International Journal of Bank Marketing

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International Journal of Bank Marketing Emerald Article: Consumer-based brand equity in banking industry: A comparison of local and global banks in Turkey Musa Pinar, Tulay Girard, Zeliha Eser

Article information: To cite this document: Musa Pinar, Tulay Girard, Zeliha Eser, (2012),"Consumer-based brand equity in banking industry: A comparison of local and global banks in Turkey", International Journal of Bank Marketing, Vol. 30 Iss: 5 pp. 359 - 375 Permanent link to this document: http://dx.doi.org/10.1108/02652321211247417 Downloaded on: 23-07-2012 References: This document contains references to 54 other documents To copy this document: [email protected]

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Consumer-based brand equity in banking industry A comparison of local and global banks in Turkey

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Musa Pinar College of Business Administration, Valparaiso University, Valparaiso, Indiana, USA

Tulay Girard Division of Business and Engineering, Penn State Altoona, Altoona, Pennsylvania, USA, and

Zeliha Eser Faculty of Business Administration, Baskent University, Ankara, Turkey Abstract Purpose – The purpose of this paper is to examine bank brand equity from consumer perspectives by comparing the consumer-based brand equity (CBBE) dimensions of local and global banks in Turkey. The paper determines if and how CBBE differs across three types of banks (state, private, and foreign). Design/methodology/approach – Measurements of brand equity dimensions were drawn from the literature, which included brand awareness, perceived quality, brand image, brand association, organizational association, and brand loyalty. Data were collected from adult customers of three types of banks. Findings – It was found that the overall CBBE, perceived quality, brand image/association, and brand loyalty were significantly higher for private banks than for state and foreign banks. Organizational association was the highest for state banks, followed by private banks, and the lowest for foreign banks. Foreign banks scored the lowest in perceived quality, brand loyalty, and the overall CBBE. Originality/value – The results help foreign banks understand branding challenges/threats they may face from local banks in new markets. Such challenges might pertain to low levels of organizational associations and service quality perceived for foreign banks, as found in this study. The findings close the gap in the area of the brand equity theory that has not been adequately developed for the banking/financial industry. Keywords Turkey, Banks, Brands, Consumer behaviour, Brand equity, Banking industry, Globalization Paper type Research paper

Introduction In recent years, the banking industry has been facing strong competitive pressures resulting mainly from the integration and globalization of financial markets, and the wider use of e-commerce to deliver services and create new products (Nellis et al., 2000). In response to these global trends, a number of major European banks pursued a “universal banking” strategy by expanding their business operations and striving to become global players with a single global branding strategy (Nellis et al., 2000; Robinson, 2007). Many developing countries have experienced an onrush of foreign banks into their financial markets. For example, between 1994 and 1999, foreign banks (i.e. those with at least 50 percent foreign ownership) increased their share of assets

International Journal of Bank Marketing Vol. 30 No. 5, 2012 pp. 359-375 r Emerald Group Publishing Limited 0265-2323 DOI 10.1108/02652321211247417

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from 7.8 to 52.3 percent in Eastern European countries (International Monetary Fund (IMF), 2000). Global brands and global branding strategy offer growth opportunities to banks to enter vast new and emerging markets (Fairland, 1995). Imeson (2008) asserts that brand is a fundamental factor in business sustainability determining how much a business can grow, what new markets it can conquer, and how much extra profit it can make. However, according to Robinson (2007), challenges for global bank brands include maintaining the consistency of a bank’s brand and customer experience, remaining relevant to local customers’ specific needs, and overcoming the image of “too big to pay attention to me” in the eyes of retail banking customers. While there is no doubt that globalization efforts offer certain opportunities and advantages for banks, it is not clear how global bank brands and global branding would perform in the new markets (countries) against local banks, be they state-owned or privately owned. In this study, a global bank refers to an institution of retail banking that has retail banking operations and/or branch offices in multiple countries. In contrast, a local bank refers to an institution of retail banking that exclusively or almost exclusively operates in the country of its establishment. On the ownership side, a state bank refers to a retail bank more than half of which is owned or controlled by the state or the national government of a country, whereas a private bank refers to one owned or controlled by private persons or entities. As banks have expanded into new markets as part of their global branding strategies, they have long suffered from a lack of guidance due to a limited number of published studies concerning the effectiveness of global branding strategies. It is possible that global bank brands may not be as successful as they could be in implementing their global branding strategies when competing with local banks. For example, prior research in Turkey as an emerging market found differences of quality in the banking services among different types of banks (i.e. state, private, and foreign banks) based on the perceptions of customers (Eser et al., 2006) and bank personnel (Pinar and Eser, 2008). The present authors feel that as banks pursue “universal banking” and global branding strategies, they need to understand the effects of these strategies on brand loyalty and brand equity. Therefore, this study aims to investigate variations in bank brand equity by type of bank by comparing the consumer-based brand equity (CBBE) of local and global banks in Turkey. The following sections will provide a background on brand equity in general, branding in banking services in particular, and present hypotheses that allow comparisons of the CBBE and its dimensions for global and local banks. They will also detail the methodology employed in this study. Branding and brand equity Branding and brand equity have recently received a great deal of attention. Keller (1993, p. 2) coined the term CBBE and defined it as “the differential effect of brand knowledge on consumer response to the marketing of a brand.” Brand equity, as a multi-dimensional variable, refers to the value inherent in a well-known brand name (Keller, 1993, 2008). The value of a brand is created by marketers through the brand’s superior quality, social esteem the brand provides for users, consumer trust in the brand, and self-identification with the brand (Keller, 1993, 2001, 2008). According to Keller (2008, p. 53), CBBE occurs “when the consumer has a high level of awareness and familiarity with the brand and holds some strong, favorable, and unique brand associations in memory.”

In the literature, brand equity has been measured with multiple constructs such as brand awareness (Aaker, 1991, 1996a; Buil et al., 2008; Pappu et al., 2005; Yoo et al., 2000), perceived quality (Aaker, 1991, 1996a; Buil et al., 2008; Pappu et al., 2005, 2006; Yoo et al., 2000; Yoo and Donthu, 2001; Tong and Hawley, 2009), brand loyalty (Buil et al., 2008; Kim and Kim, 2004; Pappu et al., 2005, 2006; Yoo et al., 2000; Yoo and Donthu, 2001; Tong and Hawley, 2009), brand image (Kim and Kim, 2004), brand association and brand personality (Aaker, 1996a, 1997; Buil et al., 2008; Keller, 1993; Pappu et al., 2005), and organizational association (Aaker, 1996a; Buil et al., 2008; Keller, 2008). Aaker (1996a, p. 10) defines brand awareness as the “strength of a brand’s presence in the consumer’s mind.” Brand recognition/recall is important in measuring brand equity because it measures the consumer’s mind-share or top-of-mind awareness of a given product or service. Without a high mind-share, it is not possible to build a strong brand and/or brand equity. Perceived quality is defined as the customer’s perception or subjective evaluations of the overall quality or superiority of a product/ brand with respect to its intended purpose relative to alternatives (Aaker, 1991; Zeithaml, 1988). According to Aaker (1991), perceived quality is not just another brand association but an association that is elevated to the status of a separate dimension of brand equity. Brand loyalty is defined as “the attachment that a customer has to a brand” (Aaker, 1991, p. 39), which is treated as a behavioral dimension of brand equity. However, as an attitudinal dimension, it refers to the tendency to be loyal to a focal brand, which is demonstrated by the intention to buy the brand as a primary choice (Oliver, 1997; Yoo and Donthu, 2001, p. 3). Aaker (1991, p. 109) defines brand association as “any link in memory to a brand.” Following Kim and Kim (2004), the present authors also include brand image as one of the brand equity dimensions. Brand image is defined as “a set of brand associations,” usually in some meaningful way (Aaker, 1991, p. 109). Aaker (1996b, p. 113) describes organizational associations as being “important bases of differentiation and choice that include having a concern for customers, being innovative, striving for high quality, being successful, having visibility, being oriented toward the community, and global player.” Although a great number of brands are known to be global as suggested by Aaker, some still remain local due to the nature of their corporate ownership. As global banks enter a new country (market), they face competition from other global banks and a host of local banks. However, clustering all of the local banks in one group and comparing local banks to global banks would result in overlooking the prominent differences between the state-owned and private local banks that global (foreign) banks compete with. Discounting the differences between the local banks may not realistically reflect the competitive structure of the banking industry in the country. In Turkey where this study is conducted, the banks are classified into three general types – state, private, and foreign banks. These three bank types dominate the Turkish banking industry. This is supported by the fact that of the total of 9,834 bank branches in Turkey, state banks own 29.6 percent of bank branches, private banks own 50.3 percent, and foreign banks own 19.7 percent (Turkiye Bankalar Birligi (Turkish Banking Association) (TBB), 2011). Prior research (Eser et al., 2006; Pinar and Eser, 2008) that used these bank types in analyzing the customer and bank personnel perceptions of bank service quality found significant quality differences among these bank types. Because the state and private banks have different structures, comparing the brand equity dimensions of foreign (or global) against state and private (local) bank types may provide better insight about each of their branding performance. Therefore, instead of classifying banks as local or global to measure organizational associations,

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this study classifies banks as state, private, and foreign to test the differences in CBBE dimensions. Branding in banking services The globalization of banks has led to structural changes in the banking industry including deregulation, consolidation, new media provision of financial services, the reduction of information asymmetries enabled by the internet, the homogeneous nature of the financial offerings, and fierce competition (Debling, 1998; Harris, 2002; Howcroft and Durkin, 2003; McDonald et al., 2001; Milligan, 1995). Due to structural changes, it has become more important than ever for financial service organizations to develop strong brands to avoid commoditization (Devlin and Azhar, 2004) and to provide differentiation and a focus for relationships, possibly both externally and internally (Devlin, 1998; Sounders and Watters, 1993). Several authors have suggested that the branding of financial services presents particular challenges because financial service brands generally lack strength, saliency, and emotional appeal (de Chernatony and Dall’Olmo Riley, 1999; McDonald et al., 2001; Jones, 1999). Devlin and Azhar (2004) confirm this perception and argue that branding in financial services is relatively weak, with many brands lacking saliency and true CBBE. Moreover, financial service providers have traditionally placed little importance on their brands, and of those who did, few moved beyond the visual brand such as the logo stage (de Chernatony and Cottam, 2006b). A review of the literature indicates that few empirical studies have addressed branding issues and challenges faced by financial services organizations. Furthermore, prior research has not addressed customer perspectives using a representative sample, brand equity and its dimensions in financial services, or the effects of global branding on brand performance and brand equity. In order to provide insight into some of these issues, this study examines the current state of branding in the banking industry in Turkey by investigating bank brand equity from the consumer perspective. Because of the inherent differences (e.g. resources, organizational culture, marketing mix, positioning) between state-owned and private banks in Turkey that foreign banks compete against, it will be possible to investigate the performance of branding strategies of the three types of banks and the impact of such strategies on individual bank CBBEs. Although Turkey, as an emerging market, serves an ideal ground to examine these issues, the present authors would like to point out that Islamic Finance is not an issue because Turkey is a secular and democratic nation. Thus, unlike some of the Islamic nations, religion has no impact on the Turkish banking industry. Hypotheses In service industries, including the banking industry, service quality plays a significant role in achieving the aspired positioning, and building brand image and customer loyalty. Because service quality impacts bank brand image, differences in service quality should reflect the brand equity dimensions of each type of bank. Banks differentiate to attract customers based on customer service and how they present and sell their products and services (Stickler, 1999). Brand equity dimensions – customer brand awareness, perceptions of service quality, brand image and associations, organizational associations, and loyalty – may differ across state, private, and foreign banks because each type of bank holds prominent competitive differences in their positioning and marketing mix offerings. In addition, the findings of prior studies indicate that service quality in Turkey seems to differ by type of bank (Eser et al., 2006; Pinar and Eser, 2007, 2008). Using

mystery shoppers in their study, Eser et al. (2006) showed that the banks in Turkey collectively offered little above average quality of service. They confirmed that while the state banks had a significantly lower quality in service than both private and foreign banks, there was no difference in service quality between private and foreign banks. Their results are consistent with the market forces theory that private banks are more efficient and profitable than state banks (Unal et al., 2007; Omran, 2007). Similarly, Pinar and Eser (2007, 2008) examined the perceptions of bank personnel regarding the importance of banking services in delivering high quality and highly satisfactory services across the banks in Turkey. They found significant differences between the perceptions of personnel at state banks and those at private and foreign banks, but no difference between those of private and foreign banks. In light of the findings of prior research, the present authors expect that private banks will have an advantage over foreign banks due to stronger organizational associations in the consumers’ minds. Therefore, private banks will have the highest brand equity, followed by foreign banks, and the lowest brand equity in state banks. Based on the brand equity theory, and the differences in services and global branding strategies of banks, the following hypotheses for each of the CBBE dimensions and overall CBBE will be tested: H1. The CBBE will be significantly different across three bank types for CBBE dimensions of: (H1a) brand awareness; (H1b) perceived quality; (H1c) brand image; (H1d) brand association; (H1e) organizational association; and (H1f) brand loyalty such that they are expected to be the highest for private banks, followed by foreign banks, and the lowest for state banks. H2. The overall CBBE is expected to be the highest for private banks, followed by foreign banks, and the lowest for state banks. Methodology In order to accomplish the study objectives and test the hypotheses, a survey instrument was designed to measure the CBBE. A list of multiple-item scales for each dimension of brand equity was compiled from the literature (e.g. Aaker, 1991, 1996a, b, 1997; Buil et al., 2008; Keller, 2008; Kim and Kim, 2004; Pappu et al., 2005, 2006; Yoo et al., 2000; Yoo and Donthu, 2001; Tong and Hawley, 2009). Brand awareness was measured with unaided recall (the top-of-mind brand recall) as suggested by Aaker (1991, 1996a), Buil et al. (2008), Pappu et al. (2005, 2006), and Yoo et al. (2000). The respondents were also asked if they patronized this bank, measured with a “Yes” or “No” response. This would indicate if brand awareness translated into usage or patronage of a given bank, or vice versa. Perceived quality was measured with seven items that were adapted from Aaker (1991, 1996a), Buil et al. (2008), Pappu et al. (2005, 2006) and Yoo et al. (2000), Tong and Hawley (2009). A five-item scale for brand image was adapted from Kim and Kim (2004). Brand association was measured in two dimensions: brand personality (three items) and organizational association (four items) for which the scale items were adapted and developed from Aaker (1996a, b, 1997), Buil et al. (2008), Keller (1993, 2008), Pappu et al. (2005). The items for brand loyalty (five items) were derived from Buil et al. (2008), Kim and Kim (2004), Yoo et al. (2000), Yoo and Donthu (2001), Tong and Hawley (2009). While the items for each of the brand equity dimensions were drawn from the above-mentioned research, they were modified to fit the objectives of this study. The

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items for perceived quality, brand image, brand association, and brand loyalty were measured on a four-point Likert-type scale ranging from 1 ¼ strongly disagree to 4 ¼ strongly agree. A four-point scale was used to avoid neutral responses and force the respondents to indicate their degree of agreement/disagreement for the scale items. This was deemed necessary based on the pre-test results where most respondents marked the neutral rating (midpoint of 3 on five-point scale). The composite score of each dimension was calculated by summing up the individual item scores. The composite score of the CBBE was calculated by summing up the summated scores of perceived quality, brand image/brand association, organizational association, and brand loyalty dimensions. The survey also included demographic questions of age, gender, education level, occupation, and income level. As the survey instrument was originally developed in English, it was translated into Turkish, and then translated back into English to avoid translation errors (Ball et al., 2002) and to make sure that the intended meanings of the questions were maintained. The translations of the instrument were pre-tested not only with several faculty members, but also customers of a bank located on one of the present author’s university campuses in order to assure that the survey items conveyed their intended meaning. Based on their suggestions, the instrument was further refined. Sample and data collection The data were collected in Ankara, Turkey, the nation’s second largest city with a population of more than five millions. Following the procedure used by Bitner et al. (1990), the survey was administered to a convenience sample of customers of state, private, and foreign banks by 60 interviewers recruited from undergraduate students in Ankara, Turkey. Interviewers were instructed not to interview fellow students, but to interview nine to 12 regular customers of each type of bank. They were also instructed to interview only one person for each type of bank rather than for all three types of banks in order to obtain independent samples. As suggested by Bitner et al. (1990), one of the authors gave the interviewers training and detailed instructions for the conduct of interviews. In order to improve their interview skills, the interviewers practiced the interview process with other students until they were comfortable with the process. Extra credit was also offered to the interviewers to motivate them to do a better job at interviewing. In order to eliminate any potential biases and confusion, and obtain independent samples, three separate but identical survey instruments were prepared for each type of bank (state, private, and foreign). After reviewing the returned surveys and eliminating unusable ones, there were a total of 607 surveys available for analysis. Of these, 196 were from state banks, 212 were from private banks, and 199 were from foreign banks. Due to page limitations, respondents’ demographic profiles are not presented in a table; however, they are available from the first author. Across the three independent samples, male respondents were almost equal in number to females. The age distributions across the three samples were also similar and representative of the population of bank customers in Ankara. Comparing the sample to the 2008 national population in Turkey provided in The World Fact Book (2011), and the US Census Bureau’s country summary data, the sample’s profile was similar to the Turkish population in gender, age, education, and income distribution. This was expected as the samples were comprised of regular bank customers in the urban area. The three sample profiles across the three banks were comparable.

Analyses and results Discriminant and convergent validity Before testing the hypotheses, several analyses were conducted to confirm scale dimensions, as well as discriminant and convergent validity of the CBBE scale. As a first step, all observed variables were evaluated for multivariate outliers using the Mahalanobis D2 measure. One case was found to be significantly different or unique in combination; therefore, it was removed from the data (Hair et al., 2010). Next, the multivariate measurement model of CBBE variables that had a predictive nature – perceived quality, brand image, brand associations, and organizational associations – that predicted brand loyalty in the three bank type data sets was evaluated for discriminant validity using the principle component analysis with varimax rotation (see Appendix 1). Brand loyalty items were evaluated separately for convergent validity due to their predicted nature. Because brand loyalty had strong positive correlations with brand image/brand association variables, a causal relationship was implied as suggested in the literature ( Jacoby et al., 1977; Keller, 1993, 2008; Kim et al., 2008, Tong and Hawley, 2009). Convergent validity was assessed by testing the reliabilities based on Cronbach’s a coefficients and construct reliability values (Fornell and Larcker, 1981). It is also important to note that because the concept of brand awareness was measured with an open-ended question as suggested in the literature (Aaker, 1991), it was analyzed with frequencies and percentages; therefore, this construct was not included in the testing of either the measurement model or the summated scores of the overall CBBE variable. Perceived quality (PQ) and organizational association (OA) items were loaded on their expected dimensions (Appendix 1). The four items for brand image (BI) and three items for brand association (BA) were loaded on the same dimension. Because these seven items seemed to theoretically measure very close constructs and had high correlations with one another, they were used together to measure one dimension named brand image/brand association (BI/BA). The factor loading for each item on all CBBE dimensions and Cronbach’s a and construct reliability values were above the recommended level (Hair et al., 2010) demonstrating convergent validity. Appendix 2 indicates that the brand image/brand association (BI/BA) construct is highly correlated with the perceived quality and brand loyalty constructs but not with the organizational associations construct. This was expected because, as mentioned earlier, service quality and brand loyalty would have strong a causal relationship with bank brand image. Because the four dimensions – PQ, BI/BA, OA, and BL – combined measured the brand equity construct as suggested in the literature, they were used in the hypothesis testing to gain valuable insight. Hypothesis 1a In testing H1a, the Pearson w2 test indicated that the population proportions of the brand awareness across state, private, and foreign banks differed significantly (w2 ¼ 1212, df ¼ 24, po0.01). The w2 test or descriptive statistics presented in Table I provided support for H1a and suggested that unlike private banks but similar to state banks, foreign banks faced the challenge of converting awareness into usage of their banks. Brand awareness and usage are further discussed in Discussions and implications. Testing hypotheses H1b-H1f In order to test H1b through H1f, whether each of the CBBE dimensions (dependent variables) differs significantly across three types of banks (independent variable) and

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First remembered n % State banks Ziraat Bank

151

77.0

Vakif Bank

23

11.7

Halk Bank

22

11.3

196

100.0

70

33.0

Is Bank

59

27.8

Yapi Kredi Bank

46

21.7

Akbank

26

12.3

Other private banks

11

5.2

212

100.0

122

61.3

Finansbank

31

15.6

Fortis Bank

23

11.6

12

6.0

11

5.5

199

100.0

Total Private banks Garanti Bank

Total Foreign banks HSBC

Citibank Table I. Top-of-mind awareness Other foreign banks and use of banks for each bank type Total

Yes

Do you use? No

Total, n (%)

77 (51.0%) (73.3%) 14 (60.9%) (13.3%) 14 (63.6%) (13.3%) 105 (53.6%)

74 (49.0%) (81.3%) 9 (39.1%) (9.9%) 8 (36.4%) (8.8%) 91 (46.4%)

151 (100.0%) (77.0%) 22 (100.0%) (11.7%) 23 (100.0%) (11.2%) 196 (100.0%)

64 (91.4%) (37.0%) 45 (76.3%) (26.0%) 38 (82.6%) (22.0%) 19 (73.1%) (11.0%) 7 (63.6) (4.0%) 173 (81.6%)

6 (8.6) (15.4%) 14 (23.7%) (36.8%) 8 (17.4%) (20.5%) 7 (26.9%) (17.9%) 4 (36.4%) (10.3%) 39 (18.4%)

70 (100.0%) (33.0%) 59 (100.0) (28.0%) 46 (100.0%) (21.7%) 26 (100.0%) (12.3%) 11 (100.0) (5.2%) 212 (100.0%)

63 (52.6%) (58.5%) 17 (54.8) (16.0%) 10 (45.5%) (9.4%) 7 (58.3%) (6.6%) 10 (90.9%) (9.5%) 107 (54.0%)

59 (47.4%) (64.8%) 14 (45.2%) (15.4%) 12 (54.5%) (13.2%) 5 (41.7%) (5.5%) 1 (9.1%) (1.1%) 91 (46.0%)

122 (100.0%) (61.6%) 31 (100.0%) (15.7%) 22 (100.0%) (11.1%) 12 (100.0) (6.1%) 11 (100.0%) (5.5%) 198 (100.0%)

the directions of the differences, an analysis of variance (ANOVA) with Tukey’s HSD post hoc procedure was used. In Table II, the results revealed significant F-test values for each CBBE dimension (po0.01). Pair-wise comparisons for perceived quality revealed significant differences between private banks and state banks, and private banks and foreign banks (po0.01), but there was no significant difference between state banks and foreign banks. These findings suggested that customers of private banks perceived a significantly higher quality of services than those of state and foreign banks did, where the perceived service quality of private banks was the highest, and state banks and foreign banks were perceived to be offering services of similar quality. Therefore, H1b is partially supported. As for brand image/association, significant differences were found between private banks and state banks, private banks and foreign banks, and state banks and foreign banks (po0.01). This indicated that customers had significantly different brand image/association perceptions of these three types of banks, where private banks had the highest brand image/associations, followed by foreign banks, and the lowest for state banks. Therefore, H1c/H1d together are supported.

(n ¼ 167)

(n ¼ 173)

(n ¼ 174)

(n ¼ 179)

17.3415.98 ¼ 1.36 17.3415.85 ¼ 1.48 15.9815.85 ¼ 0.12 19.5515.97 ¼ 3.58 19.5517.39 ¼ 2.16 15.9717.39 ¼ 1.42 10.9511.26 ¼ 0.31 10.959.32 ¼ 1.64 11.269.32 ¼ 1.95 13.5511.26 ¼ 2.28 13.5511.03 ¼ 2.52 11.2611.03 ¼ 0.23 61.2354.13 ¼ 7.10 61.2353.66 ¼ 7.58 54.1353.66 ¼ 0.47

Mean difference (AB)

Notes: aP, private bank; S, state bank; F, foreign bank; ***the mean difference is significant at pp0.01 level

State (n ¼ 170)

State (n ¼ 177) Private (n ¼ 182)

State (n ¼ 181) Private (n ¼ 197)

State (n ¼ 183) Private (n ¼ 190)

State (n ¼ 193) Private (n ¼ 199)

State Foreign Foreign State Foreign Foreign State Foreign Foreign State Foreign Foreign State Foreign Foreign

Private (n ¼ 200)

Perceived quality F(2, 574) ¼ 7.8; po0.01) P4S ¼ Fa Brand image/association F(2, 558) ¼ 29.9; po0.01) P4F4S Organizational association F(2, 542) ¼ 23.7; po0.01) S ¼ P4F Brand loyalty F(2, 544) ¼ 26.8; po0.01) P4S ¼ F CBBE F(2, 516) ¼ 16.9; po0.01) P4S ¼ F (n ¼ 184)

Bank type (B)

Bank type (A)

Dependent variable 0.41 0.42 0.42 0.46 0.47 0.48 0.29 0.30 0.30 0.38 0.38 0.39 1.46 1.47 1.49

SE

0.003*** 0.001*** 0.953 0.000*** 0.000*** 0.009*** 0.545 0.000*** 0.000*** 0.000*** 0.000*** 0.828 0.000*** 0.000*** 0.947

Significance

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Table II. ANOVA and post hoc comparisons of each CBBE dimension and overall CBBE

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Concerning the organizational associations, significant differences existed between private banks and foreign banks, and state banks and foreign banks (po0.01), but there was no significant difference between private banks and state banks. These findings indicated that consumers perceived private banks and state banks had higher organizational associations than foreign banks, while private and state banks were perceived similarly. Therefore H1e is partially supported. Finally, for brand loyalty, significant differences were found between private banks and state banks, and between private banks and foreign banks (po0.01), but not between state banks and foreign banks. These comparisons showed that private banks had a significantly higher brand loyalty than both state and foreign banks. Therefore, H1f is partially supported. Testing hypotheses H2 The results in Table II also reveal a significant ANOVA F-test (po0.01) for overall CBBE, indicating that CBBE differed across three types of banks. Significant differences were found between private banks and state banks, and private banks and foreign banks (po0.01), but there was no significant difference between state banks and foreign banks. Private banks had the highest overall CBBE composite score with 61.23, followed by state banks with 54.13. Foreign banks had the lowest score with 53.66. These results were consistent with the findings of Eser et al. (2006), Unal et al. (2007), and Omran (2007). However, because CBBE scores were not significantly different for state banks and foreign banks, H2 is partially supported. Discussion and implications The main objective of this study was to identify the dimensions of the CBBE and examine the current state of branding in the Turkish banking industry. To achieve this objective, the study tested, analyzed, and reported on how the CBBE dimensions differed across three types of banks (state, private, and foreign). Tests of the measurement model revealed four clear CBBE dimensions of perceived quality, brand image/association, organizational association, and brand loyalty with high internal reliability. Due to the strong causal relationships as suggested in the literature, BI/BA demonstrated lower discriminant validity than the other dimensions. The brand awareness analysis produced interesting results for the banks in the three bank groups. The results show that private banks have the highest usage (81.6 percent) by the awareness groups, followed by the foreign (54.0 percent) and state banks (53.6 percent) with almost identical usage rates. Among state banks, Ziraat Bank dominated the top-of-mind awareness. However, because high awareness did not translate into a high usage rate of this bank by the awareness group, Ziraat Bank needs to focus on converting this awareness group into customers. This may require further research to identify the reasons why the awareness group did not patronize Ziraat Bank. The results for the other two state banks (Vakif Bank and Halk Bank) indicated that they faced the initial challenges of increasing awareness and then increasing the usage of their banks. Among private banks, no single bank dominated top-of-mind awareness. However, Garanti Bank was the highest with a 33 percent awareness level. Private banks seemed to be doing better at converting customer awareness into users of their banks. In this case, private banks might have to focus on increasing the awareness of their banks in order to increase their customer base. Finally, the analyses for foreign banks showed that HSBC dominated top-of-mind awareness, with almost 60 percent of the awareness group being the users of this bank.

This was consistent with the Banker’s number one ranking of HSBC among the top 500 global financial brands (Imeson, 2008). The results for other foreign banks suggested that they must first increase top-of-mind awareness among their customers, and then try to convert the awareness group into users of their banks. These findings indicated that some of the Turkish banks might enjoy name awareness, but this did not seem to be sufficient for brand usage and building a strong brand, which was parallel to the findings by Devlin and Azhar (2004). Nevertheless, it is interesting to note that private banks collectively did a much better job than both state and foreign banks in converting the awareness groups into users of their banks. This was consistent with the findings of Omran (2007) that local banks with private ownership performed better. These findings were also consistent with the results of testing H1b-H1f, and H2. The results indicated that significant differences existed in the overall CBBE and its dimensions across the three types of banks. The testing of H2 indicated that the overall CBBE was significantly higher for private banks than that for state and foreign banks, but it was not significantly different between state banks and foreign banks. The findings for private banks were consistent with the findings of Eser et al. (2006), Unal et al. (2007), and Omran (2007) and the ranking of banks in Turkey by global finance (Green, 2005) where private banks dominated the rankings. In addition to the overall CBBE, pair-wise comparisons of the CBBE dimensions in Table II show that private banks had significantly higher means for perceived quality, brand image/association, and brand loyalty. While state and foreign banks were almost equal in perceived quality, and brand loyalty, foreign banks had a significantly lower perceived quality, and brand loyalty than private banks. Foreign banks had significantly lower brand image/association than private banks but higher than state banks. The organizational association for foreign banks was lower than both state and private banks. In addition to challenges for global brands presented by Robinson (2007), these findings provide important insights into the challenges global banks may face with their branding strategies when they enter new markets. Our results confirmed the strength of private banks in Turkey. However, while none of the state banks made the global financial ranking (Green, 2005), their second highest rating on perceived quality, brand loyalty, and the overall CBBE in our study may suggest that building brand loyalty could be more challenging and might require more emphasis on all of the brand equity strategies than just providing high-quality services. This may be, because of the intangible nature of banking services (Zeithaml, 1988; Zeithaml et al., 2006), that building brand loyalty is more challenging than building other dimensions of brand equity. Moreover, because of the predicted nature of brand loyalty that is based on predictive factors ( Jacoby et al., 1977; Keller, 1993, 2008; Kim et al., 2008; Tong and Hawley, 2009), the challenge of building loyalty may also be true for global (foreign) banks when they expand their operations into new markets. Given a relatively short history of the foreign banks in Turkey, they face the challenge of increasing perceived quality, organizational association, and brand loyalty to compete with state banks and especially private banks, whereas state banks face the challenge of increasing service quality, brand image/association, and brand loyalty to effectively compete with both private and foreign banks. Therefore, the perceived quality, brand image/association, organizational association, and brand loyalty items used in this study could help both state and foreign banks in improving their brand equity in Turkey. The findings in this study show that, as suggested by de Chernatony and Cottam (2006b), building a successful bank (financial services) brand may require long-term investment especially in a new foreign market.

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Foreign banks could pursue several strategies in order to increase brand loyalty. One strategy is that foreign banks, which entered the banking industry in Turkey through purchasing relatively smaller Turkish private banks, may want to keep the names of these banks instead of following a single global branding strategy. This may allow foreign banks to build on an already-existing brand loyalty in a developing country rather than impairing the strength of the relationship with bank’s existing customers (Devlin and Azhar, 2004). Although these findings provide new insight into the Turkish banking industry, they are consistent with the positioning, marketing mix, objectives, and resources of the banks in Turkey and other developing countries. As mentioned earlier, private banks typically have more resources and are more efficient (Unal et al., 2007; Omran, 2007). They can provide services of higher quality thanks to their greater resources and connections with the industry and holdings. It is also possible that local connections of private banks with their customers and business partners can generate both emotional benefits from the experience and self-expressive benefits for customers from supporting a local business (Aaker, 2004). State banks, being established and mature, usually provide stable financial resources for small enterprises and farmers. Conversely, foreign banks, being relatively newcomers to the Turkish banking industry, are still in need of increasing efficiencies, and are disadvantaged by low presence and visibility (Akcay, 2002). Finally, the state’s lax and arbitrary supervision of foreign banks may also be one of the reasons for consumers to perceive higher risks with foreign banks, which may in part explain their lower levels of organizational associations, loyalty, and therefore brand equity. The results of this study not only offer insight into the potential effects of globalization efforts of banks, but also provide the benchmark that state, local, and foreign banks have long needed to compare their performance based on the CBBE dimensions. It also closes the gap in the literature because no study exists that investigates CBBE for foreign banks in an emerging market with strong competition from state and local private banks. The findings of the study will be beneficial to foreign global banks for understanding the branding challenges they may face from local banks in new markets. In addition, the brand equity theory has not been adequately developed and examined for the banking industry to help different types of banks design their branding strategies based on the brand awareness and perceptions of customers toward their service quality, brand association/image, and brand loyalty. Moreover, since this study was conducted with bank consumers, the results improved on the limitations of prior studies that used brand experts (Dall’Olmo Riley and de Chernatony, 2000; de Chernatony and Cottam, 2006a; O’Loughlin and Szmigin, 2004) and limited sample sizes (Devlin and Azhar (2004). It elicited information from bank customers, thus providing a valuable and more realistic insight into the aforementioned branding issues. The study also contributed to the testing of CBBE measurements with actual bank customers rather than student samples, which was the case in prior research (Yoo and Donthu, 2001; Washburn and Plank, 2002). Limitations and suggestions for future research Among the limitations, the sample was limited to a convenience sample of Turkish adult citizens of one major metropolitan area in Turkey. Although the comparison of the sample profile to the population of Turkey revealed a similar distribution in age, gender, income, and education for urban areas, probability sampling would increase the representativeness of the sample. Also, the authors recommend that a future study

cover more cities where these banks operate. In addition, this study has not measured and tested the brand equity dimensions for a specific brand of a bank from each type of bank. The study asked the respondents to answer the brand equity statements for the bank brand they listed in a given type of bank. This way, the authors minimized the possibility of a reporting bias by loyal customers to a specific bank because using a specific brand would have limited the study to those customers who might be partial to their bank. However, the study can be conducted for specific bank brands. Finally, this study has not hypothesized differences in the individual measurement items across types of banks due to space limitations. However, in a future study, the managers of both state and foreign banks will be able to identify the weak areas with the lowest mean scores on perceived quality, brand image/association, organizational association, and brand loyalty factors that contribute to their brand equity, and then work on improving their weaknesses. After the improvements are implemented, a future follow-up study may be used to determine the effectiveness of improvement programs. In cross-cultural research studies that compare bank customers in various countries, our findings offer the type of bank (private, state, foreign) as a moderating variable to test specific and traceable differences in perceptions of bank customers of various cultures. Because significant differences in customer perceptions of service quality, brand image, organizational associations, brand loyalty, and the overall CBBE were found to exist across types of banks, consumer perceptions in various cultures can be hypothesized to be different across types of banks. Therefore, the findings of the studies that account for the differences based on types of banks across different cultures would be considered more reliable and generalizable. References Aaker, D.A. (1991), Managing Brand Equity, The Free Press, New York, NY. Aaker, D.A. (1996a), Building Strong Brands, The Free Press, New York, NY. Aaker, D.A. (1996b), “Measuring brand equity across products and markets”, California Management Review, Vol. 38 No. 3, pp. 102-20. Aaker, D.A. (2004), Brand Portfolio Strategy: Creating Relevance, Differentiation, Energy, Leverage, and Clarity, The Free Press, New York, NY. Aaker, J.L. (1997), “Dimensions of brand personality”, Journal of Marketing Research, Vol. 34 No. 3, pp. 347-56. Akcay, C. (2002), “Fallacies of a fantasyland: the Turkish banking sector”, Private View, Summer, pp. 40-7, available at: www.tusiad.us/content/uploaded/pw10BankingSector.pdf (accessed October 25, 2009). Ball, D.A., McCulloch, W.H. Jr, Frantz, P.L., Geringer, J.M. and Minor, M.S. (2002), International Business: The Challenge of Global Competition, McGraw-Hill Irwin, New York, NY. Bitner, M.J., Booms, B.H. and Tetreault, M.S. (1990), “The service encounter: diagnosing favorable and unfavorable incidents”, Journal of Marketing, Vol. 54 (January), pp. 71-84. Buil, I., de Chernatony, L. and Martinez, E. (2008), “A cross-cultural validation of the consumerbased brand equity scale”, Journal of Product & Brand Management, Vol. 17 No. 6, pp. 384-92. Dall’Olmo Riley, F. and de Chernatony, L. (2000), “The service brand as relationship builder”, British Journal of Management, Vol. 11 No. 2, pp. 137-51. Debling, F. (1998), “Mail myopia: or examining financial services marketing from a brand commitment perspective”, Marketing Intelligence & Planning, Vol. 16 No. 1, pp. 38-46. de Chernatony, L. and Cottam, S. (2006a), “Internal brand factors driving successful financial service brands”, European Journal of Marketing, Vol. 40 Nos 5/6, pp. 611-33.

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Measures of constructs

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Table AI. Measurements of CBBE, scales and results of factor analysis

LD

CA

Perceived quality 0.92 A1: Its staff takes care of banking services in promised time 0.72 A2: Has courteous personnel 0.74 A3: Its personnel quickly corrects mistakes 0.75 A4: Has experienced personnel 0.75 A5: Its personnel is knowledgeable about all areas of bank services 0.69 A6: Its personnel takes care of tasks accurately 0.75 Brand image/brand association 0.93 B1: Bank X is known for providing the best quality service 0.71 B2: Bank X offers the greatest assortment of banking services 0.76 B3: Bank X provides the fastest service 0.72 B4: Bank X has very pleasant atmosphere 0.78 C1: It is appropriate to describe the services offered by Bank X as “best quality” 0.72 C2: It is appropriate to describe Bank X as “contemporary” that uses high technology 0.75 C3: It is appropriate to describe Bank X’s personnel as “very customer-friendly” 0.66 Organizational association 0.86 D1: I would feel safe to keep all my money in Bank X 0.66 D2: Bank X has the longest history in banking 0.82 D3: Bank X is known to be “the most reliable bank” in all areas of services 0.77 D4: Bank X is a reliable brand 0.72 Brand loyalty 0.92 E1: Bank X is my first choice 0.88 E2: I regularly use Bank X for all my banking needs 0.88 E3: I recommend Bank X to others 0.88 E4: I consider myself loyal to Bank X 0.90 E5: I am proud to do all my banking with Bank X 0.82 Scale: 1 ¼ strongly disagree; 2 ¼ disagree; 3 ¼ agree; 4 ¼ strongly agree Brand awareness Unaided recall Please write down the name of a bank in Turkey that comes first to your mind Open-ended Do you patronize this bank? Scale: 1 ¼ yes; 2 ¼ no

CR

AVE

0.87

0.54

0.89

0.53

0.83

0.55

0.94

0.76

Notes: LD, loading; CA, Cronbach’s a; CR, construct reliability; AVE, average variance extracted for the construct

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Appendix 2

PQ BIBA OA BL

PQ

BIBA

OA

0.54 0.59 0.41 0.47

0.53 0.42 0.59

0.55 0.48

BL

375 0.76

Note: Diagonal elements are the square root of average variance extracted (AVE), which should be larger than the inter-construct correlations (off-diagonal elements) for discriminant validity

Corresponding author Tulay Girard can be contacted at: [email protected]

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Table AII. Discriminant validity of constructs