THE EFFECT OF BUILDING CUSTOMER BASED BRAND

EQUITY ON THE FINANCIAL PERFORMANCE OF MILK

PROCESSORS IN KENYA

BY

SARAH NJERI KURIA

UNITED STATES INTERNATIONAL UNIVERSITY-

AFRICA

SUMMER 2018

THE EFFECT OF BUILDING CUSTOMER BASED BRAND

EQUITY ON THE FINANCIAL PERFORMANCE OF MILK

PROCESSORS IN KENYA

BY

SARAH NJERI KURIA

A Research Project Report Submitted to the Chandaria

School of Business in Partial Fulfillment of the Requirement

for the Degree of Masters in Business Administration (MBA)

UNITED STATES INTERNATIONAL UNIVERSITY-

AFRICA

SUMMER 2018

ii

DECLARATION

I, the undersigned, declare that this is my original work and has not been submitted to any

other college, institution or university other than the United States International

University in Nairobi for academic credit.

Signed:_____________________________ Date:_________________________

Sarah Njeri Kuria (ID. No.639402)

This project has been presented for examination with my approval as the appointed

supervisor.

Signed: _____________________________ Date: _________________________

Dr. Kefah Njenga

Signed: _____________________________ Date: _________________________

Dean, Chandaria School of Business

iii

COPYRIGHT

© Copyright by Sarah Njeri Kuria, 2018.

All rights reserved. No part of this project may be produced or transmitted in any form or

by any means, electronic, mechanical, including photocopying, recording or any

information storage without prior written permission from the author.

iv

ABSTRACT

The challenge for marketers in building strong brands is ensuring that customers have the

right type of experiences with products and services and their accompanying marketing

programs so that the desired thoughts, feelings, images, beliefs, perceptions, opinions and

so on become linked to the brand (Keller, 2003). In the world today, companies are not

only focusing on building brands but they have to leverage on these brands through a set

of assets to ensure they link the consumer with the brand and thus they continuously

improve their financial performance. These assets are referred to as brand equity.

This research focused on the effect of building Customer Based Brand Equity on the

financial performance of milk processors in Kenya. The study was guided by the

following specific objectives; to review extent to which milk processors have adopted the

concept of brand equity, to analyze how milk processors in Kenya have built Customer

Based Brand Equity and to analyze the effect of Customer Based Brand Equity on

financial performance of milk processors in Kenya.

Data was collected from the 24 licensed milk processors in Kenya through structured

questionnaires in the month of April 2017. The list of the licensed milk processors was

obtained from the Kenya Dairy Board. A census study was conducted since the population

was small. The questionnaires were all sent on email and follow up calls were made to

increase the response rate. Out of the 24 questionnaires, 22 were received duly filled for

this study.

The study adopted a descriptive research design which allowed respondents to describe

the factors that they believed attributed to their sustainability and growth. This study used

both quantitative and qualitative method of data analysis. The questionnaires were coded

and edited for completeness and consistency and entered into Statistical Package for

Social Sciences (SPSS version 20). Analysis involved descriptive statistics and inferential

analysis. Descriptive analysis technique gave simple summaries about the sample data in

quantitative descriptions and included: mean, standard deviation, frequencies and

percentages.

The study revealed milk processors have greatly adopted the concept of brand equity.

Brand awareness is high as brands are well known by the customers and are easily

identifiable. The processors strongly agreed that they aimed at retaining their customers

v

and satisfying their needs every time as loyal customers tend to purchase other products

offered by the company and recommend their friends and family. The milk processors

market their brand as that of high quality and their consumers consider their brands to be

of higher quality than those of the competitors.

The study notes that milk processors have greatly adopted the concept of brand equity and

have built strong brands through CBBE. All the milk processors consider the customers

when making branding decisions and ensuring the customers have memorable

experiences with their brands.

The study concludes that there existed a positive relationship between customer based

brand equity and financial performance of milk processors in Kenya. The study noted that

higher brand awareness and loyalty provide a larger consumer base and better pricing

than competitors, higher perceived quality paves the way for premium pricing while

higher awareness, positive associations and higher quality perceptions help companies in

finding the financial resources they require more easily, hence lead to higher financial

leverage.

The study recommends that companies should differentiate their brands either through

positioning, association and segmentation. This will help build their brand equity and

enhance CBBE. The study also recommends companies to endeavor to build strong

relationships between perceived relative price and perceived product value. Finally, the

study recommends that further research should be conducted to investigate the other

factors accounting for (24.8%) effect on the financial performance of milk processors in

Kenya

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ACKNOWLEDGEMENT

First and foremost, I would like to give God all the glory throughout my entire course and

especially as I worked on this project. His grace has been sufficient to keep me going.

I would like also to acknowledge my husband, family and friends for their support and

encouragement as I worked on the project and in course of my masters.

I would also like to acknowledge my supervisor Dr. Kefah Njenga for his guidance and

wise counsel during the development of this project.

vii

DEDICATION

I dedicate this project to my family and friends.

viii

TABLE OF CONTENTS

DECLARATION ................................................................................................................ii

COPYRIGHT ................................................................................................................... iii

ABSTRACT ...................................................................................................................... iv

ACKNOWLEDGEMENT ............................................................................................... vi

DEDICATION ..................................................................................................................vii

TABLE OF CONTENTS ............................................................................................... viii

LIST OF ABBREVIATIONS ............................................................................................ x

LIST OF TABLES ............................................................................................................ xi

CHAPTER ONE ................................................................................................................ 1

1.0 INTRODUCTION ....................................................................................................... 1

1.1 Background of the Problem ...........................................................................................1

1.2 Problem Statement .........................................................................................................5

1.3 General Objective ..........................................................................................................6

1.4 Specific Objectives ........................................................................................................6

1.5 Significance of Study .....................................................................................................6

1.6 Scope of the Study .........................................................................................................7

1.7 Definition of Terms ........................................................................................................7

1.8 Chapter Summary ..........................................................................................................8

CHAPTER TWO ............................................................................................................... 9

2.0 LITERATURE REVIEW ........................................................................................... 9

2.1 Introduction ....................................................................................................................9

2.2 Brand Equity ..................................................................................................................9

2.3 Customer Based Brand Equity (CBBE) .......................................................................13

2.4 Effect of Customer Based Brand Equity on Financial Performance ...........................20

2.5 Chapter Summary ........................................................................................................24

CHAPTER THREE ......................................................................................................... 25

3.0 RESEARCH METHODOLOGY ............................................................................. 25

3.1 Introduction ..................................................................................................................25

3.2 Research Design...........................................................................................................25

3.3 Population and Sampling Design .................................................................................26

3.4 Data Collection Methods .............................................................................................26

3.5 Research Procedures ....................................................................................................27

3.6 Data Analysis Methods ................................................................................................27

3.7 Chapter Summary ........................................................................................................28

ix

CHAPTER FOUR ........................................................................................................... 29

4.0 RESULTS AND FINDINGS ..................................................................................... 29

4.1 Introduction ..................................................................................................................29

4.2 General Information .....................................................................................................29

4.3 Brand Information ........................................................................................................31

4.4 Building Brand Equity and Customer Based Brand Equity among Milk Processors in

Kenya .................................................................................................................................33

4.5 Relationship Between Customer Based Brand Equity and Financial Performance of

Milk Processors in Kenya ..................................................................................................39

4.6 Regression ....................................................................................................................41

4.7 Chapter Summary ........................................................................................................43

CHAPTER FIVE ............................................................................................................. 45

5.0 DISCUSSION, CONCLUSIONS AND RECOMMENDATIONS ........................ 45

5.1 Introduction ..................................................................................................................45

5.2 Summary ......................................................................................................................45

5.3 Discussion ....................................................................................................................46

5.4 Conclusion ...................................................................................................................51

5.5 Recommendation .........................................................................................................52

REFERENCES ................................................................................................................ 54

APPENDICES .................................................................................................................. 60

Appendix I: Cover Letter ..................................................................................................60

Appendix II: Questionnaire ...............................................................................................61

Appendix III: Licensed Milk Processors ...........................................................................65

x

LIST OF ABBREVIATIONS

CBBE: Customer Based Brand Equity

ROI: Return on Investments

KDB: Kenya Dairy Board

xi

LIST OF TABLES

Table 4.1 Response Rate of the Study ............................................................................... 29

Table 4.2: Number of Brands the Company Has ............................................................... 31

Table 4.3: Stakeholder Influence on Brand Decisions ....................................................... 33

Table 4.4: Extent to Which Companies have Built Brand Awareness ............................... 34

Table 4.5: Extent to Which Companies have Built Brand Loyalty ................................... 36

Table 4.6: Extent to Which Companies have Built Perceived Quality .............................. 38

Table 4.7: Extent to Which Companies have Built Brand Associations ............................ 39

Table 4.8: Relationship Between Brand Equity and Financial Performance ..................... 41

Table 4.9: Regression Model Summary ............................................................................. 42

Table 4.10: ANOVAa Statistic ........................................................................................... 42

Table 4.11: Table of Coefficients ....................................................................................... 43

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LIST OF FIGURES

Figure 4.1: Department in which the Respondents Work .................................................. 30

Figure 4.2: Period in which the Company has been Operational ...................................... 30

Figure 4.3: Sectors of Operation Apart from Dairy ........................................................... 32

1

Figure 4.1 Department in which the Respondents WorkCHAPTER ONE

1.0 INTRODUCTION

1.1 Background of the Problem

In today’s business world, it has become critical for every company to establish brand

equity in order to set itself apart from competition and to increase their firm value. Davis

and Dunn (2002) have described brand equity as the combination of consumer’s

awareness of the brand, the brand’s perceived quality, and associations with the brand and

loyalty to the brand. Brand equity consists of a set of advantages connected to a brand and

supplements/or removes from the firm, the worth provided by a product or service

(Karadeniz, 2010). Kardeniz adds that brand equity is a group of assets and thus the

management of brand equity contents involves investment to create and enlarge these

assets.

Brand equity stands for a brand’s capacity to generate a future value stream, either

through its ability to extract a premium price from consumers (for example, being

prepared to pay more for a Rolex watch than for an unbranded, functionally equivalent

watch) or through its ability to attract capital (for example, investors prefer to place their

funds in a company that they know and sympathize with) or otherwise facilitate relations

with interested parties (distributors, producers) (Karadeniz, 2010). Laforet (2010) states

that an organization can make profits, increase market share and enhance organizational

performance through a set of associations. These set of associations make up the brand

equity.

Fayrene and Lee (2011) cite two principal and distinct perspectives that have been taken

by academics to study brand equity – financial and customer based. From a financial

perspective, brand equity is evaluated from a financial market point of view where the

asset value of a brand is appraised while in customer-based brand equity (CBBE model)

brand equity is evaluated by the consumer’s response to a brand name. The CBBE model

incorporates theory advances and managerial practices in understanding and influencing

consumer behavior.

Laforet (2010) defines customer based brand equity as the differential effect that

consumer brand knowledge has on their response to brand marketing activity. This is

derived from the fact that the value of the brand and its equity is derived by the actions of

2

the consumer as they are the ones who ultimately decide which brands are more valuable.

This occurs when the consumer has a high level of awareness and familiarity with the

brand and holds a strong, favorable and unique association in his mind.

Keller (2001) notes that the development of the CBBE model was driven by three goals

aimed at helping marketers set strategic direction and informs their brand-related

decisions. First, the model had to be logical, well-integrated, and grounded so as to reflect

state-of-the-art thinking about branding from both an academic and industry point of

view. Second, the model had to be versatile and applicable to all possible kinds of brands

and industry settings while at the same time remaining relevant. Third, the model had to

be comprehensive with enough breadth to cover important branding topics as well as

enough depth to provide useful insights and guidelines.

According to Keller (2001), the CBBE model provides a yardstick by which brands can

assess their progress in their brand-building efforts as well as a guide for marketing

research initiatives. The concept behind the Consumer Based Brand Equity Model is

simple: in order to build a strong brand, you must shape how customers think and feel

about your product. You have to build the right type of experiences around your brand, so

that customers have specific, positive thoughts, feelings, beliefs, opinions and perceptions

about it. When you have strong brand equity, your customers will buy more from you,

they'll recommend you to other people, they're more loyal and you're less likely to lose

them to competitors. Keller’s model represents a useful yardstick for interpreting

marketing strategies and assessing the value of the brand (Laforet, 2010).

A brand should thus focus on the consumers and not the organization. Armstrong and

Kotler (2009) note that successful brands should represent customers perceptions and

feelings about a product or service and its performance which is everything that the

product or service means to the consumer which is the premise of the CBBE model.

Strong brands thus form a basis to build strong and profitable customer relationships as

presented in a profitable set of customers (Armstrong and Kotler, 2009).

A brand is said to have positive customer-based brand equity when consumers react more

favorably to a product and the way it is marketed when a brand is identified than when it

is not (e.g when a product is unnamed or has a fictitious name) while on the other hand, it

has negative consumer- based brand equity when consumers react less favorably to

3

marketing activity for the brand compared to an unnamed or fictitiously named version of

the product (Keller, 2003). A good example are the blind tests given for Coke and Pepsi

colas where participants tend to say they are no differences between the brands but when

the names are given most tend to change and say they prefer the coke brand. Thus brands

with a positive customer-based brand equity results in consumers being more accepting of

brand extension, less sensitive to price increases and withdrawal of advertising support

and more willing to seek the brand in new distribution channels.

One of the ways shareholders and senior management can increase the financial

performance of the firms is by creating sustainable competitive advantage among the

competition (Aydin and Ulengin, 2015). In terms of marketing management, one of the

best tools available to give firms competitive advantage is the brand. The study will be

conducted to illustrate whether or not an observable link exists between consumer based

brand equity, which can to a certain extent be managed by managers and the financial

performance of firms, which is an absolute necessity that should be provided by the

continuing operations of the firms.

Kenya has one of the most developed dairy industries in Sub-Saharan Africa and is the

single largest contributor to national GDP at 4.5% translating to a contribution of over

Kshs. 200 billion, a figure higher than that of tea and horticulture (Kenya National Dairy

Master Plan, 2010). The dairy sub-sector is regarded as a success case within the

agriculture sector in Kenya since it supports the poor, creates employment and is

commercially oriented. The dairy industry supports over 1.8 million farmers, 80% of who

are smallholders in high to medium potential areas and the entire pastoral communities of

Kenya as sources of food, employment, cash income, manure to support crop production,

green energy in form of biogas and financing cash needs for social status (Kenya National

Dairy Master Plan, 2010).

Kenya's dairy industry is regulated through the Dairy Industry Act, Chapter 336 of the

Laws of Kenya, as enacted in 1958 and under the Act, the Kenya Dairy Board (KDB) was

established in order to organize, regulate, and develop efficient production, marketing,

distribution and supply of dairy produce in Kenya.

The Kenyan dairy industry was founded during the colonial era when commercialization

of dairy production was initiated (Ministry of Agriculture, Livestock and Fisheries

4

[MoALF], Kenya Dairy Board [KDB], Kenya National Bureau of Statistics [KNBS],

Dutch Development Organization [SNV, Kenya], Heifer Project International [HPI

Kenya], Eastern Africa Agricultural Productivity Project [EAAPP], Agricultural Sector

Development Support Program [ASDSP], Kenya Agricultural Productivity and Agri-

business Project [KAPAP], 2013). In 1992, the monopoly of Kenya Cooperatives

Creameries in milk processing and marketing was abolished with the liberalization of the

dairy industry. As a result, there were major dynamic shifts in milk marketing and the

emergence of new processors. Milk processing in Kenya has over the past few years been

dominated by four major processors, namely, the New KCC, Brookside Dairy Limited,

Githunguri Dairy Farmers Cooperative and Sameer Dairies.

The 2009 Kenya population was 38.6 million people and is estimated to hit 58 million in

the next 20 years. The current per capita milk consumption is estimated at 110 litres,

which is projected to increase to 220 litres by 2030 due to envisaged better incomes and

better marketing (Kenya National Dairy Master Plan, 2010). There is potential for growth

of the sub-sector both domestically and regionally as Kenya has high per capita milk

consumption, and demand within the Eastern and Southern Africa region is estimated at

two million tonnes (Tegemeo Institute of Agricultural Policy and Development, Egerton

University, 2016).

Presently, out of the 4.5 billion litres of milk produced in Kenya, 65% (2.925 billion

litres) is marketed leaving 35% (1.575 billion litres) for home consumption (Kenya

National Dairy Master Plan, 2010). Kenya National Dairy Master Plan (2010) notes that

out the 2.925 billion litres of milk marketed, 45% (1.316 billion litres) is handled in the

formal market or through the processors. According to MoALF et al. (2013) , over 40

milk processors have been licensed since the dairy industry was liberalized in 1992 but

the current number of active milk processing companies has dropped to 24 as a result of

mergers, acquisitions and insolvencies. The output products from the Kenyan processors

include white liquid milk (pasteurized and long life), flavored liquid milk, fermented milk

(yoghurt and cheese), milk powder, cheese, butter, ghee and cream

There is a rising interest in the processed milk business and the players anticipate a leap

in demand for the commodity driven by rapid urbanization, increased population and

income growth (Juma, 2015). These will boost demand for dairy products across the

5

board and the entry of more players is expected to increase competition that will see firms

leverage more on their brands.

1.2 Problem Statement

Demand for milk and dairy products in COMESA and EAC countries is predicted to grow

annually at 3.5% by 2020 (Jomo Kenyatta University of Agriculture and Technology

[JKUAT], Central Artificial Insemination Station [CAIS] and Kenya Institute of Public

Policy Research Institute [KIPPRA], 2012). Billionaire investors are queuing to pump big

money into Kenya’s dairy industry, Deepak Kamani, the chairman of conglomerate Zuri

Group, has plans to build a fresh and powdered milk plant in Nyahururu while Africa’s

richest man Aliko Dangote of Nigeria has also announced plans to set up a factory in

Kenya to produce dry milk for local and export markets (Juma, 2015).

Juma (2015) observes that the rising interest in the processed milk business is seen as

preparing the players for the anticipated leap in demand for the commodity driven by

rapid urbanization, increased population and income growth. These will lead to boost in

demand for dairy products across and in turn will see an entry of more players. This will

increase competition that will see firms leverage more on pricing and product quality to

gain market share. JKUAT, CAIS and KIPPRA (2012) observe that there is need for

interventions by the processors to support growth and exploit the opportunities. One of

the ways of exploiting these opportunities is through Customer Based Brand Equity.

Chavera (2015) in her study on the relevance of customer based brand equity model in the

Geographical Information Systems (GIS) industry in Kenya noted that customer based

brand equity model has over the years been applied in various industries though some

companies are yet to adopt the concept as a whole. She calls for further studies on CBBE

within different industries to examine the extent of its adoption. In such a dynamic

industry at this time, a study on the dairy industry will come in handy.

Aydin and Ulengin (2015) note that there are few empirical studies available in the

existing literature that link consumer based brand equity and actual financial performance

of firms. This gap creates a need for this study.

6

1.3 General Objective

The general objective of the study was to examine the effect of Customer Based Brand

Equity on the financial performance of milk processors in Kenya.

1.4 Specific Objectives

1.4.1 To review extent to which milk processors have adopted the concept of Brand

Equity.

1.4.2 To analyze how milk processors in Kenya have built Customer Based Brand

Equity.

1.4.3 To analyze the effect of Customer Based Brand Equity on financial performance

of milk processors in Kenya.

1.5 Significance of Study

The research will be of benefit to;

1.5.1 Management of the Milk Processors

The study will be beneficial to the management of the milk processors as it will give

insights on managerial practice insight on CBBE. Since the study will focus on all the

milk processors, it will give industry information on what the milk processors are doing.

The study look at how various marketing concepts can be adopted to grow the brand.

1.5.2 Employees of the Milk Processors

The study will help the employees appreciate the importance of CBBE and understand

that it is not the role of the marketer’s only but it encompasses the organization.

1.5.3 Future Investors

Future investors in the milk processors will gain insights from the industry on how they

can maximize their future returns through CBBE.

1.5.4 Future Researchers on Similar Topics

This study will be a source of reference to future researchers who may be interested in

further establishing more findings in this area or researching similar topics in other

industries.

7

1.6 Scope of the Study

While the building brand equity is important to all organizations, a study of all the

organizations cannot be done due to the limitations of time and money. The scope of this

study was limited to the milk processors in Kenya and conclusions made can be

generalized to other organizations within different sectors. Limitations for the study

include not all the processors were willing to give information on their financial

performance and thus non-response to some questions in the questionnaire. Data

collection period was April 2017. The data was collected from marketing managers and

people handling branding decisions within the milk processors.

1.7 Definition of Terms

1.7.1 Brand

American Marketing Association define a brand as a name, term, symbol or design or a

combination of all these with the intention of identifying and differentiating goods and

services of one seller from the other (Laforet, 2010).

1.7.2 Brand Equity

Brand equity refers to the incremental cash gains which accrue to branded product over

unbranded product (Mohan and Sequeira, 2016).

1.7.3 Customer Based Brand Equity

This is the differential effect that consumer’s brand knowledge has on their response to

brand marketing activity (Laforet, 2010).

1.7.4 Brand Loyalty

Brand loyalty is the customers’ favorable attitude towards a specific brand (Pride and

Ferrell, 2009).

1.7.5 Perceived Quality

Atilgan (2005) defines perceived quality as the customer’s perception of the overall

quality of a product or service with respect to its intended purpose, relative to alternatives.

1.7.6 Brand Associations

Brand associations represent the basis for purchase decision and for brand loyalty. Brand

association refers to experiences, beliefs, perceptions, feelings, images and brand-related

thoughts linked in memory about a brand (Fayrene and Lee, 2011).

8

1.8 Chapter Summary

Chapter one gives an introduction on customer brand equity which is the focus of this

study. The problem statement gives reasons why the study was necessary and justification

was given from other studies done earlier that call for more research to be conducted

within this area. The chapter also discusses the research objectives, significance and

scope of the study. All terms have been defined as they apply in this study.

Chapter two reviews literature based on the research objectives. The chapter gives a better

understanding to the overall research by elaborating further on the research objectives.

Chapter three gives the research methodology used by defining what, how and from

whom data was collected, which instruments were used and how the data was analyzed.

Chapter four gives the research findings and lastly chapter five summarizes the findings,

recommendations and conclusion of the study.

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CHAPTER TWO

2.0 LITERATURE REVIEW

2.1 Introduction

This section presented various literatures relating to customer based brand equity as given

by other scholars and researchers. The literature reviewed brand equity, examined how to

build CBBE and discussed the effect of CBBE on financial performance.

2.2 Brand Equity

American Marketing Association define a brand as a name, term, symbol or design or a

combination of all these with the intention of identifying and differentiating their goods

and services from those of their competitors (Laforet, 2010). Thus any form of distinction

given to your product will be considered as a brand. The brand name is the part that can

be spoken and it includes letters and numbers while the brand mark is the element of a

brand that includes symbols or design (Pride and Ferrell, 2009).

Davis and Dunn (2002) state that the most valuable company asset is the brand then its

people follow. Well-managed brand are assets to the organization and the world today is

placing a lot of emphasis on the value of the brand (Dibb, Simkin, Pride and Ferrell,

2006). This value is what is referred to as brand equity. According to Chernatony,

McDonald and Wallace (2011), brands are estimated to represent at least 20% of the

intangible value of businesses on major world stock markets. In the recent past,

companies have been bought off at a value higher than their tangible assets with the

difference being attributed to the brand value. For example, Procter and Gamble

purchased Gillette for £31 Billion and only £4 Billion was for the tangible assets and

Philip Morris brought Kraft for £12.9 Billion with £4 Billion being the value of the

tangible assets (Chernatony, McDonald and Wallace, 2011).

Brand equity relates to the fact that different outcomes result from marketing of a product

or service because of its brand than if that same product or service had not been identified

by that brand (Keller, 2003). Marketers should use see a brand name as an implied

promise of the level of quality that consumers can expect from a brand which they will

use as a benchmark for future purchases (Laforet, 2010).

10

Through brand equity, an organization can maximize on the value of the brand using the

set of assets linked to a brand name to leverage on the value provided by a product or

service to a firm and the firm’s customers (Aaker, 2010). Armstrong and Kotler (2009)

describe brand equity as the positive differential effect that knowing the brand name has

on customer response to that product or service and thus build brand loyalty and

awareness.

Jorgensen (2013) observe that Keller’s definition of brand equity and his theory of

building brand equity should be used for the analysis but not as a measure of brand

equity. He recommends use of Aaker’s Brand Equity Ten model as the most suitable in

measuring what consumers feel about the brand. Aaker’s model proposes a multi-

dimensional model that has five different dimensions that affect the CBBE (Aydin and

Ulengin, 2015). The dimensions are; brand loyalty, brand awareness, perceived quality,

brand associations and other proprietary brand assets. Other proprietary brand assets

include patents, trademarks, and channel relationships but since these are not relevant to

consumer perception, only the first four dimensions are considered relevant to CBBE

(Mohan and Sequeira, 2016).

2.2.1 Brand Awareness

Fayrene and Lee (2011) define brand awareness as the customers’ ability to recall and

recognize the brand through their ability to identify the brand under different conditions

and to link the brand with certain associations in their memory. Recall is harder to achieve

and it is needed outside the store while recognition is needed inside the store (Kotler and

Keller, 2009). The depth of brand awareness measures how likely it is for a brand

element to come to mind and the ease with which it does so (Haglofs, 2014). A brand with

a deeper level of brand awareness is easily recalled compared to a brand that only comes

to the customers’ mind when they see it.

Brand awareness also relates to the probability that consumers are familiar with where the

brand is available and is accessible and successful brand awareness means that the brand

is highly reputable in the market (Malik et al., 2013). Brand awareness also plays a

significant role during the purchasing process of a product or service as it may control the

consumer’s perceived risk evaluation and their level of assurance about the buying

decision. This is because the consumers have knowledge about the brand and its

11

uniqueness. People tend to purchase familiar brands and are prepared to ascribe different

good attitudes to products or services that are familiar to them. It therefore becomes

important for companies to investigate where their brands are placed in the customers’

consideration set and the level of awareness about the brand as this affects customers’

perceptions about a brand and may influence their tastes (Haglofs, 2014).

Brand awareness plays an important role in the consumer decision making process as it;

increases the likelihood of the brand being in the consumer’s consideration set, affects

decisions about brands in consideration set and it influences the formation and

strengthening of brand associations in the brand image (Keller, 2003).

2.2.2 Perceived Quality

Perceived quality relates to the degree to which brands consistently produce satisfaction

by meeting customers’ expectations (Harrell and Frazier, 1999). Arnould, Price and

Zinkhan (2004) note that research has found that consumers care more about quality than

the economy hence for marketers, providing evidence of incremental quality is vital to

building competitive advantage. This is because perceived quality derives judgment by

comparing performance perceptions against expectations. If consumers feel that a brand is

ranks highly than the other, they will go for the brand when making a purchase decision

from the product category.

Keller (2008) on the other hand introduces the aspect of comparison with other brands by

defining perceived quality as the customers’ perception of the overall quality or

superiority of a product or service compared to alternatives and with respect to the

intended purpose. The same is expressed by Chi, Yeh and Yang (2009) when they state

that perceived quality makes customers subjective in their judgment on product quality

thus giving a product noticeable differentiation making it a selected brand in consumers’

minds.

The concept of perceived quality is examined in two groups of factors that are intrinsic

attributes and extrinsic attributes. The intrinsic attributes examines the physical

appearance of products while the extrinsic attributes relates to all other aspects apart from

the physical aspects for example, brand name, price, store, packaging and production

information. Marketers can segment the market through various cues relating to quality as

people vary in their use of cues (Arnould, Price and Zinkhan, 2004).

12

Perceived quality is different from objective quality. Perceived quality is the customer’s

judgment about a product’s overall excellence or superiority while objective quality refers

to the technical, measurable and verifiable nature of products/services, processes and

quality controls (Fayrene and Lee, 2011). Statt (1997) observes that objectivity varies

from one consumer to the other because each consumer perceives the world differently

and have constructed their own reality out of it.

Fayrene and Lee (2011) thus conclude that perceived quality is hence formed to judge on

the overall quality of a product since that quality is directly influenced by consumer

perceptions and consumers use these quality attributes to compare the quality of

unfamiliar products. When consumers have formed certain inferences about your

products, they will use this as a benchmark to judge any unfamiliar products. Perceived

quality is thus a relative concept which possesses situational, comparative, and individual

attributes.

2.2.3 Brand Associations

A brand association consists of all brand-related thoughts, feelings, perceptions, images,

experiences, beliefs, attitudes linked to the consumer’s mind about a certain brand

(Chieng and Lee, 2011). Zhu (2009) describes brand associations as the pieces of

information in consumers’ memories that are activated by a certain brand name.

Consumers respond to brands according to how they make them feel and brands have

ability to evoke feelings directly but consumers may respond emotionally depending on

how the brand makes them feel about themselves.

Brand associations can be classified into three major categories: attributes, benefits and

attitudes. Attributes are the descriptive features that characterize a brand such as what a

consumer thinks the brand is or have and what is involved with its purchase or

consumption. Benefits are the personal value consumers attach to the brand attributes,

that is, what consumers think the brand can do for them. Brand attitudes are consumers'

overall evaluations of a brand (Iglesias, 2001).

The associations related to the benefits represent a greater degree of abstraction than

those referring to the attributes and so, are more accessible and remain longer in the

consumer's memory. Benefits have a positive nature meaning if the brand value is greater,

their level will be higher. Benefits can be product or brand related. Product benefits are

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associations related to the physical or tangible attributes and so are present in all products

even in those sold without a brand or with an unknown brand. Brand benefits on the other

hand are associations related to intangible attributes or images added to the product

thanks to its brand name, that is, they represent benefits that can only be obtained from

products with a brand.

2.2.4 Brand Loyalty

Kotler and Keller (2009) define loyalty as a deeply held commitment to continuously

purchase a product or service despite situational influences and marketing efforts with the

potential to cause switching behavior. Brand loyalty is the customers’ favorable attitude

towards a specific brand (Pride and Ferrell, 2009). This means that if a brand has strong

brand loyalty, customers will purchase the brand consistently when they need a product in

that product category.

Brand loyalty is accomplished when the customer’s show repeated buy behavior towards

a particular brand and it comes as a consequence of customer fulfillment thus they are no

longer affected by the price factor and will show strong interest to purchase the product at

any expense (Karam and Saydam, 2015). Brand loyalty implies that consumers bind

themselves to products or services as a result of a deep-seated commitment.

Brand loyalty occurs when the consumer makes a conscious evaluation that a brand

satisfies their needs to a greater extent than others do and decide to buy the same brand

repeatedly for that reason (Hoyer and Macinnis, 2010). They add that consumer’s level of

commitment to a brand distinguishes brand loyalty to habit. Brand loyalty is strengthened

as the evaluation grows with time and as the evaluation is reinforced with time.

Cognitive loyalty is achieved when the brand becomes the consumer’s first choice when

making a purchase decision. Cognitive loyalty is closely linked to the highest level of

awareness (top-of-mind), where the brand becomes a matter of interest in a given

category. Thus, a brand should be able to become the consumer’s first choice (cognitive

loyalty) and is therefore it is purchased repeatedly (behavioral loyalty).

2.3 Customer Based Brand Equity (CBBE)

CBBE was developed by Kevin Lane Keller, a marketing professor. The basic premise of

CBBE is that the power of the brand lives in what the customers have learned, felt, seen,

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touched and heard about the brand as a result of their experiences over time lies in their

minds (Keller, 2003). The challenge for marketers in building strong brands is ensuring

that the brand forms the right type of experiences with the consumers and thus the

marketing programs accompanying the brand have the desired thoughts, feelings, images,

beliefs and perceptions (Keller, 2003).

Laforet (2010) defines customer based brand equity as the differential effect consumer

brand knowledge has on their response to brand marketing activity. This is derived from

the fact that the value of the brand and its equity is derived by the actions of the consumer

as they are the ones who ultimately decide which brands are more valuable. A brand has

positive CBBE when consumers react more favorably to the brand when compared to an

unnamed product and a brand has negative CBBE when consumers react less favorably to

marketing activity for the brand compared to an unnamed version of the product (Keller,

2003). A good example are the blind tests given for Coke and Pepsi colas where

participants tend to say they are no differences between the brands but when the names

are given most tend to change and say they prefer the coke brand.

Keller gives four steps to building CBBE. These are; establish proper brand identity,

create appropriate brand meaning through favorable brand associations, elicit positive

brand response and forge relationships with customers through brand loyalty.

2.3.1 Establish the Right Brand Identity

2.3.1.1.1 Brand Identity

Brand identity is what the firm wants the brand to mean as it represents a blueprint for

any marketing decision (Capon, 2012). Brands are more than just names and symbols as

they represent the consumer’s perceptions and feelings about a product and its

performance (Armstrong and Kotler, 2009). Capon (2012) differentiates products and

brands by noting that; products are made in the factory, can be outdated quickly and can

be copied by competitors while brands are bought by the customer, are unique and

successful brands are limitless.

Setting the brand’s identity rests purely on the organization as they need to specify the

brand’s meaning, aim and image (Kapferer, 2008). They decide what they want to project

to the public, how and when they want to project it. Identity expresses the brand’s

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tangible and intangible characteristics; everything that makes the brand what it is and

draws up the brand’s roots and heritage (Kapferer, 2008).

In order to achieve the right brand identity brand salience must be created (Keller, 2001).

Brand salience relates to aspects of customer awareness of the brand. Today brands have

meaning that go beyond their outward manifestations as they are a collection of

perceptions and associations that customers hold about a product, these are the values that

create meaning for the customers and what they expect when they are in contact with the

brand (Capon, 2012). This is what is referred to as the brand salience.

Brand identity is based on a thorough understanding of the firm’s customers, competitors,

and business environment and it needs to reflect the business strategy and the firm’s

willingness to invest in the programs needed for the brand to live up to its promise to

customers (Ghodeswar, 2008). To be effective, a brand identity needs to resonate with

customers, differentiate the brand from competitors, and represent what the organization

can and will do over time (Ghodeswar, 2008). Through the brand identity, a firm is able to

position the brand, distinguish it from competitors and define its brand image. Ghodeswar

(2008) add that a brand should be a distinctive identity that differentiates a relevant,

enduring, and credible promise of value associated with a product, service, or

organization and indicates the source of that promise.

2.3.1.1.2 Brand Positioning

Brand position is the place a brand occupies in the consumers’ minds relative to their

needs and competing brands and it’s up to the decision of the marketers to intentionally

create that position (Walker and Mullins, 2011). Brand positioning aims at aligning the

brand image and brand identity. What the firm sells about the brand must tally with what

the consumers think about the brand.

A brand is the company’s promise to deliver a specific set of features, benefits, services

and experiences constantly to the buyers (Kotler and Armstrong, 2010). As such when

developing a position strategy for a brand, one needs to establish a mission and vision for

the brand. By strategically positioning a brand in the minds of the target audience, the

company can build a strong identity or personality for the brand (Ghodeswar, 2008).

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Kotler and Armstrong (2010) note that brands can be positioned at three levels. At the

lowest level, a brand can be positioned on product attributes. This means selling the

product in terms of what it can do for the consumers. At the second level, it can be

associated with a desirable benefit. The third level is the strongest positioning as it is

based on strong beliefs and values. At the third level, brands have an emotional wallop.

Ability to endow a product, service or corporation with an emotional significance over

and above its functional value is a substantial source of value creation (Ghodeswar,

2008).

The positioning strategies adopted will depend on whether you are aiming to redefine

your current position, reposition the brand or reposition the competition (Ferrell and

Hartline, 2005). When a brand is born, there is a need to select a brand name and develop

a positioning strategy (Laforet, 2010). If you want to remain at the current position,

ensure you are constantly monitoring what the consumers want and the extent to which

the consumer’s feel your brand is satisfying their needs. When repositioning the brand,

thus means you are getting a new position for your brand and thus make fundamental

changes to your marketing mix elements. Repositioning the competition is a much easier

way as you put your competitors’ products in a less favorable light which will force them

to change their positioning strategy e.g Pepsi and Coke.

2.3.2 Create Meaningful Brand Meaning Through Brand Associations

Firms strive for brand associations that strengthen the desired brand identity and align

these associations with brand image (Capon, 2012). Brand Meaning is achieved through

favorable brand associations that involve customers so that they can try and purchase it

(Laforet, 2010).

The creation of a brand implies communicating a certain brand image in a way that the

firm's target groups can easily link the brand with a set of associations (Iglesias, 2001).

Iglesias (2001) borrows from the associative network memory model and defines brand

image as the perceptions about a brand as reflected by the cluster of associations that

consumers connect to the brand name in memory. Thus, brand associations are the other

informational nodes linked to the brand node in memory and contain the meaning of the

brand to the consumers. Brand associations have to be strong, positive and unique in

order to build brand attitude that leads to strong brand equity (Elliot and Percy, 2007).

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The two building blocks in this step are performance and imagery. Performance defines

how well your product meets your customers' needs and it consists of five categories:

primary characteristics and features; product reliability, durability, and serviceability;

service effectiveness, efficiency, and empathy; style and design; and price. Imagery refers

to how well your brand meets your customers' needs on a social and psychological level.

Your brand can meet these needs directly from a customer's own experiences with a

product or indirectly with targeted marketing or with word of mouth.

Two factors in particular strengthen brand association these are personal relevance and

consistency which has been built over time (Keller, 2008). Keller adds that the particular

associations we recall and their salience will depend not only on the strength of

associations but also on the retrieval cues present and the context in which we consider

the brand. Direct experiences with a brand create the strongest brand associations and are

particularly important during the consumer decision making process. Every aspect of the

relationship between the brand and the consumer contributes to learning that leads to

associations in memory that constitutes brand attitude (Elliot and Percy, 2007). Customer

attitudes towards the brand can range from negative effects such as hatred to simple

acceptability or attraction. Brand attachment ranges from disinterest to higher levels of

the loyalty hierarchy such as advocacy, love, and even addiction (Zhu, 2009).

Company influenced sources of information e.g adverts, form the weakest type brand

associations and as such they are easily changed (Keller, 2008). To do these, companies

must regularly and consistently communicate to the consumers over time elaborating on

the brand related information and relate it appropriately to the existing knowledge. By

this they will form retrieval cues the consumers easily relate to.

2.3.3 Elicit Positive Brand Response

Brand response refers to how customers respond to the brand, its marketing activity and

other sources of information, that is, what customers think or feel about the brand (Keller,

2001). Brand responses can be distinguished according to brand judgments and brand

feelings, meaning whether they arise more from the “head” or from the “heart” (Keller,

2001).

Keller (2001) states that brand judgments focus on customers opinions and evaluations

regarding the brand and involve how customers put together all the different performance

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and imagery associations for the brand to form different kinds of opinions while brand

feelings are customers’ emotional responses and reactions with respect to the brand and

will also relate to the social currency evoked by the brand.

The long-term success of the brand will be based on functional and psychological

attributes from customers which can be either objective or subjective in measure (Laforet,

2010). It is good to note that customer perceptions can be based on real qualities for

example product characteristics, features or style or psychological qualities for example,

perception and image (Ferrell and Hartline, 2005). Customers also respond to your brand

according to how it makes them feel. Your brand can evoke feelings directly, but they also

respond emotionally to how a brand makes them feel about themselves.

2.3.4 Forging Brand Relationships with Customers through Brand Loyalty

Brand resonance sits at the top of the brand equity pyramid because it's the most difficult

and most desirable level to reach. You have achieved brand resonance when your

customers feel a deep, psychological bond with your brand. Aaker (1996) cites that the

challenge for many brands is to develop credible and sensitive measures of brand strength

that supplement financial measures with brand asset measures. When brand objectives

and programs are guided by both types of measures, the incentive structure becomes more

balanced, and it becomes more feasible to justify and defend brand-building activities.

General progress in the measurement of brand equity will help managers develop valid

instruments for individual brands.

Greenwell (2000) defines customer acquisition cost as the dollar value required to gain

new business. Companies need to invest in building loyalty programs as the customer

acquisition cost of a new customer is six to ten times higher than that of a repeat customer

(Greenwell, 2000). Customer satisfaction is not enough to ensure repeat business.

Organizations need to enhance this customer satisfaction into customer loyalty.

2.3.4.1 Customer Relationships

Key to building lasting customer relationship is to create customer value and satisfaction

(Kotler and Armstrong, 2010). Satisfied customers are more likely to be loyal customers

and talk favorably to others about the firm and its products. Customer value represents the

customer’s evaluation of the difference between all the benefits and costs of a marketing

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offering relative to those of competing offer while satisfaction depends on the product’s

perceived performance relative to the buyer’s expectation.

Satisfied customers are more likely to seek out other products from the same company

and companies that recognize this are keen on the customer lifetime value (Perreault,

Cannon and McCarthy, 2015). Customer lifetime value is defined as the total stream of

purchases that a customer could make to the company over the length of the relationship

(Perreault, Cannon and McCarthy, 2015). Companies go a step further and work on

building customer equity. Customer equity is defined as the total customer lifetime values

of all of the company’s current customers and potential customers (Kotler and Armstrong,

2010). Thus it becomes crucial for firms to focus on the short term and the long term

relationship with the customers.

Karam and Saydam (2015) state that branded products are powerful in forging sustainable

and profitable relationship with customer compared to regular unbranded products.

2.3.4.2 Loyalty Programs

Arnould, Price and Zinkhan (2004) note that while brand names and logos improve

memory and product recall, the use of marketing communication and loyalty programs

will emphasize the brand qualities that consumer’s value. Thus loyalty programs form a

critical role in enhancing and building of the brand.

Various loyalty programs have been developed in the market today as a way of rewarding/

enticing loyal customers and by this the organization ensures they remain the preferred

brand for their customers. The programs in place ensure the client will always think of the

brand and as such remain the preferred brand by the consumer. Aaker (2010) identifies

three groups of loyalty programs in the market these are; frequent-buyer programs,

customer clubs and database marketing.

Frequent-buyer programs provide direct and tangible reinforcement for loyal behavior

and enhance value proposition of a brand. They include British Airways’ frequent traveler

program, Nakumatt’s loyalty card and Safaricom’s ‘Bonga’ reward points. Through this

the consumer accumulates points which can be redeemed later in form of flights for

British Airways, shopping or school fees in the case of Nakumatt or talk time, texts or

data bundle in the case of Safaricom.

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Customer clubs provide a vehicle through which the customer can identify with the brand,

express his/her brand perceptions and attitudes, and experience the sharing of a brand

with like-minded people (Aaker, 2010). Customer clubs include Oprah’s book club and

Disney club. These clubs provide the organization with information about the brand

which can be used to enhance the product or service.

Database marketing takes on a targeted segmented approach where news about brands is

sent to the people who are most likely to respond (Aaker, 2010). Aaker (2010) notes that

this approach makes customers feel that the firm is connecting with them individually and

thus enhance the customer- brand relationship.

2.4 Effect of Customer Based Brand Equity on Financial Performance

Investing in brands has increasingly become a strategic priority for companies as they

have realized that one of the best ways to stand apart and be perceived unique lies in

creation and on-going management of brands which in turn increases their sales and

revenues (Trivedi, Vadher and Shah). A 2008 study by EquiTrend notes that over time, the

company’s brand equity will have an impact on the return on investment (ROI). Firms

experiencing largest gains in brand equity saw their ROI average 30% while those losing

their brand equity saw their ROI average negative 10%.

Consumer based brand equity helps companies increase the efficiency and effectiveness

of their marketing programs, enjoy higher profit margins, offers good trade leverage and

helps in implementing brand extensions (Aydin and Ulengin, 2015). Aydin and Ulengin

(2015) note that brand equity can also be used as a performance indicator for marketing

activities in a company by giving accountability and justification of marketing activities.

Higher brand awareness and brand loyalty provides a large consumer base and gives an

opportunity of better pricing than competitors, while higher perceived quality paves the

way for premium pricing which leads to higher margins and better profitability (Aydin

and Ulengin, 2015). Further, higher brand awareness, positive associations and higher

quality perceptions help companies find the financial resources they require more easily

giving them higher financial leverage.

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From the financial market level, superior financial performance and shareholder value

creation are outcomes of brand equity (Zhu, 2009). The financial market has changed

over the years and companies are now accounting a portion of their stock market

capitalization with intangible assets. Comparing the 1970 to the 2000 stock market price-

to-book ratio, one would find that in 1970 intangible assets accounted for 50% of that

ratio, while in 2000 intangibles accounted for 80% of the ratio’s value.

Financial performance of firms may be observed directly from their financial statements

or indirectly by obtaining views of the managers on firm’s financial performance (Aydin

and Ulengin, 2015). In the indirect method, which will be used in this study, the

indicators that reflect the extent of the fulfillment of financial goals are assessed and they

include sales levels, market shares in target markets and profitability are assessed.

Aydin and Ulengin (2015), in their study found that, perceived quality appears to be the

primary dimension of CBBE that should be improved to enhance financial performance.

The second factor is the knowledge factor that appears as a composite of brand awareness

and brand association components. While the least important factor among the three is

brand loyalty. As for managerial implications, perceived quality appears to be the primary

dimension of CBBE that should be improved upon for enhancing financial performance.

The second factor is the knowledge factor while the least important factor among the

three is seen as brand loyalty.

The effects of CBBE of financial performance can be categorized as those relating to

growth and those relating to profitability.

2.4.1 Effects Relating to Growth

Brands with high CBBE have more success with brand and market extensions. This is

because consumers are more willing to accept brand extensions based on the reputation of

the established brand as the well-known brands convey certain brand attributes and

benefits (Zhu, 2009). The brand has the ability to extend into related markets or stretched

into new markets (Drummond, Ensor and Ashford, 2008). A brand like Bic has been

successfully extended from the pen market to razor and lighters. Customers are willing to

try out the products because familiar brand provides credibility, thus reducing search time

22

and costs and as a result, increases the likelihood of the purchase of a brand that shares

the same name.

With the right brand identity, companies gain competitive advantage as they differentiate

themselves from their competitors in the minds of consumers (Haglofs, 2014). It can be

said that everything that is associated with the brand in customers’ minds makes the brand

distinctive from competitors’ brands and differentiates the firm’s offering from others.

Companies that have built strong brands have seen true dollar value during acquisitions,

for example in 1997, Rolls Royce was sold to BMW and Volkswagen. Volkswagen

bought all the plant and hard capital for over $1 billion while BWM bought the rights to

the Rolls Royce brand at $66 billion (Laforet, 2010). This partly explains why brands

have become added to company balance sheet and a major reason for company’s making

acquisitions in the late 1980s, for example, in 1988, Nestlé acquired Rowntree at six

times its book values so as to acquire brand names such as Kitkat, Smarties and Rolo.

2.4.2 Effects Relating to Profitability

Profitability can be defined as the rate at which profit is generated (Wilson and Gilligan,

2005). Strong brands can increase cash flow in four ways: obtaining higher prices

(premium prices), higher volume growth, lower costs (economies of scale in marketing

and distribution) and higher asset utilization as a result of integration with suppliers and

distributors leading to reductions in inventories, manufacturing and distribution assets

(Kalicanin,Veljkovic and Bogetic, 2015).

According to Armstrong and Kotler (2009), high brand equity gives the company trade

leverage when bargaining with retailers since customers expect stores to carry the brand.

This is advantageous to the firms since they can go to as many stores as they wish.

Bennett (2001) notes the following as the advantages associated with loyalty; brand

loyalty provides fewer reasons for consumers to engage in extended information search

among alternatives, purchase decisions based on loyalty may become simplified and even

habitual in nature as a result of satisfaction with the current brand and a base of loyal

customers is advantageous for an organization as it reduces the marketing cost of doing

business.

23

Aaker (2010) notes that brands with high customer loyalty are expected to generate a

consistent and predictable revenue stream to the organization and represent a substantial

entry barrier to competitors because the cost of enticing loyal customers is prohibitively

expensive. Thus organizations have a responsibility to entice their loyal customers noting

that it costs more to entice new customers than it is to retain those you have (Keller,

2008).

Brand equity also acts as an appropriate measure for evaluating the long run impact of

marketing decisions. Raggio and Leone (2007), note that when a consumer encounters a

brand, marketing initiated or not, there arises the opportunity to change the mental

representation of the brand and the kind of information that can appear in consumer

memory. Such an encounter may occur when a consumer views only the name, logo or

packaging of the brand and automatically generates perceptions about and/or associations

with the brand.

It is believed generally that brands with high levels of equity are associated with superior

performance including sustained price premiums, inelastic price sensitivity, high market

shares, successful expansion into new categories, competitive cost structures and higher

profitability (Zhu, 2009). Strong brand equity helps achieve larger margins because the

consumer becomes less price conscious and expenses go down through more cost

effective marketing initiatives. This allows you to generate revenue through increased

sales and higher price margins.

In the short run, higher quality perceptions lead to increased profits due to premium

prices and in the long run, it leads to effective business growth as a result of market

expansion and market share gains (Sanyal and Datta, 2011).

Researchers have found that brand associations have a positive influence on consumer

choice, preferences and intention of purchase, their willingness to pay a price premium

for the brand, accept brand extensions and recommend the brand to others (Iglesias,

2001). Hawkins and Mothersbraugh (2010), note that consumers who believe a brand

delivers superior quality, is exciting to use and is produced by a company with

appropriate social values are likely to be willing to pay a premium for the brand, go the

extra mile to locate and buy it, recommend it to others, forgive a mistake or any product

flaws and engage in activities that market the brand.

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2.5 Chapter Summary

This chapter sheds more light on the concept of brand equity and CBBE. It is no longer

enough for companies to build strong brands as they have to align their marketing

strategies and efforts around the brands. The chapter focuses on four dimensions of brand

equity, which are brand awareness, perceived quality, brand associations and brand

loyalty. CBBE focuses on the customer’s perceptions and feelings about a brand. Through

CBBE, companies can build strong and profitable customer relations through the brand.

The chapter analyses the effect of CBBE on the financial performance in a firm. Financial

performance is analyzed as those relating to growth and those relating to profitability.

Growth relates to entry into new markets either through brand extensions or geographical

markets. Profitability relates to consumers willing to pay extra for a brand, loyal

customers making repeat continuous purchases and cannot be influenced by competitor

activity.

Chapter three gives the research methodology used. It tells of how and from where the

data was collected, what data was collected and how the data was analyzed.

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CHAPTER THREE

3.0 RESEARCH METHODOLOGY

3.1 Introduction

This chapter outlines the research design methodology adopted for the study. Section 3.2

discusses the research design, 3.3 defines the population and sampling procedures to be

adopted, 3.4 discusses the data collection methods to be adopted, 3.5 discusses the

research procedures and section 3.6 discusses the data analysis methods to be used in the

research.

3.2 Research Design

Research design is a blueprint for data collection, measurement and analysis based on the

research questions. It gives the structure and strategy of the whole research process.

Cooper & Schindler (2001), further say it gives the source of information, techniques to

gather data and the sampling technique used.

Selliz et al (1962) as cited by Mella (2012) define research design as a framework for

arrangement of conditions for collection and analysis of data in a manner that aims to

combine relevance to the research purpose with economy in procedure. This means the

design chosen should be in line with the purpose of the study and at the same time should

be the most economic method so as to save on time, energy and money.

The study used the descriptive cross-sectional design. Descriptive studies aim to describe

something usually market characteristic or function (Malhotra, 2007). A cross-sectional

study allows one to pick out the parameters of a phenomenon at a specific point in time

with an aim of getting accurate means of capturing a population’s characteristics at a

single point in time relating to what, where, how, who and when of a research topic

(Cooper and Schindler, 2005). The findings of the study can then be used to generalize to

the whole population. This study seeks to examine the effect of Customer Based Brand

Equity on the financial performance of milk processors in Kenya.

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3.3 Population and Sampling Design

3.3.1 Population

Mugenda & Mugenda (2009), define population as an entire group of individuals, events

or objects with a common observable characteristic. The target population for this study

was the 24 licensed milk processors as given by the Kenya Dairy Board (Appendix III). A

census study was conducted since the population was small. The questionnaire was sent

to the company’s marketing department.

3.3.2 Sampling Design

3.3.2.1 Sampling Frame

Malhotra (2007) define the sampling frame as a representation of elements in the target

population from which a sample is drawn. For this study, the sampling frame is the list 24

licensed milk processors as given by the Kenya Dairy Board (Appendix III).

3.3.2.2 Sampling Technique

The sampling technique is used to get a sample form which data can be collected. The

technique can either be probability sampling or non-probability sampling. Since the

population for this study was small, a census study was conducted.

3.3.2.3 Sample Size

Mugenda & Mugenda (1999) recommends a sample size of 30 units or 10% of the study

population be used to draw conclusions about the whole population. Since the population

for this study was small, the whole population was studied.

3.4 Data Collection Methods

Primary sources of data were used for the study. Primary data was collected from the

study population through the use of a questionnaire. Questionnaires are defined a method

used in data collection, where each person or respondent is asked to answer to the same

set of questions that have been put in the same predetermined format (de Vaus, 2002). The

questionnaire for this study contained both closed ended and open ended questions and

was divided into three sections. Section A gathered general information about the

company and section B gathered information relating to effect of CBBE on financial

performance.

27

The questionnaire was self- administered through electronic mail and the drop and pick

up later method. A cover letter accompanied the questionnaire as it explained the purpose

of the data and assured the respondents of data confidentiality. Follow-up telephone calls,

emails and personal visits were made to the respondents so as to increase the response

rate.

3.5 Research Procedures

The research started with the formulation of a questionnaire based on the research

objectives. This was the tool of data collection. Once the questionnaire had been

developed, a pilot test was conducted. The pilot tests was used to measure the reliability

and validity of the questionnaire as it helped develop and pre-test the research instrument

(Baker, 1994). Mugenda & Mugenda (2009) recommends that the ideal size of the

sample for the pilot test be 1% to 10% of the sample size.

Since the questionnaires were self-administered, they were sent out on email and others

were dropped at the respondent’s offices. A cover letter accompanied each of the

questionnaires. The data from questionnaires were coded, collated and edited for ease of

credibility and analysis.

3.6 Data Analysis Methods

Mugenda & Mugenda (1999) state that it is through data analysis that researchers can

make sense of the data collected. Data analysis entails editing, coding and analyzing data

so as to make conclusions that are easy to interpret.

The questionnaires gave both quantitative and qualitative data. The data was first coded

into meaningful categories based on the research question, then edited for completeness

and consistency and finally tabulated. MS Excel spreadsheet was used for initial

tabulations and analysis while Statistical Package for Social Studies (SPSS) Student

Version 16.0, a comprehensive package analyzed the data thoroughly and faster.

Analysis was both descriptive statistics and inferential analysis. Descriptive statistics

gave simple summaries about the sample data in quantitative descriptions and included:

mean, standard deviation, frequencies and percentages. Multiple regression and Pearson

Product- Moment correlation as forms of inferential statistical analysis was used in

determining the relationship between the dependent and independent variables.

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3.7 Chapter Summary

This chapter details the research design to be used for this study which is descriptive.

Since the target population was small, a census was conducted for the 24 licensed milk

processors. Primary data will be collected through the use of a questionnaire. The data

was analyzed through descriptive and inferential statistics.

Chapter four gives the results and findings for the study. Chapter five gives the summary

and recommendations of the study.

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CHAPTER FOUR

4.0 RESULTS AND FINDINGS

4.1 Introduction

This chapter discusses the interpretation and presentation of the findings obtained from

the field. The chapter presents the background information of the respondents, findings of

the analysis based on the objectives of the study. Descriptive and inferential statistics

have been used to discuss the findings of the study.

4.2 General Information

4.2.1 Response Rate

Response rate represents the total number of respondents who have participated in the

study and it is usually represented as a percentage. The target respondents for this study

were the 24 licensed milk processors obtained from the Kenya Dairy Board. We sent out

questionnaire to all the 24 firms and we received 22 duly filled questionnaires which is a

response rate of 92%.

Table 4.1 Response Rate of the Study

Questionnaires Administered Questionnaires Filled

And Returned

Percentage

Respondents 24 22 92%

4.2.2 Departments in which the Respondents Work

Respondents were requested to indicate the departments in which they work. Results

obtained show that 48% of the respondents worked in the marketing department, 26% of

the respondents worked in the customer service department, 13% of the respondents are

managing directors, 9% of respondents worked in the finance department while 4%

worked in the administration department. This implies that respondents holding various

job designations were equitably engaged in this research. Results are analyzed in figure

4.1

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Figure 4.1 Department in which the Respondents Work

4.2.3 Period which the company has been operational

The study sought to establish how long the company been operational. From the analysis,

52.2% of the respondents indicated that the company had been operational for over 15

years, 34.8% of the respondents indicated 5-10 years, whereas 13.0% of the respondents

indicated11-15 years. This implies that considerable number of companies has been

operational for a considerable period of time which implies that they were in a position to

give credible information relating to this study. Results are in figure 4.2 below

0

2

4

6

8

10

12

Less than

5 years

6-10 years 11-15

years

Over 15

years

Frequency

Figure 4.2: Period in which the Company has been Operational

Sales and

Marketing

48%

Managing Director

13%

Administration

4%

Customer Service

26%

Finance

9%

31

4.3 Brand Information

4.3.1 Number of Brands

The study sought to determine the number the brands that the company had. From the

analysis, the study revealed that most of the firms as shown by 31.8% had 4 brands,

18.2% of the companies had over 10 brands and 3 brands and 9.1% of the companies had

6 brands and 5 brands. Results are analysed in table 4.1

Table 4.2: Number of Brands the Company Has

Frequency Percentage

2 brands 3 13.6

3 brands 4 18.2

4 brands 7 31.8

5 brands 2 9.1

6 brands 2 9.1

over 10 4 18.2

Total 22 100.0

4.3.2 Diversification

Respondents were requested to indicate whether the company operated in any other sector

another than dairy industry. From the analysis, 48% of the respondents indicated that the

company had no other operation in any other sector, 17% of the respondents indicated

they are in the honey and jam sector, 13% of the respondents indicated they are in the

bakery and customer advisory services respectively, while 9% of the respondents

indicated they are in animal feeds production. This implies that considerable number of

milk processing firms had diversified to other sectors.Results are given in figure 4.3

32

None

48%

Honey and

Jams

17%

Customer

Advisory

13%

Bakery

13%

Animal Feeds

Production

9%

Figure 4.3: Sectors of Operation Apart from Dairy

4.3.3 Stakeholders Impact on Brand Equity

The study sought to determine the extent to which the various stakeholders influenced

branding decisions and strategies by dairy processing firms. The respondents were

required to rate the importance of the stakeholders in a five point Likert scale. The range

was ‘most important’ (5) to ‘not important’ (1). The scores of not important (N.I) and

least important (L.I) had an equivalent mean score of 0 to 2.4 on the continuous Likert

scale; ( 0≤ N.I/L.I <2.4). The scores of moderate important (M.I) had an equivalent mean

score of 2.5 to 3.4 on the continuous Likert scale; (2.5≤M.I. <3.4). The scores of

important (I) and most important (MtI) had an equivalent mean score of 3.5 to 5.0 on a

continuous Likert scale; (3.5≤ I/M.I <5.0).

A standard deviation of >1.5 implies a significant difference on the impact of the variable

among respondents. Majority of the respondents rated customers (mean = 4.87),

competitors (mean=4.24) and management (mean = 3.87) as very important stakeholders

in their branding process. The study noted that Government/ Policy makers and General

Public had moderate influence on decision making process and implementation of

branding strategies as shown by a mean = 3.35 and 3.39 respectively. Results of the

study are given in Table 4.3

33

Table 4.3: Stakeholder Influence on Brand Decisions

Stakeholder Mean Std

deviation Customers 4.87 0.34

Competitors 4.24 1.10

General Public 3.39 1.20

Management 3.87 1.14

Government/ Policy makers 3.35 1.15

4.4 Building Brand Equity and Customer Based Brand Equity among Milk

Processors in Kenya

4.4.1 Brand Awareness

This section sought to determine the extent to which various milk processors in Kenya

had implemented brand awareness strategies.

Respondents were asked to rate the extent to which their companies had implemented

brand awareness strategies in a five point Likert scale. The range was ‘strongly agree’ (5)

to ‘strongly disagree’ (1). The scores of strongly disagree (S.D) and disagree (D) had an

equivalent mean score of 0 to 2.4 on the continuous Likert scale; (0≤ S.D/D <2.4). The

scores of ‘neutral’ have been taken to represent a variable that had an impact to a neutral

extent (N.E.) with an equivalent mean score of 2.5 to 3.4 on the continuous Likert scale;

(2.5≤N.E<3.4). The scores of strongly agree (S.A) and agree (A) had an equivalent mean

score of 3.5 to 5.0 on a continuous Likert scale; (3.5≤S.A/A<5.0). A standard deviation of

>1.5 implies a significant difference on the impact of the variable among respondents.

From the analysis majority of the respondents strongly agreed that customers are familiar

with company’s brand, customer could easily identify the brand and the brand is easy to

recall. The findings are in line with Keller (2003) study which notes that, brand awareness

relates to the strength of the brand node or trace in memory and is reflected by consumers'

ability to identify the brand under different conditions. This relates to the likelihood that a

brand name will come to mind and the ease at which it does. The highest level of brand

awareness is top of mind awareness and by raising brand awareness; firms can reinforce

brand loyalty (Kapferer, 2008).

34

The study also revealed that dairy processing firms have built strong brand identities

which have been communicated and positioned well to reach the target market. The

creation of a brand implies communicating a certain brand image in such a way that all

the firm's target groups link such a brand (and thus the products sold using its name) with

a set of associations (Iglesias, 2001).

Results are given in table 4.4

Table 4.4: Extent to Which Companies have Built Brand Awareness

Statements relating to brand awareness Mean Std deviation

Our company has built a good brand identity 4.09 1.20

Our company has communicated our brand identity to our

customers

4.04 1.07

Our customers are aware about our brand identity 3.65 0.98

The brand identity our customers have is what the

company

3.70 1.02

Our brand is a reflection of the customers 3.57 1.27

We have built a consistent brand image 3.96 1.11

We consistently keep brand messaging 3.70 0.97

We have built a personality around the brand 4.04 1.11

The brand has been positioned well to reach the target

market

4.09 0.90

Our brand is easy to recall 4.22 0.85

Our brand is recognizable 3.96 1.11

Our customers are familiar with our brand 4.65 0.49

Our brand is easily identifiable to our customers 4.48 0.79

Our customers can easily identify our brand even from a

distance

4.39 0.72

Our company has done a good job in marketing the brand 4.13 0.69

When our customers go to buy dairy products, our brand is

in the list of choices

4.43 0.51

35

4.4.2 Brand Loyalty

This section investigates the extent to which various milk processors in Kenya had

implemented brand loyalty strategies.

Respondents were asked to rate the extent to which their companies had implemented

brand loyalty strategies in a five point Likert scale. The range was ‘strongly agree’ (5) to

‘strongly disagree’ (1). The scores of strongly disagree (S.D) and disagree (D) had an

equivalent mean score of 0 to 2.4 on the continuous Likert scale; (0≤ S.D/D <2.4). The

scores of ‘neutral’ have been taken to represent a variable that had an impact to a neutral

extent (N.E.) with an equivalent mean score of 2.5 to 3.4 on the continuous Likert scale;

(2.5≤N.E<3.4). The scores of strongly agree (S.A) and agree (A) had an equivalent mean

score of 3.5 to 5.0 on a continuous Likert scale; (3.5≤S.A/A<5.0). A standard deviation of

>1.5 implies a significant difference on the impact of the variable among respondents.

Majority of the respondents strongly agreed that the company aims at retaining its

customers and satisfying the customers’ needs every time, loyal customers tend to

purchase other products offered by the company, customers were happy with the

company’s purchases and customers are more likely to recommend the brand to their

friends and family. According to Ghodeswar (2008), brand loyalty influences consumer

behavior which is in line with the findings of this study. Brand loyalty implies that

consumers bind themselves to a brand as a result of a deep-seated commitment and

purchase the brand consistently when they need a product in that product category and

reduce time spent when buying a product (Pride and Ferrell, 2009).

Results are given in table 4.5

36

Table 4.5: Extent to Which Companies have Built Brand Loyalty

Mean Std deviation

When our customers go to buy dairy products, our

brand is in the list of choices

4.43 0.51

Our brand aims at building relationships with our

customers

4.13 0.92

The company takes interest on feedback given by

customers

4.35 0.49

Our company aims at retaining its customers 4.65 0.49

Our company aims at satisfying the customers’ needs

every time

4.43 1.04

Our customers are happy with their purchases 4.39 0.50

Our repeat customers tend to purchase our other

products

4.39 0.50

Our new products are taken well by our loyal

customers

4.22 0.74

Our customers will continue buying our brand at any

price

3.70 1.29

Our customers are likely to continue purchasing our

brand

4.22 0.42

Our customers would not go for another brand if I the

brand was not available at the time

3.09 1.20

Our customers are more likely to recommend the

brand to their friends and family

4.35 0.49

4.4.3 Perceived Quality

This section investigates the extent to which milk processors in Kenya had implemented

product quality strategies.

Respondents were asked to rate the extent to which their companies had implemented

brand loyalty strategies in a five point Likert scale. The range was ‘strongly agree’ (5) to

‘strongly disagree’ (1). The scores of strongly disagree (S.D) and disagree (D) had an

equivalent mean score of 0 to 2.4 on the continuous Likert scale; (0≤ S.D/D <2.4). The

scores of ‘neutral’ have been taken to represent a variable that had an impact to a neutral

37

extent (N.E.) with an equivalent mean score of 2.5 to 3.4 on the continuous Likert scale;

(2.5≤N.E<3.4). The scores of strongly agree (S.A) and agree (A) had an equivalent mean

score of 3.5 to 5.0 on a continuous Likert scale; (3.5≤S.A/A<5.0). A standard deviation of

>1.5 implies a significant difference on the impact of the variable among respondents.

Zhu (2009) notes that perception plays an important role in determining the loyalty of a

consumer in that when a buyer is convinced that his choice is the correct one and he is

buying superior products, then he will not shift his loyalty towards that product easily.

This is in line with the findings of the study as it reveals that, majority of the respondents

strongly agreed that milk processing firms market their brands as that of high quality

(mean = 4.83), milk processing firms consistently provide a high quality brand, milk

processors provides a high quality brand (mean = 4.74), the consumers consider the

brands are trustworthy (mean = 4.65), consumers believe product from individual firms

were of higher quality compared to products competitors and that the firms brand quality

is preferred by customers than that of the competitors (mean = 4.57).

The study also revealed that most of the milk processing firms have influenced the

customer perception about their brands, customers got what they expected from the firms’

brand and that customers consistently get what they expect from the brand (mean = 4.43),

customers believe that the firms provide a high quality brand (mean = 4.39) and the firm’s

management was happy with the perception customers have about the brand (mean =

4.26).

The results also indicate that establishing a value perception is critical in the buying

process. Tangible cues exhibiting high quality (e.g. packaging, shelf space, media

placement) need profound attention. Furthermore, it is suggested that risk (which plays an

important part in the consumer decision process) is minimized through optimal retail

service quality and customer reassurances. Results are analyzed in table 4.6

38

Table 4.61: Extent to Which Companies have Built Perceived Quality

Mean Std deviation

We provide a high quality brand 4.74 0.45

We consistently provide a high quality brand 4.74 0.45

Our product is of higher quality compared to our

competitors

4.57 0.51

Our brand quality is preferred to that of the competitors 4.57 0.51

Our customers believe we provide a high quality brand 4.39 0.50

We market our brand as that of quality 4.83 0.39

We have influenced the customer perception about our

brand

4.43 0.51

We are happy with the perception customers have about the

brand

4.26 0.69

Our brand delivers what it promises 4.30 0.47

Customers get what they expect from our brand 4.43 0.51

Customers consistently get what they expect from our

brand

4.43 0.51

Customers get value for my money when they buy our

brand

4.30 0.47

All our products from are of superior quality 4.52 0.51

The organization manufacturing the brand is trustworthy 4.65 0.49

4.4.4 Brand Associations

This section investigates the extent to which various milk processors in Kenya had

implemented strategies geared at formation of brand associations.

Respondents were asked to rate the extent to which their companies had implemented

brand loyalty strategies in a five point Likert scale. The range was ‘strongly agree’ (5) to

‘strongly disagree’ (1). The scores of strongly disagree (S.D) and disagree (D) had an

equivalent mean score of 0 to 2.4 on the continuous Likert scale; (0≤ S.D/D <2.4). The

scores of ‘neutral’ have been taken to represent a variable that had an impact to a neutral

extent (N.E.) with an equivalent mean score of 2.5 to 3.4 on the continuous Likert scale;

(2.5≤N.E<3.4). The scores of strongly agree (S.A) and agree (A) had an equivalent mean

39

score of 3.5 to 5.0 on a continuous Likert scale; (3.5≤S.A/A<5.0). A standard deviation of

>1.5 implies a significant difference on the impact of the variable among respondents.

From the analysis majority of the respondents strongly agreed that the company’s product

are of high quality (mean=4.65); the firm’s brand is able to meet the consumer’s needs

(mean=4.52) and the firm’s brand is reliable (mean=4.52). Respondents agreed that the

firms brand is relatable with the target market (mean=4.43); brands were dependable

(mean=4.39); consumers always counted on them (mean=4.39); the price charged by

most of the dairy company is fair for the value offered and that firms brand is good value

for money (mean = 4.39) and that most of the dairy firm’s management perceived that

their brand is stylish and attractive (mean = 4.13).

Results are analyzed in table 4.7

Table 4.7: Extent to Which Companies have Built Brand Associations

Mean Std deviation

Our brand is reliable 4.52 0.51

Our brand is able to meet the consumer’s needs 4.52 0.51

Our brand is good value for money 4.39 0.50

The product are of high quality 4.65 0.49

Our brand is stylish and attractive 4.13 0.69

Our brand is dependable and consumers can always

count on it

4.39 0.50

Our brand is relatable with our target market 4.43 0.51

Our customers are confident in our product 4.30 0.47

The price we charge is fair for the value we give 4.39 0.50

4.5 Relationship Between Customer Based Brand Equity and Financial Performance

of Milk Processors in Kenya

This section investigates the relationship between brand equity and financial performance

of milk processors in Kenya.

Financial performance of the firms can be observed directly from their financial

statements or indirectly by obtaining views of the managers on firm’s financial

performance (Aydin and Ulengin, 2015). For this study, we have used the latter method

40

where the indicators that reflect the extent of the fulfillment of financial goals, such as

sales levels, market shares in target markets and profitability are assessed.

From the analysis majority of the respondents agreed that the firm’s loyal customers make

it easy for the company to get into new markets (mean = 4.30), most of the dairy product

customers were price inelastic (mean = 4.13), loyal customers recommend their friends

and families to purchase company’s products, the firms loyal customers make it easy for

the firm to introduce new products (mean = 4.04), loyal customers give the dairy firms

continued stream of revenue (mean = 4.00).

The study also revealed that brand’s quality enable the company to charge a premium

price (mean = 3.26), brand positioning strategy gives dairy manufacturing firms leverage

with their distributors, most of the dairy firms always got value for their marketing

efforts (mean = 3.96), brand positioning gives dairy processing firms the competitive

advantage (mean = 3.87) and that most of the dairy processing firms had unique brand

identity which is difficult for competitors to imitate (mean =3.83). Results are analyzed

in table 4.8

41

Table 4.8: Relationship Between Brand Equity and Financial Performance

Mean Std deviation

Our brand’s quality enable us to charge a premium price 3.26 1.01

Our customers are price inelastic 4.13 0.81

Our loyal customers make it easy for us to introduce new

products

4.04 0.93

Our loyal customers make it easy to get into new markets 4.30 0.88

Our loyal customers recommend us to friends and

families

4.04 0.77

Our loyal customers give us continued stream of revenue 4.00 0.95

Our brand positioning gives us competitive advantage 3.87 0.92

Our brand positioning gives us leverage with our

distributors

3.96 0.93

Our brand identity makes it difficult for competitors to

imitate

3.83 0.89

We always get value for our marketing efforts 3.96 0.71

4.6 Regression

In this study, a multiple regression analysis was conducted to test the influence among

predictor variables. The research used statistical package for social sciences (SPSS V

21.0) to code, enter and compute the measurements of the multiple regressions. The

dependent variable was financial performance while the independent variables were brand

awareness, brand associations, perceived quality and brand loyalty.

The findings showed that there exists a linear relationship between the dependent and

independent variables used in the study. This is shown by a correlation (R) coefficient of

0.871. The determination coefficient as measured by the adjusted R-square presents a

moderately strong relationship between dependent and independent variables given a

value of 0.752. This depicts that the model accounts for 75.2% of the variations in

42

financial performance while 24.8% remains unexplained by the regression model. The

regression model was:

Y = β0 + β1X1 + β2X2 + β3X3 + β4 X4 + ε

Whereby Y is financial performance, β0 is the regression constant, β1 – β4 regression

coefficients, X1 is brand awareness, X2 is brand associations, X3 is perceived quality, X4

is brand loyalty and ε is the model’s error term. The model summary is presented table 4.9

below.

Table 4.9: Regression Model Summary

Model R R Square Adjusted R Square Std. Error of the Estimate

1 .871a .758 .752 .59485

a. Predictors: (Constant), brand awareness, brand associations, perceived quality and

brand loyalty

b. Dependent Variable: financial performance

The ANOVA statistics is represented in table 4.10 below was used to present the

regression model significance. From the ANOVA statistics for the study, the regression

model had a significance level of 0.000% which is an indication that the data was ideal

for making a conclusion on the population parameters as the value of significance (p-

value) was less than 5%. The calculated value was greater than the critical value

(11.817>2.50) an indication that brand awareness, perceived quality, brand associations

and brand loyalty all affect the financial performance of milk processors in Kenya. The

significance value was less than 0.05 indicating that the model was significant.

Table 4.10: ANOVAa Statistic

Model Sum of Squares df Mean Square F Sig.

1

Regression 158.532 4 39.633 11.817 .000b

Residual 60.372 62 3.354

Total 218.904 22

Critical value =2.50

a. Predictors: (Constant), brand awareness, brand associations, perceived quality and

brand loyalty

b. Dependent Variable: financial performance

43

Table 4.11: Table of Coefficients

Model Unstandardized

Coefficients

Standardized

Coefficients

t Sig.

B Std. Error Beta

(Constant) 1.147 .229 5.009 .003

Brand Awareness .691 .077 .435 8.974 .000

Perceived Quality .573 .064 .318 8.953 .000

Brand Associations .813 .093 .271 8.742 .000

Brand Loyalty .687 .094 .271 7.309 .004

From the data in the above table the established regression equation was

Y = 1.147+ 0.691X1 + 0.573X2 + 0.813X3 + 0.687 X4

From the above regression equation, it was revealed that holding brand awareness,

perceived quality, brand associations and brand loyalty to a constant zero, the financial

performance of milk processors in Kenya would be 1.147. A unit increase in brand

awareness would enhance the financial performance of milk processors in Kenya by a

factor of 0.691. A unit increase in perceived product quality would enhance financial

performance of milk processors in Kenya by factor of 0.573.A unit increase in brand

associations would enhance the financial performance of milk processors in Kenya by a

factors of 0.813. A unit increase in brand loyalty would enhance the financial

performance of milk processors in Kenya by a factor of 0. 687. All the variables were

significant as their significant value was less than (p<0.05).

4.7 Chapter Summary

This chapter sought to find out the effect of building customer based brand equity on the

financial performance of milk processors in Kenya. The study consisted of general

information of the respondents and their companies, general review of their adoption of

brand equity concept, examination of how they have built customer based brand equity

and its impact on their financial performance. The study found that brand awareness,

brand loyalty, perceived quality and brand association will affect the financial

44

performance of the milk processors in Kenya. Each of the factors has a positive linear

relation with financial performance. Chapter five will give a summary of the findings,

conclusions drawn from the findings and will give recommendations based on the

findings.

45

CHAPTER FIVE

5.0 DISCUSSION, CONCLUSIONS AND RECOMMENDATIONS

5.1 Introduction

In this chapter, the researcher provides the major summary of the study, a discussion on

the findings of the research compared with the findings in the literature review. The

findings were concluded on the basis of effect of customer based brand equity on the

financial performance of milk processors in Kenya Recommendations for further

improvement were made through identification of building customer based brand equity.

5.2 Summary

The purpose of this study was to analyze the effect of customer based brand equity on the

financial performance of milk processors in Kenya. The study was guided by the

following specific objectives; to review extent to which milk processors have adopted the

concept of brand equity, to analyze how milk processors in Kenya have built Customer

Based Brand Equity and to analyze the effect of Customer Based Brand Equity on

financial performance of milk processors in Kenya.

The study adopted a descriptive research design which allowed respondents to describe

the factors that they believed attributed to their sustainability and growth. The study

targeted a sample of 24 respondents. Primary data was collected by means of structured

questionnaires owing to its enhanced reliability. Pre-testing was done by administering

the questionnaire to 5 respondents who were not included in the actual study. This

enabled the researcher to fine tune the questionnaire for objectivity and efficiency of the

process. This study used both quantitative and qualitative method of data analysis. The

data was presented using tables. Data was analyzed using Statistical Package for Social

Sciences (SPSS).

The study revealed that all the respondents all the respondents had more 4 brands in the

markets and others had diversified into other sectors other than dairy and other regionally

and were now operating outside Kenya. The study noted that a positive relationship

existed between brand awareness and financial performance of milk processors in Kenya.

When customers go to buy dairy products, the company’s brand was always in the list of

their choices. Targeted customers can easily identify the brand even from a distance,

46

brands for dairy processing firms were easily recalled by customers and that most of the

dairy processing firms have done a good job in marketing their brands. The study noted

that the exits a positive relationship between brand loyalty and financial performance of

milk processors. The study also revealed that customers of diary firms were likely to

continue purchasing company’s brand and that new product for diary firms were taken

well by the loyal customers. The study also revealed that most of the milk processing

firms have influenced the customer perception about their brands. Results obtained show

that most companies produced products of high quality, the brands are able to meet the

consumer’s needs and the brands are reliable.

The study confirmed that the firm’s loyal customers make it easy for the company to get

into new markets, most of the dairy product customers were price inelastic, loyal

customers recommend their friends and families to purchase company’s products, the

firms loyal customers make it easy for the firm to introduce new products and that loyal

customers give the dairy firms continued stream of revenue. It was also revealed that

brand’s quality enable the company to charge a premium price, brand positioning strategy

gives dairy manufacturing firms leverage with their distributors, most of the dairy firms

always got value for their marketing efforts, brand positioning gives dairy processing

firms the competitive advantage and that most of the dairy processing firms had unique

brand identity which is difficult for competitors to imitate. It was also revealed that the

companies should conduct trade marketing campaigns; enhance advertising; enhance

customer education and awareness; expand market research, increase the bi-products of

the dairy to enhance brand equity. This will in turn enhance financial performance of

firms.

5.3 Discussion

5. 3.1 Review of Brand Equity among Milk Processors

The study noted that the milk processors considered the customer first while making their

branding decisions. Other stakeholders who were considered important were competitors

and management. Including stakeholders in brand decision making process supports the

strategic call by Askarany and Yazdifar (2012). The findings also concur with the research

by Appiah-Adu and Singh (2008) which found a link between customer orientation, new

product success and company performance.

47

The study also revealed that dairy processing firms had built a good brand identity and

that the brand has been positioned well to reach the target market (mean = 4.09), the firms

had communicated their brand identity to the targeted customers, the firm had also built a

personality around the brand (mean = 4.04) the company’s brand is recognizable .the firm

have built a consistent brand image (mean = 3.96), most of the dairy processing firms

consistently kept brand messaging (mean = 3.70), targeted customers are aware about

firms brand identity (mean = 3.65) and that the brand is a reflection of the customers

(mean =3.57) The findings are in line with the proposal by Kapferer (2008) which states

that the highest level of brand awareness is top of mind awareness and that raising brand

awareness helps to reinforce brand loyalty.

The study further revealed that brand awareness in any industry gives that company an

edge. Brand awareness accomplishes several objectives for companies seeking to increase

sales in the marketplace. A brand awareness campaign needs to be flexible enough to

grow with the company and adjust if needed. The company should seek to build customer

awareness, promote its website and add value.

The study revealed that milk processors in Kenya had implemented brand awareness

strategies to a great extent. The study also noted that customers were familiar with various

brands by milk processors (mean = 4.65), most of the brand belonging to dairy

processing firms were easy to identify (mean = 4.48), when customers go to buy dairy

products, the company’s brand was always in the list of their choices (mean =4.43),

targeted customers can easily identify company’s brand even from a distance (mean =

4.39), brands for dairy processing firms were easily to recalled by customers (mean =

4.22) and that most of the dairy processing firms have done a good job in marketing their

brands (mean = 4.13). Creating brand awareness is usually the first step in building

advertising objectives which is in line with the findings of Capon (2012).

5.3.2 Customer Based Brand Equity Among Milk Processors in Kenya

The basic premise of CBBE is that the power of the brand lives in what the customers

have learned, felt, seen, touched and heard about the brand as a result of their experiences

over time i.e. ‘power of brand lies in what resides in the minds of customers’ (Keller,

2003). The study noted that the milk processors considered the very important customer

while making branding decisions.

48

The findings of the study show that the milk processors are keen on CBBE. Keller (2003)

notes that for a company focused on CBBE, the challenge in building strong brands is

ensuring that customers have the right type of experiences with products and services and

their accompanying marketing programs so that the desired thoughts, feelings, images,

beliefs, perceptions, opinions and so on become linked to the brand. Ali (2014) notes that,

every interaction with the stakeholders affects brand equity and increases it as the more

positive the experience, the stronger is the brand and the more the organization has

positive reputation.

The study noted that milk processors in Kenya had implemented brand loyalty strategies

to a great extent, The study also revealed that most of the milk processing firms have

influenced the customer perception about their brands, customers got what they expected

from the firms’ brand and that customers consistently get what they expect from the firms

brand (mean = 4.43), customers believe that the firm provides a high quality brand (mean

= 4.39), most of the dairy processing firms’ brand delivers what it promises and

customers get value for my money when they buy company’s brand (mean = 4.30), the

firm’s management was happy with the perception customers have about the brand (mean

= 4.26). The results of the study are similar to those proposed by Keller, (2008) who

found a strong positive relationship existed between price and perceived product value

and between perceived product value and willingness‐to‐buy.

The study further noted that milk processing firms aimed at retaining their customers

(mean = 4.65), others agrees that the company aims at satisfying the customers’ needs

every time and through this the firms’ dairy brand is always among the list of choices

(mean = 4.43 ). The firms’ loyal customers tend to purchase other products offered by the

company, were happy with the company’s purchases (mean = 4.39) and are more likely to

recommend the brand to their friends and family (mean = 4.35). This study reveals that

brand loyalty has an influence on consumer behavior and is in line with the findings of a

research by (Ghodeswar, 2008).

The study also revealed that customers of diary firms were likely to continue purchasing

company’s brand and that new products for diary firms were taken well by the loyal

customers (mean = 4.22), the diary firms took keen interest on feedback given by

customers (mean = 4.35), the firm’s brand aimed at building relationships with the

49

customers (mean = 4.13), the targeted customers would not go for another brand if the

brand was not available at the time (mean = 3.09) and that the firm expected that their

customers will continue buying the brand at any price (mean = 3.70). Laforet (2010)

notes that building a strong brand image is one of the best ways to get consumers to

connect and engage with the brand which is in line with these findings.

The research revealed that various milk processors in Kenya had implemented product

quality strategies, that milk processing firms marketed their brands as that of high quality

(mean = 4.83) milk processing firms consistently provide a high quality brand, dairy

firms provides a high quality brand (mean = 4.74) the organization manufacturing the

brand is trustworthy (mean = 4.65) all the products manufactured by the firm are from

superior quality (mean = 4.52) product from individual firms were of higher quality

compared to products competitors and that the firms brand quality is preferred by

customers than that of the competitors (mean = 4.57). The findings are in line with the

findings by Zhu, (2009) Perception plays an important role in determining the loyalty of a

consumer in that when a buyer is convinced that his choice is the correct one and he is

buying superior products, then he will not shift his loyalty towards that product easily.

The results further indicate that establishing a value perception is critical in the buying

process. Tangible cues exhibiting high quality (e.g. packaging, shelf space, media

placement) need profound attention. Furthermore, it is suggested that risk (which plays an

important part in the consumer decision process) is minimized through optimal retail

service quality and customer reassurances

5.3.3 Customer Based Brand Equity on Financial Performance of Milk Processors in

Kenya

This revealed that revealed brand equity and financial Performance of milk processors in

Kenya, that the firm’s loyal customers make it easy for the company to get into new

markets (mean = 4.30), most of the dairy product customers were price inelastic (mean =

4.13), loyal customers recommend their friends and families to purchase company’s

products, the firms loyal customers make it easy for the firm to introduce new products

(mean = 4.04), loyal customers give the dairy firms continued stream of revenue (mean =

4.00). The findings are in line with the argument by Aaker (2013) that brand equity

provides value to customers. It enhances the customer’s ability to interpret and process

50

information, improves confidence in the purchase decision and affects the quality of the

user experience.

The study noted that milk processors in Kenya had implemented strategies geared at

formation of brand associations. Regression results predict that a unit increase in brand

associations would enhance the financial performance of milk processors in Kenya by

factor of 0.813,the study also note that the company’s product are of high quality (mean =

4.65), the firm’s brand is able to meet the consumer’s needs, the firms brand is reliable

(mean = 4.52) other agreed that the firms brand is relatable with the target market (mean

= 4.43) Liker and Meier 2006; Kumar et al, (2000) Positive brand association helps an

organization to gain goodwill, and obstructs the competitor’s entry into the market

The study further revealed that brands offered by most of the dairy firms were dependable

and consumers always counted on them, the price charged by most of the dairy company

is fair for the value offered and that firms brand is good value for money (mean = 4.39)

and that most of the dairy firm’s management perceived that their brand is stylish and

attractive (mean = 4.13). The findings are in line with the proposal by Kamakura and

Russell, (2011) which recommends that brands should be associated with something

positive so that the customers have a positive relationship to the brand.

The study also revealed that brand’s quality enable the company to charge a premium

price (mean = 3.26), brand positioning strategy gives dairy manufacturing firms leverage

with their distributors, most of the dairy firms always got value for their marketing

efforts (mean = 3.96), brand positioning gives dairy processing firms the competitive

advantage (mean = 3.87) and that most of the dairy processing firms had unique brand

identity which is difficult for competitors to imitate (mean =3.83), the findings are in line

with the findings by Kiraithe and others (2011) that the brand equity creates value for

both the consumer and the firm, the brand provides value to the firm by generating value

for the consumers and consumers' brand associations are a key element in brand equity

formation and management.

From the analysis, most of the dairy companies made an average annual revenue not

exceeding 300 million, most of the dairy companies made an average annual total costs

not exceeding 1001 to 1,500 million and that most of the dairy companies made an

average annual total costs not exceeding 1001 to 1,500 million.

51

5.4 Conclusion

5. 4.1 Review of Brand Equity

The study concludes that reviews on customer based brand equity influenced the financial

performance of milk processors in Kenya. Reviews on Customer-based brand equity

formed businesses foundation that creates a positive attitude toward a brand, and how to

capitalize on attitudes and loyalties of their customers. Building a strong brand with

significant equity provides milk processors with numerous benefits, such as greater

customer loyalty and less vulnerability to competitive marketing actions or marketing

crises; larger margins as well as more favorable customer response to price increases and

decreases; greater trade or intermediary cooperation and support; increased marketing

communication effectiveness; and licensing and brand extension opportunities

5.4.2 Customer Based Brand Equity among Milk Processors in Kenya

The study concludes that strategizing on Building customer based brand positively

influenced the financial performance of milk processors in Kenya. Building customer

based brand equity forms the foundation or base building block in developing brand

equity and provides three important functions. First, awareness influences the formation

and strength of brand associations that make up the brand image and gives the brand

meaning. Second, creating a high level of customer based brand in terms of category

identification and needs satisfied is of crucial importance during possible purchase or

consumption opportunities. Building customer based brand influences the likelihood that

the brand will be a member of the consideration set, that handful of brands that receive

serious consideration for purchase and that Brand awareness is also important during

possible consumption settings in terms of maximizing potential usage

5.4.3 Customer Based Brand Equity on Financial Performance of Milk Processors in

Kenya

The study concludes that there exists a strong relationship between perceived relative

price and perceived product value, as well as between perceived product value and

willingness‐to‐buy influenced customer purchase decisions. The results also indicate that

establishing a value perception is critical in the buying process. Tangible cues exhibiting

high quality (e.g. packaging, shelf space, media placement) need profound attention.

Furthermore, it is suggested that risk (which plays an important part in the consumer

52

decision process) is minimized through optimal retail service quality and customer

reassurances.

5.5 Recommendation

5.5.1 Recommendation for Improvement

5.5.1.1 Review of Brand Equity

In order for milk processors in Kenya to build customer based brand equity, it is

important for milk processors in Kenya to position their dairy product uniquely and

ensure product reliability. Milk processors should clearly explain their position, this will

be critical in ensuring that consumers can easily remember about the qualities that they

care most about the product. Milk processing companies should consistently and

continually implements tangible measures that build positive perception on their products.

This may necessarily mean working on product quality aspects like packaging, shelf

space, media placement.

5.5.1.2 Customer Based Brand Equity among Milk Processors in Kenya

The study also recommends that the management of Milk processing companies should

consider initiating campaigns to enhance their brand awareness, there is need to segment

branding efforts to target highly specific audiences. Brand awareness strategies should

continue to focus on capturing the attention of current customers. These customers can be

identified as those individuals whom have shown an interest by visiting the company

website, reading company announcements, or otherwise indicated intent to purchase. To

make the most of branding efforts, marketers should focus their attention on the brand's

identified target market.

5.5.1.3 Customer Based Brand Equity on Financial Performance of Milk Processors

in Kenya

The study recommends that the brands for milk processing firms should be associated

with something positive so that the customers relate companies brand to being positive.

Brand managers should choose between brand and line extension as the primary form of

growth for the brand. Milk processing companies should also endeavor to build strong

relationships between perceived relative price and perceived product value. In order to be

able to choose the better alternative, brand managers need to relate consumer’s

53

perceptions of the brands, in the form of brand associations, to decisions on line or brand

extension.

5.5.2 Recommendations for Further Studies

The independent variables brand awareness, perceived quality, brand associations and

brand loyalty only accounted for 75.2% changes on financial performance of milk

processors in Kenya Therefore; the study recommends that further research should be

conducted to investigate the other factors accounting for (24.8%) effect on the financial

performance of milk processors in Kenya.

54

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APPENDICES

Appendix I: Cover Letter

Sarah Njeri Kuria

USIU- Africa

P. O. BOX 14634-00800

Nairobi.

April 2017.

Dear Sir/Madam,

RE: DATA COLLECTION

I would like to first of all thank you for your time.

I am a student at am a student at United States International University pursuing a degree

in Masters in Business Administration (MBA). As partial fulfillment for my degree, I am

conducting a research on: The Effect of Building Customer Based Brand Equity on the

Financial Performance of Milk Processors in Kenya.

The questionnaire attached is part of a research and it will gather the information needed.

The findings of this study will be solely used for academic reasons and I guarantee utmost

confidentiality

Your participation is very essential for the accomplishment of this study and it will be

highly appreciated. Please respond as honestly and objectively as possible.

Yours Faithfully,

Sarah Njeri.

61

Appendix II: Questionnaire

If any question may not be appropriate to your circumstances do not answer.

Section A: General Information

1. Organization: ___________________________________

2. Department: ___________________________________

3. Designation: ___________________________________

4. How long has the company been operational?

a) Less than 5 years

b) 5-10 years

c) 10-15 years

d) Over 15 years

5. The company operates

a) In Kenya only

b) East Africa only

c) Africa only

d) Worldwide

6. How many brands does your company have? _______________

7. Other than Dairy, does your company operate in another industry? ________

If yes, which one _____________________

Section B: Customer Based Brand Equity

8. While making and implementing branding strategies, how do the following stakeholders

impact on your decisions (5 = most important; 4= important; 3= moderately important;

2= least important; 1= not important)

Stakeholder 5 4 3 2 1

Customers

Competitors

General Public

Management

Government/ Policy makers

9. Who is the main target group for your brand? ____________________

62

10. Please tick the choice that you feel suits your situation from the choices provided by

the likert scale

1 = Strongly Disagree 2 = Disagree 3 = Neutral 4 = Agree 5 = Strongly

Agree

1 2 3 4 5

Brand Awareness

1. Our company has built a good brand identity

2. Our company has communicated our brand identity to our

customers

3. Our customers are aware about our brand identity

4. The brand identity our customers have is what the

company

5. Our brand is a reflection of the customers

6. We have built a consistent brand image

7. We consistently keep brand messaging

8. We have built a personality around the brand

9. The brand has been positioned well to reach the target

market

10. Our brand is easy to recall

11. Our brand is recognizable

12. Our customers are familiar with our brand

13. Our brand is easily identifiable to our customers

14. Our customers can easily identify our brand even from a

distance

15. Our company has done a good job in marketing the brand

16. When our customers go to buy dairy products, our brand

is in the list of choices

Brand Loyalty

17. Our brand aims at building relationships with our

customers

18. The company takes interest on feedback given by

customers

19. Our company aims at retaining its customers

20. Our company aims at satisfying the customers’ needs

every time

21. Our customers are happy with their purchases

22. Our repeat customers tend to purchase our other products

23. Our new products are taken well by our loyal customers

24. Our customers will continue buying our brand at any price

63

25. Our customers are likely to continue purchasing our brand

26. Our customers would not go for another brand if I the

brand was not available at the time

27. Our customers are more likely to recommend the brand to

their friends and family

28. Our customers trust our brand

Perceived Quality

29. We provide a high quality brand

30. We consistently provide a high quality brand

31. Our product is of higher quality compared to our

competitors

32. Our brand quality is preferred to that of the competitors

33. Our customers believe we provide a high quality brand

34. We market our brand as that of quality

35. We have influenced the customer perception about our

brand

36. We are happy with the perception customers have about

the brand

37. Our brand delivers what it promises

38. Customers get what they expect from our brand

39. Customers consistently get what they expect from our

brand

40. Customers get value for my money when they buy our

brand

41. All our products from are of superior quality

42. The organization manufacturing the brand is trustworthy

Brand Associations

43. Our brand is reliable

44. Our brand is able to meet the consumer’s needs

45. Our brand is good value for money

46. The product are of high quality

47. Our brand is stylish and attractive

48. Our brand is dependable and consumers can always count

on it

49. Our brand is relatable with our target market

50. Our customers are confident in our product

51. The price we charge is fair for the value we give

64

Section C: Brand Equity and Financial Performance

1. Our brand’s quality enable us to charge a premium price

2. Our customers are price inelastic

3. Our loyal customers make it easy for us to introduce new

products

4. Our loyal customers make it easy to get into new markets

5. Our loyal customers recommend us to friends and families

6. Our loyal customers give us continued stream of revenue

7. Our brand positioning gives us competitive advantage

8. Our brand positioning gives us leverage with our

distributors

9. Our brand identity makes it difficult for competitors to

imitate

10. We always get value for our marketing efforts

11. In your opinion, what more can your firm do to raise the brand equity and in turn your

financial performance

..........................................................................................................................................

..........................................................................................................................................

..........................................................................................................................................

........................................

THANK YOU FOR YOUR TIME

65

Appendix III: Licensed Milk Processors

Company Name Postal Address Physical Location

1 Afrodane Industry P. O. Box 46336 NAIROBI Kinale off Nairobi

Naivasha Highway

2 Aspendos Dairy P. O. Box 10202 KANGEMA

3 BioFoods Products P. O. Box 27623-00506 NAIROBI

4 Brookside Dairy P. O. Box 236 RUIRU

5 Countryside Dairy Ltd P. O. Box LUGARI, KAKAMEGA

6 Doinyo Lessos P. O. Box 169- 30100 ELDORET KENYATTA STREET

ELDORET

7 Egerton University P. O. Box 536 NJORO EGERTON

UNIVERSITY 8 Eldoville Farm P. O. Box 24390 NAIROBI

9 Githunguri DFCS P. O. Box 3 GITHUNGURI GITHUNGURI TOWN

10 Happycow Dairy P. O. Box 558 NAKURU JOSEN TRUST HOUSE,

NAIROBI-NAKURU

HIGHWAY 11 Kabianga Dairy P. O. 1595 KERICHO KERICHO

12 Kinangop Dairy P. O. Box 54954-00620 SHOWBE PLAZA

NAIROBI

13 Meru CFU P. O. Box 2919 MERU

14 New Amstrong Co. Ltd P. O. Box

15 New KCC P. O. Box 30131-00100 DAKAR ROAD,

INDUSTRIAL AREA

16 New Sameer A&L P. O. Box LUNGA LUNGA RD,

CLESOI 17 Palmhouse Dairies P. O. Box 10001-00400

18 Pamside Dairy / Lantana P. O. Box 745 01000 THIKA GARISSA ROAD,

THIKA

19 Raka Milk Processors P. O. Box 3372 00506 NAIROBI KUGURU FOOD

COMPLEX,

ENTERPRISE RD 20 Stanley & Sons P. O. Box

21 Sunpower Products P. O. Box 4111-00100 NAIROBI ST. GEORGE'S ROAD,

TIGONI

22 Uplands Premium

Dairies P. O. Box 479 – 00502 NAIROBI

KAGWE TOWN,

KIAMBU

23 Wakulima Dairy P. O. Box 232-10103 MUKURWE-INI,

NYERI 24 Wimssy Fresh Dairy P. O. Box