Measuring Perceived Brand Parity

ABSTRACT - Perceived brand parity relates to the perception among consumers that all major alternatives in a product class are similar. Though high levels of brand parity greatly concerns many marketing professionals, scant empirical research has been published on the topic. The current paper presents the results of a research project which developed a multi-item scale measuring perceived brand parity for consumer nondurable goods and applied the scale to investigate perceived brand parity's impact on cognitive brand loyalty, price sensitivity, and perceived utility of marketplace information. Implications for marketing theory and practice are discussed.

Citation:

James A. Muncy (1996) ,"Measuring Perceived Brand Parity", in NA - Advances in Consumer Research Volume 23, eds. Kim P. Corfman and John G. Lynch Jr., Provo, UT : Association for Consumer Research, Pages: 411-417.

Advances in Consumer Research Volume 23, 1996      Pages 411-417

MEASURING PERCEIVED BRAND PARITY

James A. Muncy, Valdosta State University

[The author wishes to thank James B. Wilcox and Roy D. Howell of Texas Tech University for their helpful comments at various stages of this research.]

ABSTRACT -

Perceived brand parity relates to the perception among consumers that all major alternatives in a product class are similar. Though high levels of brand parity greatly concerns many marketing professionals, scant empirical research has been published on the topic. The current paper presents the results of a research project which developed a multi-item scale measuring perceived brand parity for consumer nondurable goods and applied the scale to investigate perceived brand parity's impact on cognitive brand loyalty, price sensitivity, and perceived utility of marketplace information. Implications for marketing theory and practice are discussed.

INTRODUCTION

Kottman (1977) argued that product differentiation is the "sine qua non of successful marketing" (p. 146). Within a product category, when such differentiation does not exist (i.e., all brands are very similar), brand parity is said to exist. According to Kottman (1977) brand parity can be very problematic to the marketing managers:

...the idea of parity is an anathema in marketing. It is antithetical to the notion of differentiation, and product differentiation is regarded as the lifeblood of successful national brand marketing and advertising. (p. 146)

These feelings have been echoed by several leading marketing and advertising practitioners (see, for example, Giges 1988; Kanter 1981; Sloan 1989).

Is this concern justified? Based on intuition it would seem so. Very often the primary goal of a marketing program is to create a customer base that is cognitively brand loyal and insensitive to price competition. However, such a customer base may be difficult to develop in the absence of perceived differences between major brand alternatives. Few consumers would likely say "I am going to be loyal to a specific brand even though all of the major brands in the product category are just alike." Neither does it seem likely that a customer would be willing to pay a higher price for a particular brand when the major alternatives in a product category are all the same. Even developing a preference for a specific brand may be very difficult when all of the brands in the particular category are seen as being alike.

In a similar way, customers appear to be insensitive to marketplace information in circumstances of high brand parity. Muncy (1990) discusses a research study which found a strong relationship between perceived brand differences and information search. He explained these findings by stating that "it is only when the consumer perceives that differences actually do exist that he or she is motivated to find out information about what these differences are" (p. 146). Others have also argued that consumers are also less receptive to advertising when high parity perceptions exist (Giges 1988). If consumers are less receptive to marketing communications when parity perceptions are high, then they may not even give advertisers the opportunity to present information which could change such parity perceptions. So battling brand parity may be confounded by its own very existence.

Given all of the difficulties created by high parity perceptions, it is not surprising that Allen Rosenshine, the President and CEO of the Omnicom Group (BBDO's parent company) stated that it is the "very purpose of advertising to differentiate brands in the consumer's mind and to minimize brand parity where it does exist" (Giges 1988, p. 68). What is surprising is that very little empirical research has been published on brand parity. Most of the assertions given above on the relationship between brand parity and brand loyalty, price sensitivity, and receptiveness to market information are based on intuition or slight empirical evidence. No scale with demonstrated psychometric properties even exists for measuring brand parity. The small amount of empirical evidence that does exist is based on single item measures of brand parity or simple laboratory manipulations.

The current paper discusses the results of a research project which was developed to address these two concerns. First, a scale measuring brand parity was developed. Second, the scaled was administered to a national sample of consumers to see if it related as expected to measures of brand loyalty, price sensitivity, and perceived utility of marketplace information. The second part of this research was done both to test the effect of brand parity on key consumer behavior variables which interests advertisers and to investigate the construct validity of the measure developed.

WHAT IS PERCEIVED BRAND PARITY?

Before discussing the empirical investigation, it is important to explore the nature of brand parity. For the current study, perceived brand parity (PARITY) will be defined as the overall perception held by the consumer that the differences between the major brand alternatives in a product category are small. Thus, when consumers perceive the major brand alternatives as being similar, then PARITY is high. Conversely, when consumers perceive the alternatives as being dissimilar, PARITY is low.

PARITY can be seen as the opposite of product differentiation. When a firm is able to successfully differentiate itself in the consumer's mind, then it is diminishing brand parity. However, though brand differentiation is usually used in reference to a specific brand, parity relates to the whole product class (or at least the major alternatives in the product class). Once any major alternative becomes highly differentiated in the consumer's mind, either horizontally or vertically, then brand parity vanishes for the whole product class. The only possible exceptions could be when a brand becomes vertically differentiated by becoming highly inferior in the consumer's mind or when a brand becomes horizontally differentiated in such a way that the consumer no longer sees himself or herself as in the market for this brand. In both of these cases, the differentiated brand is no longer seen by the consumer as being a major brand alternative (for a discussion of the distinction between horizontal and vertical product differentiation, see Beath and Katsoulacos 1991).

It should also be noted that, as defined, brand parity exists as a perception in the consumer's mind and not necessarily as an intrinsic characteristic of a product class. Thus, it is possible that a consumer would perceive no parity for a product category where the brands are basically alike; conversely, a consumer could have high parity perceptions for a product category where the brands are quite dissimilar. Though one would expect that actual product similarities or differences have a major impact or the degree of perceived brand parity, it is likely that other marketplace factors (such as advertising) and consumer characteristics (such as experience with the product) also influence perceived parity.

VARIABLES RELATED TO PARITY

Numerous consumer and marketplace variables might potentially be related to PARITY. The current study selected three such variables which are of particular interest to adverting and marketing managers. These three are cognitive brand loyalty (LOYALTY), price sensitivity (PRICE), and perceived utility of marketplace information (INFO). Before discussing the specific hypothesized relationship between these variables and PARITY, it is important to define them.

Cognitive Brand Loyalty (LOYALTY)

Definitions of brand loyalty abound. Jacoby and Chestnut (1978) reviewed over 200 studies which used over fifty different definitions of brand loyalty. They concluded that these conceptualizations can be categorized as defining either behavioral brand loyalty, cognitive brand loyalty, or a combination thereof. The current research studied the narrower of these conceptsCcognitive brand loyalty (LOYALTY) is studied here and it is defined as a psychological commitment to a particular brand due to some real or imagined superiority attributed to that brand.

Price Sensitivity (PRICE)

The only variable that has been empirically related to brand parity in any significant way whatsoever is price sensitivity (Brooker, Wheatley and Chie 1986; Lambert 1972; Leavitt 1954; Obermiller and Wheatley 1984; Obermiller and Wheatley 1985; Tull, Boring and Gonsior 1964). All of these studied the conditions under which brand parity impacts price sensitivity (PRICE) which, as defined for this study, refers to the consumers willingness to select a lower priced alternative if one such alternative exists.

Perceived Utility of Marketplace Information (INFO)

Newman (1977) concluded that consumer information search will continue until the costs of search outweigh the benefits. As indicated above, information search may be impacted by perceived brand parity because the consumer sees the marketplace information as being less useful when all brands are seen as being the same. Thus, the current research studied the perceived utility of marketplace information (INFO) which is defined as the overall perception in the consumer's mind that the information provided in the marketplace is useful for making brand purchasing decisions.

HYPOTHESES

The current study tested three main hypotheses and made an assumption about a fourth relationship. These relationships are modeled in Figure 1. Each of these hypotheses will now be discussed.

PARITY and LOYALTY (^g ₁₁)

Jacoby (1971) conducted a three hour group interview with six housewives. He discussed several consumer nondurable products. From this interview, he concluded the following:

...perhaps the strongest mediator of brand loyalty was whether the housewife perceived quality differences to exist across various brands making up that particular product class. That is... the greater the perceived differences in quality across brands, the more individuals felt it was important to differentiate across these brands, and the greater the likelihood of the individual being brand loyal. (p. 28)

Muncy (1990) reports similar findings. These two authors both provide empirical evidence (though very limited) that PARITY may be one of the most (if not the most) significant predictor of brand loyalty. More importantly, the intuitive reasons given for expecting brand loyalty to be related to brand parity seems plausible. However, there is clearly a need for a stronger empirical test of this relationship. Thus, the first hypothesis tested in the current study is as follows:

Hypothesis 1: Higher levels of perceived brand parity (PARITY) will result in lower levels of cognitive brand loyalty (LOYALTY).

PARITY and PRICE (^g ₂₁)

The one variable that has been systematically related to brand parity is price sensitivity (Brooker, et al. 1986; Lambert 1972; Leavitt 1954; Obermiller and Wheatley 1984; Obermiller and Wheatley 1985; Tull, et al. 1964). The overwhelming evidence is that consumers are less price sensitive when they perceive large differences between alternatives than when they perceive such differences to be small. Most researchers believe, and empirical evidence supports, the assertion that consumers will have a greater tendency to use price as a cue for product quality when parity is low than when parity is high. It may also be that consumers see little benefit of paying a higher price when all brands are seen as being basically alike. In either case, the empirical evidence to date supports the following hypothesis:

Hypothesis 2: Higher levels of perceived brand parity (PARITY) will result in higher levels of price sensitivity (PRICE).

PARITY and INFO (^g ₃₁)

Very little research exists on the impact of brand parity on specific steps in the consumer decision making process. Muncy (1990) discussed a research project where perceived brand differences had a substantial influence on information search. The explanation given was that if consumers see all brands as being similar, then there is little benefit of information search because the search would not provide useful information which would help differentiate the choice set. This is consistent with Newman's (1977) hypothesis that consumers will engage in information search only if the perceived benefits exceed the costs. If parity decreases the perceived benefits of search, less search should occur.

The current research did not study the impact of brand parity on information search per se. Rather, it focused on parity's impact on the perceived utility of marketplace information. First, it was not feasible to study information search since this research studied nondurable purchases and very little if any pre-purchase information search typically precedes such purchases (Deshpande, Hoyer and Jeffries 1982; Hoyer 1984; Wells and LoSciuto 1966). Second, though information search may be of more interest in basic consumer research, it seems that the perceived utility of market information may be of more interest to those in marketing. Thus, the current study tested the following specific hypothesis:

Hypothesis 3: Higher levels of perceived brand parity (PARITY) will result in less perceived utility of marketplace information (INFO).

FIGURE 1

MODEL FOR PARITY STUDY

LOYALTY and PRICE (b ₂₁)

A fourth relation was assumed though it was not a specific focus of the current study. It was assumed that, as consumers become more cognitively brand loyal, they become less price sensitive. The conceptual link between these two variables is so strong that the first attempt to measure cognitive brand loyalty used a laboratory measure of price sensitivity as an indicant of such commitment (Pessemier 1959). Thus, in the testing of the current hypotheses, it was assumed that LOYALTY would be negatively related to PRICE.

METHODOLOGY

The current study followed the procedure suggested by Churchill (1979) for scale development. Initially, multi-item scales for each construct of interest were developed. The scales were then administered (with appropriate modifications) iteratively to different groups of students until they demonstrated adequate inter-item consistency. The four scales were then administered to a national sample of consumers.

Instrument Development

Twenty-nine students enrolled in an undergraduate consumer behavior class at a major southeast university were asked to give statements that described products based on their similarity to other brands. Based on their responses and on previous research (Kanter 1981; Leavitt 1954; Tull, et al. 1964), a set of eight statements were developed to measure PARITY. These statements were given in a questionnaire to 93 students enrolled in an introductory marketing class. Measures of the three other variables of interest in the current study (price sensitivity, cognitive brand loyalty, and perceived utility of marketplace information) were developed in a similar way.

TABLE 1

COEFFICIENT ALPHA FOR ALL SCALES

As suggested by Churchill (1979), an iterative of pretesting and refinement was conducted using various student samples. After three iterations, the result were five item scales for PARITY and LOYALTY and four item scales for INFO and PRICE. All four of the scales demonstrated reliability within the range suggested by Nunnally (1978). The four scales and eighteen items used in the current study are presented in Appendix A.

Product Categories Studied

The current research studied PARITY across a varying set of consumer nondurrables. From the initial pretest with students, three nondurable product categories were identified where there were significant differing opinions as to the degree of similarity among brands. The three product categories were laundry detergent, shampoo, and toothpaste. For all of these product categories, there were some respondents who perceived all brands as being similar and there were some respondents who believe there to be large brand differences.

Questionnaire

Three questionnaires were developedCone for each product category. Each questionnaire was identical except that the names of the products were changed. The eighteen statements developed above were embedded in a letter sent to selected consumers asking them to respond, giving them instructions, and thanking them for their participation. Subjects were asked to circle their responses on a five-point scale from SA (strongly agree) to SD (strongly disagree). Because there was a desire to maximize response rate and because the current study simply focused on four key variables, the eighteen statements and only the eighteen statements discussed above were included on the questionnaire. Through doing so, the questionnaire and the solicitation letter could all be printed on the front side of one page (on university stationary). It is believed that this is the reason why the current study obtained a very high response rate (see discussion below).

Sample

The sample consisted of 1,200 heads of households obtained from a large mailing list company (Alvin B. Zeller of New York). The sample was divided into three groups of 400 each with each group receiving a questionnaire pertaining to one of the product categories studied. Two waves were mailed. A surprising 82%response rate was obtained (62% with the first wave and 21% in the second wave). This high response rate was attributed to the shortness of the questionnaire and the ease with which consumers could respond to the survey (see discussion above).

ANALYSIS AND RESULTS

Coefficient a (Cronbach 1951) was computed for each construct and within each product category (see Table 1). These reliability estimates are generally consistent with what was obtained in the pretest except that the reliability estimates for INFO (especially for toothpaste) were slightly lower (ranging from 0.56 to 0.70) and the reliability estimates for PARITY were slightly higher (ranging from 0.86 to 0.91).

The conceptual model presented in Figure 1 was tested through LISREL 7 (J÷reskog and S÷rbom 1989). The results are presented in Table 3. The correlations between the latent variables are presented in Table 4. The goodness of fit indices and the completely standardized solutions for the l_x's and l_y's are consistent with what one would expect given the reliability estimates obtained through calculating coefficient a. Only l^y5 1 (LOYALTY5) and l^y6 2 (PRICE1) were low (below .65). Though future research may want to reevaluate and possibly reword these two statement, their l's were not so low that they were likely to significantly impact the overall research findings.

Hypothesis 1 (negative effect of PARITY on LOYALTY) received strong support. The estimates for g 1 1 (PARITY ^¦ LOYALTY) were all negative with absolute magnitude greater than 0.7. This clearly indicates that those who see all brands as being similar have a lower tendency to be cognitively brand loyal.

Hypothesis 2 (positive effect of PARITY on PRICE) received moderate support. Though the absolute correlations between x ₁ (PARITY) and h ₂ (PRICE) were high (ranging from .71 to .77), the estimates for ^g _{2 1} (PARITY ^¦ PRICE) were all between .11 and .21. The reason is clear when one looks at the estimates of b_{2 1} (LOYALTY ^¦ PRICE), none of which are smaller than .76. Thus, much of the relationship between PARITY and PRICE is accounted for by the strong relationship between PARITY and LOYALTY and the corresponding strong relationship between LOYALTY and PRICE. However, even when these indirect effects are partialed out, there is evidence that PARITY does have a moderate direct influence on PRICE.

Hypothesis 3 (negative effect of PARITY on INFO) received moderate to strong support with ^g _{3 1} (PARITY ^¦ INFO) ranging from -.289 to -.481. Given the lower coefficient a's associated with INFO, it is possible that there was attenuation in the relationship identified and that this relationship would be even stronger if better measures were used.

DISCUSSION AND FUTURE RESEARCH

Is parity "an anathema in marketing?" From the results of the current research, it could certainly be concluded that it is. The consumer with high parity perceptions appears to be less brand loyal, more price sensitive, and less receptive to marketplace information. Thus, it is not surprising that so many in marketing are saying that advertisers must work hard to battle brand parity (Giges 1988; Kanter 1981; Sloan 1989).

Parity should also be of interest to consumer researchers. It is a fairly simple construct to conceptualize and operationalize but its impact on consumer decision making may be quite dramatic. The current research provided a measure which can be used in surveys to measure brand parity. It also identified variables that relate to brand parity. However, it did not even begin to explore what may cause brand parity perceptions. To what extent is brand parity related to actual differences between products and to what extent is it related to marketing variables (such as advertising) or consumer variables (such as familiarity with product). These are all interesting questions that would have implications for both consumer behavior theory and marketing practice.

TABLE 2

RESULTS FROM STRUCTURAL EQUATIONS ANALYSIS

The current paper presented one model of parity's effect on certain key consumer behavior constructs. The current model could be debated. Thought the current empirical findings seemed to indicate that it is a viable model, other models could also be developed and tested. Though this is an adequate model, it does not necessarily mean that it is the best model. Further research is needed to address this question.

Also, the current study related brand parity to a limited set of variables. Other variables should also be investigated. For example, how would parity perceptions impact attitude formation or the choice of a decision heuristic or how might perceived brand parity relate to brand equity? These also deserve future research.

TABLE 3

CORRELATION MATRIX OF LATENT VARIABLES

APPENDIX 1

MEASURES USED IN STUDY (LAUNDRY DETERGENT)

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