Do Co-Branding Products Increase Consumers’ Purchase Behaviors in Taiwan?

ABSTRACT - This study examines the effect of co-branding strategy on consumers’ evaluation of the extension products. Co-branding is operated based on the brand strength, similarity/complementary of parent brands. The results indicate that, for high involvement product, brand strength rather than similarity/complementary of parent brands play a critical role in the evaluations of co-branding products. The evaluations of co-branding product influence the brand equity. Discussions, contributions, and suggestions to future research and practitioners are addressed.

Citation:

Mengkuan Lai (2005) ,"Do Co-Branding Products Increase Consumers’ Purchase Behaviors in Taiwan?", in AP - Asia Pacific Advances in Consumer Research Volume 6, eds. Yong-Uon Ha and Youjae Yi, Duluth, MN : Association for Consumer Research, Pages: 89-95.

Asia Pacific Advances in Consumer Research Volume 6, 2005      Pages 89-95

DO CO-BRANDING PRODUCTS INCREASE CONSUMERS’ PURCHASE BEHAVIORS IN TAIWAN?

Mengkuan Lai, National Chengkung University, Taiwan

[The author thanks National Science Council, Taiwan for supporting this research.]

ABSTRACT -

This study examines the effect of co-branding strategy on consumers’ evaluation of the extension products. Co-branding is operated based on the brand strength, similarity/complementary of parent brands. The results indicate that, for high involvement product, brand strength rather than similarity/complementary of parent brands play a critical role in the evaluations of co-branding products. The evaluations of co-branding product influence the brand equity. Discussions, contributions, and suggestions to future research and practitioners are addressed.

As the market becomes increasingly competitive and more variety of products available to consumers, brands can facilitate consumers in decision process and enhance effectiveness (Doyle 1990). Brand extension has been a widely applied strategy by marketers in introducing new products to reduce the risks and costs and leverage on brand equity. Seventy-eight percent of new products introduced in 1998 were based on line extension however their success rate (28%) was lower than new products (47%) (Ernst and Young 1998, cited from Simms 2000). Co-branding among marketers from either same or different distribution levels and across industries has become a viable strategy. Few researches have focused on co-branding. Thus, the primary purpose of this study is to investigate the effects of parent brands’ brand equity on the evaluations of co-branding products.

Affect and Purchase Intension

Affect is an individual’s evaluation of a particular stimulus on its meanings, causes, consequences, and personal implications (Westbrook 1987, p. 259). Affect is a primal motive that could be viewed as a crucial determinant in product choices (Chaudhuri 1997). Although various definitions of affect could be found in literature, researchers agree that it is a mental phenomenon characterized by continuous experiences with emotions and moods and subjective affect states (Westbrook 1987). Both positive and negative affect influence purchase intention. Different affects are produced by different causes. Consumer purchases are often emotionally (Curry-Swann 1998), substantial impacts on cognitive process and social behaviors occur even with mild changes in emotional states (Aaker, Stayman, and Hagerty 1986). In addition, researches (Ajzen and Fishbein 1980; Miniard and Cohen 1979; Warshaw 1980) point out that purchase intention is a more valid predictor to behavior compared with attitude that can substitute behavior in developing models (Ryan and Bonfield 1980; Eroglu 1992). Accordingly, both affect and purchase intention are dependent variables of this study.

Brand, Alliance, and Consumer Attitudes

Consumers tend to rely on external (e.g., price and brand) rather than internal (e.g., quality) product information while making decision since external information is easier for them to obtain and judge. Brand simplifies decision process by providing consumers with a sense of safety and consistency (Barwise and Robertson 1992). In most transactions, especially consumer products, brand is a crucial factor (Barwise and Robertson 1992).

Successful brands could generate higher return on investment and quality, and service rather than advertising are the optimal strategies to build brands (Doyle 1990). Therefore, manufacturers value the potential value and power of their brands while realizing that every brand has its limitations (Boad 1999). Under this circumstance, many successful brands re-concentrate on their core business and become conservative in brand stretching. Alternatively, alliances have become a preferred strategy by increasing number of marketers compared to engaging in high risk and cost brand extension, expansion or diversification (Boad 1999).

Brand alliances refer to the collaboration between two existing brands in order to produce a new product. The alliance parties could be of either the same level (e.g., manufacturer to manufacturer) or different levels (e.g., manufacturer and retailers) in the marketing channels (Park, Jun, and Shocker 1996) that cooperate with each other on the 4Ps. Brand alliance is the optimal collaboration mode between two corporations since alliance makes the relationship highly visible and the reputation of the involved parties are affected by the results of alliance (Park, Jun, and Shocker, 1996). When the characteristics between the alliance parties are inconsistent, consumers would be confused (Park, Jun, and Shocker 1996).

Brand Strength and Purchase Intentions of Co-branding Products

Strong brand can enhance brand familiarity and knowledge thus generates association between brand and quality (Smith and Park 1992), which, in turn, reduce perceived risks and increase purchase intention of the extension (Aaker and Keller 1990; Reddy, Holak, and Bhat 1994). Park, Jun and Shocker (1996) claimed hat the strength of the header positively impact the evaluation of co-branding products. However, the strength of parent brands both influence the evaluation of co-branding product.

H1: The strength of the parent brands both positively impacts the evaluations (i.e., affect and purchase intention) of co-branding product.

Similarity or Fit of Parent Brands. Brand similarity is viewed as the shared salient attributes of abstract product concept or actual product attributes between the core brand and the extension (Loken and Ward 1990). Although co-branding related literature tends to be reports on business cases and its effects, the success of co-branding does rely on the brand equity of the parent brands. Research has found the similarity or fit between parent brand and extension to have significant impact on the evaluation and purchase intention of its extension (Aaker and Keller 1990; Boush and Loken 1991) since consumers presume that their knowledge on parent brand can be transferred to the extension (Keller and Aaker 1992).

Brand equity exerts even higher value in organizational portfolio than presents alone (Barwise and Robertson 1992). In other words, the overall performance of an organization can enhance brand value. When the characteristics of parent brands of the co-branding partners are inconsistent, consumers will be confused (Park, Jun, and Shocker 1996). Park, Jun, and Shocker (1996) studied composite brand in terms of complementary and concluded that parent brands compensate each other generate more positive evaluation on the extension when compared to rely on the strong brand in introducing extension.

H2a: The higher the similarity between the parent brands the more positive the evaluations (i.e., affect and purchase intention) of co-branding products.

H2b: Parent brands compensate each other will have a positive impact on the evaluation (i.e., affect and purchase intension) of co-branding products.

Brand serves as a signal of product quality (Rao, Qu, and Ruekert, 1999) that consumers utilize to evaluate new product (Cohen and Golden 1972). Brand with established equity could be used in expanding new products. However, the failure of the extension will undermine the image of high equity parent brand (Keller and Aaker 1992). Attitudes toward brand alliance positively impact on the brand equity of parent brands (Simonin and Ruth 1998). Accordingly, this study hypothesizes,

H3: The evaluations of co-branding product will have a positive impact on the brand equity of parent brands.

METHOD

A 2 (order of the co-branding brands) x 2 (high versus low brand strength) x 2 (fit and complimentary of parent brands) factorial design was used to test the hypotheses. The similarity and compliment of parent brands were determined based n respondents’ evaluation of parent brands’ brand equity. Control group with product name and model but no brand name appeared on the ad was included in the experiment. Two steps involved in the development of measurementsCselection of co-branding product and parent brand and the development of formal questionnaire.

Selection of Co-branding Product and Parent Brand

Since Park, Jun, and Shocker (1996) studied co-branding equity with low involvement product, this study chose high involvement product to test the effect of co-branding. Considering market potential in the future, this study selected cell phone PDA as co-branding product of cell phone and notebook. A pretest was carried out to decide the parent brands. The respondents were first asked about the importance of the parent products (cell phone and notebook) and the important product attributes. Then they indicated whether they recognized the brands and select the three most favorable and three least favorable brands from a list of all the brand name and its logs of cell phone (31) and notebook (26) available in the market at the time of the data collection. One hundred and 20 questionnaires were distributed. High and relatively low brand awareness was determined based on the rate of recognition and consensus among respondents on the degree of favorableness of the brands. As a result, the high and relatively low strength brands were Nokia and Okwap for cell phone and IBM, Asus, Toshiba and Twinhead for notebook, respectively.

The second pretest was to select the photo of cell phone PDA to be placed in the advertising in the formal experiment. Six cell phone PDA photos were chosen from more than 20 prototypes collected. Each of the six photos was presented to respondents by power point. Respondents were asked to evaluate each cell phone PDA as it was an actual product on six semantic differential scale items (like/dislike, great/poor function, attractive/unattractive, good/bad quality, in/out of style, and buy/not buy). Finally, respondents were presented with the six photos appeared on the same page and asked to select the most favorable one. The photo with the highest means of all the items was selected based on the responses from 44 valid questionnaires collected.

The Development of Formal Questionnaire

The questionnaire includes an advertising of a coming to market cell phone PDA, manipulation checks, and items measuring affect, function, and demographics. The content of the ads includes the co-branding name, cell phone PDA photo, and product attributes. Seventeen advertising scenarios (2 cell phone parent brands x 4 notebook parent brands x order of co-branding, plus one control groups) were developed. Manipulation check items asked respondents the main products produced by each of the parent brand. Affect is measured with a 17 semantic differential scale (Lai and Liu 2001) modified from Watson, Clark, and Tellegen’s (1988). Product function is measured with 8 items. Consumer-based brand equity scale (Lassar, Mittal, and Sharma 1995) was used to measure brand equity of parent brand and co-brand.

RESULTS

Considering the characteristics and price of the research product, cell phone PDA, respondents were people with full-time job. Among the 647 questionnaires distributed, 508 are valid. The sample distributions are 59% male, 85% aged between 23 and 40, 38.9% has monthly income of $885~$1475, 22.7% in manufacture, 18.8% are government employees, and 17.8% in service industry.

Item-to-total analysis and factor analysis were used to extract factors. Single factor was extracted for function and purchase intention with the explained variance of 59% and 81% and a value of .85 and .88, respectively. Positive and negative affects were extracted from affect measurement and the a values are both .87. As to the brand equity measures, factor results after deleting item 1 and 4 are the same as reported by Lassar, Mittal, and Sharma (1997), indicating construct validity (Zaichowsky 1985). The a values of social image, attachment, trust, and performance are .92, .94, .80, and .80, respectively. The measurement is valid and reliable.

Each variable index is the sum of item multiplies its corresponding loading and percentage of variance explained by that factor if there are more than one factors compose the variable (Anastasi and Urbina 1997, p. 302). The study then analyzed the components and overall brand equity of parent brands to decide on the similar and complementary co-branding partners. The ranks of overall brand equity, from high to low, are Toshiba, Nokia, IBM, ASUS, OKWAP, and Twinhead. For the co-branding based on the similarity of parent brands, the two brands are both rated high (or low) on all the components and overall brand equity and their differences are not statistically different. For the complementary co-branding, one of the co-branding partners is rated high while the other is rated low on all the components and overall brand equity and the differences are statistically significant. As a result, the high and relative low brands strength of notebook parent brands is Toshiba and Twinhead, respectively. The high and relative low brand strength of cell phone parent brands is Nokia and Okwap, respectively. The similar co-branding groups are Toshiba Nokia and Twinhead Okap. The complementary co-branding groups are Toshiba Okwap and Tiwnhead Nokia. Table 1 list the brand equity of each co-branding group.

Hypothesis testing

H1 is tested by GLM where the independent variable is the strength of parent brands. Only the main effect of the brand strength of cell phone is significant on the functional evaluation of co-branding product (see table 2). Nokia generates higher functional evaluation than that of Okwap. Hypothesis 1 is partially supported.

GLM is used to test hypothesis 2 where the independent variable is the co-branding groups plus control group. The results (see table 3) show that except for purchase intention, the main effect of co-branding is significant at .05 for positive and negative affect and function evaluation. Scheffe tests indicate that on positive affect evaluation, Toshiba Nokia is significant higher than control group. Toshiba Nokia generates significantly lower negative affect than control group. Both Toshiba Nokia and Tiwnhead Nokia are rated higher on function when compared to control group.

TABLE 1

BRAND EQUITY OF CO-BRANDING BRANDS

TABLE 2

GLM RESULTS-DEPENDENT VARIABLES = F (BRAND STRENGTH OF CELL PHONE AND NOTEBOOK)

The results do not completely support hypothesis 2. The reason could be that respondents consider only the strong co-branding partner when evaluating co-branding products. Thus, the co-branding groups were re-classified based on the strong brand of the two parent brands composing the co-brand. For instance, Nokia Toshiba is classified as Toshiba group since Toshiba has higher brand equity than Nokia. Four groups resulted form the classification-Toshiba, Nokia, Okwap, and control group. The results of GLM analyses show that the main effects are significant at .05 except that for purchase intention. Scheffe tests found that Toshiba group generates higher positive affect than control group does. Both Toshiba and Nokia groups generate higher functional evaluation than control group does.

To test whether the strong brand placed as the header or modifier has a significant effect on the evaluation of co-branding product, a 2-way GLM was performed to analyze the data. The results show that the interaction effect of order of the strong brand in the co-branding and similar/complementary parent brands on the evaluation of co-branding products is not significant. Only the main effects of order of the strong brand in the co-branding on negative affect and the similar/complementary parent brands on the evaluation of co-branding products are significant. When strong brand is placed as the header, co-branding product arouses less negative affect to respondent. Twinhead Nokia generates higher functional evaluation than Twinhead Okwap. Both are similarity groups.

TABLE 3

GLM RESULTS: (POSITIVE AFFECT, NEGATIVE AFFECT, FUNCTIONAL EVALUATION, AND PURCHASE INTENTION = F (CO-BRANDING GROUPS)

It seems that respondents consider only the strong partner instead of the relationships between the two partners when evaluating co-branding product. Thus, this study examined whether the strong brand partner with different levels of brand equity partner influence the evaluation of co-branding products. The results of t-test show that there is no difference on the evaluation of co-branding product whether Toshiba co-brands with Nokia or Okwap.

Hypotheses relating to purchase intention are not supported. It could be that 97.9% and 18.8% of respondents already own a cell phone and a PDA, respectively. Thus, this study examines the effects of respondents’ intention on replacing their current cell phone and PDA on the dependent variables (four groups resulted). The results show that, compared with no intention of replacing both cell phone and PDA, respondents intend to replace both have higher positive affect, function evaluation, and purchase intention toward co-branding product.

Stepwise regression is used to test whether the evaluations of co-branding products (i.e., positive affect, negative affect, function, and purchase intention) have positive impact on the evaluation of original brand. Three different measures of brand equity were used in the regression models, brand equity of co-branding, brand equity of co-branding minus that of the strong brand partner, brand equity of co-branding minus that of the control group. Similar patterns of independent variables entering the regression model are observed with different measures of brand equity (see table 4). The variances of dependent variable explained by the independent variables are similar for the three dependent variable measures (R² ranges from .31 to .61). Functional evaluation accounts for most of the variance explained by the independent variables for the performance component of brand equity (about 25%). Purchase intention explains most of the variances of social image component of brand equity (around 45%). Positive affect accounts for the most variances of trust (about 23%) and attachment (about 30%) component and overall brand equity (about 40%). It appears that the dependent variable is most affected by its relevant independent variable.

CONCLUSIONS

This study simulates a new product, cell phone PDA, to investigate the effects of brand strength, similarity/complementary co-branding partners on the evaluations of co-branding products. The results of this study show that, on brand strength, only cell phone parent brand affect the evaluation of function of co-branding product. The similarity/complementary partners have effects on the evaluation of function of the co-branding product is partially supported. It could be that co-branding strategy is still not common in Taiwan. At the time of data collecting, there is only one recognizable co-brandingBSony Ericsson which is the merge of cell phone divisions of Sony and Ericsson. Respondents base their evaluation of the co-branding product on the strong partner under this circumstance. A further test provides evidence that strong partner plays the major role in co-branding.

All the effects of independent variable on the purchase intention are not significant. A further analyses show that those effects will be significant if respondents are considering replacing their current cell phone or PDA.

As to the effect of co-branding equity on the equity of parent brands, the regression results show that each brand equity component is affected most by its relevant evaluation dimension of co-branding product. Specifically, evaluation of function accounts for performance component, purchase intention accounts for social image, and positive affect influence trust and attachment component and overall brand equity.

TABLE 4

THE RESULTS OF STEPWISE REGRESSION-BRAND EQUITY OF CO-BRANDING = A + B₁ PERFORMANCE + B₂ PURCHASE INTENTION + B₃ POSITIVE AFFECT

Contributions

The results of this study contribute to the co-branding literature. Co-branding has been a common marketing practice but not many researches have been focus on this subject. Park, Jun, and Shocker (1996) concluded that complementary brands generate better attribute evaluations than solely rely on the extension of a strong brand. They used a low involvement product. However, the results of this study suggest that respondents probably depend on their perceptions on the strong partner to evaluate the co-branding product. The first reason could be that respondents are not familiar with the co-branding strategies. In fact, some respondents indicated that they did not notice the research product was marketed by two manufactures. The second reason could be that respondents believe in well-established brand (or brand-oriented) in making decision especially for high involvement product, cell phone PDA in this study. They only focus on the one brand that appeals to them. Thus, the order of co-branding partners has no significant effect on the evaluation of co-branding product. As to the effect of the evaluation of the co-branding extension on the brand equity of parent brands, the results of this study are similar to previous research (e.g., Rao, Qu, and Ruekest 1999; Simonir and Ruth 1998).

Suggestions to practitioners

Co-branding strategy makes the relationship between the alliance partners highly visible (Park, Jun, and Shocker 1996), thus increase the awareness level. The reputation of co-branding partners certainly would impact the success of co-branding strategy. The following suggestions are based on the findings of this research.

First, the results of this study show that both similarity and complementary partners enhance the positive evaluation of co-branding product. Since co-branding is a market expansion strategy (Kotler and Armstrong 1996) and a differentiation strategy in the mature market (Dagnoli and Hum, 1991). Thus, marketers could pursue partners that are either comparable or complementary on the marketing mix to develop new markets. For marketers with an average-rated brand equity, pursuing high brand equity partner in establishing co-branding strategy seem to be more viable when potential buyers are not familiar with co-branding or aspiring to brand name products.

Second, the study found that respondents have higher evaluation of co-branding product when they have the intention to replace their current related product. Thus, marketers need to arouse consumers’ interest in the new product before co-branding strategy can generate profits. Marketers need to recognize the need and switch cost of consumers to introduce attractive co-branding product.

Suggestions for future research

This study manipulates the similarity/complementary of co-branding partners by the evaluations of brand equity, future research may consider co-branding of the marketing mix; for example, the co-branding of channel operator and product brand. The results of this study propose that brand strength is more effective than similarity/complementary alliance to extend to new product for high involvement products. Future research could test whether product category does impact on the co-branding strategy.

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