Exploring The Strategic Role of Brand Equity Towards Competitive Advantage in The Smartphone Industry
Exploring The Strategic Role of Brand Equity Towards Competitive Advantage in The Smartphone Industry
Exploring The Strategic Role of Brand Equity Towards Competitive Advantage in The Smartphone Industry
42–55
RESEARCH ARTICLE
Abstract: This study intends to explore the strategic role of brand equity towards competitive advantage from the
customer’s perspective in the context of the smartphone market in Kuching, a city located in Sarawak, Malaysia. Based
on the two competitive advantage strategies (cost advantage and differentiation), this study aims to investigate the extent
these two strategies affects brand equity prediction towards customer satisfaction. By employing convenience sampling,
self-administered questionnaires were distributed among smartphone users. A total of 417 respondents were involved in
the process. The data collected were further evaluated using the Statistical Package for Social Sciences (SPSS). Pearson’s
correlation analysis, multiple regression analysis, and independent sampled t-test were used to perform statistical analysis.
The results revealed that elements of Brand Equity (brand awareness, brand associations, perceived quality, and brand loyalty)
have a positive relationship with customer’s satisfaction. There is also a significant difference between the two competitive
advantage strategies, that is, cost advantage and differentiation. Results showed that when the elements of brand equity
increase, customer satisfaction level also increases and the level of increment among two samples of study is different.
This study contributes in a twofold manner. Brands can be effective tools for the organizations to gain their competitive
advantage, but specific advantage and segment need specific brand treatment.
Keywords: brand associations, brand awareness, brand equity, brand loyalty, perceived quality
The emergence of the Internet and handphones 2017 in Malaysia, and now this figure projected to
have boosted up the invention and continuation of reached to 20.96 million in 2018 which is estimated
smartphone production in the market, making it an to increase up to 21.76 million in 2019, forming a
interesting issue to be studied by marketers nowadays. big industry. Based on a report by Newzoo (2018),
The presence of these two technologies in the 21st the smartphone penetration rate of Malaysia has been
century have shown considerable primary impact ranked 11th in the Asia-Pacific region and 30th in the
towards the economy of a country as they are offering global ranking (i.e., 57.5%). The figures indicate
more powerful computing systems with enhanced that the Malaysian smartphone market is facing a
connectivity than an old, outmoded mobile phone challenging marketing environment with increasingly
(O’Leary & O’Leary, 2005). According to Statista demanding consumers, strengthened competition, and
(2017), there were 19.9 million smartphone users in rapidly growing market.
Brand equity is very important for every brand plays important roles in marketing, such as consumers
to generate higher revenues and profits. More tend to feel familiar, contemplate the “when” in their
specifically, the smartphone brands are increasingly buying decision, and consequently start trusting brands
getting attention, and competition among smartphone (Keller, 1993). Brand awareness has been assessed
brands is now stiffer than ever. Bojei and Hoo (2012) empirically as an element of brand equity through
explained the importance of brand equity in the context a series of research studies (Yoo et al., 2000; Pappu
of smartphone markets in Malaysia and found that the & Quester, 2006; Tong & Hawley, 2009). In short,
dimensions of brand equity (i.e., brand association, customers will only consider and purchase products
brand awareness, brand loyalty, and perceived quality) or services from brands that they recognize.
positively influence the smartphone usage and its According to Cobb-Walgren, Ruble, and Donthu
repurchase intention. Other studies relate brand equity (1995), the higher brand awareness among customers,
with smartphone brands. A-Qader, Omar, and Rubel the higher will be the purchase intentions. Cobb-
(2017) did a study on the relationship of brand equity Walgren et al. (1995) also found in their study that
and brand experience among the smartphone users in brand awareness is helpful only in directing customers
Malaysia and found that the brand equity of smartphone towards purchase intentions, but they are useless
users is greatly influenced by the dimensions of in influencing repurchase intentions in the future.
effective brand experience. Furthermore, Huang and However, in a study on smartphone brands, Bojei
Shih (2017) explained the role of a perceived attribute and Hoo (2012) found that brand awareness plays a
of innovation as a new dimension of brand equity significant role in increasing smartphone usage and
in the context of smartphone markets in Taiwan. further encouraging customers towards the repurchase
According to Abid and Khattak (2017) brand equity of intention. Smartphones containing advanced features
smartphone brands increases when, (1) the consumer’s are of great help to consumers in day to day life and
expectations are met, (2) brand is in congruence with businesses; therefore, companies should increase
the consumer’s personality, and (3) brand is doing no brand awareness regarding updated features among
immoral activities. It is evident from these studies consumers to increase overall brand equity (Huang &
that brand equity enhances the customer satisfaction Shih, 2017). Once the brand awareness is successfully
of smartphone brands, which this study aims to prove. developed, it is not compulsory for smartphone
brands to advertise based on advanced technologies
Dimensions of Brand Equity to gain customer preferences because a customer
As shown previously, there are various definitions blindly associates new technology to the brand values
of brand equity by different authors, which results in (Petruzzellis, 2010). It is emphasized by Keller (1993,
diverse brand equity dimensions. Most of the studies 1998), Aaker (1997), and Berry (2000) that elements
defined brand equity based on four elements: brand of brand knowledge, (i.e., brand image and brand
awareness, brand association, perceived quality, and awareness) are very important in building successful
brand loyalty, as stated in Aaker’s renowned conceptual brands.
model of brand equity.
Brand Association
Brand Awareness Brand association serves as a platform for building
Whether a brand is recognized, recalled by the customer loyalty through repeat purchases (Aaker,
consumers, or it is known to the consumers, is referred 1991). Aaker (1996a) conceptualized brand association
to as brand awareness. At one extreme, some brands as a follow-up phenomenon of brand awareness,
are unknown to a majority of the people. On the other indicating that customers must first be aware and
hand, some brands are known to almost everyone in recognize the brand before a set of associations can be
the world (Ahmad & Sherwani, 2015) showing a high developed (Washburn & Plank, 2002). Aaker (1991)
level of brand recognition. To develop and maintain considered brand association as one of the magnitudes
a high level of brand awareness is among one of the of brand equity. Belen del Río, Vazquez, and Iglesias
primary focus of the brand managers because of the (2001) further added that brand association provides a
advantages that are brought to the firms through brand differential advantage to the brand. According to Keller
awareness (Jamil & Wong, 2012). Brand awareness (1993), the combination of attitudes, attributes, and
Exploring the Strategic Role of Brand Equity Towards Competitive Advantage in the Smartphone Industry 45
benefits can shape brand association. Low and Lamb and give firms a strong opportunity for brand extension.
(2000) suggested that brand associations have primary Perceived quality also helps in maintaining brand
dimensions that include brand attitude, brand image, image and therefore correlates with customer-based
and perceived quality. brand equity (Yoo & Donthu, 2001). Customers are
According to Cobb-Walgren et al. (1995), higher likely to purchase from the brands that are perceived
brand association leads to higher purchase intention. to offer superior quality (Cobb-Walgren et al., 1995).
Furthermore, in a study on smartphones, Bojei and Bojei and Hoo (2012) supported this argument and
Hoo (2012) found that besides purchase intention, found that the higher perceived quality of smartphone
brand association also helps in enhancing repurchase brands the higher is the purchase intention of the
intentions among the consumers of smartphones. Bojei customers. Besides, a global smartphone brand that is
and Hoo (2012) further added that brand association being marketed in numerous countries and big cities
with reference to smartphones could be seen by the is perceived to have a good quality, which further
experiential and functional attributes that a specific results in conducive and flattering consumer attitudes
brand offers. For example, consumers used to associate regarding the global brands (Pappu, Quester, &
positive things with brands like innovativeness, Cooksey, 2007; Roy & Chau, 2011). Thus, in short,
distinctiveness, high technology, sophistication, and perceived quality assures the prevalence of the chosen
excellence. Thus, in the context of a smartphone, the brand over others.
distinctive features and functions offered by specific
brand could signify brand associations. Aaker (1996b) Brand Loyalty
asserted that brand associations are determined by Brand loyalty is a significant phenomenon to be
the brand identity that has been created through the studied in the context of marketing strategy. Assael
integration of intangible and tangible features. In short, (1998) and Deighton, Henderson, and Neslin (1994)
users’ perception toward the experiential and functional conceptualized brand loyalty as the repurchase
characteristics makes up the brand association. behavior of consumers that are delighted with their
previous buying experience for the same brand.
Perceived Quality Oliver (1999) defined brand loyalty as “a deeply held
Aaker (1991) defined perceived quality as commitment to buy or patronize a preferred product
“consumer’s perception of the overall quality or or service consistently in the future, thereby causing
superiority of a product or a service with respect to repetitive same-brand or same-brand-set purchasing,
its intended purpose, relative to alternatives” (p. 52). despite situational influences and marketing efforts
Zeithaml (1988) revealed that perceived quality is the having the potential to cause switching behavior” (p.
overall product quality and excellence that is judged 41). Travis (2000) continued to claim that brand loyalty
by a consumer. Perceived quality is different from is the ultimate objective and connotation of brand
brand association because it plays a noteworthy part equity, adding that brand loyalty is brand equity. Brand
in differentiating a brand from others (Ha, Janda, & loyalty results from loyalty-based buying decisions that
Muthaly, 2010). High perceived quality implies that might become an everlasting habit (Solomon, 2013).
consumers can identify and distinguish the superiority Besides, brand loyalty could support the organization
of a brand when they come by to have long term as a chance to respond and handle the competition.
involvement with the brand. Perceived quality is being Loyal customers of a brand are always satisfied and
confirmed as one of the main elements of the brand inclined to remain with their favorite brand, making
equity model (Farquhar, 1989; Keller, 1993; Aaker, them less sensitive to price increase due to the product’s
1996b) as it provides value that differentiates the brand ability to satisfy their needs (Rundle-Thiele & Bennett,
from its competitors. Basically, perceived quality can 2001). Cobb-Walgren et al. (1995) are of the view that
contribute towards the value of a brand in many ways; purchase intention among consumers is high when
it can provide a good reason for purchasing the brand’s brand loyalty is high. Consistent with the findings of
product and empowers the brand to differentiate itself Cobb-Walgren et al. (1995), Bojei and Hoo (2012) also
from the competitors (Aaker, 1991). found brand loyalty to be linked positively with the
Furthermore, Aaker (1991) explained that perceived repurchase intentions for smartphones in Malaysian
quality also allows the firms to charge premium prices markets. In the category of electronic accessories like
46 S. Hashim, E. L. Yi Ying, & S. Ahmed
smartphones, it is not essential for brands that have satisfaction and competitive advantage (Miles, Miles,
brand loyalty to gain customer preferences through & Cannon, 2012), studies which directly relate and
the push of new technologies; rather, loyal customer compare competitive advantage with effects of brand
associate new technologies with the brands themselves equity have been neglected in the past. For the success
(Petruzzellis, 2010). of smartphone brands, customer satisfaction is very
crucial as customers who find a particular smartphone
Customer Satisfaction brand up to the desired level of expectations tend to
To gain customer satisfaction is the primary goal recommend that brand to others (Martensen, 2007).
of companies in both service and product industry. Various scholars have emphasized that smartphone
Customer loyalty and customer retention, which companies should consider the preferences of the
are considered very important and helps in high customers and their desired features of smartphones so
turnovers and increased profits, are connected with that they can be satisfied and make repeat purchases
customer satisfaction (McQuitty, Fin & Wiley 2000). (Martensen, 2007; Petruzzellis, 2010; Bojei & Hoo,
Oliver (1981) stated that satisfaction is “the summary 2012; Huang & Shih, 2017).
psychological state resulting when the emotion
surrounding disconfirmed expectations is coupled with Competitive Advantage
prior feelings about the consumer experience” (p. 24). Porter (1985) introduced the term “competitive
Customer satisfaction is viewed as a vital approach advantage” as the sustainable superior performance in
for a company to achieve long term business success the firm’s products or services relative to competitors in
and gain a competitive advantage (Pappu & Quester, the same industry or towards industry average. Barney
2006). This is also vital in terms of a firm’s economic (1995) viewed competitive advantage as the strength
performance. Furthermore, customer satisfaction that a firm gains through its successful implementation
affects consumer purchase intentions (Cronin & Taylor, of the marketing mix that is valued by customers. On
1992), making repeat purchase behavior possible and the other hand, Murray (2014) defined competitive
help produce strong brands with a strong competitive advantage as “a characteristic, feature or an opportunity
advantage (LaBarbera & Mazursky, 1983). Past that an organization possesses which makes it more
literature shows that customer satisfaction has strong attractive than its competitors” (p. 189). Almost
links with different dimensions of brands (Grace & everything can be well-thought-out as a competitive
O’Cass, 2001). Various dimensions of brand equity edge, from either a higher profit margin or greater return
effects satisfaction directly, such as employee service, to other valuable possessions available in the company
servicescape (Berry, 2000), core service, and emotions (Jurevicius, 2013). Strategic managers and researchers
that instigate while encountering services (Babin & have long been concerned about understanding the
Babin, 2001). foundations of competitive advantage for firms
The relation between overall brand equity and (Rumelt, 1984; Barney, 1995). The concept of
customer satisfaction has become a major concern in competitive advantage results from the rivalry among
marketing research for the past two decades. Today, companies in the same industry and great importance
customer satisfaction is seen as a primary strategy by is given to this concept because the competition is
marketers to gain customer loyalty, improve customers’ being viewed as the focus of a company’s success or
willingness to pay more, and enhance customer failure (Murray, 2014). “Competition determines the
lifetime value (Hogan, Lemon, & Rust, 2002; Keller appropriateness of a firm’s activities that can contribute
& Lehmann, 2006). It is recognized that delighted to its performance, such as innovations, a cohesive
customers become less price-sensitive and more loyal culture or good implementation” (Porter, 1985, p. 1).
to the firm for a longer period when compared with Competitive advantage can be further described
dissatisfied customers (Dimitriades, 2006). Although through cost and differentiation advantages. Be it a
there has been an abundance of surveys conducted to cost advantage or differentiation, it is concerned with
investigate the connection between brand equity and the value chain of the company (Porter & Millar,
customer satisfaction (Ahmad & Sherwani, 2015; Bilal 1985). Porter and Millar (1985) further explained that
& Malik, 2014; Nam, Ekinci, & Whyatt, 2011; Torres certain cost drivers are associated with every single
& Tribo, 2011) and relationship between customer value activity, which controls the cost and leads to
Exploring the Strategic Role of Brand Equity Towards Competitive Advantage in the Smartphone Industry 47
cost advantage. Similarly, the efficient working of each smartphone brands and a single minimal feature can be
value activity makes the company able to differentiate a source of competitive advantage in this technology-
itself from rivals not only in selling products or services driven industry, so firm’s innovation capabilities are
but also in other activities like logistics and after-sales essential to create competitive advantage (Lew &
services. According to Porter and Millar (1995), if the Sinkovics, 2013). It is noted in previous studies that
collective costs of all the activities being performed in competitive advantage through product innovation
a company are less than the costs encountered by the affects the reputation of the company and its influence
competitors, then the company is considered to have on consumers in a positive way (Henard & Dacin,
a cost advantage. However, a differentiation strategy 2010). Therefore, it is concluded that the smartphone
is achieved by outperforming in the related industry market is increasingly competitive, and smartphone
and having uniqueness in some aspects that are valued brands must keep striving for product innovation for
by the customers (Porter & Millar, 1995). Considering the sake of gaining a competitive advantage.
these two important competitive advantages, this study
incorporated samples from each of the two advantages Hypothesis
to find the differences.
According to Delgado-Ballester and Munuera- This research is conducted primarily using Aaker’s
Alema´n (2005), brand equity has the features conceptual brand equity model that consists of four
which help in creating a competitive advantage that basic elements—brand awareness, perceived quality,
is sustainable to the firms and increase value in the brand association, and brand loyalty. The model of
minds of customers. Hunt and Morgan (1996) were brand equity is being used as an independent model
also among those who emphasized the relationship of to test the level of customer satisfaction among
brand equity with a competitive advantage and stated two samples of the population, one focusing on the
that trust and loyalty together form brand equity, which cost advantage sample and the other focusing on
further creates a competitive advantage. Combining differentiation sample. These four elements of brand
all the definitions above, competitive advantage can equity are used as the independent variables in this
be defined as a strategy providing the company with study, and any changes among the four elements
unique capabilities that makes the company proficient will affect the dependent variable, which is customer
for outperforming its competitors while sustaining their satisfaction. The conceptual model is shown in
customers and reputation. Considering the smartphone Figure 1.
market globally, there is immense competition among
H1
Brand Awareness Customer Satisfaction
H2
H5 (Cost Advantage Sample)
Brand Association H6 H9
H3
H7
Perceived Quality Customer Satisfaction
H4
(Differentiattion Advantage Sample)
Brand Loyalty H8
H1 and H5: Brand awareness has a positive relationship with customer satisfaction.
H2 and H6: Brand association has a positive relationship with customer satisfaction.
H3 and H7: Perceived quality has a positive relationship with customer satisfaction.
H4 and H8: Brand loyalty has a positive relationship with customer satisfaction.
H9: There is a significant difference between customer satisfaction level in cost advantage
and differentiation sample.
48 S. Hashim, E. L. Yi Ying, & S. Ahmed
Table 1
Descriptive Statistics of Respondents (Cost and Differentiation Advantage Sample)
Table 2
Reliability Analysis
Table 3
Hypothesis Testing Summary (Differentiation vs Cost Advantage)
Customer Satisfaction
Details Cost Advantage Differentiation Advantage
Brand Awareness 0.436** t = 2.171; 0.031 sig. (H1) 0.755** t = 2.986; 0.003 sig. (H5)
Brand Association 0.438** t = 1.114; 0.027 sig. (H2) 0.830** t = 4.420; 0.000 sig. (H6)
Perceived Quality 0.639** t = 4.011; 0.000 Sig. (H3) 0.810** t = 4.111; 0.000 sig. (H7)
Brand Loyalty 0.647** t = 5.128; 0.000 sig. (H4) 0.772** t = 5.552; 0.000 sig. (H8)
N 217 200
Mean Satisfaction 3.6968 4.009
Std. Deviation 0.57571 0.69724
R² 0.512 0.788
relationships between all the independent variables and is different among cost advantage and differentiation
dependent variable are all significant with P < 0.05. sample in Kuching smartphone market.
Therefore, hypotheses H5, H6, H7, and H8 are accepted.
Discussion
Independent Sampled T-test
Independent sampled t-test has been conducted This study is conducted to investigate the
in this research to test the extent and the strength of relationship between four elements of brand equity
the relationship between two samples of the study, (brand awareness, brand association, perceived quality,
which are cost advantage sample and differentiation and brand loyalty) and competitive advantage through
sample. The t-test enables researchers to examine the customers’ perspective, that is, customer satisfaction
difference between two distinct populations using towards smartphone brands in Kuching. Also, it is
the data gathered from two different samples. Table conducted to explore the differences between the level
4 showed the statistical results of the two samples. of customer satisfaction among Kuching smartphone
There are 217 respondents for cost advantage sample users in cost advantage and differentiation samples.
and 200 respondents for differentiation sample. Also, This study reveals that the four elements of brand
there is a difference between cost advantage sample equity have a positive relationship with the customer
and differentiation sample with a mean value of 3.6968 satisfaction level. Previous studies showed that the
and 4.0090, respectively. brand equity model (Aaker, 1991) had been described
The results reveal that there is a significant as the determinant of customer satisfaction in most of
difference between the customer satisfaction level the cases (Ryu et al., 2010). Based on recent studies,
among both samples, that is, sample who valued cost it can be concluded that customer satisfaction signifies
and sample who valued differences/uniqueness at F a major element in generating value and advantage
= 0.884, p = 0.026. Based on the F-value of 0.884 for companies in a competitive environment (Bilal &
and the significance level at 0.026 (p < 0.05), it is Malik, 2014; Ahmad & Sherwani, 2015).
concluded that the effect of brand equity elements Out of four elements of brand equity, results showed
towards customer satisfaction level is different among that in cost advantage sample, brand loyalty has the
cost advantage and differentiation sample. strongest relationship with customer satisfaction
Overall, smartphone users in differentiation level, which is consistent with the research conducted
sample are more satisfied (mean value = 4.0090) with by Ahmad and Sherwani (2015). This indicates the
their smartphone brand choices when compared to criticality of brand loyalty development among all
smartphone users among cost advantage sample who the elements of brand equity to leverage the customer
valued cost as their consideration for smartphone satisfaction level among smartphone users who valued
brands (mean value = 3.6968). Therefore, this study cost as their primary consideration of selecting a
supports H9, and we conclude that the effect of brand smartphone brand.
equity model in influencing customer satisfaction level
Table 4
Independent Sample Test
In differentiation sample results, brand association data obtained is only able to disclose the effect of the
has the most dominant effect on customer satisfaction predictor variable towards a criterion variable within
level. This means that customers who valued a specific timeframe. Additionally, the limitation of
uniqueness and differences in considering their using convenience sampling techniques has denoted
smartphone brands would most probably be satisfied that the outcomes of this research will be more specific
when they are well associated with the brand. Bridges, and cannot be generalized. Secondly, marketing
Keller, and Sood (2000) asserted that a strong brand managers should also take the inter-correlations among
association strengthens brand equity and consequently all the four elements of Aaker’s brand equity model
leads to increased satisfaction. Overall, smartphone into consideration. Customer satisfaction level can be
users in the differentiation sample are more satisfied increased if the brand’s image and its superiority are
with their smartphone brand choices when compared recognized by the customers.
to smartphone users among the cost advantage As a conclusion, the cost leadership strategy
sample who valued cost as their consideration for that primarily adopts the price penetration tactics
buying smartphone brands. This reveals that there should focus on how to keep their price competitive.
is a significant difference between those who value Organizations can realign their marketing efforts that
cost and those who value uniqueness/differences in focus more on product design and efficient distribution
selecting their smartphone brands. system to keep the price low as part of their competitive
Three implications can be derived from the findings advantage strategy. For the organizations that pursue
of this study. First, smartphone brands who practice differentiation strategy, it must be ensured that their
cost leadership strategy (i.e., they primarily aimed to target customers are well associated with their brand
market their smartphone at a penetration price while because brand associations can lead to customer
keeping their production cost low) should focus their satisfaction. Therefore, brands can be effective tools for
efforts on building brand loyalty. Brand loyalty is the the organizations to gain their competitive advantage,
repurchase behavior of customers that may lead the firm but specific advantage and segment need specific brand
to gain market share with more satisfied customers, treatment.
which reduces marketing cost because customers are
already loyal to the product and will repurchase without Acknowledgment
thinking much about the advertising efforts by other
brands. Consequently, it results in strengthening the This work was supported by UNIMAS’s Special
brand towards competitive threats. Grant Scheme (F01/SpGS/1419/16/20).
Secondly, for those companies who pursue
differentiation strategy, they should first ensure that Declaration of ownership:
their target customers are well associated with their
brand. The results of the current study show that brand This report is our original work.
association has the most dominant effect on customer
satisfaction level. Connecting their customers with Conflict of interest:
good feelings and great perceptions can assist the
brands to obtain higher customer satisfaction level. None.
This study concludes that brand association is the
predicting variable of customer satisfaction towards Ethical clearance:
customers that value uniqueness when purchasing
smartphones. The study was approved by the institution.
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