Introduction. The theoretical models underlying the current research

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1 Understanding (customer-based) brand equity in financial services Illinois State University, Normal, Illinois, USA Abstract Purpose The purpose of this study is to advance marketers understanding of customer-based brand equity (CBBE) within the context of a B2B financial service marketing setting. Design/methodology/approach Two nation-wide studies were used to investigate whether brands are in fact differentiated in the minds of the target audience; test two competing explanations of the formation of CBBE using structural equation analyses; and reconcile satisfaction and CBBE theories within a single theoretical model. Findings The results suggest that these customers do differentiate brands, and that Netemeyer et al. s model of CBBE is generally supported. In addition, the extended model of CBBE proposed herein explains more variance in loyalty intentions, while simultaneously demonstrating the importance of customer satisfaction in CBBE models, and incorporates customer attitudes into conceptualization of CBBE. Research limitations/implications First, the current research focuses specifically on CBBE. Second, the reported MDS results are exploratory in nature and must be interpreted with caution. Practical implications The results will help financial service marketers measure CBBE as well as relate brand power to customer satisfaction and customer attitude measurement through implementing the proposed framework in their own competitive setting. Originality/value The two nation-wide studies reported herein enhance our understanding of CBBE and its relationship to customer attitudes and satisfaction research within a single theoretical model, as well as identifying the influential roles of both hedonic and utilitarian forms of brand attitudes in the formation of CBBE. Keywords Customers, Brand equity, Customer satisfaction, Insurance liability Paper type Research paper An executive summary for managers can be found at the end of this article. Introduction Brands and the power they possess are critically important to today s service firms, and are fundamentally linked to the concept of relationship marketing (Sheth and Parvatiyar, 2000). Not surprisingly, the role of brand considerations and relationship marketing in financial service marketplaces is growing in importance (Colosi, 2005; O Loughlin and Szmigin, 2005; O Loughlin et al., 2004; Anon, 2004a; Anon, 2004b; Benrud, 2004). Service marketers understanding of how to measure and manage brand power has occurred primarily through the investigation of brand equity. The argument that brand equity is an important consideration for service marketers (Davis, 2000; Keller, 2001; Keller and Lehmann, 2003) and should therefore be managed as an asset (Aaker, 2003; Davis, 2000; Keller, 2003) is well supported by the literature. In fact, Davis (2000) argues that brand power is the alternative to price competition. The current issue and full text archive of this journal is available at 21/4 (2007) q Emerald Group Publishing Limited [ISSN ] [DOI / ] The following manuscript reports two complementary nationwide studies that empirically validate a newly proposed relationship marketing model that promises to assist financial service marketers in better understanding and measuring brand power in their own competitive settings. The proposed model not only provides a replicable framework for measuring brand equity within financial service settings, but also reconciles brand equity models with existing customer satisfaction models, and explicitly considers the role of customer brand attitudes. The remainder of this manuscript is divided into four sections. First, we present the theoretical underpinnings of the models we assess. Second, we discuss the methods employed to empirically validate the identified research models. Third, we present and discuss the results of the studies we conducted to test our hypotheses. Finally, we articulate the managerial and research implications of our findings. The theoretical models underlying the current research The following study ultimately concerns the conceptualization and operationalization of brand equity for use in financial service marketing models. A commensurable constitutive and operational definition of the brand equity construct in the This study was funded by a Research Grant from the Katie Insurance School, Illinois State University. Received: April 2005 Revised: August 2005 Accepted: November

2 general services marketing literature is not without controversy. However, the literature suggests that there have been two primary perspectives related to brand equity, one based on financial outcomes for the firm and the other on softer consumer-based perceptions of firm performance (see Ambler et al., 2002): 1 Brand Equity: denotes the differences in customer responses to marketing activities (a financial perspective). 2 Customer Equity (CBBE): denotes the valuation of the customer base (a strategic perspective). Thus, in Ambler et al. (2002) s view, brand equity focuses on how the customer sees the characteristics of the firm s offerings, recognizing that these characteristics only assume meaning when the brand interacts with the customer. On the other hand, a customer equity perspective focuses on the customer s profitability, but that profitability is often driven by what the customer thinks about the brand. Thus, while the two constructs differ is some regards, they share a common basis in terms of their reliance on perceptions, beliefs, feelings, and attitudes (i.e. the customer s mind-set). This position appears consistent with Keller s (2003, p.60) definition of customer-based brand equity (hereafter referred to as CBBE) as... the differential effect that brand knowledge has on consumer response to the marketing of that brand. The current research therefore focuses on CBBE for two reasons: 1 Ambler et al. (2002) note that service firms have traditionally taken a CBBE perspective, therefore, focusing on CBBE provides a greater base of comparison with the extant service-marketing literature; and 2 much of the data necessary to test the financial-based brand equity perspective are confidential and not available to marketing researchers. Models of the CBBE construct have also evolved over time, and are not themselves devoid of controversy. Keller s (1993) original model of CBBE involved two overall dimensions brand awareness and brand image[1]. Brand equity from this perspective occurs when a consumer is familiar with the brand and holds some favorable, strong, and unique brand associations in memory. However, Lassar et al. (1995) argue for a five-factor conceptualization comprised of performance, social image, value, trustworthiness, and attachment. Aaker (1996a, b) alternatively presents a perspective of CBBE which posits five different overall dimensions of CBBE: brand loyalty, brand awareness, perceived quality, brand associations, and other proprietary brand assets such as competitive advantage. Aaker and Joachimsthaler (2000) simplify this model to include only the four primary dimensions of brand awareness, perceived quality, brand associations, and brand loyalty. Yoo and Donthu (2001) propose a ten-item operationalization of the brand equity construct based on the three dimensions of brand loyalty, perceived quality, and brand awareness/associations. More recently, Keller (2003) argues for a six-factor model of CBBE that includes brand salience, brand performance, brand imagery, brand judgments, feelings toward the brand, and resonance[2]. Netemeyer et al. (2004) reports a most recent effort to date to reconcile models of CBBE that compares and contrasts Keller s (1993) and Aaker s (1996a, b) conceptualizations of CBBE. These authors declare that Aaker (1996a, b) views CCBE as a set of assets/liabilities that are linked to a brand s name and symbol that affects the value perceived by a customer. Thus, the core of Aaker s interpretation is value added, which is a function of several core facets (i.e. perceived quality, perceived value for cost, uniqueness, and willingness to pay a price premium). CBBE occurs in Keller s conceptualization when the consumer is familiar with the brand and holds some favorable, strong, and unique brand associations in memory. The primary associations Keller refers to include beliefs and attitudes about the brand. Thus, Netemeyer et al. (2004) conclude that both Aaker and Keller s frameworks focus on the primary brand associations of perceived quality, perceived value, uniqueness, and willingness to pay a price premium. His team conducted four studies in the fast food industry suggesting that perceived brand quality, perceived brand value, and brand uniqueness are the most relevant (i.e. core facets) that predict CBBE (operationalized as the willingness to pay a price premium) for a brand (see Figure 1). The current research first tests the efficacy of Netemeyer et al. s (2004) conceptualization of brand equity specific to a financial service setting. Please note that the dependent variable in our models of CBBE involve purchase loyalty intention instead of brand purchase intention based on the knowledge that most respondents already carry some form of PLI coverage, either as a personal policy or as an employerprovided benefit. This leads to the first set of research hypotheses as articulated in Table I (H1-H7). However, an interesting quandary exists in that CBBE is only one of a number of antecedent variables in the literature identified to directly influence the formation of brand intentions. For example, customer satisfaction is widely recognized to influence the formation of behavioral intentions in service settings (Fournier and Mick, 1999; Leeflang and Wittink, 2000; Oliver, 1997). The service marketing literature generally supports the argument that satisfaction, as the result of quality perceptions and value judgments, is a direct antecedent to purchase intentions (Chiou et al., 2002; Cronin and Taylor, 1992; Hennig-Thurau et al., 2002; Loveman, 1998; Oliver, 1997, 1999; Zeithaml and Bitner, 2003). Studies related to the service-profit chain (Anderson and Mittal, 2000 Heskett et al., 1997) and the American Customer Satisfaction Index (ACSI, see: model.htm) similarly supports this conceptualization and the Figure 1 The research model of CBBE 242

3 Table I The research hypotheses Figure 1 research hypotheses Generalizing Netemeyer et al. (2004) to a financial service setting Figure 2 research hypotheses The proposed model of CBBE H1. Willingness to pay a price premium is positively related to perceived brand quality No H2. Willingness to pay a price premium is positively related to perceived brand value Yes (0.18) H3. Willingness to pay a price premium is positively related to brand uniqueness Yes (0.45) H4. Brand loyalty intention is positively related to a willingness to pay a price premium Yes (0.34) H5. Brand loyalty intention is positively related to brand awareness No H6. Brand purchase loyalty intention is positively related to brand familiarity No H7. Brand purchase loyalty intention is positively related to brand popularity No H8. Perceived brand value is positively related to perceived brand quality Yes (0.70) H9. Satisfaction with a PLI brand is positively related to perceived brand value Yes (0.36) H10. CBBE is positively related to perceived brand value No H11. CBBE is positively related to hedonic brand attitude Yes (0.18) H12. CBBE is positively related to utilitarian brand attitude Yes (0.22) H13. CBBE is positively related to brand uniqueness Yes (0.51) H14. Satisfaction is positively related to CBBE Yes (0.36) H15. Loyalty intentions are positively related to CBBE No H16. Loyalty intentions are positively related to satisfaction Yes (0.61) Confirmed in analyses? (including standardized path coefficients) relation of value to satisfaction judgments. This begs the question of whether or not satisfaction models can be successfully reconciled with Netemeyer et al. s (2004) CBBE conceptualization. We therefore developed a second competing theoretical research model that extends the work of Netemeyer and his colleagues by attempting to reconcile their proposed CBBE model with the service marketing relationships identified above (see Figure 2). This leads to a separate series of research hypotheses, also articulated in Table I. For example, H8, H9 and H10 introduce satisfaction and its antecedents into the model. However, we did not stop with a consideration of satisfaction and its antecedents. We further note that alternative explanations of the formation of behavioral intentions exist in the social psychology literature that may also be reconcilable with CBBE models. For example, Perugini and Bagozzi s (2001) attitudinally-based Model of Goal-Directed Behaviors (MGB) suggests that precursors to Figure 2 The revised model of CBBE behavioral intentions involve desires as a direct motivational antecedent. Attitudes in this conceptualization are believed to influence behavioral intentions through the mediating influence of desires. Thus, we are uncomfortable with the omission of brand attitude in models of the formation of brand equity, particularly given Ambler et al. s (2002) and Keller s (2003) identification of the importance of brand attitude to a customer s brand-related mind set, and Rust et al. s (2005) arguments for how brand attitudes are believed to influence brand equity judgments in the customer equity framework. Keller (2003) notes that the literature identifies several ways to conceptualize attitudes[3]. However, Voss et al. (2003) report a ten-item, two dimensional scale of consumer brand attitude that begins reconciling this perspective by including a hedonic and a utilitarian dimension. We therefore assess their scale relative to the extension of Netemeyer et al. s (2004) CBBE model proposed herein in the professional liability insurance (hereafter referred to as PLI) industry. Specifically, consistent with Keller s (2003) conceptualization of CBBE, and Perugini and Bagozzi s (2001) MGB Model, we hypothesize that brand attitudes represent exogenous constructs in the CBBE model, and possess both a utilitarian and hedonic dimension. This leads to our final set of research hypotheses (H11-H16) that modifies Netemeyer et al. s (2004) model of CBBE based on the preceding literature review (see Table I). Methods The financial services research setting for our studies involves PLI, defined as protection for professionals against liability for damages and cost of defense based upon his/her alleged or real professional errors and omissions or mistakes (Federated Insurance Glossary). We chose this industry setting for two reasons. First, while the need for PLI has long been 243

4 recognized in many industries, including medical (Domino, 2004), architectural and engineering (AIA Architect, 2004), and law (Haynes and Hatter, 2004), the Sarbanes-Oxley Act of 2002 is raising awareness of the need for PLI in the financial service sector[4]. Coustan et al. (2004) predict that the Sarbanes-Oxley Act will have a profound effect on the specific target set of respondents for the current research. Second, this industry setting provides a rigorous condition for theory testing as it is among the most intangible and credence-quality-laden of all financial service products. We are also encouraged by Berry s (2000) argument that brand equity will not be equally important to all firms. He specifically identifies four conditions under which brand equity is likely to be most important, all of which are conditions that characterize PLI: 1 the purchases require only low levels of involvement and simple decision processes; 2 the product or service is highly visible to others; 3 the experience associated with the product or service can be passed from one individual or generation to the next; and 4 it is difficult to evaluate the quality of the product or service prior to consumption. We also recognized that there are two complementary questions that must first be answered in order to fully address the research question underlying this research. First, are the competitive brands in the PLI space truly differentiated? Potential CBBE influences assume brand differentiation. Any absence of brand differentiation calls into question the potential contribution of CBBE for a given competitive situation. Second, does the revised model of CBBE identified in Figure 2 add more to the explained variance associated with ultimate loyalty intentions of accountants toward their PLI brands than does the model of Netemeyer et al. (2004)? We conducted two separate nationwide studies in order to answer these questions. Please refer to Appendix A for the constitutive and operational measures of model constructs used in the current research. Study 1 The first study attempts to ascertain whether existing PLI brands are currently differentiated in the minds of the target audience as a condition to investigating CBBE relative to the PLI industry. We first employed expert practitioner interviews in order to make two necessary decisions concerning our initial study[5]. First, we narrowed our inquiry to the top seven industry competitors because they represented the bulk of market share, and to facilitate the use of comparative analyses. Second, we identified seven attributes that formed the foundation of our initial inquiry as to attribute importance (please see Table II). Four of these attributes are related to company characteristics, and three are related to policy characteristics. We next sought to ascertain whether or not the identified PLI brands were positioned uniquely in the minds of target respondents based on importance ratings of the attributes identified in Table II. Gustafsson and Johnson (2004) assert that it remains an unsettled question as to whether importance ratings should come directly from consumers (i.e. be explicit) or be statistically derived (i.e. be implicit). These authors ultimately conclude that the efficacy of the use of derived (implicit) or direct (explicit) forms of attribute importance is situationally dependent, i.e. the best method depends on its compatibility with the research goals and context. We therefore ascertained attribute importance in Study 1 using both explicit and implicit forms of importance weights. We captured explicit measures of attribute importance two ways. The first way was by conducting a direct rating (DR). In this method, respondents are asked to give a value between 1! 100 for each specific attribute. We use this method of assessing attribute importance based on the arguments of Bottomley et al. (2000) who assert that the DR method is the most reliable method when compared to the commonly used point allocation method (wherein respondents divide ratings of all attributes into 100 to impart importance scores). The second explicit method involved the use of a 9-point performance rating scaled poled from Very Poor to Excellent. We captured implicit forms of importance weights through the use of conjoint analysis. Study 2 Study 2 begins by continuing our inquiry into the question, Are the competitive brands in the PLI space actually differentiated in the minds of the target audience? Study 2 adds to our understanding of this question through the use of Multidimensional Scaling (hereafter referred to as MDS). MDS is also known as perceptual mapping, and its purpose is to transform customer judgments of similarity or preference into distances represented in multidimensional space (Hair et al. 1998). Consequently, we collected data concerning the similarity accountants perceive among the top seven PLI providers and developed a positioning map. The final research question involved model testing of the competing CBBE conceptualizations presented in Figures 1 and 2. We employed structural equation analyses (hereafter referred to as SEM) in order to provide an overall test empirical test of the competing models, and specifically test our stated research hypotheses in both Netermeyer et al. s (2004) and the proposed extended model. Results The following section presents the results of our statistical analyses, and is divided into four subsections. First, we describe the obtained sample for both studies. Second, we present the results associated with Study 1. Third, we present the results associated with Study 2. Finally, we provide a discussion of the results. The obtained samples from Study 1 and Study 2 Study 1 and Study 2 each consisted of a unique random sample of 2000 Managing Partners from a large and wellknown accounting professional association. An incentive of a $10 Wal-Mart gift card was offered for returning a fully completed survey. We received back 137 usable surveys for Study 1. We also noted 39 surveys were not deliverable based on our purchased sampling frame, and 55 respondents provided inadequate responses for purposes of analyses. This yielded a total response rate for Study 1 of 10 percent, and a usable response rate of 7 percent. For Study 2, we received back 155 usable surveys. We noted with our second sample (1) 41 surveys were returned as not deliverable, and (2) 44 respondents provided inadequate responses for purposes of 244

5 Table II Attributes for Study 1 Characteristic Company characteristics Company brand strength Reputation/trustworthiness of firm Overall policy value Quality of human agents representing insurance carriers Policy characteristics Policy flexibility Price of individual policies Terms & conditions of policy Definition used in this study Concerns the power of the insurance company and its brand relative to competitors in terms of market leadership, financial strength, and overall firm performance (e.g. measures such as the A.M. Best Rating). The two categories for this characteristic are high and low Concerns perceptions of the honesty/integrity of the company, that is, whether or not you can fully trust a firm to perform ethically and responsibly. The two categories for this characteristic are excellent and poor Concerns how well customers perceive that they are receiving a fair return in terms of what they give up in a relationship with an insurer. It s the overall ratio of what the customer gets for what they give up. The two categories for this characteristic are excellent and poor Concerns the quality of those representing the insurer, including agents, intermediaries and/or customer service personnel. The two categories for this characteristic are excellent and poor Refers to the latitude in customer decision making concerning issues such as consent to settlement, ability to choose counsel, and payment options (e.g. installment options vs. annual payment). The two categories for this characteristic are high and low Refers to the price per employee policy to firms, after factoring in the deductible (or the policy holder copayment). The two categories for this characteristic are high and low Refers to issues such as breadth of coverage (e.g. $5 million vs. $10 million), number of exclusions, etc. The two categories for this characteristic are excellent and poor analyses. This yielded a total response rate for Study 2 of 10 percent, and a usable response rate of 7.8 percent. We were generally pleased with the sample of responses. Newell et al. (2004) confirm that there is a general trend toward lower response rates in survey research. However, we are encouraged in that the obtained sample possesses the statistical qualities of both representativeness and sufficient statistical power to avoid Type I and Type II errors in analyses. In terms of representativeness, the two samples were remarkably similar in that the majority of respondents were white, middle-aged males, with between years of accounting experience, and had held their current PLI policies for 11 years or less. We were also pleased to note that our obtained data contained responses from many geographically-disparate US states. Discussions with industry practitioner experts supported our conclusion that the obtained samples are representative of the population from which they are derived. The statistical power of a test refers to the probability that it will lead a researcher to reject the null hypothesis when that hypothesis is in fact wrong (Murphy and Myors, 1998). These authors suggest that there are no hard-and-fast rules in social sciences for how much power is enough for a particular study, however, there is a consensus on two issues. The first is that if a derived power rating falls below 0.50, the study is more likely to fail than to succeed. Second, it is difficult in practice to achieve power ratings above Consequently, the most widely accepted convention for power analyses specify 0.80 as the desired level of power to be achieved. This is the standard we employ in the current research. Therefore, we evaluated statistical power for our study and concluded that we have sufficient power to conduct SEM-based model testing (see McQuitty, 2004). Having concluded that our obtained samples for both nationwide studies are both representative and possesses sufficient statistical power to support analyses, we next analyzed the obtained data. Results from Study 1 Study 1 captures both explicit and implicit forms of importance weights in an effort to identify attribute importance in PLI services. Not surprisingly, when asked directly which of the identified attributes were important, respondents tended to state that they were all important using either the DR (100 point) or the 9-point scale measures of attribute importance (Peterson and Wilson, 1992). Consequently, brand differentiation was not readily apparent using explicit measures of attribute importance. However, brand differentiation was apparent in the implicit form of attribute importance (see Table III). The conjoint results suggest that terms/conditions of policies appears as the most important policy-related characteristics, and overall policy value appears as the most important company-related characteristics. Interestingly, company brand strength also appeared to be a very important company characteristic, generally supporting the argument for a focus on CBBE in this industry setting. Please note that company versus policy Table III Results of conjoint analyses Characteristic Conjoint-derived importance weights Company characteristics Company brand strength Reputation/trustworthiness of firm Overall policy value Quality of human agents representing insurance carriers Policy characteristics Policy flexibility Price of individual policies Terms and conditions of policy

6 characteristics were independently compared to avoid the inevitable respondent fatigue associated with trading off seven unique characteristics (even with only two levels of each). Consequently, these results provide some support for the assertion that a basis exists for brand differentiation within the PLI competitive setting. Results from Study 2 Study 2 builds upon and extends the first study. We first confirmed that PLI providers are differentiated in the target audience through the development of a perceptual map using multidimensional scaling. The results of SPSS MDS analyses report a stress score of , and an RSQ score of 0.572[6]. Thus, we can explain about 57 percent of the perceived distances between PLI brands. These results further support a interpretation that the individual brands of PLI providers hold unique positions in customers minds. However, the data supporting our MDS effort should be interpreted with caution[7]. The second question generally addressed in Study 2 concerns which of the two competing models of CBBE best measures the efficacy of brand-related marketing strategies and tactics (i.e. the model in Figure 1 or Figure 2)? However, prior to discussing the obtained results, we are also sensitive to the need for demonstrating the reliability and validity of our measures, and recent calls for increasing the information supplied with SEM results (McDonald and Ho, 2002). Hair et al. (1998) suggest calculating construct reliability estimates and variance-extracted (i.e. validity) measures when using SEM. Construct reliability scores exceeding 0.7 and shared variance scores exceeding 50 percent are the recommended criteria for model constructs (Hair et al., 1998; Raines-Eudy, 2000). Table IV demonstrates that the scales used for the model variables all exceed recommended criteria, reflecting acceptable reliability and validity in measurement. In terms of recent recommendations for reporting SEM results as suggested by McDonald and Ho (2002), we first recognize that potential nonnormality of data can prove problematic in structural equation analyses because the maximum likelihood estimation assumes multivariate normality. It is commonly recognized that survey research often yields data that does not meet this condition. We therefore normalized the data prior to analysis using the normalization algorithm in PRELIS. Second, as is often inherent in survey-based research, we did note a small number of missing values in responses related to measures of our constructs. This can be problematic in that LISREL provides full information and multiple imputations based on Table IV Reliability and validity of measures Construct Construct reliability Variance extracted CBBE Purchase/loyalty intention Perceived quality Perceived value Brand uniqueness Utilitarian attitude Hedonic attitude Satisfaction the assumption that data are missing at random. Thus, we addressed the issue of missing values with our model variables prior to analyses by inserting variable means via the SPSS Missing Values statistical software package for missing values. Third, we considered the issue of identifiability. McDonald and Ho (2002) argue for three considerations in this matter. The first issue is identifiability of the measurement model. We meet McDonald s (1999) independent cluster condition in that we have at least three pure indicators for each latent variable in our model. In addition, these authors assert that, in applications, this condition often results from substantive issues, which increases our confidence that we have met this reporting condition. The second issue relates to identifiability of the path model. We also meet this standard in that the choices to include and/or omit directed and nondirected arcs have been based on substantive grounds from prior research. McDonald and Ringo-Ho also assert that if the research model has no nondirected arcs between causally ordered variables, then it is certainly identified. The final identifiability issues relate to scaling of the latent variables. Fortunately, LISREL provides a rescaling technique for this purpose. We therefore assert that our research model appears appropriately identified in the current research. Fourth, McDonald and Ho (2002) also make a suggestion to publish correlation matrices with SEM results unless the size of the model makes this practice prohibitive. However, given the large number of predictors in the models assessed herein (35), in deference to the value of journal space we chose to refrain from reporting such a cumbersome table[8]. Fifth, McDonald and Ho (2002) address the issue of model fit indices. Social scientists are largely aware that there has been a great deal of discussion and confusion concerning the appropriate model fit indices to report with SEM analyses. McDonald and Ho (2002) appear to support reporting of the RMSEA and CFI. We therefore report these global fit indices in the current research. Sixth, McDonald and Ho (2002) recommend the reporting of standard errors when reporting nonstandardized path parameters. However, they further acknowledge that usable standard errors are not currently available for standardized solutions in LISREL. We report standardized solutions in the current research which supports interpretations of implicit forms of importance weight, and therefore do not report the standard errors associated with our SEM results. Table V presents the results of our model testing using SEM, suggesting acceptable fit for both Netermeyer et al. s (2004) conceptualization of CBBE, and the revised model proposed herein. A number of insights result of the model assessment. First, the data generally supports Netermeyer et al. s (2004) conceptualization of CBBE, explaining 35 percent of CBBE and 12 percent of the intention to maintain purchase loyalty with their current PLI provider. Interestingly, however, we alternatively find that neither quality nor value appear to significantly contribute to CBBE in the findings. We further note that the relatively unimpressive R 2 associated with loyalty intentions in the PLI marketplace is similar to that found by Netemeyer et al. (2004) in a fast food setting. However, we also find empirical support for the revised theoretical model proposed in Figure 2. The results related to the revised model suggest the importance of satisfaction when simultaneously considering value, CBBE, and satisfaction judgments in the same explanatory model of the formation of loyalty intentions. Specifically, consistent with our theoretical arguments, the roles of both value and CBBE appear to be 246

7 Table V Results of model assessment Dependent variable Equation R 2 RMSEA CFI Netemeyer et al. s (2004) model (see Figure 1) CBBE NS * Quality þ 0.18 * Value þ 0.45 * Brand Uniqueness 0.35 Loyalty intention 0.34 * CBBE 0.12 Revised CBBE model (see Figure 2) Value 0.70 * Quality 0.50 Satisfaction 0.36 * Value þ 0.36 * CBBE 0.35 CBBE NS * Value þ 0.18 * Hedonic Attitude þ 0.22 * Utilitarian Attitude þ 0.51 * Brand Uniqueness 0.41 Loyalty intention NS * CBBE þ 0.61 * Satisfaction 0.40 Notes: NS þ Not statistically significant at p # 0.05; Path coefficients represent standardized coefficients constrained to a direct influence on satisfaction judgments. Satisfaction, in turn, intermediates both constructs in the formation of loyalty intentions. Interestingly, the revised model explains only slightly more variance in CBBE than the Netemeyer et al. (2004) conceptualization, but significantly more variance in the formation of loyalty intentions (a þ333 percent increase). In addition, as predicted, we find that both hedonic and utilitarian attitudes appear to directly influence the formation of CBBE. Table I includes these findings by research hypothesis. Discussion of results of Studies 1 and 2 In summary, the results of the two nationwide studies reported herein add to our understanding of CBBE in financial service marketplaces in a number of ways. First, tentative evidence is apparent that PLI financial service providers are (and therefore can be) differentiated based on brand considerations. This suggests promise for financial service marketers focusing on brand positioning considerations in the development of long-term, relationship marketing strategies and tactics. Second, our results reconcile the abundant satisfaction literature with emerging models of CBBE in the formation of behavioral intentions. Specifically, the results suggest that customer satisfaction fully mediates the CBBE! Loyalty Intentions relationship in this competitive setting. Thus, the results reaffirm the importance of customer satisfaction in marketing activities related to financial service marketplaces. Finally, the revised model proposed herein also reconciles CBBE with brand attitude theory. Consistent with the emerging evidence in the literature (Voss et al., 2003, Okada, 2005), both utilitarian and hedonic forms of attitudes differentially influence the formation of CBBE in the results presented herein. The next section presents the managerial and research implications of the results reported herein. Managerial and research implications The research reported herein represents a multidisciplinary nationwide inquiry attempting to better understand brand management in financial service marketplaces. The reported research helps to bridge the gap between theory and practice related to brand management by providing an explanation of how brand attitudes, CBBE, value, and satisfaction work together to contribute to the formation of loyalty intentions. The results provide numerous insights. Managerially, our findings first provide a theory-based framework for reconciling the alternative roles of quality, value, satisfaction, and brand-related considerations in guiding strategic decision making in financial service markets. Many financial service marketers already capture quality, value, and satisfaction perceptions from their customer bases. The framework proposed herein will tangibly allow financial service marketers to use this data more effectively by better understanding how these perceptions interplay with important brand considerations such as brand attitudes and CBBE in their own competitive setting. That is, the current research provides the framework and measures necessary for practitioners to replicate the study reported herein in analyzing their own competitive brand situations. Second, the results also make clearer the path of the formation of loyalty intentions for financial service marketers. The newly developed theoretical model presented in Figure 2 accounts for much more variance in loyalty intentions than previous conceptualizations such as proposed by Netemeyer et al. (2004). Brand attitudes and uniqueness are found to be important as they help develop CBBE. The dual influence of value and CBBE leads to the formation of satisfaction judgments, which in turn will contribute to the formation of loyalty intentions. The take-away for financial service marketers is that the importance of customer satisfaction does not appear to be diminishing in these markets. As such, the results reported herein will help practitioners better utilize satisfaction measurement in support of their own brandrelated relationship marketing efforts. Yet a third managerial implication relates to the legitimate criticism of existing CBBE models involving the absence of financial measures of brand equity. However, Rust et al. (2005) present a customer equity framework that may help overcome this criticism by calling for the strategic management of value equity, relationship equity, and brand equity. The general idea of the customer equity approach is to measure and manage a firm s return on marketing via optimizing the lifetime value of customers of a service organization (also see Rust et al., 2004). Rust et al. (2005) assert that the linkage between brand equity and customer equity lies in the power of the brand to influence repeat business, and hence contribute to the lifetime value of a customer to a firm. The specific mechanism is as follows: " Brand Attitude! " Brand Purchase, # Substitute Brand Purchase, and " Positive Word-of-Mouth Behaviors. The study reported herein will help allow financial service 247

8 marketers to begin developing more comprehensive measures of brand equity that additionally capture financial considerations through mechanisms such as the customer equity framework. There also exists a number of interesting research implications from the reported studies. First, the studies we report provide an incremental advance in our understanding of how CBBE forms and operates in the formation of desirable customer intentions. However, there is room to increase the predictive power of CBBE models in financial service settings. Keller (2003) identifies a number of constructs that can be considered in expansions of the model proposed herein including brand awareness, brand judgments, brand imagery, brand feelings, and brand resonance. Chadhuri (2002) relates brand reputation as a mediator of the effect of brand advertising, brand familiarity, and brand uniqueness on brand equity outcomes. Future research might inquire as to how CBBE coexists and operates with other important marketing constructs in the formation of customer loyalty. Second, we suspect that one reason why value plays a differential role our proposed model versus Netemeyer et al. s (2004) conceptualization may relate to how value is defined across service industries. Rust et al. (2005) specifically address this concern in the development of the customer equity framework by considering Zeithaml (1988) s demonstration of the multiplicity of possible definitions of perceived value across service industries. Oliver (1999) and Holbrook (1999) also present interesting insights into how value is conceptualized can have implications for theoretical models such as proposed herein. Future research should investigate the definitions of value specific to financial service markets to further our understanding of the relative influence on brand equity. Third, future research should continue to consider teasing out the differences between alternative conceptualizations of quality, satisfaction, value, and brand attitude at the concept and process levels of analysis. Netemeyer et al. (2004) recognize and discuss the problems associated with disentangling perceived brand quality from perceived brand value given their close conceptual domains and the fact that as judgments they are formed similarly. Part of the problem may lie in the fact that service quality, satisfaction, and value have all been closely related to consumer attitudes. For example, Oliver (1997, p. 20) suggests that...the consumer s attitude may be closely linked in tone to the consumer s general perception of quality of a good or service. Fournier and Mick (1999) term the distinction between satisfaction and attitude as tenuous. Value similarly can be conceived of as an attitudinal-like holistic construct (Holbrook, 1999) or at least closely related to attitudes (Bagozzi et al., 2002). Oliver (1999) likewise notes that value can be conceived as either an antecedent or an outcome depending on the definition used for the value construct. While the issue of whether or not conceptualizing perceived brand quality, customer satisfaction, and/or perceived brand value best as a form of attitude or not remains unresolved, we concur with the general sentiment suggesting that reconciling brand attitude in models of brand equity is a worthwhile consideration in extensions of their model. One useful approach to achieving this end may be to attempt to reconcile CBBE models with emerging more complex attitudinal conceptualizations such as those proposed by Perugini and Bagozzi (2001; 2004). In other words, this research stream may benefit from a focus on the identification of the underlying psychological model driving the formation of CBBE judgments, and their subsequent influence on future purchase and attitudinal loyalty decisions. Incorporating attitudinal models into this research stream offers additional potential insights. For example, similar to Keller (2003), we are curious if the pursuit of the brand personality considerations can further our understanding and explanatory power of CBBE models (see Aaker, 1999). Along these lines, investigations of brand/attitude strength may also prove insightful (Holland et al., 2003; Van Harreveld and van der Plight, 2004; Visser et al., 2003). Sheeran et al. (2002) provide evidence that that the strength of the perceived behavioral control (PBC)! intention relationship in attitude models depends not only on the type of behavior but also on the type of person. Sheeran et al. (2003) present evidence that greater accuracy of PBC is associated with improved prediction of behavior by the construct. Clearly, there is a viable and uncultivated stream of research to pursue in this regard, particularly as PBC relates to services marketing and loyalty behaviors. Future research should revisit the attitude! intention relationship relative to CBBE and customer satisfaction in financial service settings. Fifth, future research might consider reconciling emerging models of CBBE with brand extension strategies (Balachander and Ghose, 2003; Swaminathan et al., 2001) and brand equity dilution (Keller and Soon, 2003). Such a research stream might meld well with more comprehensive brand equity models that consider both financial and customer-based considerations of brand equity. Much works remains concerning efforts to develop a comprehensive model of brand equity that includes both financial concerns and CBBE. Ailawadi et al. (2003) provide a useful starting place to begin the process of reconciling the revised CBBE model proposed herein with financial-based models of brand equity. Study limitations This study, in a field setting, involves several limitations that we encourage readers to consider. First, Ambler et al. (2002) suggest measuring financial-based types of brand equity when possible, and further assert a likely synergy between the alternative perspectives. The current research focuses specifically on CBBE. We second calls for future research to find a way to more fully involve PLI industry participants in studies in order to capture (sensitive) financial-based brand equity considerations, such as the study recently reported by Ailawadi et al. (2003). This will likely require the sharing of some sensitive financial information by financial service marketers. Second, the obtained response rates, while sufficient to confidently support statistical inquiry, are nonethe-less unimpressive. Finally, the reported MDS results must be interpreted with caution. We believe that the results, while not fitting the data particularly well, do provide tentative evidence that individual brands of PLI providers are differentiated in the minds of accounting customers. However, future research should replicate and verify the results reported herein. Epilogue The results of the nationwide interdisciplinary studies reported herein further our understanding of how CBBE 248

9 forms and influences customer behaviors in a rapidly evolving financial service marketplace. Vargo and Lusch (2004) articulate how service industries are changing, with these changes often leading to a greater emphasis on relationship marketing and long-term brand considerations. This appears to be the case in the PLI financial service product category. The focus of these studies has been to develop not only an incremental theoretical advance, but also a tangible measurement framework to assist financial service marketers in utilizing emerging service theory. We encourage the replication and building upon the results of the studies reported herein. Notes 1 Brand awareness relates to the strength of the brand node or trace in memory, as reflected by the consumer s ability to identify the brand under different conditions. Brand image is defined as perceptions about the brand as reflected by the brand associations held in consumer memory. 2 Salience is breadth and depth of brand awareness. Performance involves attributes such as ingredients and benefits, reliability/durability/serviceability as well as style, design, and price. Imagery involves demographics, purchase/use situations, personality, history and experience. Judgments involve various brand attitudes including satisfaction, quality, and value. Feelings involve emotions, security, social approval and self-respect. Resonance involves loyalty, sense of community, and active engagement. 3 He specifically identifies four main roles/functions that attitudes can play: utilitarian functions, value-expressive functions, ego-defensive functions, and knowledge functions. 4 In brief, the Sarbanes-Oxley Act (for publicly traded firms) calls for a new Public Company Accounting Oversight Board, new rules for audit committees and auditors, criminal protection for whistle blowers, and new additions to financial reporting and auditing processes (see: to learn more about this Act). 5 These interviews involved several senior industry executives, each with decades of experience specific to the PLI industry. 6 RSQ is the proportion of variance of the disparities of the scaled data accounted for by their corresponding distances. 7 Our panel of industry experts interpreted the two dimensions in the derived perceptual map to involve customization and expertise based on the locations and proximity of the PLI brands and their competitive knowledge. The MDS map is available upon request from the lead author. 8 This table is available upon request from the lead author of this study. References Aaker, D. (1996a), Measuring brand equity across products and markets, California Management Review, Vol. 38 No. 3, pp Aaker, D. (1996b), Building Strong Brands, The Free Press, New York, NY. Aaker, D. (2003), The power of the branded differentiator, Sloan Management Review, Fall, pp Aaker, D. and Joachimsthaler, E. (2000), Brand Leadership, The Free Press, New York, NY. Aaker, J. (1999), Dimensions of brand personality, Journal of Marketing Research, Vol. 34 No. 8, pp Ailawadi, K., Lehmann, D.L. and Neslin, S.A. (2003), Revenue premium as an outcome measure of brand equity, Journal of Marketing, Vol. 67, pp Ambler, T., Bhattacharya, C.B., Edell, J., Keller, K.L., Lemon, K.N. and Mittal, V. (2002), Relating brand and customer perspectives on marketing management, Journal of Service Research, Vol. 5 No. 1, pp Anderson, E.W. and Mittal, V. 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10 Gustafsson, A. and Johnson, M.D. (2004), Determining attribute importance in a service satisfaction model, Journal of Service Research, Vol. 7 No. 2, pp Hair, J.F. Jr, Anderson, R.E., Tatham, R.L. and Black, W.C. (1998), Multivariate Data Analysis, 5th ed., Prentice Hall, Upper Saddle River, NJ. Harris, J. (2004), Professional Liability Insurance Update 2004, AIA, Washington, DC, available at: thisweek04/tw1022/1022insure_survey.htm (accessed November 23, 2004). Haynes, A.S. and Hatter, D.G. (2004), Sarbanes-Oxley: regulating lawyers, HierosGamos, Houston, TX, available at: (accessed November 23, 2004). Hennig-Thurau, T., Gwinner, K.P. and Gremler, D.D. (2002), Understanding relationship marketing outcomes: an integration of relational benefits and relationship quality, Journal of Service Research, Vol. 4 No. 3, pp Heskett, J.L., Earl Sasser, W. Jr and Schlesinger, L.A. (1997), The Service Profit Chain, The Free Press, New York, NY. Holbrook, M.B. 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11 Van Harreveld, F. and van der Plight, J. (2004), Attitudes as stable and transparent constructions, Journal of Experimental Social Psychology, Vol. 40, pp Vargo, S.L. and Lusch, R.F. (2004), Evolving to a new dominant logic for marketing, Journal of Marketing, Vol. 68, January, pp Visser, P.S., Krosnick, J.A. and Simmons, J.P. (2003), Distinguishing the cognitive and behavioral consequences of attitude importance and certainty: a new approach to testing the common-factor hypothesis, Journal of Experimental Social Psychology, Vol. 39, pp Voss, K., Spangenberg, E.R. and Grohmann, B. (2003), Measuring the hedonic and utilitarian dimensions of consumer attitude, Journal of Marketing Research, Vol. XL, August, pp Yoo, B. and Donthu, N. (2001), Developing and validating a multidimensional consumer-based brand equity scale, Journal of Business Research, Vol. 52, pp Zeithaml, V.A. (1988), Consumer perceptions of price, quality, and value: a means-end model and synthesis of evidence, Journal of Marketing, Vol. 52, July, pp Zeithaml, V.A. and Bitner, M.J. (2003), Services Marketing: Integrating Customer Focus Across the Firm, 3rd ed., McGraw-Hill Irwin, Boston, MA. Further reading Anon (2004), Federated Insurance Glossary, available at: www. federated.ca/gloss/p.htm (accessed November 23, 2004). Anon (2004), Special report: professional liability, National Underwriting Company, available at: www. insurancenewsnet.com (accessed November 23, 2004). Corresponding author Steven A. Taylor can be contacted at: staylor@ilstu.edu Executive summary and implications for managers and executives This summary has been provided to allow managers and executives a rapid appreciation of the content of the article. Those with a particular interest in the topic covered may then read the article in toto to take advantage of the more comprehensive description of the research undertaken and its results to get the full benefit of the material present. When buying a car or a carton of cornflakes, the brand is likely to be important perhaps more so than the price. Whether you are splashing out on the most expensive thing you have bought in years, or just shopping for a few inexpensive groceries, people tend to know what brands they like and are familiar with, and have a fair knowledge of how to differentiate between competing products. In services, too, brands and the power they possess are critically important to and are fundamentally linked to the concept of relationship marketing. Which internet service provider do you choose? Given the choice, which airline do you fly with? Who do you bank with? Purchasers and providers both know quite a lot about branding and how loyalty to a particular brand has to be earned and managed. But what if it s not something so familiar as an automobile or a breakfast serial that s being purchased? What if it s something far more esoteric and intangible? A financial service perhaps? And not just a simple savings account required by a customer, but a PLI policy required by financial services professionals to defend themselves against any liability for damages based on alleged professional errors or omissions? Do people who need such a financial services product and they also include doctors, architects, engineers and any other professionals who may face public liability claims differentiate between brands? As competitive products are on offer, the answer to that and the further questions that follow, are of importance to both providers and buyers. In a study designed to advance marketers understanding of customer-based brand equity (CBBE) within the context of a B2B financial service marketing setting, Steven A. Taylor, Gary L. Hunter and Deborah L. Lindberg suggest that customers in the financial service setting investigated do indeed differentiate brands. After ascertaining whether or not identified PLI brands were positioned uniquely in the minds of target respondents, they inquired into whether the competitive brands in the PLI space were actually differentiated. They also found general support for Netemeyer et al. s (2004) model of CBBE which suggest that perceived brand quality, perceived brand value, and brand uniqueness are the most relevant (i.e. core facets) that predict CBBE (operationalized as the willingness to pay a price premium) for a brand. However, the extended model of CBBE that they themselves propose appears to offer the benefits of explaining more variance in loyalty intentions, while simultaneously demonstrating the importance of customer satisfaction in CBBE models, and incorporating customer attitudes into conceptualization of CBBE. Their study helps to bridge the gap between theory and practice related to brand management by providing an explanation of how brand attitudes, CBBE, value, and satisfaction work together to contribute to the formation of loyalty intentions. The results provide numerous insights. Managerially, their findings first provide a theory-based framework for reconciling the alternative roles of quality, value, satisfaction, and brand-related considerations in guiding strategic decision-making in financial service markets. Many financial service marketers already capture quality, value, and satisfaction perceptions from their customer bases. The framework proposed by the authors tangibly allows financial service marketers to use the data more effectively by better understanding how these perceptions interplay with important brand considerations such as brand attitudes and CBBE in their own competitive setting. In other words it provides the framework and measures necessary for practitioners to replicate their study in analyzing their own competitive brand situations. Second, the results also make clearer the path of the formation of loyalty intentions for financial service marketers. The newly developed theoretical model Taylor et al. present accounts for much more variance in loyalty intentions than previous conceptualizations. Brand attitudes and uniqueness are found to be important as they help to develop CBBE. The dual influence of value and CBBE leads to the formation of satisfaction judgments, which in turn will 251

12 contribute to the formation of loyalty intentions. The takeaway for financial service marketers is that the importance of customer satisfaction does not appear to be diminishing in these markets. As such, these results will help practitioners to better utilize satisfaction measurement in support of their own brand-related relationship marketing efforts. The study will also help financial service marketers to begin developing more comprehensive measures of brand equity that additionally capture financial considerations through mechanisms such as the customer equity framework. Taylor et al. conclude: Vargo and Lusch (2004) articulate how service industries are changing, with these changes often leading to a greater emphasis on relationship marketing and long-term brand considerations. This appears to be the case in the PLI financial service product category. The focus of these studies has been to develop not only an incremental theoretical advance, but also a tangible measurement framework to assist financial service marketers in utilizing emerging service theory. We encourage the replication and building upon the results of the studies reported herein. (A précis of the article Understanding (customer based) brand equity in financial services. Supplied by Marketing Consultants for Emerald.) To purchase reprints of this article please reprints@emeraldinsight.com Or visit our web site for further details: 252

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