesty International and the IFRC), several waves of focus groups with a total of 28 brand managers, led to the derivation and validation of a formal brand equity model. At the heart of this model are four core variables (Consistency, Focus, Trust, and Partnerships) and their associated causal loops, as well as a computer simulation of Trust. This dissertation contributes to the marketing literature by advancing our understanding of brand equity in nonprofits through modeling and demonstrating the effective use of system dynamics in areas of marketing that have traditionally not considered this methodological approach. Specific recommendations for international nonprofit managers and future areas of related research are also included. Building Brand Equity in International Nonprofit Organizations

7 DEDICATION This dissertation is dedicated to my family: To my husband Stephen for his unwavering love and support, To my son Thomas, whose pride in me, makes me proud of myself, To my son Daniel, whose ready laughter is the world s sweetest music, To my daughter Sophie, without whom I would be bereft in a house full of guys, To my son Luc, my intra-dissertation baby, whose endless requests for hugs are impossible to resist, To my mother Gisele, who read this work in its early stages and believed in me. Building Brand Equity in International Nonprofit Organizations

8 ACKNOWLEDGEMENTS First and foremost, I would like to thank the chair of my dissertation committee, Dr. Bernard Simonin, friend, mentor, colleague and champion. There is no doubt that this dissertation is a reality in large part thanks to his tireless mentoring, counsel, and support. It has been an honor and a pleasure to work with him and I look forward to many more years of fruitful collaboration. Thank you also, to my two other dissertation committee members, Dr. John Hammock and Dr. Peter Walker for their advice, help and guidance. Their interest in this research and their many thoughtful questions, have spurred me on to accomplish something which I am proud of. I would also like to acknowledge John Lyneis and Dr. Nelson Repenning both from MIT, for their invaluable support and fruitful suggestions concerning system dynamics and modeling. This research would not have been possible without those individuals at the nonprofit organizations which opened their doors to me and who helped gather their colleagues for many hours of brainstorming. Thank you to: Adam Hicks, Ellen Kupp, Sam O Sullivan, Andre Doren, and Denise Searle. Thank you also to Gerard Sheehan, Executive Associate Dean, and Jenifer Burkett-Picker, Director of the PhD Program for their financial support of this research through a number of different grants. Finally, a warm and huge thank you to my family and close friends whose patience and tolerance make it possible to do it all and whose love makes mine, a truly wonderful life! Building Brand Equity in International Nonprofit Organizations

9 TABLE OF CONTENTS Chapter 1: Introduction 1 Problem Statement 2 Purpose and Significance of the study 3 Definition of Terms 5 Theoretical Framework, methodology and research questions 7 Scope and Research Limitations 8 Summary of Findings 10 Conclusion 12 Chapter 2: Theoretical Background and Literature Review 13 Brands, Branding and Brand Equity 14 Brands 14 Branding 16 Recent trends in brands and branding 18 Brand Management 20 Brand Equity 22 Brand Valuation 24 The merits of brand equity models vs brand valuation 27 Strategic Management of Nonprofit Organizations 29 The changing world of international nonprofits 29 What makes nonprofit organizations different? 31 Nonprofit Brand Management 36 The role and importance of brands for nonprofits 36 Brand equity models for nonprofit organizations 39 Chapter 3: Research Methodology 43 Introduction to System Dynamics 43 Overview 43 Application to brand equity 45 Methodological Approach and Philosophy 49 Grounded theory development 49 Theory development using case study research 50 Combining theory development and system dynamics 51 Development of Research Protocols 54 Case study selection 54 Using a re-iterative and phased approach 58 Focus groups 59 System dynamics research tools 59 Conducting the Research and Analysis 61 Research approach and protocol 61 Managing the focus groups 63 Conducting the analysis using the constant comparison method 65 Qualitative and Quantitative System Dynamics Approaches 67 To simulate or not to simulate? 67 Building Brand Equity in International Nonprofit Organizations

10 Chapter 4: Initial Data Collection and Analysis 70 Data Collection 70 Part one 22 semi-structured questions 72 Part two group model building system dynamics exercises 73 Model boundary charts 74 Reference modes 75 Initial causal loops 76 Data Analysis 80 Step 1: Transcribing the flip charts from the focus groups 80 Step 2: Searching for common themes using the constant 81 comparison method Step 3: Identifying recurring variables from the common themes 84 using a constant comparison method Step 4: Analysis of the common variables from the model 88 boundary charts Step 5: Analysis of the common variables from the initial 91 causal loops diagrams Pulling the Analysis Together 94 Chapter 5: System Dynamics Model 95 Causal Loop Diagrams 96 Variable maps 96 Simplified Causal Loop Diagrams 97 Consistency 97 Focus 99 Trust 101 Partnerships 103 Developing Stock Flow Diagrams from Causal Loops 107 Chapter 6: Model Validation and Operationalization 113 Data Collection and Analysis 113 Data collection 113 Part one: validating the simplified causal loops 114 Part two: Operationalization of stock variables 115 Data Analysis 117 Step 1: Transcribing the flip charts and notes 117 from the brainstorming session Step 2: Searching for common themes using the constant 118 comparison method Step 3: Identifying common suggestions 118 and recommendations Modifying the Causal Loops 123 Consistency CLD 123 Trust CLD 124 Focus CLD 124 Partnerships CLD 125 Building Brand Equity in International Nonprofit Organizations

11 Variable names 125 Putting brand equity back into the model 127 Chapter 7: Simulation 137 Model Specification 140 Connecting to brand equity and the other independent variables 141 Trust - identity image 142 Relevance recognition trust 144 Visibility accountability integrity 146 Scrutiny issues and scandals 149 Increase and decrease in brand trust 151 Model Analysis 153 A note of introduction 153 Base case scenario 153 Optimizing brand recognition 154 Optimizing accountability 155 Stifling scrutiny 157 Stifling NGO scandals 157 Discussion 158 Chapter 8: Discussion 161 Brand Equity Model and Key Variables 162 Consistency 162 Focus 163 Trust 165 Partnerships 167 Internal branding 168 Is international nonprofit brand equity built differently? 171 Is international nonprofit brand equity built differently from 171 for-profit brand equity? Do different types of international nonprofit organizations 175 Build brand equity differently Data collection and analysis 175 Contrasting findings 176 Conclusion 182 How and to what extent do different brand audiences impact 184 brand equity differently? Chapter 9: Conclusion, Limitations and Future Research 188 Managerial Implications 189 Guidelines for managing brand equity of international nonprofit 188 organizations System dynamics and research in marketing 195 Limitations 198 Replicability of the research 198 Focus group structure and participation 198 Building Brand Equity in International Nonprofit Organizations

12 Interpretation of field data and application of 199 constant comparison Applicability and generalizability of the model 201 Future Research 203 Completing the simulation model 203 Validating and assessing the final model 204 Expanding on the model 205 Conclusions 207 Reference List 108 Appendices 224 Appendix 2.1: Main academic and commercial brand equity models 224 Appendix 3.1: PhD dissertations using a system dynamics methodology 229 in marketing ( ) Appendix 4.0 Case study participants 230 Appendix 4.1: Initial research protocol Phase Appendix 4.2: Core Template Care Brainstorming Session 237 March 23 rd 2006 Appendix 4.3: Core Template Oxfam Brainstorming Session 243 April 5 th 2006 Appendix 4.4: Core Template World Vision Brainstorming Session 249 May 1st 2006 Appendix 4.5: Summary of Common Themes 255 Analysis of the semi-structures questions Phase 1 Appendix 5.1: Variable Maps 263 Appendix 6.1: Second research protocol Phase Appendix 6.2: Phase 2 research: participants worksheets 274 Appendix 6.3: Core Template II, Care Brainstorming Session 280 Nov 13th 2006 Appendix 6.4: Core Template II, Oxfam Brainstorming Session, Dec th 2006 Appendix 6.5: Core Template II, World Vision Brainstorming Session 289 Nov 22nd 2006 Appendix 6.6: Summary of common themes II 293 Analysis of the second phase of research Appendix 6.7: Revised CLDs 302 Appendix 7.1: Simulation Model Formulas 304 Appendix 8.1: Literature review of variables driving brand equity 311 Appendix 8.2: Core Template, IFRC Brainstorming session 313 August 28 th 2006 Appendix 8.3: Core Template Amnesty International Brainstorming 320 Session, December 11 th, 2006 Appendix 8.4: Summary of common themes fir IFRC and AI 324 Building Brand Equity in International Nonprofit Organizations

13 Chapter 1: Introduction You have first an instinct, then an opinion, then a knowledge, as the plant has root, bud and fruit Ralph Waldo Emerson Nonprofit organizations are playing an increasingly important role in our lives and many large international nonprofit organizations are now considered among the world s most powerful and trusted brands (Wootliff and Deri 2001). At the same time, these organizations are facing tremendous challenges in terms of their ability to implement their missions, and are concurrently facing a crisis of legitimacy (Slim 2002). Given this context, branding, and by extension understanding what drives brand equity, is critical for international nonprofit organizations (Chiagouris 2005, Nadaff 2004, and Smillie 1995). Yet nonprofit managers and leaders have seemed reluctant to actively embrace existing brand equity building activities (Bishop2005, Ewing and Napoli 2005, and Nissim 2004). This may be in part, because no explicit brand equity models exist specifically for nonprofit organizations (Haigh and Gilbert 2005). As such, the aim of this dissertation is to model brand equity for international nonprofit organizations engaged in development, advocacy and relief work, using a combination of a system dynamics approach and grounded theory development. System dynamics is a methodology that seems to be well suited for the field of marketing, particularly in the analysis of complex system such as brand equity, but its use to date has been surprisingly limited (Sisodia and Hurly 2002, and Sveiby, Linard and Building Brand Equity in International Nonprofit Organizations 1

14 Dvorsky 2002). This research addresses this issue by demonstrating the effective use of system dynamics modeling in marketing. It is my expectation that the model of brand equity for international nonprofit organizations derived from this research will shed light not only on the variables that influence brand equity, but also on their inter-relationships. While many different brand equity models currently exist (Knowles 2004, and Woods 1998), to date, none are designed specifically for international nonprofit organizations. Nor have any brand equity models been developed using a system dynamics approach. This dissertation addresses both of these gaps and joins the growing research on nonprofit branding. 1. Problem statement International nonprofit organizations have become a powerful force in the world and have grown in numbers, influence, and visibility (McGann and Johnstone 2006). They play a major role in alleviating poverty, protecting human rights, preserving the environment, and providing relief worldwide, and although they are very numerous, the largest 20 international nonprofit organizations account for 50% of the sector s funding and activities (Greensmith 2001). However, the world of international nonprofits is changing, driven by the forces of globalization and competition, and many are facing important challenges of legitimacy, credibility and effectiveness. (Lindenberg and Bryant 2001). Facing these challenges will require that these organizations have strong brands now and in the future (Smillie 1995). Recent studies by Edelman PR show that in both the U.S. and Europe, trust in NGOs is substantially higher than trust in other groups such as business, government and the media. Furthermore, this relative trust is growing over time (Annual Edelman Trust Building Brand Equity in International Nonprofit Organizations 2

15 Barometer 2006). This greater brand trust potentially translates to high levels of brand equity (essentially a measure of brand strength), and NGOs are increasingly being perceived as the new super brands (Wootliff and Deri 2001). Yet, surprisingly little research has been devoted to nonprofit branding (Laidler-Kylander, Simonin and Quelch 2007). Brands play key roles for nonprofits. Strong brands, with high brand equity, are undeniably important for nonprofit organizations today and in the future (Webster 2002). However, nonprofit organizations do not seem to actively manage their brands and many nonprofits are reticent and unfamiliar with the concepts of branding and brand building. Indeed some research suggests that brand management has been neglected by many nonprofit organizations (Bishop 2005). The absence of explicit guidelines developed specifically to assist nonprofit organizations manage their brand equity (Haigh and Gilbert 2005) may partly be responsible for this under-management of nonprofit brands, and is the problem that this research seeks to address. The substantial differences between nonprofits and for-profits outlined in the literature review (chapter 2), suggests that international nonprofits build brand equity differently than for-profit organizations. Understanding the drivers of brand equity for international nonprofit organizations, and how these differ from existing for-profit brand equity models is, in effect, at the heart of this dissertation. 2. Purpose and significance of the study Branding and building brand equity are increasingly recognized as critical components for the success of international nonprofit organizations (Chiagouris 2005, Nadaff 2004, and Smillie 1995). To date, no explicit brand equity models have been Building Brand Equity in International Nonprofit Organizations 3

16 developed specifically for the nonprofit sector (Haigh and Gilbert 2005). System dynamics appears particularly well-suited for studying brand equity but has not been widely used in marketing (Sisodia and Hurly 2002, and Sveiby, Linard and Dvorsky 2002). The purpose of this research is to address these two gaps by developing a model of brand equity, based on both a systems dynamics and grounded theory development approach, for international nonprofit organizations. Senge argues that a successful system dynamics model should: organize, clarify and unify knowledge; give people a more effective understanding about an important system; change the way people think about and act within a system (Senge 1990). It is my hope that this dissertation will do just that: 1) It answers the call for a more unified definition of brand equity (Czellar and Denis 2002), thereby unifying knowledge. 2) It captures explicit mental models of brand equity, thereby clarifying knowledge. 3) It also provides, a more effective understanding of brand equity. 4) Finally, the model provides a framework for nonprofit managers to build and manage brand equity, and demonstrates the use of system dynamics to marketing academics, helping both groups change the way they think and act. This research is of significance to the field of marketing because: 1) It is the first empirical study to develop a brand equity model for international nonprofits, and 2) It demonstrates the effectiveness of system dynamics in marketing, a methodology which is currently underused but relevant. This research is also of significance to nonprofit managers who have to date, been reticent to engage in branding activities. It provides them with an initial framework to help them more effectively focus scarce resources to strengthen their brands. Building Brand Equity in International Nonprofit Organizations 4

17 3. Definition of Terms There are three main concepts or terms that are central to this dissertation. These are: 1) brand equity; 2) international nonprofit organizations; and 3) system dynamics. All three are defined and briefly introduced below. These terms will be discussed more fully in chapters 2 and a) BRAND EQUITY Brand equity as defined by Aaker is, a set of brand assets and liabilities linked to a brand, its name and symbol that add to or subtract from the value provided by a product or service to that firm s customers (Aaker 1991). These assets and liabilities can be grouped into five main categories: brand loyalty, name awareness, perceived quality, brand associations, and other assets (such as patents and trademarks), and can be thought of as the drivers and levers of the brand. Brand valuation, often mistaken used interchangeably with the concept of brand equity, is the determination of the financial worth of a specific brand (Abratt and Bick 2003). While brand valuation can be defined as a snapshot of future cash flows, brand equity can be defined as a measure of the emotional reservoir that reflects demand (Haigh and Gilbert 2005). The concepts of brand, branding, brand management, brand equity and brand valuation are described in detail in chapter b) INTERNATIONAL NONPROFIT ORGANIZATIONS Nonprofit organizations share six basic features: they are formal, private; selfgoverning; non-profit distributing; voluntary; and of public benefit (Salamon and Anheier Building Brand Equity in International Nonprofit Organizations 5

18 1996). Under the International Classification of Nonprofit Organizations (ICNPO) developed by Salamon and Anheier, international nonprofit organizations are classified under group 9 and include development assistance organizations; international disaster and relief organizations; and international human rights and peace organizations (Salamon and Anheier, 1996). There are an estimated 13,000 international nonprofit organizations operating in the world today (Eizenstat 2004). However, it is estimated that the largest 20 international nonprofit organizations account for half of the financial activity of this sector (Greensmith 2001). For this dissertation, the unit of analysis will be international nonprofit organizations from the ICNPO group 9 described above. The role and characteristics of international nonprofit organizations, as well as the challenges they face, are outlined in chapter 2. The population from which case studies are drawn, and the rationale used for case study selection, will be described in the chapter c) SYSTEM DYNAMICS System Dynamics is a methodology for studying and managing complex feedback systems, such as one finds in business and other social systems (as defined by the System Dynamics Society at systemdynamics.org, Nov 2005). It combines the theory, methods and philosophy needed to analyze the behavior of complex, non-linear systems and has been used in many fields including; corporate planning, policy design, biological and medical modeling, and theory development in the natural and social sciences. It is a powerful tool that helps assess complex issues involving delays, feedback and nonlinearities and links causal mapping diagrams to computer simulation models (Harris Building Brand Equity in International Nonprofit Organizations 6

19 and Williams 2005). System dynamics and its applicability to the study of brand equity will be described in detail in chapter Theoretical framework, methodology and research questions The approach of this dissertation is one of theory building and therefore I do not propose to test a hypothesis. Indeed, Eisenhardt suggests that theory-building research is begun as close as possible to the ideal of no theory under consideration and no hypotheses to test. She adds that, preordained theoretical perspectives or propositions may bias and limit the findings (Eisenhardt 1989). This study seeks to develop a model or theory of what drives brand equity in international nonprofit organizations. Specifically, its aim is to elucidate the key managerial and contextual variables that impact brand equity and how they interact. This research is based on: 1) extensive field research; 2) grounded theory development through case studies; 3) a system dynamics approach and; 4) constant comparison analysis. These methodologies, their relevance, and interrelationships will be described in detail in chapters 3 and 4. When thinking about what drives brand equity in international nonprofit organizations, three areas of reflection arise: 1) Are international nonprofit brands built differently from international for-profit brands? 2) Do different types of international nonprofit organizations build brand equity differently? 3) How and to what extent do different brand audiences of international nonprofits impact brand equity differently? These questions will both guide the development of the model, and will be used as a framework for reflecting on the final model in the conclusion of this dissertation (chapter 9). They are not intended as hypotheses and will not be formally tested. Building Brand Equity in International Nonprofit Organizations 7

20 In order to provide a context to this study and to address the questions above, this dissertation draws on three main bodies of research (see chapter 2). These are: 1) The existing marketing literature on branding, brand management, brand equity, and brand valuation; 2) The current literature on nonprofit management, trends and challenges facing the international nonprofit community, and differences between nonprofits and for profits; and 3) The emerging body of literature on nonprofit brand management. Finally, in the discussion chapter (chapter 8), I conduct a brief meta-analysis of existing for-profit brand equity models to ascertain the dominant variables driving forprofit brand equity, and contrast these with the proposed model for nonprofit brand equity, derived from this research. This answers the call by Ewing and Napoli, regarding the need to undertake a comparison of brand management practices between nonprofit organizations and for-profits (Ewing and Napoli 2005). 5. Scope and Research Limitations This empirical study advances a model of brand equity for international nonprofit organizations and is based on two waves of research. The first wave of research draws on three case studies: Care, Oxfam, and World Vision, and comprises two distinct phases. The first phase develops an initial model of brand equity based on four causal loops, and the second phase validates this initial model. The final model derived from the first wave of research, consists of: 1) Four core variables: Consistency, Focus, Trust and Partnerships; 2) Final causal loops for each variable; and 3) A simulation for Trust. The second wave of research draws on two additional case studies: Amnesty International and the International Federation of Red Cross and Red Crescent Societies (IFRC). These are examined and compared to the final brand equity model derived from the first wave of Building Brand Equity in International Nonprofit Organizations 8

21 research, to gain insights into whether different types of international nonprofit organizations build brand equity differently. The aim of this research is to develop a model of brand equity for international nonprofit organizations that illuminates the key variables that impact brand equity and how they interact. This model taps into the mental models of international nonprofit managers and as such, does not directly assess brand equity from the perspective of brand audiences. The practical contributions this research makes are twofold: 1) To provide nonprofit managers with guidelines for managing their brands; 2) To demonstrate the effective use of system dynamics in research marketing. Both of these are reviewed in the conclusion of this dissertation (chapter 9). The limitations of this dissertation fall into two categories: 1) Replicability of the empirical research and analysis; and 2) Applicability of the proposed model. In terms of replicability, two main issues arise. The first concerns focus group structure and participation, as well as the role of researcher as both focus group moderator and data gatherer. The possible biases arising from these concerns are discussed in the final chapter of the dissertation. The second issue of replicability, concerns the interpretation of field data in two specific areas: the data analysis using a constant comparison (development of categories and data blocks); and the assumptions behind particular loops in the causal loop diagrams. As discussed in chapter 9, this aspect of the research, described in detail in chapters 4, 5 and 6, is influenced by a researcher s expectations and prior experience, which can introduce a second level of biases. In terms of applicability, two issues also arise. First the case study selection itself may introduce a bias. Second, the sample size may be limiting with respect to Building Brand Equity in International Nonprofit Organizations 9

22 generalizability of results when it comes to other international nonprofit organizations and domestic nonprofits. It is only through additional research that further refines and tests the proposed brand equity model, that the issue of applicability can be evaluated. Nevertheless, as discussed in chapter 8, an initial analysis of the applicability of the brand equity model to both Amnesty International and the IFRC, suggests a higher degree confidence in the overall robustness and universality of the model. 6. Summary of Findings The first wave of this research was conducted in two phases. During the first phase, an initial model of brand equity for international nonprofit organizations was created using a combination of grounded theory development using case studies, and a system dynamics approach. Focus groups were conducted and a constant comparison analysis was used to develop an initial brand equity model consisting of four initial causal loop diagrams. This is discussed in detail in chapters 4 and 5. In the second phase of the first wave of research, the initial model described above was tested in the field in order to: 1) validate the initial causal loops and 2) operationalize key model variables. From this second phase, modifications were made to the initial causal loops, resulting in final causal loops for the four core model variables: Consistency, Focus, Trust and Partnerships. This second phase of the research and resulting model are described in chapter 6. These four final causal loops represent the core of the proposed brand equity model for international nonprofit organizations. Finally, data from both the first and second research phases, as described above, were used to develop a simulation model for the key brand equity variable of Trust. This simulation model is described in chapter 7 and contributes both to the proposed brand Building Brand Equity in International Nonprofit Organizations 10

23 equity model itself and the demonstration of system dynamics in the field of research marketing. This dissertation suggests that the proposed brand equity model for international nonprofits differs from for-profit brand equity models, whose dominant variables are Awareness and Loyalty. In addition, this dissertation suggests that different types of international nonprofit organizations, in terms of their focus on relief or advocacy, may also build brand equity slightly differently. Specifically, for advocacy organizations, globalness and organizational flexibility may be additional important brand equity variables. For relief organizations on the other hand, identity and recognition may be important for brand equity. Building further on the brand equity model derived in this study, a set of 11 specific recommendations are proposed to international nonprofit managers in chapter 9. These are: 1) Increase internal coordination; 2) Concentrate external messaging efforts; 3) Strive for operational focus; 4) Stick closely to the mission; 5) Endeavor to differentiate the organization; 6) Raise visibility and; 7) Promote organizational integrity; 8) Select partners that provide the best fit; 9) Manage partnerships and portfolios of relationships; 10) Recognize and embrace the powerful internal role of the brand; and 11) Encourage internal brand ambassadors. Finally, chapter 9 also summarizes the benefits of using system dynamics over traditional qualitative research, particularly in estimating the relative importance of specific brand equity variables and their interaction. Building Brand Equity in International Nonprofit Organizations 11

24 7. Conclusion This dissertation advances a model of brand equity for international nonprofit organizations engaged in development, advocacy and relief work, using a combination of a system dynamics approach and grounded theory development. The proposed model sheds light on the variables that influence brand equity in international nonprofit organizations, as well as the nature of their inter-relationships, and provides explicit guidelines for both nonprofit managers and marketing academics. This study addresses two identified research gaps: 1) The lack of a brand equity model specifically for nonprofit organizations and 2) The use of system dynamics in researching brand equity and in research marketing more broadly. Finally, this study not only adds to the emerging research on nonprofit branding through its formal modeling of brand equity, but also contributes to the overall marketing literature on the basis of its methodological approach and the relevance of its findings. Building Brand Equity in International Nonprofit Organizations 12

25 Chapter 2: Literature Review This study draws on three main bodies of literature. 1) The existing marketing literature on branding, brand management, brand equity, and brand valuation. 2) The current literature on nonprofit management, the trends and challenges facing the international nonprofit community, and the differences between nonprofits and for profits. 3) The emerging body of literature on nonprofit brand management. The first of these literatures provides a context to the concept of brand equity, summarizes existing knowledge, and identifies current research trends in the field of branding and brand management. The second body of literature on nonprofit management gives an overview of the environment in which the case studies in this study operate, and the challenges and opportunities they face. It also provides an overview of some of the differences between for-profits and nonprofit organizations that can lead to insights into the variables that drive brand equity in nonprofits as opposed to for-profit organizations. The final literature to be reviewed is the emerging literature on nonprofit brand management at the heart of which this research and dissertation lies. Building Brand Equity in International Nonprofit Organizations 13

26 1. Brands, Branding, and Brand Equity 1. a) BRANDS Originally used to mark ownership of cattle, Kotler in the early 1980s described a brand as a name, term, symbol or design, or a combination of them, which is intended to signify the goods or services of one seller or group of sellers and to differentiate them from those of competitors (Kotler 1984, 482). Aaker defines a brand as one of the most important intangible asset of any business (Aaker 1991) and Bedbury summarizes a brand as, a psychological concept, held in the minds of the public. He argues that, one cannot entirely control a brand. At best one can only guide and influence it (Bedbury 2002, 46). Brands are associated with tangible entities such as consumer product goods, places, organizations or people and a help identify and differentiate products and entities, as well as creating trust with consumers. In fact, Morrison and Firmstone assert that brands function in the same way as trust, in that they simplify decision making by acting as summarized knowledge (Morrison and Firmstone 2000, 38). Brands exist because they provide consumers with convenience and assurance. They enable consumers to differentiate among different offerings and provide them with a certain measure of satisfaction and feelings of affiliation (Feldwick 2002). The majority of brand research concerns consumer product brands and the research marketing literature abounds with brand choice models that help understand the impact of marketing mix variables on brand choice (Bass 1974, Chintagunta et al 1991, Gonul and Srinivasan 1993, Guadagni and Little 1983, Massy et al 1970, Rossi and Building Brand Equity in International Nonprofit Organizations 14

27 Allenby 1993, and Siddhartha et al 2004). Recent research by Siddhartha et al focuses on brand choice models which incorporate the no-purchase outcome (Siddhartha, Seetharaman, and Strijnev 2004) and current research by Erdem, Swait and Valenzuela builds on existing research on brand as signals under uncertainty (Erdem and Swait 1998, Keller 2002, and Wernerfelt 1988) focusing on the role of credibility (Erdem, Swait and Valenzuela 2006). Proportionally little research however, has been devoted to brands and brand choice models as they apply to organizations, places or people. Brands also provide benefits to companies and organizations by: enhancing the success of new product introductions (through brand extensions discussed in the next section); helping achieve price premiums; increasing market share; driving greater stockholder returns; and increasing customer loyalty (Aurand, Gorchels and Bishop 2005, and Fournier 1998). Brands are business assets, albeit intangible ones, owned by companies and organizations. Some estimates suggest that as much as 70% of certain company s market valuation may be accounted for by the brand which reflects perceptions and expectation about how a company will perform in the future (Lamons 2003). A study by Brand Finance, an independent brand valuation firm, revealed that at the year-end December 1998, only 28 percent of the Financial Times Stock Exchange (FTSE) 350s market capitalization was explained by their net balance sheet assets. Intangible assets were largely responsible for the remaining 72 percent of value, and in most cases brands are the most significant intangible asset. (Heberden 2002). Building Brand Equity in International Nonprofit Organizations 15

28 1. b) BRANDING Branding can be defined as the application of a brand to a product, company, organization, individual and even a country (Anholt 2002). Brand management, discussed in the subsequent section, is the collection of activities that go into building, nurturing and protecting a brand over time (Arnold 1992). Gobe stresses the importance of a brand s ability to elicit positive emotional reactions and create connections with consumers (Gobe 2001). Thompson et al state that over the last decade, emotional branding has emerged as a highly influential brand management paradigm (Thompson, Rindfleisch and Arsel 2006). Bergstrom et al for example, suggest that a brand is the sum total of all perceived functional and emotional aspects of a product or service and that everything and everyone is branded, because all actions communicate a meaning of some kind. They add that, branding, the verb, is about adding a higher level of emotional meaning to a product or service, thereby increasing its value to customers and other stakeholders (Bergstrom, Blumenthal and Crother 2002). These same authors also see a brand s value as being positively related to the extent of the emotional attachment of these stakeholders to the brand and underline the importance of building relationships. Much recent consumer marketing research arrives at conclusions consistent with these tenets of emotional branding (Aaker 1997, Aaker, Fournier, and Brasel 2004, Brown et al 2003, Fournier 1998, Kozinets 2001, McAlexander et al 2002, and Muniz and O Guinn 2001). It appears therefore, that in research marketing, the emotional branding paradigm is replacing the original paradigms based on cognitive theories of consumer knowledge formation (Thompson, Rindfleisch and Arsel 2006). Building Brand Equity in International Nonprofit Organizations 16

29 In addition to emotional branding, brand extension, the use of established brand names to launch new products, in existing or new product categories, as well as the determinants of brand extension success, have emerged as important areas of research inquiry (Aaker and Keller 1990, Bottomley and Doyle 1996, Dacin and Smith 1994, Swaminathan, Fox and Reddy 2001, and Volckner and Sattler 2006). Recent research in this area has focused on co-branding extensions, counter-extensions (a competitor brand in the extension category backing into the parent category) and brand extension strategies relating to spillovers (Anand and Shachar 2004, Kumar 2005, and Kumar 2005(b),). The issue of spillover within the area of brand extensions has generated growing research interest (Ahluwalia, Unnava and Burnkrant 2001, Balachander and Ghose 2003, John, Loken and Joiner 1998, and Roehm and Tybout 2006) and current research by Roehm and Tybout, explores the spill over effect of a brand scandal on competitors with a product category. (Roehm and Tybout 2006). The negative impact of the spill over related to brand scandal, as we shall see in chapter 8 of this dissertation, may be of particular relevance to the brand equity of international nonprofit organizations. For some authors however, branding all comes down to building brand equity. When we speak of branding, states Vinjamuri, we are really talking about the process of building brand equity or the reach and strength of our brand (Vinjamuri 2004). Brand equity is discussed at length in a subsequent section of this chapter. Building Brand Equity in International Nonprofit Organizations 17

30 1. c) RECENT TRENDS IN BRANDS AND BRANDING Increasingly, brands are seen less as reflections of product characteristics and more as distinct personalities. What is now considered critical for a brand is the perception of a brand in the eyes, minds and hearts of consumers. Indeed, consumers are described as owning the brands (Arnold 2002). As Marc Gobe suggests, branding is about cultural relevance and emotional connection, not hype (Gobe 2001). He argues that brand awareness is not the same as emotional connection, and that simply because a brand is well known, does not guarantee that the associated products or services will be selected. Powerful brands, he suggests, differentiate themselves by projecting human qualities and emotional values. The benefits of emotional branding strategies are increasingly being endorsed by the recent research coming out of the academic marketing community (Thompson et al 2006, Fournier, 1998, Brown et al 2003, Holt 2002, Kates 2004, and Zaltman 2003). We have witnessed, over the past decade, the emergence of a growing trend towards corporate branding, as opposed to product branding, where corporate brand management aims to establish a favorable disposition towards the organization (as a whole) by its various stakeholders (Gylling and Lindberg-Repo 2006). Knox and Bickerton define corporate branding as drawing on the traditions of product branding in that it shares the same objective of creating differentiation and preference. However, these authors believe that corporate branding is more complex, requiring the management of interactions with multiple stakeholder audiences (Knox and Bickerton 2003). Aaker also believes that a corporate brand (or organization brand) can generate leverage, synergy and clarity which may be particularly useful when the environment is Building Brand Equity in International Nonprofit Organizations 18

31 cluttered confused and complex (Aaker 2004). Finally, Knox and Bickerton define corporate brands as the visual, verbal and behavioral expression of an organization s unique business model (Knox and Bickerton 2003). There is also an increasing interest and research into the importance of internal branding. Internal branding is defined by Vallaster and de Chernatony as being about aligning employee behavior with brand values (Vallaster and de Chernatony 2006). Bergstrom et al, state that there is an increasing realization that the inside and the outside of the brand must match. They believe that until recently, companies have not paid enough attention to employees and how they relay the brand message. These researchers also assert that the same brand should permeate all aspects of a business or organization, and that all great brands have a single purpose, to create a unique and strong emotional bond between themselves and their audiences in order to create greater loyalty than would otherwise have been enjoyed (Bergstrom, Blumenthal and Crother 2002). According to these same researchers, internal branding refers to three things: 1) communicating the brand effectively to the employees; 2) convincing them of its relevance; and 3) successfully linking every job in the organization to the delivery of the brand essence. In addition, at a corporate level, they believe that internal branding can be a unifying organizational force for disparate companies operating within the same portfolio. There is no doubt that branding and the power of brands have increased substantially in the last few decades. In the private sector, Temporal argues that branding is so critical that companies are now replacing corporate visions and missions with brand visions and missions, which in turn are driving business strategy and related activities Building Brand Equity in International Nonprofit Organizations 19

32 (Temporal, 2002). But there has also been some backlash to the pervasiveness of brands and branding. In her book No Logo, Naomi Klein suggests that branding is an antisocial activity and that the power and presence of brands curtail choice, and result in environmental damage and human rights abuses (Klein, 2000). There is some evidence, as described later in this chapter, that nonprofit organizations somewhat echo Klein s sentiments of distrust and unease with brands and branding. 1. d) BRAND MANAGEMENT Successful brand management, according to Aaker, includes: an understanding of how to develop a brand identity; knowing what the brand stands for; and effectively expressing that identity (Aaker 1996). But as alluded to in the previous section, brand management is also about building relationships with consumers, and brands are owned by the consumers, whose perception of the brand is the brand s reality (Bedbury 2002). Fournier for example, believes that managing a brand is analogous to managing the customer- brand relationship (Fournier 1998). Brand management can also be viewed as the management of a key asset, albeit an intangible one (Guzman, Montana and Sierra 2006). Finally, Hogan et al suggest four keys to successful brand management: 1) Identifying the most important customers; 2) Concentrating investment on the customer touch-points that will do the most to raise profitable demand; 3) Setting realistic goals for implementation; and 4) Constantly revisiting performance (Hogan, Almquist and Glynn 2005). Much brand research has emphasized the importance of brand personality in brand management (Fournier 1998, Johar, Sengupta and Aaker 2005, Ogilvy 1983, Plummer 1985, and Sentis and Markus 1986) and current research explores the changes in Building Brand Equity in International Nonprofit Organizations 20