1. University of Basel / University of Hohenheim 1 Messung und Steuerung der Markenbeziehungsqualität – Brand Relationship Quality as a Formative Third-order Construct – – Findings of a cross-industry study in the German consumer market – First International Consumer Brand Relationship Colloquium (22 – 24 April, 2010) Manfred Bruhn (University of Basel) Falko Eichen (University of Basel) Karsten Hadwich (University of Hohenheim)

2. University of Basel / University of Hohenheim 2 Overview 1. Introduction and Literature Review 2. Research Objectives and Approach 3. Proposed Measurement Model 4. Empirical Study 5. Discussion

3. University of Basel / University of Hohenheim 3 Introduction  Increasing importance of relationship marketing in the consumer market  Comprehensive measurement of Brand Relationship Quality (BRQ) regarded as the key to effective Brand Relationship Management  Empirical and conceptual research gaps with regards to BRQ measurement  Empirical:  Focus on high-involvement product categories  Few cross-industrial studies  Conceptual:  Focus on the brand in its role as relationship partner (Brand Management Perspective)  Missing integration of brand in its role as interaction platform (Relationship Management Perspective)

4. University of Basel / University of Hohenheim 4 Literature Review (1/2) SourceIndustry (Sample Size) [Country] Dimensions Love/ Passion Self Connection Interde- pendence Commit- ment IntimicyPartner Quality Others Fournier (1994)Favourite Brand (n=270) [USA] XXXXX Brand Attachment Hayes/Capella/Alford (2000) Sunglasses (n=160) [USA] XXXX Brand Attractiveness Monga (2000) Favourite Brand (n=71) [USA] XXX Thorbjørnsen et al. (2002) Airline (n=123) Restaurant Chain (n=123) [Norway] XXXXX Park/Kim/Kim (2002) Grocery Food (n=550) [Korea] XXXXX Nostalgia, Brand Trust Aaker/Fournier/Brasel (2004) Online-Foto Services (n=69) [USA] XXXX Brand Satisfaction

5. University of Basel / University of Hohenheim 5 Literature Review (2/2) SourceIndustry (Sample Size) [Country] Dimensions Love/ Passion Self Connection Interde- pendence Commit- ment IntimicyPartner Quality Others Kressmann et al. (2006) Automobile (n=600) [n.s.] XXXX Smit/Bronner/ Toolboom (2007) Automobile (n=164) Computer (n=223) Beer (n=303) Shampoo (n=248) [Netherlands] XXXXXX Nostalgia, Brand Trust Veloutsou (2007) n.s. (n=277) [Great Britain] Emotional Exchange, Two-Way Communication Breivik/Thorbjørnsen (2008) Frozen Pizza (n=277) TV-Channel (n=256) [Norway] XXXXXX Behavioral Frequency

6. University of Basel / University of Hohenheim 6 Research Objectives and Approach  Development of a holistic measurement model for BRQ that offers a more complete understanding by considering the status of brand relationships as both a means versus an end  Testing of the proposed measurement model across different consumer industries (cross-industry comparison) Research Objectives: Approach: 1.Literature study: Review of existing BRQ measurement models and dimensions 2.Qualitative interviews with 10 customers and 5 experts: Investigation of the quality dimensions of BRQ and item collection 3.Expert interviews with five marketing professors: Specification of measurement models (formative versus reflective) 4.Pre-study (n=118): Optimization of measurement models 5.Cross-industry study (n=2.009)

7. University of Basel / University of Hohenheim 7 Findings of literature study and Interviews  BRQ consists of two quality dimensions : 1.Quality of the Brand as Relationship Partner (“Me and the Brand”)  Overall assessment of the brand in its role as a partner in a dyadic relationship with the consumer  Brand Relationship Theory (Fournier 1998) 2.Quality of the Brand as Interaction Platform (“Me, the Brand and the others”)  Degree to what the brand meets customer`s expectations in its role as a platform for substantial and repeated two-way interactions with other brand representatives  Social Penetration Theory (Altman and Taylor 1973)  Measurement of BRQ quality dimensions by means of six sub-dimensions:  Quality of Brand as Relationship Partner: Brand satisfaction (Esch et al. 2006), brand trust (Hess 1998) and emotional brand closeness (Scarabis 2006)  Quality of Brand as Interaction Platform: Intensity of consumer-consumer-interactions, intensity of employee-consumer-interactions and intensity of system-consumer-interactions  Decision for formative model specifications between the different measurement levels

8. University of Basel / University of Hohenheim 8 Measurement Model of BRQ Brand Relationship Quality (BRQ) Intensity of Employee- Consumer Interactions (ECI) Intensity of Consumer- Consumer- Interactions (CCI) Intensity of System- Consumer- Interactions (SCI) Brand Trust (BT) Brand Satisfaction (BS) Quality of Brand as Relationship Partner (BRP) Emotional Brand Closeness (EBC) Quality of Brand as Interaction Platform (BIP) Construct (3rd order) Dimensions (2nd order) Sub-dimensions (1st order)

9. University of Basel / University of Hohenheim 9 Study Design  8 industries; selection of industries and brands was guided by variance and relevance considerations  Online-survey; recruiting of survey respondents via GfK Online Panel Germany (30.000 people)  Combination of randomization and quota sampling  Of 2.241 respondents invited, 1.121 completed questionnaire (response rate of 50%) IndustryGoods typeUsage focus Proportion of budget Involvement Frequency of purchase AutomobileConsumer DurableSymbolic/functionalHigh Low Cell PhoneConsumer DurableSymbolic/functionalMediumHighMedium ToothphasteFMCGFunctionalLowMediumHigh BeerFMCGSymbolic/functionalLowMediumHigh TissuesFMCGFunctionalLow Medium Tinned VegetablesFMCGFunctionalLow High Motor InsuranceContract GoodFunctionalMediumHighLow Wireless Network OperatorContract GoodsSymbolic/functionalMedium Low

10. University of Basel / University of Hohenheim 10 Index Construction of Brand Relationship Quality (BRQ)  Item collection based on literature review and qualitative study  Reflective multi-item measurement models  Pre-Study for optimization of measurement models (n=118)  PLS Graph 3.0  Three-step approach for index construction with PLS (Ulaga and Eggert 2006): 1.Assessment of reflective measurement models 2.Summation of respective items of each sub-dimension to obtain a score, which served as formative indicator for the two quality dimensions 3.Measurement of BRQ on the basis of (1) the two formative dimensions and (2) two reflective items  “There is a deep connections between me and this brand.”  “I have a good relationship with this brand.”

11. University of Basel / University of Hohenheim 11 Measurement Model of Brand Relationship Quality (BRQ) FactorItemsLoadingt-ValueCRAVEAlpha Brand Satisfaction I am satisfied with this [brand]..951314.36.960.889.936 This [brand] has come up to my expectations..957315.60 This brand is close to an ideal [brand]..920188.90 Brand Trust This [brand] is reliable..932172.48.962.893.940 This is an honest [brand]..955301.10 I trust this [brand]..948260.08 Emotional Brand Closeness I feel that I understand this [brand]..828115.07.932.774.904 This [brand] and I are meant for each other..934260.44 This [brand] reveals a lot about my personality..83888.70 This [brand] plays a decisive role in my life..913170.27 Intensity of Consumer- Consumer Interactions I think that this [brand] provides sufficient options to get in touch with other consumers/users of this [brand]..841109.89.920.793.870 It is interesting to share experiences with other consumers/users of this [brand]..930239.92 I use or would like to use the option to get in touch with other consumers/users of this [brand]..899155.83 Intensity of Employee- Consumer Interactions I think that this [brand] provides sufficient options to get in touch with employees of this [brand]..855120.89.922.797.874 It is important to me being able to get in touch with employees of this [brand]..932255.12 I use or would like to use the option to get in touch with employees of this [brand]..889152.05 Intensity of System- Consumer Interactions I think that this [brand] provides sufficient options to get in touch with producer of this [brand] through interactive online applications..844110.65.921.795.872 It is important to me being able to get in touch with the producer of this [brand] through interactive online applications..936257.29 I use or would like to use the option to get in touch with the producer of this [brand] through interactive online applications..892161.37

12. University of Basel / University of Hohenheim 12 Discriminant Validity Brand Satisfaction Brand Trust Emotional Brand Closeness Intensity of Consumer- Consumer Interactions Intensity of Employee- Consumer Interactions Intensity of System- Consumer Interactions Brand Satisfaction.889.581.206.021.013.023 Brand Trust.893.368.084.082.095 Emotional Brand Closeness.774.300.183.189 Intensity of Consumer- Consumer Interaction.793.523.496 Intensity of Employee- Consumer Interaction.797.697 Intensity of System-Consumer Interaction.795 Notes: Bold numbers on the diagonal show the AVE. Numbers below the diagonal represent the squared correlations.

13. University of Basel / University of Hohenheim 13 PLS Estimation for BRQ Measurement Model Brand Relationship Quality Quality of the Brand as Relationship Partner Quality of the Brand as Interaction Platform Intensity of the Customer- Customer Interaction Intensity of the Employee- Customer Interaction Intensity of the System- Customer Interaction Brand Satisfaction Brand Trust Emotional Brand Closeness.468.169.455.649.444.035.564.282 R 2 =.56 Note: All parameters, except for brand trust, are significant at 5% level.

14. University of Basel / University of Hohenheim 14 Influence of Relationship Quality Dimensions on BRQ Industries Quality of the Brand as Relationship Partner Quality of the Brand as Interaction Platform TotalIn PercentTotalIn Percent Average across industries0,56467%0,28233% Automobile0,65371%0,27329% Cell Phone0,54863%0,32237% Toothpaste0,59978%0,16522% Beer0,54471%0,22429% Tissues0,61976%0,19424% Tinned Vegetables0,43653%0,38947% Motor Insurance0,44753%0,39947% Wireless Network Operator0,56764%0,31936%

15. University of Basel / University of Hohenheim 15 Influence of Relationship Quality Sub-Dimensions on BRQ RankingAverageAutomobileCell PhoneToothpasteBeerTissues Tinned Vegetables Motor Insurance Wireless Network Operator 1 EC BT (0,366) [39,5%] (0,391) [37,5%] (0,359) [37,6%] (0,435) [57,1%] (0,450) [73,6%] (0,429) [48,1%] (0,298) [36,8%] (0,268) [26,9%] (0,308) [31,3%] 2 BT CCIBT EC (0,250) [27,1%] (0,225) [21,6%] (0,244) [25,6%] (0,222) [29,2%] (0,162) [26,4%] (0,246) [27,5%] (0,204) [25,2%] (0,256) [25,7%] (0,224) [22,7%] 3 CCIBSSCI BS BT SCI ECI (n.s) SCICCIECICCI (0,132) [14,3%] (0,119) [11,5%] (0,137) [14,4%] (0,105) [13,7%] (0,110) [12,3%] (0,154) [19,0%] (0,200) [20,1%] (0,175) [17,7%] 4 SCI CCIBS CCI ECI (n.s) CCISCI (0,128) [13,9%] (0,112) [10,8%] (0,125) [13,1%] (0,108) [12,1%] (0,154) [19,0%] (0,175) [17,6%] (0,174) [17,6%] 5 ECICCIECIBS, ECI (n.s) BS ECI (n.s) CCIBS (0,048) [5,2%] (0,105) [10,1%] (0,089) [9,3%] (0,097) [9,7%] (0,105) [10,7%] 6 BSECIBS ECI (n.s.) (0,088) [8,5%] (n.s.) (n.s) EC: Emotional Brand Closeness BT:Brand Trust BS: Brand Satisfaction CCI: Intensity of Consumer-Consumer-Interactions ECI:Intensity of Employee-Consumer-Interactions SCI: Intensity of System-Consumer-Interactions n.s: Not significant on 5% level

16. University of Basel / University of Hohenheim 16 Discussion  Need for a holistic view on BRQ Quality of Brand as Relationship Partner and Interaction Platform as drivers of BRQ  Need for an industry-specific view on BRQ measurement and management Importance of BRQ dimensions and sub-dimensions varies across industries Management Implications:  Complexity reduction for proposed measurement model Test of alternative measurement model (first and second order measurement models)  Further research with regards to Quality of the Brand as Interaction Platform e.g. studies about how to best stimulate interactions among customers  Moderating Effects: e.g. which factors influence importance of BRQ quality dimensions Further Research:  Generalization of results Test of measurement model on brand level and in different countries necessary Limitations:

17. University of Basel / University of Hohenheim 17 Thank you very much for your attention!