Effect of Social Responsibility on Brand Performance with mediation of the effect of Equity and the Company's Reputation in the Insurance Industry

Transcription

1 Effect of Social Responsibility on Brand Performance with mediation of the effect of Equity and the Company's Reputation in the Insurance Industry 1. Vahid Ahmadi 2. Zahra Alipur 1. MA in Business Administration, North Tehran Branch, Islamic Azad University, Tehran, Iran 2. Assistant Professor of Business Administration Department, North Tehran Branch, Islamic Azad University, Tehran, Iran Abstract performance was not approved. The study aims to determine the effects of social responsibility on the brand performance with the mediation of equity effect and company reputation in the insurance industry. For this purpose, a standardized questionnaire was available to clients of insurance companies as Asia, Karafarin and Pasargad in Tehran who had the experience of using services of these insurance companies and finally 384 questionnaires were used in the analysis of research hypotheses. Data received from clients were analyzed using confirmatory factor analysis and structural equation techniques. LISREL and SPSS were used to approve or reject hypotheses. The study was a survey in terms of data collection and correlational in terms of examining the relationships between variables. According to the results of hypotheses testing, it was observed that the impact of insurance corporate social responsibility on the brand equity, and brand equity on brand performance was approved. But the impact of corporate social responsibility on brand reputation and brand reputation on brand Keywords: Social responsibility, brand, brand equity, company reputation 1. Introduction Today, people live in environments that go increasingly toward service-based economy. Other services are not considered as a small part of the economy, but also as the heart of value creation in the economy. Insurance industry plays an important role in providing services. Studies show that social responsibility and corporate reputation have a positive effect on the insurance industry and a relationship exists between social responsibility and brand equity and its performance. In most of previous researches, discussions about brands and brand equity was almost focused on the consumer. Empirical evidences increasingly suggest that when deciding in buying, the buyers are affected not only by the tangible features such as price and quality, but also influenced by the subtle characteristics such as trust, communication with brand, reputation of image and source (Cretu and Brody Mudambi et al. 1997). The emotional aspects of brand equity are the important source of sustainable competitive advantage (Lynch, 2004, p. 403). Buyers' perceptions about corporate social responsibility may be associated with the history of brand equity, quality improvement, creating brand loyalty, and brand satisfaction. Social responsibility is still an evolving concept and therefore without a unified definition, but in definition, it refers to voluntary activities done by companies to increase economic, social and environmental efficiency (Amashy et al. 2008). Brands affect the lifestyle and culture and even sometimes represent it. Brands are influencing the personal lives of individuals and may influence the values, beliefs, policies and even people. Insurance companies include firms that have broad social responsibilities, many of their decisions may lead to change in lifestyles among the population or affect their economic status directly. Due to the expansion of insurance offices and companies in the country, competition in the industry is getting more and more difficult. In this situation, to achieve the highest productivity, all companies should use the existing knowledge resources and influence of social responsibility properly. In this study, the basic question is to what extent the social responsibility affect the brand performance with the mediating role brand equity and the company's reputation in the insurance industry? 2. Literature review 364

2 Market environment always reflects new challenges. Globalization of trade and economy, services, competition dynamism have made the current and future situation of organization at risk and meanwhile, the companies will be successful that meet the needs and values expected by the customers properly and in accordance with their desire. The customer expects the organization to provide the highest value with the most appropriate cost and the organizations are constantly looking for new ways and creating innovation in providing values. The real value of a company is located somewhere out of it, that is, in the minds of actual and potential buyers. Thought and mentality of brand forms the basis for deciding to buy and brand credibility. The main goal of any company is profit and one way to achieve this is to treat so that people well know the company brand. In this case, we can rule the customer's mind, the company just needs to show itself in the minds of customers in the best condition with honesty and a proper way (Barthhorp, 2010). Corporate social responsibility is a fairly new issue that is spreading quickly among different organizations and it should be pointed out that the organizations should pay more attention to the consequences and the effects of their activities and consider their effects on environment, society, and community members. The more the brand awareness and brand associations, it would lead to more purchase and profitability. Wang et al., (2006) refers to brand satisfaction as another part of equity, and compares the value-added of products or services with a particular brand on a customer based on the subjective evaluation of product quality and service quality, buyer's expectations and perceptions. Jones, (2005) examines the interaction between the brand, shareholders, their expectations, equities, brand equity and social responsibility. (Keller, 2003) CSR can have an impact on positive oral advertising, brand awareness, brand reputation and brand image. Bryce Lee et al., (2002) also acknowledged that the company's reputation constitutes as an important part of the brand in social responsibility and behavior. (Smith and Higgins, 2000, 309) Brand and concern for consumer and responsibility in business is a means to provide competitive advantage. (Aaker model, 1996) Brand equity is composed of five parts: brand awareness, brand loyalty, brand associations, perceived quality and innovation, and relationship channel (Ziadi, 2012). A famous brand has many unique benefits, including reduced costs and alliance between customers and goals of the company (Bahraini Zadeh, 2008). Studying the brand value from the perspective of consumers helps companies to make better strategic decisions about the definition of the target market and positioning their products and tactical decisions about measures and actions related to the marketing. 365

3 Figure 1: Primary conceptual model of research 3. Methodology According to the studies done and literature and the initial conceptual model, some indicators were extracted through which a questionnaire with the characteristics in Table 1 was prepared. Table 1: Research extracted indicators Index 1 Question NO. Source The company's products and services are our first choice. We feel loyalty to the company. Despite other companies, we will not select them. 1 to 3 The company brand has a good quality. The company brand performance is at a very high level. The company brand is very reliable. The company brand is famous in insurance industry. The company brand can be recognized among competing companies. Compared to other companies operating in the insurance industry, the brand is the leader. The company brand in my mind has no problem in comparison 4 to 6 7 to 11 Chih-Jen Chiu Chin-Fang Yang Chi-Shiun Lai Da-Chang Pai (2010) 1 Latent Variable 366

4 with other companies. The company brand has features that have remained in my memory. The company's services meet most of my expectations. The company's services meet my enthusiasm. Overall I am very satisfied with the company's services. Services of the company often brings me happiness and joy. Customers' perception about company brand is positive. Customers have a good evaluation about the company compared with competitors. Customers are optimistic about the long-term future of the company. The company brands has raised its sell. The company brand has increased the buying groups. The company brand is different from other companies. The company generally works well. The company has charitable activities. The company is very interested in protecting the environment. The company is committed to protect the interests of buyers. The company cares for the elderly and disabled. The company invests in social affairs. 12 to to to to 27 The statistical population of the study are all clients of insurance companies, Iran, Asia, Karafarin, and Pasargade in Tehran that had experienced using the services of these insurance companies. The number of clients of insurance companies in Tehran is unlimited. Two-stage random cluster sampling method is used in this study and in the first stage of sampling, agencies of Iran, Pasargadae, Asia and Karafarin Insurance companies was considered as the main cluster and in the second phase, 384 subjects were selected randomly from among the companies' clients and equally and questionnaire was distributed among them and the number of statistical samples was done through sample size determination table by Krejcie and Morgan methods. According to the table, for unlimited communities, the number of sample is 384. Also, structural validity, content validity and face validity were used to examine the data validity. Thus, to design the questionnaire according to the model strong background as well as bearing in mind the main model variables, it was tried that in terms of indicators which measure the latent variables, the questionnaire rely on a proper support of the practical theories and applications in research and several tests. With a precise definition of each of the structures, structure measurement criteria and combined scale of the criteria, the content validity of the questionnaire was ensured. Also, to measure the face validity, questionnaire and its content was examined by the University professors and their comments and amendments were considered. On the other hand, in order to analyze the internal structure of the questionnaire and discovering the constituent elements of each structure, construct validity was performed using confirmatory factor analysis. In this study, to answer the questions, the Likert scale is used. The numerical values 1, 2, 3, 4 and 5 are intended for 5 options, which includes strongly disagree, disagree, no idea, agree and strongly agree, respectively, and the reverse inquiries are inversely rated. 367

5 Table 2: Cronbach's alpha coefficient of the questionnaire Number of Latent variable questions Question No. Cronbach's alpha 1 Loyalty 3 1 to Perceived quality 3 4 to Brand awareness 5 7 to Brand satisfaction 4 12 to Company reputation 3 16 to Brand performance 4 19 to Corporate Social company social 7 responsibility 5 23 to Total Inventory 27 1 to Data Analysis 4.1. Construct validity - testing models and hypotheses he results of confirmatory factor analysis of each of the variables is given by LISREL for each parameter individually. In confirmatory factor analysis, the researcher knows which question is related to what aspect. That is, in confirmatory factor analysis, a conceptual model exists for each of the concepts or variables. Measurement model shows brand equity (including 4 aspects: brand loyalty, brand quality, brand awareness and brand satisfaction) in the standard estimates and significance factor. The estimated results (bottom of figure) shows the relative goodness of the indicators. According to the LISREL output, value of χ 2 /df is calculated less than 3. RMSEA value is equal to Permitted limit of RMSEA is Indices GFI, AGFI and NFI are equal to 0.92, 0.89 and 0.96, respectively which represents a good fit of model. The model factor loadings in standard estimate state shows the impact of each variable or items in the explanation of the variance between the variables or the main factor. In other words, the factor loading shows the correlation of each observer variable (questionnaire questions) with a latent variable (factors). The next output (model in significance state) shows the significance of coefficients and parameters obtained in the brand equity measurement model that all coefficients are statistically significant. Two outputs of LISREL (model in the standard estimate and model the significant coefficients) are shown below. 368

6 Figure 2: Model of measuring variables of brand equity in the standard estimation 369

7 Figure 3: Model of measuring variables of brand equity in the case of significant coefficients 4.2. Company's reputation variable measurement model Measurement model of company reputation is shown in standard estimate state and significance factor. The estimation results (bottom of figure) shows the relative goodness of the indicators. According to the LISREL output, the value of χ 2 /df is measured less than 3. RMSEA value is which less than the permitted limit of RMSEA is Indices GFI, AGFI and NFI are equal to 0.89, 0.91 and 0.93 respectively, which represents a good fit of model. The next output (model in significance state) shows the significance of coefficients and parameters obtained on the company reputation measurement model that all coefficients obtained are significant. Two outputs of LISREL (model in the standard estimate and model in the significant coefficients) are shown below. 370

8 Figure 4: Model of measuring variable of corporate reputation in the standard estimate Figure 5: Model of measuring variable of corporate reputation in a significant coefficient 4.3. Brand performance measurement model Measurement model shows the brand performance in standard estimate and significant coefficient. The estimation results (bottom of figure) shows the relative goodness of the indicators. According to the LISREL output, value of χ 2/df is measured less than 3. RMSEA value is which is less than the permitted of RMSEA Indices GFI, AGFI and NFI are 0.89, 0.91 and 0.93 respectively, which represents a good fit of model. Next output (model in significance state) shows the significance of coefficients and parameters obtained in brand performance measurement model that all factors have been significant. Two LISREL outputs (model in the standard estimate and model in the significance factors) are shown below. 371

9 Figure 6: Model of measuring variables of brand performance in the standard estimate Figure 7: Model of measuring variables of brand performance in a significance coefficient 4.4. Social responsibility measurement model Measurement model of social responsibility is shown in standard estimates and significance factor. The estimation result (bottom of figure) shows the relative goodness of the indicators. According to the LISREL output, value of χ2/df is measured less than 3. RMSEA value is equal to 0.001, which is less than the permitted limit of RMSEA, Indices GFI, AGFI and NFI are 0.89, 0.91 and 0.93 respectively, which represents a good fit of model. Next output (model in significance state) shows the significance of coefficients and 372

10 parameters obtained in the model to measuring social responsibility that all the coefficients obtained are significant. Two LISREL outputs (model in the standard estimate and model in the significance coefficient) are shown below. Figure 8: Model of measuring variable of social responsibility in the standard estimate Figure 9: Model of measuring variables of social responsibility in a significant factor 4.5. Testing research hypotheses using structural equation modeling Structural model in standards estimate and significance factor are discussed. Figures 2 to 9 show the effect of independent variables on the dependent variable. The results of confirming or rejecting hypotheses can be seen in Table

11 Table 3: Study of approval or rejection of the research hypotheses Research hypotheses Insurance corporate social responsibility affects its reputation. Insurance company reputation affects the insurance company performance. Insurance corporate social responsibility affects the brand equity. Insurance companies' brand equity affect the brand performance. Path coefficient R 2 t-value Result Rejected Rejected Confirmed Confirmed In testing research hypotheses, using structural equation modeling, first output of the software indicates the goodness of fitted structural models to test hypotheses (ratio of χ2 to df is less than 3). The RMSEA also indicates the goodness of structural model fit. In other words, the observed data are largely based on the conceptual model. Table 4: Indicators of fitting research model Index title Accepted range Value Result X 2 /df 2 X 2 /df 2.46 Approved RMSEA 3 RMSEA < Approved GFI 4 GFI> Approved AGFI 5 AGFI> Approved CFI 6 CFI> Approved Ifi 7 IFI> Approved 2 Chi Square Divided to Degree of Freedom 3 Root Mean Square Error of Approximation 4 Goodness of Fit Index 5 Adjusted Goodness of Fit Index 6 Comparison Fit Index 7 Incremental Fit Index 374

12 Figure 10: The research model in standard estimation coefficient Figure 11: The research model in significant factor 5. Discussion and conclusion According to the hypotheses results, it was showed that the impact of corporate social responsibility and the impact of brand equity on brand performance was approved. But the impact of corporate social responsibility on brand reputation and brand reputation on brand performance was not approved. According to the first hypothesis test results, it seems that the social responsibility of the insurance company has no impact on its reputation. A good reputation is a barrier to negative understanding by stakeholders. In addition, a good reputation attracts employees and clients. Fulfilling social responsibility commitments is along with positive understanding of clients about the company's reputation. Organizations and 375

13 companies can boost their reputation among the people by setting up policies of sale promotion and effective advertising on social responsibilities. By presenting special features to their clients and the community, they not only can provide their consent, but also do effective propaganda for increasing their reputation. But in this study, this hypothesis was not confirmed. So the company managers should identify other factors affecting the company's reputation and use it for their clients' loyalty. According to the test results of the second hypothesis, it seems the insurance company's reputation has no significant impact on its performance. However, by analyzing data related to this study, the effect of fame on the performance of the insurance company was not approved, but having reputation for insurance companies is one of the methods of word of mouth marketing and advertising. The higher the company reputation for providing high quality services, it can attract more customers. Therefore, the managers are recommended to increase their social activities, and their reputation to increase their customer satisfaction and loyalty. According to the third hypothesis testing, it seems that insurance company social responsibility has a significant positive impact on brand equity. Therefore, brand equity can be explained as by the history of brand. The brand equity is a set of brand assets and liabilities and debts related to it and its name and logo, which increases the value of a goods or services created for its customers or detracts from it. Brand equity is one of the concepts that defines the distinction between brands. Addressing social responsibility increases the brand value among customers and society. The insurance organizations and companies are recommended further efforts in the field of responsibilities based on social responsibility, create moral positive attitude in mind of their clients. With the commitment to ethical - social and humane principles, they can present better view of their services by considering the social responsibility and include a positive brand associations of their name in people's minds. According to test results of the fourth hypothesis, it seems that brand equity has a significant positive impact on brand performance. So, brand performance can be explained as through brand equity. A high brand equity can increase the effectiveness of advertising and promotions in sales, increases market penetration rate and reduces the cost of development of new product lines. While it is established that brand equity fully impact on shareholders' profits and should be an incentive for companies to consider the vital problem more. Perhaps the intangibility of the asset results in the company's lack of attention to this important issue. The insurance companies are recommended to increase their social activities such as dedicating part of their incomes to resolve social deprivation, building hospitals, supporting sports and etc. which result in promoting their brand value among clients and consequently improving corporate performance. References Aaker, D. A.: 1996, Building Strong Brands (Free Press, New York). Aaker, D. A. (1991); Managing Brand Equity: Capitalizing on the Value of a Brand Name, New York. Abul Hassan, Sofyan Syafri Harahap, (2010) "Exploring corporate social responsibility disclosure: the case of Islamic banks", International Journal of Islamic and Middle Eastern Finance and Management, Vol. 3 Iss: 3, p Amaeshi, K. M., O. K. Osuji and P. Nnodim: 2008, Corporate Social Responsibility in Supply Chain of Global Brands: A Boundaryless Responsibility? Clarifications, Exceptions and Implications, Journal of Business Ethics 81, Barnett, M.: 2008, Stakeholder Influence Capacity and the Variability of Financial Returns to Corporate Social Responsibility, Academy of Management Review 32(3), Beverland, M.: 2005, Creating Value for Channel Partners: The Cervena Case, Journal of Business and Industrial Marketing 20(3), Bihari, S & Pradhan, S. (2010), CSR and Performance: The Story of Banks in India, Journal of Transnational Management Brickley, J., C. Smith and J. Zimmerman: 2002, BusinessEthics and Organizational Architecture, Social ScienceNetwork Electronic Paper Collection, Bromley, D. (2002), Comparing corporate reputations: League tables, quotients benchmarks, or case studies?,corporate Reputation Review, 5(1),

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