RELATIONAL APPROACH TO MANAGING SERVICE BRAND RELATIONSHIPS

RELMA2006finalpet Tuominen Pekka Professor, Docent, PhD RELATIONAL APPROACH TO MANAGING SERVICE BRAND RELATIONSHIPS 14 th International Colloquium in Relationship Marketing Arenas of Relationship Marketing September 13-16, 2006 Department of Marketing at the University of Leipzig Leipzig GERMANY University of Tampere Department of Management Studies Kanslerinrinne 1 33014 University of Tampere Tampere, FINLAND Phone: +358-3-35517583 Fax: +358-3-35516020 Email: pekka.tuominen@uta.fi

2 Abstract For decades the value of a firm was measured in terms of its real estate, plants and equipment. However, it has been recognised that a firm s real value lies outside the business itself: in the minds of current and potential buyers. Customers brand relationships can be seen as managerially relevant assets through which companies capitalise value. Relationship marketing has emerged, but little theoretical work has been conducted on the relational phenomena at the level of brand relationships in the service sector in particular. The importance of creating brands in service offerings has also become apparent, and branding has become a vital issue for service firms. However, the traditional understanding of branding neglects the key characteristic of services as processes, and thus tends to exclude the role of the customer in the delivery of a service. The purpose of this conceptual study is to describe, analyse, and understand the relational approach to managing service brand relationships. First, the study elaborates the emerging characteristics of service brands. Secondly, the study discusses the paradigms of brand management in the context of service branding. Finally, the study provides conclusions and managerial implications. The four paradigms of brand management can be categorised into product, projective, adaptive, and relational paradigms. The categorisation of brand paradigms has two analytical dimensions. The dimension of brand centrality runs from a tactical orientation, where brands are conceptualised and managed as tactical instruments appended to a product, to a brand orientation in which the process of branding revolves around the creation, development, and protection of brand identity. The dimension of customer centrality runs from unilateral approaches in which consumers are perceived as passive recipients of value created within the firm to multilateral approaches where consumers are viewed as active contributors in the value creation of a firm. Introduction Traditionally, the value of a firm has been measured in terms of its real estate, tangible assets, plants, and equipment. However, it is now increasingly recognised that a firm s real value lies outside the business itself in the minds of current and potential buyers (Aaker 1996; Grönroos 2000b; Pearson 1996). In paying very high prices for companies that have recognised brands, buyers are actually purchasing a position in the minds of customers (de Chernatony 2002, 19; Kapferer 2004, 10). The relationships between customers and brands are assets through which companies can capitalise value (Lindberg-Repo and Grönroos 2004, 238). The interpretation of a brand in terms of a relationship is a logical extension of the idea of a brand having a personality. A person has a distinctive personality on the basis of a bundle of traits such as friendliness, reliability, and honesty and these characteristics are used and developed in forming relationships. By extension, a considerable amount of research has focused on how the personality of a brand enables a customer to express his or her own self through the use of a brand. Brand personality can be viewed as a central driver of customer preference and usage, and as a common denominator that can be used to market a brand across cultures (Aaker 1997, 347-350; Aperia and Back 2004, 71-75; Doyle 1998, 169-170; Keegan, Moriarty and Duncan 1995, 319).

If brands can be personified, customers can have relationships with them. These relationships are purposive particularly in the case of services. Customers choose brands, at least in part, because they wish to understand their own selves and seek to communicate aspects of themselves to others. By engaging in a relationship with a brand, albeit briefly, customers are able to resolve and legitimise ideas about themselves. However, although the service provider might wish to use its brand to develop a close relationship with its customers, those customers might prefer a more distant relationship (de Chernatony 2002, 40-41). Fournier (1998) has used relationship theory to characterise brand relationships and to develop new insights into why consumers use brands in the way they do. She extended the metaphor of interpersonal relationships into the brand domain to conceptualise the relationships that customers form with brands (Keller 2006, 160). According to Fournier (1998, 365), brands serve as persistent repositories of meaning for customers, who purposefully and differentially employ them in creating, substantiating, and reproducing concepts of themselves. Fournier and Yao (1997) have argued that the brand is an active relationship partner with the customer, and have provided a framework for characterising the types of relationships that consumers form with brands. According to the framework, brand relationships: (i) involve reciprocal exchanges between active and interdependent relationship partners; (ii) are purposive involving the provision of meanings; (iii) are complex phenomena that range across several dimensions and take many forms providing a range of potential benefits for participants; and (iv) are process phenomena that evolve over a series of interactions and in response to fluctuations in the contextual environment (Fournier 1998, 344). The purpose of this conceptual study is to describe, analyse, and understand the relational approach to managing service brand relationships. The study first elaborates the emerging characteristics of service brands. Secondly, the study discusses the paradigms of brand management in the context of service branding. Finally, the study provides conclusions and managerial implications. 3 Emerging characteristics of service brands Brands vary in power they exercise in the marketplace because, ultimately, their power resides in the minds of consumers (de Chernatony 2002, 19; de Chernatony and Dall Olmo Riley 1998b, 1076-1077; Kapferer 2004, 10). Consumers are not passive recipients of marketing activity, and branding is not done to consumers; rather, branding is something that customers do things with. The power of a brand can thus be understood in terms of its position in the minds of customers. At one extreme are brands that are unknown to most buyers in the marketplace. Then, there are brands about which buyers have a degree of awareness recall, and recognition. Beyond such awareness, there are brands that have a degree of brand acceptability. Then there are brands that enjoy a degree of preference. Finally, there are brands that command a degree of brand loyalty (de Chernatony 1993, 174-175; Keller 1993, 1-22; Kotler and Keller 2006, 275-281). As customers have become more experienced, de Chernatony and McDonald (1998, 36-46) have identified eight distinct functions of brands. These include brand as: (i) a sign of ownership; (ii) a differentiating device; (iii) a communicator of functional capability; (iv) a device that enables buyers to express something about themselves; (v) a risk-reducing device; (vi) a shorthand communication device; (vii) a legal device; and (viii) a strategic device. More recently, de Chernatony (2002, 18-20) has categorised these diverse functions into three perspectives (i) an input-based perspective (branding as a way of directing resources to

influence consumers and to achieve customer response); (ii) an output-based perspective (consumers interpretations of how brands enable them to achieve more); and (iii) a timebased perspective (recognising brands as dynamic entities with an evolutionary nature). De Chernatony and Dall Olmo Riley (1998a, 418-424) identified twelve main elements among the broad range of definitions of brand in the literature. These elements referred to brands in terms of their role as: (i) legal instruments; (ii) logos; (iii) company; (iv) communication shorthand; (v) risk reducers; (vi) identity systems, (vii) images in consumers minds; (viii) value systems; (ix) having personalities; (x) parties to a relationship; (xi) adding value; and (xii) evolving entities. These twelve brand elements include various aspects of the company s activities and the consumers perceptions. The brand exists by virtue of a continuous process whereby the values and expectations imbued in the brand are set and enacted by the company and interpreted, and then redefined by the consumers (de Chernatony 2002, 18-58; de Chernatony and Dall Olmo Riley 1998a, 427-428). In the service industry, many definitions of brands miss the key characteristic of services as processes by excluding the customer. In fact, in branding a service, the involvement of the customer is of even greater significance than it is in the case of branding a good because a service is a much less standardised basis for branding than is a tangible physical good. Because customers participate in the service process, Grönroos (2000b, 290) has proposed that a service brand is created in dynamic brand relationships whereby the customer forms a differentiating image of the service on the basis various brand contacts to which the customer is exposed. The brand thus is created in the minds of a customer following the sequence of brand contacts that form the ongoing relationship between the two parties. A relationship approach to marketing posits such brand relationships as the means of developing, maintaining, and enhancing a brand in the minds of current and potential customers, and other stakeholders. If a brand relationship has been created and nurtured, the service provider has achieved brand involvement with the customer. Strong brand involvement means that a customer feels positively involved with the service provider (Grönroos 2000b, 290). 4 Paradigms of brand management Louro and Cunha (2001, 849-875) have identified four paradigms of brand management (i) product; (ii) projective; (iii) adaptive; and (iv) relational. This categorisation of brandmanagement paradigms can be analysed along two dimensions. The first is brand centrality the extent to which brands guide and configure a firm s strategy; the other is customer centrality consumer involvement in value co-creation (Louro and Cunha 2001, 854). These two dimensions reflect central themes present in the branding literature concerning the strategic importance of brands and the differential degree of customer and firm participation in defining brand meaning and value (Aaker 1996; de Chernatony 1993; Kapferer 2004). The two dimensions and the four paradigms are shown in Figure 1 (Louro and Cunha 2001, 855).

5 B r a n d C e n t r a l i t y Unilateral Customer C e n t r a l i t y Product Paradigm Projective Paradigm Tactical Orientation Brand Orientation Adaptive Paradigm Relational Paradigm Multilateral Figure 1. The paradigms of brand management The vertical dimension of brand centrality runs from a tactical orientation, where brands are conceptualised and managed as tactical instruments appended to a product, to a brand orientation in which the process of the organisation revolves around the creation, development, and protection of brand identity. Tactical orientation to brand management focuses on the legal values of brands. According to this perspective, branding emerges as part of a marketing strategy being primarily associated with the advertising of products. In contrast, brand orientation takes a multidimensional view of the complexity and value of a brand both to firms and to consumers (Louro and Cunha 2001, 854-855). The dimension of customer centrality runs from a unilateral orientation in which consumers are perceived as passive recipients of value created within the firm to a multilateral orientation where consumers are viewed as active contributors in value creation. Unilateral orientation focuses on the marketing activities of the firm as the central determinants of value creation. Customers are conceptualised as a passive audience enacting a predetermined role in consumption. Multilateral orientation emphasises the interdependent nature of value creation. Customers are conceptualised as sources of competence and co-developers of personalised experiences. Brand value is continuously co-created, co-sustained, and co-transformed through firm-customer interactions (Louro and Cunha 2001, 855-856). The product paradigm reflects a tactical and unilateral orientaiton to brand management with the physical good or service as the locus of value creation. Brands are constructed as logos and legal instrument that perform firm-centred brand roles. Firms use brands to designate legal ownership, protect against imitation, and support product communication and visual differentiation (de Chernatony and Dall Olmo Riley 1998a, 418-424). Within the product paradigm, brand management is focused on the marketing mix with product

emerging as its core element. The silence metaphor illustrates the peripheral role of branding in the product paradigm (Louro and Cunha 2001, 856). The projective paradigm complements the product paradigm by highlighting the strategic importance of branding. Within this paradigm, brands are conceptualised as focal platforms for implementing a strategic goal of a firm. A brand is not a product: it is the product s source, its meaning and its direction, and it defines its identity in time and space. Too often brands are examined through their component parts: the brand name, its logo, design, packaging, advertising or name recognition. Real brand management, however, begins much earlier with a strategy and a consistent integrated vision. Its central concept is brand identity. This identity must be defined and managed and it is at the heart of brand management. (Doyle 1998, 172; Kapferer 1992, 12). Brand management is focused on reinforcing and developing brand positioning through the creation, development, and communication of a coherent brand identity. Such identity is on the sender s side, and the aim is to specify the meaning of a brand. Identity precedes image. Before projecting an image to the public, firms must know exactly what they want to project (Kapferer 2004, 95-99). Within the projective paradigm brand management is focused on the brand logic, with the brand identity emerging as its core element. The monologue metaphor captures the emphasis of branding in the projective paradigm (Louro and Cunha 2001, 859-860). The adaptive paradigm complements the projective paradigm by stressing the role of consumers as central constructors of brand meaning. Customer-based brand equity, brand awareness and brands as images achieve high level of attention in this paradigm. Customerbased brand equity occurs when the customer has a high level of awareness with the brand and holds strong, favourable, and unique brand associations in memory. Brand awareness includes both brand recognition and brand recall. Brand awareness can be characterised according to depth and breath. (Keller 2003, 67). The adaptive paradigm acknowledges consumers as co-creators of brand meaning in the form of brand image, which is constructed in the minds of customers. (de Chernatony 2002, 9; Kapferer 2004, 98-99). Brand image can be defined as customers perceptions of a brand as reflected by the brand associations held in customers memory. Brand associations can be classified into attributes, benefits and attitudes. (Boush and Jones 2006, 4; Keller 1998, 93-102). Brand management is enacted as a tactical process of cyclical adaptation to customers representations of the focal brand whereby brand image gradually supplants brand identity. Brand image becomes the core theme underlying strategic formation and frames the specification of a brand and its supporting marketing program. Within the adaptive paradigm brand management is focused on customer orientation with the brand image emerging as its core element. The listening metaphor depicts the implicit orientation underlying the adaptive paradigm (Louro and Cunha 2001, 863). The relational paradigm takes into account the active role of customers in the co-creation of brand meaning. This paradigm conceptualises brand management as an ongoing dynamic process whereby brand value and meaning are created together through the behaviours and collaboration of firms and customers. Brands emerge as active symbolic partners that codefine the relational space. In this paradigm, firm-consumer relationships are brand-mediated, and brand management is a dialectical process that recognises the active role of consumers in co-creating and co-developing brand meaning and value. Within the relational paradigm brand management is focused on the relational discourse with the brand relationship emerging as its core element. The relational paradigm of brand management is a promising direction for future investigation, although research is still in its infancy. The dialogue metaphor illustrates the nature of relationship-based brand management (Louro and Cunha 2001, 865-866). 6

7 Conclusions In accordance with the relational paradigm, in an ongoing brand relationship it is not only the seller, which is supposed to talk to the customer, and the customer is supposed to listen. According to the relational paradigm, both partners in the brand relationship communicate with each other through four distinctive brand messages: (i) planned messages; (ii) service messages; (iii) product messages, and (iv) unplanned messages (Duncan and Moriarty 1997; Grönroos 2000a, 2000b). The four sources of brand messages provide communication-based brand contact points between a buyer and a seller (Grönroos 2000b, 266-267; Heinonen and Strandvik 2005, 186-187; Lindberg-Repo and Grönroos 2004, 231-232). The various types of brand messages are developing in a continuous process, and in the minds of customers their effects are probably accumulating. The absence of communication also sends distinct messages and therefore contributes to the total communication process (Grönroos 2004, 105-106). In the service context, the customer has an active role, and the customer thus becomes a co-producer of value that takes place through these brand contact points (Lindberg-Repo and Grönroos 2004, 231). Furthermore, in accordance with the relational paradigm, a dialogue can develop between a service provider and a customer in the context of services, and this ongoing dialogue can lead to the development of a common knowledge base. A dialogue can be understood as an interactive process of reasoning together in which there is a willingness on the part of both partners to listen and communicate in achieving a common goal (Christopher, Payne and Ballantyne 2002, 222-223). In a dialogue there are no senders or receivers rather, there are participants in the dialogic process (Grönroos 2004, 107). Such a dialogue enables more than the mere maintenance of a relationship; rather, it facilitates relationship enhancement one of the most important goals of relationship marketing (Lindberg-Repo and Grönroos 2004, 231). Managerial implications Little empirical work has been conducted on relationship phenomena associated with brand relationships especially in the service sector (de Chernatony 1999, 157-179; de Chernatony and Segal-Horn 2001, 646-651; Fournier 1998; 343). The importance of creating brands in service offerings has become apparent, and communication issues in branding have become extremely vital for service firms. Moreover, the traditional understanding of service branding tends to neglect one of the key characteristics of services the fact that services are processes and this neglect causes the crucial role of the customer in services delivery to be relatively overlooked in discussions of brand relationships in the current literature of corporate communication in the service sector (Berry 2000, 128; Grönroos 2000b, 285-286). Traditionally, the branding of physical goods has been viewed from the marketer s perspective as indicated in the product paradigm of brand management. The consumption of a physical good involves the consumption of the final product, but the consumer is not involved in the production process. In contrast, the customer of a service often participates actively in the production process, and the customer is thus much more important in successful brand creation in the service industries (Grönroos 2000b, 50-59). By creating relationship dialogue, communication principles have gradually replaced short-term exchange notions in servicebranding thought and practice. It has become evident that in services the customer is often an

integral part of the process of production, delivery, and consumption, and that this requires a close relationship between the service provider and the customer. In particular, long-term relationships with customers are especially important in services (Bruhn 2003; Christopher, Payne and Ballantyne 2002; Egan 2004; Gummesson 2002; Varey 2002). Service brands continuously develop and change as the customer relates to the flow of communication in the form of diverse brand messages. These brand messages come from contact personnel, from physical product elements in the service process, and from various planned and unplanned communication messages. When the customer is given an active role in the service-branding process, a relationship emerges and develops between the customer and the service brand (Grönroos 2000b, 287). This brand relationship gives a service brand a certain meaning in the minds of the customers as a result of how a customer perceives the service-brand relationship over time. A significant brand is important to a person because it connects with his or her life, thus producing a behavioural, attitudinal, and emotional involvement with the brand. The managerial aim of service branding is to establish a satisfying bond that sustains buying and recommendation (Varey 2002, 63). It is evident that contact personnel have a vital role in creating relationship dialogue and brand contacts and maintaining and enhancing brand relationships in the service industry. 8 References Aaker, David (1996) Building Strong Brands. Free Press: New York. Aaker, Jennifer (1997) Dimensions of Brand Personality. Journal of Marketing Research 1997:8, 347-356. Aperia, Tony and Back, Rolf (2004) Brand Relations Management. Bridging the Gap between Brand Promise and Brand Delivery. Liber. Malmö. Berry, Leonard (1983) Relationship Marketing. In: Emerging Perspectives on Services Marketing, ed. by Leonard Berry, Lynn Shostack and Gregory Upah, 25-28. American Marketing Association: Chicago. Boush, David and Jones, Scott (2006) A Strategy-Based Framework for Extending Brand Image Research. In: Creating Images and the Psychology of Marketing Communcation, ed. by Lynn Kahle and Chung-Hyun Kim, 3-29. Lawrence Erlbaum Associates: London. Bruhn, Manfred (2003) Relationship Marketing. Management of Customer Relationships. Prentice Hall: London. de Chernatony, Leslie (1993) Categorizing Brands: Evolutionary Processes Underpinned by Two Key Dimensions. Journal of Marketing Management 1993:2, 173-188. de Chernatony, Leslie (1999) Brand Management Through Narrowing the Gap Between Brand Identity and Brand Reputation. Journal of Marketing Management 1999:1-3, 157-179.

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