Consumer-based brand equity and country-of-origin ...

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EJM 40,5/6

Consumer-based brand equity and country-of-origin relationships

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Some empirical evidence Ravi Pappu

Received February 2005 Revised August 2005

University of Queensland, Brisbane, Australia

Pascale G. Quester University of Adelaide, Adelaide, Australia, and

Ray W. Cooksey University of New England, Armidale, Australia Abstract Purpose – The objective of the present research is to examine the impact of the country of origin of a brand on its consumer-based equity. Design/methodology/approach – Brand equity was conceptualized in this paper as a combination of brand awareness, brand associations, perceived quality and attitudinal brand loyalty. A doubly multivariate design was incorporated in a structured questionnaire to collect data via mall intercepts in an Australian capital city. Findings – Multivariate analysis of variance of the data indicated that consumer-based brand equity varied according to the country of origin of the brand and product category. This impact of country of origin on brand equity occurred where consumers perceived substantive differences between the countries in terms of their product category-country associations. Research limitations/implications – An important direction for future research would be to examine how the consumer-based equity of a brand would be affected, if the country of origin were changed from a country with weaker association with the product category to a country with strong association with the product category. The results would be useful to MNCs contemplating international manufacturing. Practical implications – Marketing managers operating in the international context must identify the sources of brand equity, and understand the importance of incorporating country of origin into their brand equity measurement. Further, the results suggest that, when a brand offers a variety of product categories, brand managers should monitor and track the brand’s consumer-based equity for each product category. Originality/value – The present study is one of the first to empirically examine and confirm the impact of country of origin on the consumer-based equity of a brand. Keywords Brand awareness, Brand equity, Brand loyalty, Quality, Country of origin, Australia Paper type Research paper

European Journal of Marketing Vol. 40 No. 5/6, 2006 pp. 696-717 q Emerald Group Publishing Limited 0309-0566 DOI 10.1108/03090560610657903

The authors gratefully acknowledge the financial support of the Faculty of Economics, Business and Law, University of New England, provided in the form of a Faculty Internal Research Grant awarded to the first author, which provided the necessary funding for this research. The authors would also like to thank the two anonymous reviewers for their detailed and insightful comments on an earlier draft of this article.

Introduction Brand equity is considered a key indicator of the state of health of a brand, and its monitoring is believed to be an essential step in effective brand management (Aaker, 1991, 1992). Both researchers (e.g. Shocker et al., 1994) and practitioners (e.g. Biel, 1992) have argued for the importance of understanding the concept of brand equity. Country of origin is another important variable influencing consumer perceptions of brands (Hulland, 1999) and brand images (Ahmed et al., 2002). In the present study, consistent with the definition offered by Thakor and Katsanis (1997, pp. 79-80), country of origin is defined as “the country in which the product is made”[1]. The impact of country of origin on consumer perceptions or evaluations of products is called the “country of origin effect” (Samiee, 1994). Researchers have suggested that country of origin effects may impact the equity of certain brands (e.g. Thakor and Katsanis, 1997). For example, Aaker (1991) and Keller (1993) both argued that country of origin could affect a brand’s equity by generating secondary associations for the brand. Indeed, even a foreign-sounding name is known to affect a brand’s equity (Leclerc et al., 1994). Increasingly, and for a variety of reasons, brands from one country are being made available to consumers in other countries (Shocker et al., 1994). In such instances, international marketers need to understand the sources of the equity of their brands. Some researchers have realized this and advocate extending the international consumer research scope to include brand equity (Wang, 1996). For example, measurement of brand equity across international boundaries is essential if brand managers are “to manage and control brand equity effectively” (Shocker et al., 1994, p. 156). There is prolific research in both the areas of country of origin effects and brand equity. However, brand equity remains a complex phenomenon in the international context (Onkvisit and Shaw, 1989). Brand equity has been conceptualized as a multidimensional construct (e.g. Aaker, 1991), and the impact of country of origin on some of its components (e.g. perceived quality) has been widely researched in the marketing literature (see Chao, 1998). However, no empirical research to date has evaluated how country of origin may affect brand equity. This paper aims to fill this gap in the international context. More specifically, this research aims to develop a better understanding of the effect of country of origin on brand equity. Background and justification for the present research A better understanding of the linkages between brand equity and country of origin is important for a number of reasons. For example, researchers have advocated that managers need to maintain the “core essence of a brand” in their international branding decisions (de Chernatony et al., 1995). “The ‘essence’ of the brand is a single simple value, easily understood and valued by consumer” (Arnold, 1992, p. 17). When brands are competing in the international arena, marketing managers should understand how to maintain the core essence of their brand across international boundaries. Examining how country of origin impacts brand equity and its associated dimensions (e.g. perceived quality, brand associations) should reveal the means to protect or enhance the core essence of a brand. The country of origin of a product is an important marketing element known to influence consumer perceptions as well as behavior. An improved understanding of how country of origin information influences brand equity is also valuable to

Country-of-origin relationships

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marketing practitioners, for whom “quantification of brand equity” and “identification of elements that are likely to impact changes in consumer behavior and lead to changes in brand equity” are two important issues (Biel, 1993, p. 77). The literature does not provide a satisfactory explanation for the factors influencing brand equity in the international context. Despite exhaustive research on brand equity over the past few decades, the marketing literature does not fully explain how a change in the country of origin of a brand would affect its consumer-based equity. Neither is it clear whether the impact of country of origin on the consumer-based equity of a brand would be product-category specific. The goal of this paper, therefore, is to examine and elucidate the potential relationships between country of origin and consumer-based brand equity. More specifically, the main objective of the present study is to identify empirically possible differences in consumer-based brand equity, according to the country where the product is made. Key variables and constructs Consumer-based brand equity In this paper, we conceptualize brand equity in accordance with Aaker (1991) and Keller (1993), using a consumer (or marketing) perspective (as opposed to a financial one). Brand equity is therefore referred to as consumer-based brand equity and defined as “the value consumers associate with a brand, as reflected in the dimensions of brand awareness, brand associations, perceived quality and brand loyalty”. This definition was adapted from Aaker (1991, p. 15). Aaker defined brand equity as a set of assets (or liabilities), and found brand awareness, brand associations, perceived quality and brand loyalty to be its four most important dimensions from a consumer perspective. Some empirical evidence supports the notion that these four are distinct dimensions of consumer-based brand equity. As per Aaker, we define brand awareness as “the ability of a potential buyer to recognize or recall that a brand is a member of a certain product category. A link between product class and brand is involved” (p. 61). We define a brand association as “anything linked to the memory of a brand” (Aaker, 1991, p. 109). Perceived quality is defined as the “customer’s perception of the overall quality or superiority of a product or service with respect to its intended purpose relative to alternatives” in this study, as per Aaker (1991, p. 85). According to Aaker, perceived quality is not just another brand association but an association that is elevated to the status of a separate dimension of brand equity. However, whereas Aaker treated brand loyalty as a behavioral dimension, we conceptualize it as an attitudinal dimension and define it as “the tendency to be loyal to a focal brand, which is demonstrated by the intention to buy the brand as a primary choice” (Yoo and Donthu, 2001, p. 3). “Product category-country” associations Consumers have associations toward entities such as products, places, brands and countries of origin. These associations can have direction and strength. For example, Farquhar and Herr (1993) argued that product category-brand associations can be bi-directional. That is, consumers may recall a product category when they think of a brand name and they may recall a brand name when they think of a product category. Product category-country associations, which refer to consumers’ ability to evoke a country when the product category is mentioned, are of interest when examining the relationships between country of origin and consumer-based brand equity. Since

consumers are known to associate countries with certain product categories and vice versa (Terpstra and Sarathy, 2000), consumers’ “product category-country” associations appear to be bi-directional. Conceptual development and hypotheses In this study, country of origin and product category are the independent variables of interest. Consumer-based brand equity is hypothesized as a four-dimensional construct, as shown in the large rectangle in Figure 1. Each of the consumer-based brand equity dimensions is a dependent variable in the framework expected to be affected by country of origin. Since the proposed model is being tested for two product categories, product category is also included as an independent variable in the design so that the effect of the country of origin variable could be teased out. Moreover, consumers’ product category-country associations are believed to moderate the effect of the country of origin on consumer-based brand equity dimensions, as indicated by the dotted line in Figure 1. Country of origin and consumer-based brand equity The associative network memory model (Anderson, 1993) provides a good basis for explaining the relationships between country-of-origin and consumer-based brand equity. Both Aaker (1991) and Keller (1993) used the associative network memory model to explain consumers’ brand associations and the notion of brand equity. The country of origin of a product is an extrinsic cue (Thorelli et al., 1989), which, similar to brand name, is known to influence consumers’ perceptions and to lead consumers to cognitive elaboration (Hong and Wyer, 1989). Country of origin is known to lead to associations in the minds of consumers (Aaker, 1991; Keller, 1993). For example, consumers might associate the countries France and Spain with the intangible attributes “reliability” and “durability”, to a different degree. These country of origin associations of consumers could therefore influence the consumer-based equity dimensions of a brand from a specific country. Researchers have argued that country of origin effects may be part of the brand equity of certain names (Shocker et al., 1994, p. 150). For brands offered in the international arena, such as Japanese brands available to consumers in Australia, consumer-based equity should be influenced by the very fact that the brand’s country of origin is Japan. Consumer perceptions of Japanese brands have improved over the years (Kamins and Nagashima, 1995). Furthermore, brand names such as Sony or Toyota clearly signal their country of origin to consumers. Such origin cues are similarly entrenched within many well-known brand names (Phau and Prendergast, 1999). Conversely, an inferior country of origin could tarnish a brand name (Thakor and Katsanis, 1997). That is, if the country of origin of a brand were to change from a country towards which consumers have favorable associations (e.g. the USA), to a country towards which consumers have less favorable associations (e.g. Mexico), the brand names in question could be tarnished and the consumer-based equity of these brands erodes. For example, Johansson and Nebenzahl (1986) found that Japanese brands of automobiles (Honda/Mazda) made in Korea/Mexico/The Philippines lost their attractiveness compared to when they were made in Japan. Similarly, Nebenzahl and Jaffe (1996) found that Sony (in the product category VCRs) suffered erosion in its


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Figure 1. A model of country-of-origin effects on consumer-based brand equity

brand image when made in countries such as the former USSR/Poland/Hungary. This discussion leads to the following general hypothesis: H1. In a given product category, the consumer-based equity of a brand varies significantly according to the country of origin of the brand. Given that consumer-based brand equity is conceptualized as a four-dimensional construct, this general hypothesis can be subdivided into more micro-related predictions. However, no hypothesis was made in the present study regarding the impact of the country of origin on the brand awareness component of consumer-based

brand equity, since it would be difficult to manipulate experimentally consumers’ mindset with respect to brand awareness. For example, asking consumers if they were aware of the brand Honda (without providing the country of origin), to test for their brand awareness level and then to respond to the hypothetical case of a product carrying the brand Honda but made in the USA (or some other country) would create demand artefacts. In addition, consumers are known to associate a brand with its home country even when the country of origin information is not made available to them. On the other hand, a brand could generate and leverage secondary associations from an array of entities. For example, people, places and events could be linked to a brand (Keller, 1993) and generate secondary associations. According to Aaker (1991), country of origin associations are one such type of consumers’ brand associations. Similarly, Keller (1993) argued that consumers’ country of origin associations serve as secondary associations to their brand associations. Brand associations are supposed to contribute to brand equity when consumers are aware of the brand and hold “strong, favorable and unique brand associations” in their minds (Keller, 1999, p. 2). Rossiter and Percy (1987) suggested that secondary associations should be emphasized in marketing communications based upon consumers’ awareness, beliefs and attitudes of the concerned people, places or events. The inference is that favorable secondary associations are beneficial to the brands. Keller (1993) also argued that favorable associations contribute to the equity of a brand. If consumers’ country of origin associations serve as secondary associations, they should influence brand associations, and therefore brand equity, leading to the following hypothesis: H1a. In a given product category, brand associations vary significantly according to the country of origin of the brand. A number of researchers have established that country of origin influences perception of quality of products (e.g. Heslop et al., 1987; Kaynak and Cavusgil, 1983). Perceived quality (Zeithaml, 1988) is a key dimension of brand equity (Aaker, 1991), believed to enhance the value of the brand by providing consumers with a reason to buy. We hypothesize that country of origin information affects the perceived quality of products. That is, consumers are likely to hold favorable perceptions of the quality of a brand when the brand is known to originate from countries with a strong association with the product category compared to when the brand is known to originate from countries with weaker association with the product category. We expect that the perceived quality levels of a brand will vary by the country of origin of the brand. That is, the perceived quality level of Ericsson made in Sweden is likely to be higher than the perceived quality level of Ericsson made in Mexico or Hungary, for the product category “mobile phones”. Furthermore, consumers’ perception of the quality of products is known to be product-category specific (Kaynak and Cavusgil, 1983). Hence, our third hypothesis can be stated as follows: H1b. In a given product category, perceived quality varies significantly according to the country of origin of the brand. The extant literature does not provide much insight into the relationship between country of origin and brand loyalty. However, we argue that country of origin could affect the brand loyalty component of a brand’s equity. Brand loyalty in the present study is defined as consumers’ intention to buy a brand as a primary choice.


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Consumers may prefer a brand based partly on its country of origin. This might be because consumers have experienced, or are convinced about, either the features or attributes or benefits offered by the brand (e.g. Nike) originating from the particular country (USA). Therefore, it can be argued that, similar to brand loyalty, consumers may exhibit country loyalty. Moreover, country of origin effects in one product category are known to transfer to new product categories offered from the same country (Agarwal and Sikri, 1996). It is hypothesized, therefore, that country of origin affects consumers’ loyalty towards a brand. H1c. In a given product category, brand loyalty varies significantly according to the country of origin of the brand. Furthermore, consumers’ product category-country associations are believed to moderate the effect of the country of origin on consumer-based brand equity dimensions. For example, the consumer-based equity of a brand made in a country with strong product category-country associations (e.g. car/Germany) is likely to be substantially higher than that for the same brand made in a country with weaker product category-country associations (e.g. car/Mexico), in cases where consumers perceive substantive differences between the two countries in terms of their product category-country associations. The empirical study designed to examine the proposed model is described in the next section of this paper. Method Research design and procedures A cross-sectional mall intercept survey was used to collect the data. A total of 672 responses was collected through systematic sampling from a busy shopping mall in an Australian state capital city. The questionnaire used as the data collection instrument included an experimental design. A doubly multivariate design was employed for examining the differences in consumer-based brand equity across three different countries of origin. The model was tested using two product categories: cars and televisions. That is, country of origin (three levels) and product category (two levels) were the two between-subjects factors and brand name (three levels) was the within-subjects factor: the three levels were nested within each product category (i.e. Toyota, Mitsubishi and Suzuki were nested within cars; Sony, Toshiba and Hitachi were nested within televisions). The unit of analysis was the individual consumer. Since country-of-origin perceptions are known to vary by consumers’ home country, we needed respondents who were born in Australia or who had lived in Australia for a considerable period of time. The population was defined as “people in the age group of 18 to 70 who were born in Australia or who have stayed in Australia for more than one year and have used products in the relevant category (televisions or cars)”. All respondents had used products in the category they were exposed to (televisions or cars). The majority of the sample (92.5 percent) had lived in Australia for five or more years and met this condition, with more than 82 percent of the sample living in Australia for 15 or more years. Of the 672 completed questionnaires obtained, 75 were found to be incomplete and consequently discarded. Of the remaining 597 questionnaires, a further 58 were from respondents not born in Australia or who had not lived in Australia for at least one

year. These respondents were also eliminated from the analysis, yielding a final sample of 539. Data collection instrument and measures The survey questionnaire included three sections. Section one of the questionnaire comprised two questions, aimed at capturing respondents’ product category-country associations. Respondents were asked to list the names of (a maximum of six) countries that came to their mind when they thought of a given product category (cars or televisions). Respondents had the option to say that no countries came to their mind when thinking of the given product category. The order in which the respondents listed the countries was used as the basis for computing a product category-country association (PCCA) rating for each of the countries mentioned by the respondents. The countries were then ranked, based on their PCCA rating. Section two of the questionnaire included items measuring various dimensions of consumer-based brand equity, namely brand awareness, brand associations, perceived quality and brand loyalty (see the Appendix). Measures for brand equity used in the present study were compiled from the literature (e.g. Aaker, 1991, 1996, 1997; Yoo et al., 2000; Yoo and Donthu, 2001). For example, aided recall and unaided recall were used as measures for brand awareness. Brand personality (e.g. sincerity and excitement) and organizational associations (e.g. liking and trust) were used as the measures for brand associations. That is, one of the questions required respondents to rate the statement “I trust brand X”, on a scale of 1 to 11. Measures for perceived quality were adapted from Aaker (1991). For example, respondents were asked to rate the statement “Brand X is reliable”, on a scale of 1 to 11. Measures for attitudinal brand loyalty were also adapted from the literature. For example, respondents were asked to rate the statement “Brand X would be my first choice” on a scale of 1 to 11. These measures had been empirically tested and employed in earlier studies (e.g. Cobb-Walgren et al., 1995; Yoo and Donthu, 2001). Each item had the verbal anchors “strongly disagree” and “strongly agree” for the 1 and 11 scale points. Demographic questions (e.g. respondent age, gender, country of birth and length of stay in Australia) were included in section three of the questionnaire. To improve readability and understanding, the questionnaire was pre-tested using a judgment sample of actual consumers, and was subsequently revised. Three different versions of the questionnaire (one for each of the three countries) were designed for each of the product categories included in the study. For a given product category, questions in all sections were identical in each of the three versions of the questionnaire, except for the section on brand equity. Each respondent completed only one version of the questionnaire. Dependent variables The four consumer-based brand equity dimensions served as the dependent variables. Confirmatory factor analysis (CFA), used to establish the dimensionality of consumer-based brand equity, supported the hypothesized four-dimensional model[2]. The multi-dimensional consumer-based brand equity construct exhibited convergent, discriminant and construct validity. The parameter estimates of the measurement model showed that all indicator variables loaded their hypothesized factors (e.g. consumer-based brand equity dimensions) in a statistically significant


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manner (p , 0:05), indicating convergent validity. Furthermore, each of the constructs exceeded the suggested level of 0.70 for reliability for both cars and televisions. All the constructs also exceeded the suggested level of 0.50 for variance extracted in the selected product categories of cars and televisions. Discriminant validity of each pair of constructs was tested for all the six brands. First, each pair of constructs were analyzed by standard confirmatory factor analytic procedures. The standard model was then compared to a second model in which the correlation between the two factors was fixed at 1.0 and their relationship with other variables was constrained to be equal. The results indicated that the four constructs exhibited discriminant validity. We then compared consumers’ purchase intention towards a brand and the equity consumers associated with the same brand to examine construct validity. Previous researchers (e.g. Cobb-Walgren et al., 1995; Yoo and Donthu, 2001) observed that consumer purchase intention and brand equity are positively associated. The correlation between consumer-based brand equity and consumer purchase intention was moderate (Toyota 0.37; Mitsubishi 0.48; Suzuki 0.46; Sony 0.39; Toshiba 0.43; and Hitachi 0.51) but significant (p , 0:001) for all the six brands included in the study, demonstrating construct validity. Analysis procedures It was important to understand the extent to which respondents associated the selected countries and the selected brands with the car and television product categories. The associative strength of respondents’ product category-country associations was measured using the “naming method” suggested by Fazio (1987, 1990). The “naming method” involved presenting subjects with the name of the product category label (e.g. cars/televisions) and asking them to recall the names of countries. The principal objective of the present research was to examine consumer-based equity differences of brands made in different countries. Differences in consumer-based brand equity were analyzed by country of origin of the brand and product category using a doubly multivariate repeated-measures multivariate analysis of variance (MANOVA). The MANOVA used the four consumer-based equity variables (brand awareness, brand associations, perceived quality and brand loyalty), which were computed by averaging the scores of the items loading onto them, as the dependent variables. Country of origin and product category were the independent variables used in the MANOVA. The data were checked, and all the assumptions (e.g. equality of variance-covariance matrices, normality, linearity and absence of multicollinearity) of MANOVA were met and in all cases, the cell sizes (see Table I) were well above the minimum recommended size[3]. A requirement for MANOVA is that the dependent variables be correlated. Bartlett’s test of sphericity (Hair et al., 1998) indicated that

Product category Table I. MANOVA results: between-subjects factors cell sizes

Television Car Total

Japan

China

77 96 173

91 85 176

Country of origin Malaysia 86 104 190

Total 254 285 539

MANOVA was appropriate for analyzing the data (Bartlett’s x 2(9) ¼ 2,078.23; p , 0:001) and that the assumption of equality of variance-covariance matrices was satisfied. The Box’s test was not significant at the 0.001 level. A lower level of significance was used as per advice from Hair et al. (1998). Results and discussion Respondents’ associations Japan, Germany, USA, Australia and Italy were the top five countries respondents associated with the product category of cars. Respondents most strongly associated Japan (ranked 1) with cars, compared to the other two countries included in our study, China (ranked 10) and Malaysia (ranked 12). Japan, the USA, Australia, the UK and Germany were the top five countries associated with the product category televisions by respondents. Compared to China (ranked 6) and Malaysia (ranked 9), respondents associated Japan (ranked 1) most strongly with televisions. Thus, a clear hierarchy was observed among the three countries included in the study, in terms of respondents’ product category-country associations.


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Results of MANOVA The results of all multivariate hypothesis tests associated with the experimental design are summarized in Table II. Several statistically significant results were obtained. The two-way multivariate interaction between country of origin and product category was not significant at p , 0:05 indicating that differences in consumer-based brand equity of brands based on their country-of-origin were not significant across the two product categories. However, Table II shows that the multivariate main effect for country of origin was significant, indicating differences in the set of consumer-based brand equity dimensions among the three different countries (the mean vectors for the brand equity dimensions for each of the three countries of origin are shown in Table III). Hypothesis H1 was therefore supported. The results show that the dependent variables, the set of four consumer-based brand equity variables, vary according to the country of origin of the brand. However, the multivariate main effect for the country of origin accounted for just a small (3 percent) percentage of the variance in the dependent variables. Univariate F-tests (see Table III), conducted as a consequence of the significant multivariate country of origin main effect, showed that each of the consumer-based brand equity dimensions (brand associations, perceived quality and brand loyalty) varied significantly with the country-of-origin of the brand, supporting hypotheses H1a, H1b and H1c.

Between-subjects effect Country of origin £ product category Country of origin Product category

Wilks’ l

Exact F

Hypothesis df

Error df

p

MVh 2 a

0.975 0.940 0.956

1.720 4.166 6.111

8 8 4

1,060 1,060 530

0.090 , 0.001 * , 0.001 *

0.013 0.030 0.044

Note: aMV indicates multivariate; *deemed significant at the 0.01 level

Table II. MANOVA results: significance of multivariate tests

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Source measure

F(df, dferror)

Country of origin Brand awareness Brand associations Perceived quality Brand loyalty

3.96 8.66 12.02 4.60

(2, 533) (2, 533) (2, 533) (2, 533)

p-value

h2

0.020 * * 0.001 * , 0.001 * 0.010 * *

0.015 0.031 0.043 0.017

Japan 1.64 6.54 7.19 5.87

(0.80) (2.28) (2.18) (2.87)

Mean (SD) China

Malaysia

1.55 5.89 6.33 5.02

1.50 5.77 6.32 4.98

(0.80) (2.22) (2.30) (2.67)

(0.80) (2.28) (2.24) (2.77)

Mean (SD) Cars TVs

Table III. MANOVA results: univariate tests – between-subjects effects

Product category Brand awareness Brand associations Perceived quality Brand loyalty

7.70 10.83 9.79 10.19

(1, 533) (1, 533) (1, 533) (1, 533)

0.006 * 0.001 * 0.002 * 0.001 *

0.014 0.020 0.018 0.019

1.62 5.81 6.38 5.05

(0.76) (2.35) (2.36) (2.84)

1.50 6.33 6.86 5.53

(0.77) (2.14) (2.12) (2.63)

Note: Figures in parentheses are standard deviations; *deemed significant at the 0.01 level; * *deemed significant at the 0.05 level

As previously mentioned, no hypotheses were made regarding the differences amongst the groups in terms of their brand awareness, and brand awareness measures were not systematically varied among the three groups of respondents. Despite this, significant country of origin differences were observed. The possible reasons for this are explored in the conclusions and implications section. Post hoc multiple comparison tests were conducted to investigate significant univariate group differences among means (see Table IV), using Tukey’s (1953) honestly significant differences (HSD) method. Respondents’ awareness of brands made in Japan was significantly higher than that of brands made in Malaysia, but was not significantly different from that of brands made in China (see Table IV).

Table IV. MANOVA results: post hoc tests for country of origin

Consumer-based brand equity dimension

Country 1

Country 2

Mean difference

Brand awareness

Japan Japan China

China Malaysia Malaysia

0.09 0.14 * * 0.05

Brand associations

Japan Japan China


0.65 * 0.77 * 0.12

, 0.01 , 0.01 0.80

Perceived quality

Japan Japan China


0.86 * 0.87 * 0.01

, 0.01 , 0.01 0.99

Brand loyalty

Japan Japan China


0.85 * 0.89 * 0.04

, 0.01 , 0.01 0.23

Note: *Deemed significant at the 0.01 level; * *deemed significant at the 0.05 level

p 0.24 0.02 0.52

Respondents’ awareness of brands made in Malaysia was also not significantly different from that of brands made in China. Respondents’ brand associations for brands made in Japan were significantly higher than those for brands made either in China or Malaysia (see Table IV) but respondents’ brand associations for brands made in Malaysia did not differ significantly from those for Chinese brands. In a similar fashion, respondents’ perceived quality of brands made in Japan was deemed significantly higher than that of Chinese and Malaysian brands (see Table IV), whereas respondents’ perceived quality of brands made in China was not significantly different from that of brands made in Malaysia. The same pattern was observed for loyalty, with respondents’ brand loyalty for Japanese brands significantly higher than that for brands made in China or Malaysia (see Table IV) but not varying significantly between Chinese and Malaysian brands. Linking the outcomes of this MANOVA with the results of respondents’ association outcomes provides additional insights: everything else being equal, consumer-based equity of brands made in a country (e.g. Japan) with strong associations with the product category was significantly higher than that for the same brands made in the countries (e.g. China and Malaysia) with weaker association with the product category, where respondents perceived substantive differences between the countries in terms of their association with the product category. Post hoc multiple comparison tests indicated that the consumer-based brand equity dimensions of brands were significantly different when the country of origin was changed from Japan to China or from Japan to Malaysia, but not when it was changed from China to Malaysia. As previously mentioned, respondents perceived larger rank differences between Japan and the other two countries (China and Malaysia) in terms of their association with the selected product categories. Table II shows that the multivariate main effect for the product category was significant at p , 0:01, indicating that consumer-based equity measures varied significantly between cars and televisions (see Table III). However, the multivariate main effect for the product category accounted for a small (4.4 percent) percentage of the variance in the dependent variables. The follow-up univariate F-tests of each of the four consumer-based brand equity dimensions of brand awareness, brand associations, perceived quality and brand loyalty indicated significant differences by product category (see Table III) and indicated that the consumer-based brand equity dimensions were product category specific. The individual means for brand equity dimensions for televisions and for cars are shown in Table III. Cars showed significantly lower ratings for brand associations, perceived quality and brand loyalty, but significantly higher brand awareness ratings, compared to televisions. Conclusions and implications Hypothesis H1 stated that the consumer-based equity of a brand varied according to its country of origin. The major substantive finding from the testing of the model is that, for the product categories of televisions and cars in the Australian market, the consumer-based equity of a brand varied significantly according to its country of origin. This finding confirms the predictions of previous researchers that country of origin impacts brand equity (e.g. Shocker et al., 1994; Thakor and Katsanis, 1997). This finding also lends support to Ahmed and d’Astous’s (1996) argument that the equity of a brand may be “enhanced or detracted by the brand’s associations with new and different countries of origin” (p. 94).


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Further, our results suggested that this impact occurred where consumers perceived substantive differences between the countries in terms of their product category-country associations. That is, the consumer-based equity of a brand made in a country with stronger product category-country associations (e.g. Japan), was significantly higher than that of the same brand made in a country with weaker product category-country associations (e.g. China/Malaysia). While previous research has only examined the linkages between country of origin and certain components of brand equity, the present study is one of the first to examine the relationships between country of origin and the multi-dimensional consumer-based brand equity. Although a large body of previous research has demonstrated the impact of country of origin on consumers’ product evaluations and purchase intentions (e.g. Hong and Wyer, 1990; Johansson et al., 1985) and examined the relative importance of brand and country of origin cues (e.g. d’Astous and Ahmed, 1992; Okechuku, 1994; Wall et al., 1991), the present study contributes to the literature by confirming empirically the impact of country of origin on the consumer-based equity of a brand. Country of origin has been partitioned into cues such as “country of manufacture”, “country of design”, and “country of brand” and “country of assembly”. Extant research on the relative importance of these cues (on consumers’ product evaluations) provides conflicting results. Some researchers have found that country of brand was more important for consumers (e.g. Ulgado and Lee, 1993), whereas others found than the country of manufacture was more important (e.g. Ahmed and d’Astous, 1995) or both cues were equally important (e.g. Chao, 1993). In the present study, the consumer-based equity of a brand made in a country other than its home country was found to be significantly lower. This finding lends support to Amonini et al.’s (1999) conclusion that “the relative influence of the ‘country of brand’ and the ‘country of manufacture’ may be product or situation specific” (p. 20). Hypotheses H1a, H1b and H1c predicted the relationship between country of origin of a brand and three of the dimensions of its consumer-based equity. Each of these three consumer-based equity dimensions of a brand (i.e. brand associations, perceived quality and brand loyalty) was expected to vary significantly by the country of origin. Our empirical results confirmed this and provided further support for Aaker’s (1991) and Keller’s (1993) notion that country of origin associations are secondary associations to brand associations. Respondents’ associations for a brand varied significantly by the country of origin. While the impact of country of origin associations on brand associations was not directly measured in the study, our findings from MANOVA related to country of origin associations suggest that consumers’ country of origin associations do influence their brand associations. Previous research has demonstrated that the country of origin of a product influenced consumers’ perception of its quality (e.g. Chao, 1998; Heslop et al., 1987) and the present study further confirmed this. Furthermore, researchers have observed that the impact of country of origin was the largest in relation to perceived quality (e.g. Lim et al., 1994; Verlegh and Steenkamp, 1999). The present study also found that the differences by country of origin were the largest for perceived quality. For example, the magnitude of difference for perceived quality across countries of origin were approximately twice that observed for brand loyalty, and one and half times that measured for brand associations (see Table IV).

Country of origin effects in one product category are known to transfer to new product categories from the same country (Agarwal and Sikri, 1996). The results of the present study lend credence to this notion of “transference of beliefs”. For example, respondents in the present study were found to be more loyal towards a brand made in a country with strong association with the product category compared to the same brand made in a country with a weaker association with the product category. This suggests that respondent beliefs about a country/products from a country (e.g. China/Malaysia) transferred to foreign brands (e.g. Sony/Toyota) made in that country. Support for hypothesis H1c also lends credence to the notion of country loyalty. This is consistent with Ahmed and d’Astous’s (1996, p. 199) view that consumers may develop loyalty towards countries and, consequently, may continue to prefer cars from Japan or shoes from Italy. As previously discussed, the relationship between country of origin and brand awareness was not predicted as it was not possible to manipulate consumer mindset regarding brand awareness. However, brand awareness varied significantly according to the country of origin of the brand. One plausible explanation for this is that the results might have occurred because of demand artefacts. For example, the question related to brand recall required the respondents to list the names of up to six brands from a given product category. Since brand awareness measures were not systematically varied among the three groups of respondents, each respondent was asked to evaluate the brand equity measures from only one of the three countries: Japan, China or Malaysia. However, respondents might have answered the question on brand awareness towards the end, by which time they might have (incorrectly) presumed that their awareness of brands made in a particular country was questioned. Lim and Darley (1997) demonstrated that country of origin studies are susceptible to demand artefacts. Our results also indicated that consumer-based equity of brands significantly varied by product category. The consumer-based equity of brands for cars was significantly different from that of televisions. Each of the four consumer-based equity dimensions for a brand varied by product category. To the authors’ knowledge, the issue of whether brand equity or its dimensions are product category specific has never previously been examined in the literature. While previous studies (e.g. Kaynak and Cavusgil, 1983) have demonstrated that country of origin effects were product-category specific, our research has established that brand equity may also be product category specific. Overall, MANOVA results indicated that both country of origin (3.4 percent) and product category (4.4 percent) accounted for small but significant proportions of the variance in consumer-based brand equity (see Table II). Managerial implications The results indicate that country of origin is an important variable which can affect the equity of a brand. Marketing managers operating in the international context must identify the sources of brand equity, and understand the importance of incorporating country of origin into their brand equity measurement. In addition, they will have to estimate the influence of the country of origin of the brand, while tracking or estimating brand equity in the host country. The present research addressed the above two issues in the international context. First, brand equity was measured for a particular product category. Second, the impact of country of origin on the dimensions of brand equity was investigated. Overall, in the face of the increased significance


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attached to branding and measurement of brand equity, it is important for marketers to understand the influence of country of origin on the equity of their brand. To the best of the authors’ knowledge, this research is one of the first studies integrating and testing empirically two important areas of marketing, namely brand equity and country of origin effects. Notably, the present study used a sample of actual consumers, and therefore its findings are more open to generalization than most previous research often based on student samples (e.g. Johansson et al., 1985; Ettenson et al., 1988). The results of the study have implications for multinational production, marketing communications, global branding, brand equity measurement and positioning decisions. Traditionally, the availability of cheap labor has driven multinationals to move their production to other countries, without much consideration for issues such as the extent to which consumers associate the product category with the country in question. For example, Nike had shifted shoe manufacturing to China, a country not very strongly associated with the product category (athletic shoes). Companies base their sourcing decisions on “comparative advantage or cost differentials” often ignoring the effect of such decision in terms of country image (Jaffe and Nebenzahl, 2001, p. 21). A particularly important implication of the present study is that such moves could adversely influence the consumer-based equity of brands in some product categories. Our results suggest that marketing managers considering offshore manufacturing/sourcing options should carefully weigh cost considerations with the risk of the possible erosion of brand equity. Marketing managers will also need to examine consumers’ “product-category” associations in target countries. Further, our results suggest that when making overseas manufacturing decisions, Japanese automobile/television manufacturers would be better off selecting China compared to Malaysia as a manufacturing location. The results have implications for Australian importers of the brands Sony, Toshiba and Hitachi (televisions) and Toyota, Mitsubishi and Suzuki (cars). Our findings suggest that Australian importers (in the product categories of cars and televisions) would be better off importing these brands from Japan, rather than from China or Malaysia, and selecting brands made in China compared to Malaysian ones. In addition, our results have implications for marketing communications. For the country of origin of the brand to contribute to its consumer-based equity, consumers need to strongly associate the country of origin with the product category in question. Marketing managers will have to consider this when designing their marketing communication strategy. Managers will not only need to focus on developing a favorable image for the country of origin of the brand but must also work toward developing strong “country-product category” associations in the target consumers’ minds. Furthermore, our results indicated that country of origin affects all four dimensions of consumer-based brand equity. Brand managers will have to take country of origin into consideration in their global branding decisions and to manage the dimensions of consumer-based brand equity more effectively. For example, “brand associations” must be managed in such a way that the brand’s country-of-origin effects contribute to the overall equity of the brand. Leveraging secondary associations is an important way of building a brand’s equity (Aaker, 1989; Keller, 1998) and the results of the present study could help brand managers by suggesting the countries of origin from which they could leverage secondary associations for a brand. Finally, our results confirmed our hypothesis that consumer-based brand equity is product-category specific. When a brand (e.g. Sony) offers a variety of product

categories (e.g. video tapes, televisions), brand managers should monitor and track the brand’s consumer-based equity for each product category. That is, higher brand equity in one product category does not necessarily mean similarly high brand equity levels in other product categories. Limitations and future research directions The nature of the experimental design constrained the number of countries (three), brands (six) and product categories (two) included in the study. In order to generalize the results, researchers should test our model using other brands and product categories. Given that country of origin effects were found to be product category specific, the inclusion of other product categories would be required in future research of this kind. Furthermore, the two product categories included in the present study enjoyed varying degrees of consumer product involvement. Researchers may therefore want to examine whether differences in consumer-based brand equity of brands exist between brands of high-involvement product categories. This may help marketers understand whether the degree of involvement with a product category also moderates the consumer-based equity of a brand. The present study compared products from “more developed countries” to those from “less developed countries”, and may therefore have revealed larger than typical country-of-origin effects. Future research should include only more developed countries or only less developed countries as countries of origin, since country-of-origin effects were larger in studies that used a mixture of types of countries together as the stimuli (Verlegh and Steenkamp, 1999). Country-of-origin effects were also found to be larger for studies using between-subjects designs compared to studies that used within-subjects designs (Verlegh and Steenkamp, 1999). Since country of origin was used as a between-subjects factor in the doubly multivariate design in the present study, this may have produced larger country-of-origin effects. A further limitation of the present study was the reliance on indirect inference based on patterns between two different analyses. Future studies may include more elaborate designs supporting statistical tests to examine formally the influence of the moderating role of product category-country associations on consumer-based equity of a brand. Our study focused on measuring changes in consumer-based brand equity when the country of origin changed from a country with strong association with the product category to a country with a weaker association with the product category. An important direction for future research would be to examine how the consumer-based equity of a brand would be affected, if the country of origin were changed in the opposite direction. That is, if the country of origin were changed from a country with weaker association with the product category to a country with strong association with the product category – what would be the effect on the consumer-based equity of a brand? The results would be useful to MNCs contemplating international manufacturing. For example, it would be beneficial to the Korean automobile maker Hyundai to know whether shifting the production of its high-priced vehicles to countries such as Australia would result in increased equity for the brand. It would be hard to predict the results. Some researchers found that Japanese brands when made in the USA suffered an erosion of brand image (a developed economy with a favorable country image) (Johansson and Nebenzahl, 1986). The results of the present study suggest that the consumer-based equity of a brand from a country with a weaker


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association with the product category would be significantly lower than that of the same brand made in a country with strong association with the product category. Since country-of-origin effects are known to vary by consumer nationality (Johansson et al., 1985) and culture (Balabanis et al., 2002; Sharma et al., 1995; Watson and Wright, 2000), our results might also have been biased as our sample included a small percentage (7.5 percent) of people who had lived in Australia for less than five years. However, Australia has a multi-cultural society with more than one in five (23 percent) persons resident in Australia born overseas as at 2003 (Australian Bureau of Statistics, 2004). Hence, it would be logical to expect any sample of Australian consumers to include some people born outside the country. Our results indicated that the consumer-based equity of a brand was product-category specific. Future researchers should explore the reasons behind such differences. The brand names included in the study were different for car (e.g. Toyota) and television (e.g. Sony) product categories. Future research could examine whether a brand name would have different levels of consumer-based equity in different product categories. That is, would the consumer-based equity of Sony in the product category DVDs be significantly different from its equity levels for televisions? It would clearly be helpful to marketing managers considering brand extensions or product range to understand how the equity of a brand changes from one product category to another. Finally, the effect of country of origin on consumer-based brand equity may be moderated by variables other than consumers’ product category-country associations. For example, the degree of economic development of the country of origin of the brand may influence the effects of country of origin on consumer-based brand equity, providing rich and exciting avenues for further research in this area. Notes 1. The authors were aware that different terms were used in the literature to refer to the country where a product is produced, such as country of production (e.g. Nebenzahl and Jaffe, 1996), country of manufacture (e.g. Amonini et al., 1999; Samiee, 1994) and country of origin (e.g. Maheswaran, 1994; Thakor and Katsanis, 1997). 2. Details of confirmatory factor analysis used to measure consumer-based brand equity and results of brand name within product category effects were not included in this paper because of space constraints, but can be provided upon request from the first author. 3. MANOVA requires a minimum cell size of 20 (Hair et al., 1998). References Aaker, D.A. (1989), “Managing assets and skills: the key to a sustainable competitive advantage”, California Management Review, Vol. 31 No. 2, pp. 91-106. Aaker, D.A. (1991), Managing Brand Equity, The Free Press, New York, NY. Aaker, D.A. (1992), “Managing the most important asset: brand equity”, Planning Review, Vol. 20 No. 5, pp. 56-8. Aaker, D.A. (1996), Building Strong Brands, The Free Press, New York, NY. Aaker, J.L. (1997), “Dimensions of brand personality”, Journal of Marketing Research, Vol. 36 No. 3, pp. 345-55. Agarwal, S. and Sikri, S. (1996), “Country image: consumer evaluation of product category extensions”, International Marketing Review, Vol. 13 No. 4, pp. 23-39.

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Appendix

Dimension measure Brand awareness (Aaker, 1991) Unaided recall X1. Asked for the name of the brand (product category is mentioned) Aided recall X2. Which of the brands are you aware of? (names of the brands provided) X3. Which of the following brands have you used before? (brand recognition, based on aided recall, names of the brands were provided) Brand associations Brand personality (Aaker, 1997) X4. It is appropriate to describe the products offered by brand X as “up-market” X5. It is appropriate to describe the products offered by brand X as “tough” Organizational associations (Aaker, 1991, 1996) X6. I like the company which makes brand X X7. I would feel proud to own products from the company which makes brand X X8. I trust the company which makes brand X Perceived quality (Aaker, 1991, 1996; Yoo et al., 2000) X9. Brand X offers products of very good quality X10. Brand X offers products of consistent quality X11. Brand X offers very durable products X12. Brand X offers very reliable products X13. Brand X offers products with excellent features.

Table AI. Measures used in the main empirical study

Brand loyalty (Yoo et al., 2000; Yoo and Donthu, 2001) X14. I consider myself loyal to brand X X15. Brand X would be my first choice Note: “X” is replaced by the brand name in the questionnaire

About the authors Ravi Pappu is a Senior Lecturer in the UQ Business School at the University of Queensland, Australia. His research interests encompass the areas of brand management, international marketing and marketing education. His work has been published in the Journal of Marketing Education, the Journal of Product and Brand Management, and the Journal of Retailing and Consumer Services. He teaches in the areas of international marketing, marketing management, marketing research and e-marketing. Ravi Pappu is the corresponding author and can be contacted at: [email protected] Pascale G. Quester is Professor in Marketing at the School of Commerce of the University of Adelaide. Her work has been published in leading journals, including Psychology and Marketing, Industrial Marketing Management, Journal of Advertising Research, European Journal of Marketing and many more. She is also a member of the editorial board or an ad hoc reviewer for several international titles. French-born, she is also a founding director of FACIREM, the Franco-Australian Centre for International Research In Marketing, and was Visiting Professor at La Sorbonne in 1999 and again in 2003. She recently won, with I. Lim, the 2004 Most Outstanding Paper Award of the Journal of Product and Brand Management.

Ray W. Cooksey is a Professor of Organizational Behaviour and Human Resource Management in the New England Business School at the University of New England. He teaches in the areas of managerial decision-making, organizational behaviour, communication management, management of change, research methodology and quantitative and qualitative data analysis. Much of his research has focused on decision-making in managerial and educational contexts and on non-linear complexity perspectives in human resource management and organizational behavior. He is the author of Judgment Analysis: Theory, Methods, and Applications and numerous articles.

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