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Corporate Branding in the FMCG Industry

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! Stockholm School of Economics Institute of Marketing and Strategy Master Thesis Fall 2012 Corporate Branding in the FMCG Industry The Notion of Perceived Category Fit Large FMCG conglomerates have recently
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! Stockholm School of Economics Institute of Marketing and Strategy Master Thesis Fall 2012 Corporate Branding in the FMCG Industry The Notion of Perceived Category Fit Large FMCG conglomerates have recently started to engage in corporate branding activities, communicating that there is a substantial firm behind multiple wellestablished brands. This means that the consumer now becomes increasingly aware that seemingly independent product brands somehow are connected. Given that those companies operate brand portfolios within the most distinct categories this thesis has tapped into the so far completely untouched impact of category fit on a consumer s evaluation of the corporate brand. Through looking at three different corporate brand building dimensions: corporate brand credibility, perceived corporate brand understanding and a corporate brand s boundaries this thesis aims at investigating how those dimensions are influenced by the composition of a brand portfolio. More specifically, how a consumer s evaluation of the above mentioned dimensions differs depending on if the company operates a homogeneous or heterogeneous brand portfolio (high vs. low fit). The results from an online survey conducted with 214 German students show that perceived fit has an impact on all three dimensions investigated. While fit showed to have only a moderate impact on the company s perceived credibility, results are much stronger in regard to the consumer s ability to grasp what the company is about. It also has been found that fit strongly influences whether a corporate brand is perceived as a specialist or generalist and thus sets the frame for a brands future operations. The findings suggest that brand manager should carefully assess how the breadth of the corporate brand should be perceived. Keywords: Corporate Branding, Category Fit, FMCG, Image Transfer, Corporate Image Authors: Christine Alff (40202) Eva Maria Mayer (40196) Opponents: My Charlotte Lestander (50008) Tutor: Magnus Söderlund Examiner: Jonas Colliander Presentation: December 19 th 2012! Acknowledgements MANY THANKS TO Our tutor, Magnus Söderlund, for his input and guidance. Our experts for sharing their opinion and experiences on the field of corporate branding: Michael Brandtner, Associate at the Branding Consultancy Ries & Ries Heinz Günther, Owner of Divergenz Marketing Strategy Consulting Martin Holzberg, Ph.D., manager at Batten & Company Anne Koch, Corporate Branding & Reputation Management at Henkel Markus Meierer, Ph.D., Assistant Professor at Chair of Marketing and Market Research, University of Zurich Prof. Hans-Willi Schroiff, Ph.D., former Vice President Market Research at Henkel Sara Rosengren for her valuable input regarding the validation of our questionnaire. All the participants of the questionnaire for their time and support. Our families and friends for their support throughout the whole process. i Table of Content 1 Introduction Introduction of the Corporate Brand in the FMCG Marketplace Research Gap Problem Statement Purpose of the Study Delimitations and Prerequisites Words to Know Thesis Outline Literature Review and Hypotheses Generation Categorization Theory Naturally Formed Categories - Similarity-Based Approaches to Categorization Ad-hoc Categories Antecedents and Consequences of Categorization The Inclusion/Exclusion Model (IEM) and the Categorization Process Fit Within Brand Extension Literature What matters most Relevant Corporate Branding Dimensions in FMCG Corporate Brand Credibility Corporate Brand Image Clarity Boundaries of a Corporate Brand Research Model Hypotheses Generation The Impact of Category Fit on the Corporate Brand Credibility The Impact of Category Fit on the Corporate Brand Image Clarity The Impact of Category Fit on the Boundaries of a Corporate Brand Summary of Hypotheses Methodology Initial Work Scientific Approach and Overall Research Design Preparatory Work Portfolio Design Pre-Study 3 - Selection of the Corporate Brand Stimulus Pre-Study 4 - Selecting a Category for an Incongruent Brand Launch Pilot Study - Testing the Final Questionnaire The Main Study Approach to Sampling ii 3.4.2 Quantitative Data Sampling Questionnaire Analytical Tools Preliminary Analysis Main Analysis Data Quality Reliability Validity Results Manipulation Check Category Fit Validating Portfolio Design Research Question 1 Corporate Brand Credibility The Relationship of Product Brand Quality and Corporate Brand Credibility The Impact of Fit on Expertise and Trust Research Question 2 Brand Image Clarity Research Question 3 Boundaries of The Corporate Brand Competence in a Particular Category Acceptance of an Incongruent Brand Introduction Acceptance of a Congruent Brand Introduction Summary of Main Results Discussion The Notion of Fit It s all a Matter of Perspective The Impact of Fit on Corporate Brand Credibility The Impact of Fit on Corporate Brand Image Clarity The Impact of Fit on the Boundaries of the Corporate Brand Managerial Implications Criticism of the Study Future Research References Appendix iii List of Figures Figure 1: Transfer Effects between Corporate Brand and Product Brand 5 Figure 2: Summary of Categorization Theory and the IEM Model 15 Figure 3: Research Model 21 Figure 4: Pre-Study Overview 31 Figure 5: Final Portfolio Composition of the Main Study 32 Figure 6: Corporate Brand and Portfolio Stimulus 37 List of Tables Table 1: Summary of Hypotheses 29 Table 2: Pre-Study I - Category Fit 33 Table 3: Final Brand Choice Comparison of Quality, Familiarity and Corporate Brand Knowledge 35 Table 4: Category Values for an Incongruent Brand Launch 38 Table 5: Correlations Perceived Quality Expertise & Trustworthiness 50 Table 6: Comparing Means of Expertise and Trustworthiness in HF and LF 51 Table 7: Comparing Means of Image Clarity Measures in HF and LF 52 Table 8: Comparing Means of Competence in Bodycare and Chocolate in HF and LF 53 Table 9: Comparing Means of Incongruent Launch Acceptance in HF and LF 54 Table 10: Comparing Means of Congruent Launch Acceptance in HF and LF 55 Table 11: Summary of Main Results 56 iv 1 Introduction The Past Companies like P&G offer many products that are not recognized by their consumers to be related to their organization. P&G is a strong company, with a powerful portfolio of brands, yet it is not a powerful corporate brand to its customers. (Kay, 2006, p.753) The Future? Leveraging the scale and collective reach of P&G s brand portfolio takes our brand marketing to a new level, [ ] and unifying all of our brands into a holistic advertising campaign is the perfect way to grow our business. P&G UK and Ireland Vice President Irwin Lee (Marketing Week, 2012) 1.1 Introduction of the Corporate Brand in the FMCG Marketplace When observing recent developments in the fast moving consumer goods (FMCG) industry, it is striking that all of the big FMCG companies have recently started to endorse their product brands with the corporate brand. For instance, both Procter & Gamble (P&G) and Unilever do now round off their TV ads for a variety of product brands belonging to different categories by displaying the corporate logo. Also in the supermarket, consumers increasingly find the corporate brand logo on the packaging of several product brands. Thus, customers are slowly starting to become aware that there is a large conglomerate behind the offering (Aaker, 2004). This development is particularly interesting, when considering that these companies have traditionally focused on creating strong stand-alone product brands, typically described as a house of brands brand architecture (Laforet & Saunders, 1994). In the FMCG sector, branding has traditionally been perceived as a way of identifying products, which has led to brands being managed in isolation and the single brand being the focus of attention (Saunders & Guoqun, 1997). Consequently, strong brands are operated within highly diversified brand portfolios of the big FMCG companies - with the corporate brand barely known by the average customer. Today - this so far rather untapped resource has gained attention, as the product-based positioning tool has been questioned in terms of its ability to cope with the substantially changed environment that organizations face nowadays (Balmer & Gray, 2000; Knox & Bickerton, 2003). Thus, the latest stage in the development of traditional product brand management is the increasing influence of the company behind the brand and its role in 1 the creation of economic value (Knox & Bickerton, 2003). The reason for this lies in the corporate brand being seen as a tool to enable companies to react to new challenges in a variety of ways: In the FMCG industry these challenges include an increasing proliferation of brands (Anand & Shachar, 2004; Kay, 2006), which not only results in consumers being over-exposed to marketing messages but also in an accelerating homogenization of products (Hatch & Schultz, 2003). A corporate brand may counteract these developments as it allows a company to distinguish and differentiate itself on an additional dimension and communicate a consistent quality and performance level (Balmer & Gray, 2003). Corporate brands can help consumers to avoid brand confusion (Souiden et al., 2006) and may serve as a relevant anchor when facing a decision dilemma among multiple almost interchangeable products or services (Kay, 2006). An additional reason for the shift to corporate branding is grounded in consumers increasing interest in the corporation and the values behind all kinds of products and services (Balmer & Gray, 2000; Anisimova, 2007). However, before even thinking about leveraging on the corporate brand to drive the product brands competitive advantage, the corporate brand needs to build a strong reputation and brand equity in the eyes of the consumer (Goertz, 2007). Taking this into consideration, it is an interesting issue how the big FMCG conglomerates intend to build their corporate brands. When observing the companies today, it is noticed that their strong, well-established product brands serve as a source for building corporate brand equity. Provided that strong stand-alone brands have been built in the industry, it follows that the corporate brand needs to be strongly associated with those product brands in order to build distinctive brand associations (Kay, 2006). Given that most FMCG companies operate a wide portfolio of very distinct brands in different categories (Warc, 2012), it is a thrilling question how a mixed portfolio of brands is subsumed under one corporation and how such a positioning influences key constituents, including the consumer (Dacin & Brown, 2006). Through corporate branding the consumer now becomes aware that seemingly independent product brands somehow are connected. Thus, the concept of perceived fit deserves special attention, as it relates to the similarity or congruence between two or more objects or brands. In the present context, fit is conceptualized in terms of category fit, meaning if it is perceived logical and natural that brands from distinct categories are produced by the same company. The transferability dimension of fit (Aaker & Keller, 1990) plays an important role here, as it relates to the 2 perceived ability of any firm operating in one product brand category to make a product brand in another product category (adopted from the extension context from Aaker & Keller, 1990). For the companies and their successful corporate branding strategy, knowing whether such fit across strong single brands (and their respective categories) has an impact on the consumer s impression of the corporate brand (and if so, which one) is of crucial importance. This is based on the corporate brand being built for a desired backward effect, i.e. a positive halo effect onto all of the connected brands the company markets. Thus, such knowledge should guide companies on where to use the umbrella function of a corporate brand. Given that P&G and Unilever have just initiated their corporate brand introduction, it should be of relevance to investigate which effect such fit has on the consumer s initial image creation. As of today, almost nothing is known regarding the influence of perceived fit on the corporate brand evaluation in the FMCG market. Thus the question arises: Does perceived category fit have an impact on the consumer s perception of the newly communicated corporate brand? In this widely unexplored field the present thesis steps in. 1.2 Research Gap Corporate branding is a relatively new topic with an increased research focus in various disciplines since the 1990s (Balmer & Gray, 2003). The existing contributions, which largely focus on the organizational practices needed to develop and manage corporate brands (Melewar, 2012), are certainly helpful for gaining a general understanding of the multidimensional nature of corporate brands. However, the impact on various consumer-related topics still needs to be addressed (Souiden et al., 2006; Anisimova, 2007). This is due to the consumer traditionally being neglected as a target group for corporate branding, when in the past corporate brands were predominately built to address employees and potential investors. As suggested above, FMCG companies now increasingly focus on the consumer by using the corporate brand to sharpen their products positioning (Meierer, 2008). Thus, this paper approaches corporate branding from the customer-based brand equity (CBBE) perspective, which recognizes that the power of a brand and its ultimate value to the firm resides within the customer (Gylling & Lindberg-Repo, 2006). Furthermore, in order for companies to be customer-oriented, which might be the most crucial success driver within FMCG, corporations really need to listen carefully to what the customers think. This paper will thus focus on the external, customer-focused instead of the internal dimension of corporate branding (Fetscherin & Usunier, 2012). 3 A further research gap being addressed is related to the limited number of empirical evidence on the topic (Fetscherin & Usunier, 2012). Many papers illustrate but do not empirically test corporate branding and are rather descriptive in nature (Kazi, 2009). This thesis will thus empirically investigate the effect of a corporate brand endorsement on the consumer s perception of a corporate brand. In particular, there is a lack of studies investigating the interplay between product brands and corporate brands (Dacin & Brown, 1997; Sheinin & Biehal, 2007). Within this field, there are some contributions focusing on the transfer of a corporate brand to a single product brand but not vice versa (e.g. Brown & Dacin, 1997; Bräutigam, 2004; Sheinin & Biehal, 2007). In addition, Sheinin and Biehal (2007) researched the effect of a corporate brand on the product portfolio. However, going one step back, there is very little contribution of how a corporate brand is built in the consumers minds given the interaction of strong brands. For instance, existing research on corporate branding mostly starts with an established strong corporate brand, but does not investigate how a multi-brand portfolio serves as a basis for the introduction of a corporate brand. Within the FMCG field, Goertz (2007), Esch et al. (2010) and Brunner (2010) were the first to empirically test how a strong corporate brand is built through its portfolio of brands, finding that portfolio advertising is more suitable to build the corporate brand than single brand advertising. Yet, those studies do not investigate how the perceived fit between brands and categories matters in terms of the evaluation of the corporate brand. Up until now, the notion of perceived fit has been found as one of the most relevant factors in the brand extension and brand alliance literature, but has not been explored in the light of strong, stand-alone product brands and their impact on a newly communicated corporate brand. Concluding, it is assumed that FMCG companies have certainly researched how one way or the other of organizing their brand portfolio influences a consumer s image of the corporate brand. However, such knowledge is not yet accessible within marketing academia. Therefore, as of today, very little is known about how strong brands and the perceived fit influence the consumer s evaluation of the corporate brand. 4 1.3 Problem Statement Until recently, the FMCG powerhouses such as P&G and Unilever have very effectively pursued the strategy of promoting multiple single brands to target different market segments and have thus built product brands that are highly familiar to the public. One may state that this expertise in effective multi-branding has made those companies that successful. However, this product-based positioning tool has been questioned recently in terms of its ability to cope Figure 1: Transfer Effects between Corporate Brand and Product Brand (adapted from Goertz, 2007, p.14) with the substantially changed environment concerning increasing competition and the accelerating homogenization of products that organizations face nowadays (Balmer & Gray, 2000; Knox & Bickerton, 2003). As argued above, it makes most sense for the FMCG companies to build corporate brands by capitalizing on their already established strong product brands due to their ability to be leveraged (Kay, 2006). Thus, credit can begin to go back to the corporate or parent brand from each product category in which the company operates (Branding Strategy Insider, 2012), which is exemplified in Figure 1. Not until the corporate brand has reached sufficient brand strength and is connected to certain rather general values which can span across more than one category or brand (such as quality, expertise, tradition etc.), will the corporate brand be able to strengthen the product brands. Within the brand extension literature, a forward effect refers to the transfer from the established parent brand to the new product and a backward effect from the new product to the parent brand (Martinez & Pina, 2010). Adapting this notion to the corporate brand, this thesis reverses the model and argues that the forward effect in the present context lies in building the corporate brand based on the product brands, whereas the backward effect is related to the subsequent impact of the corporate brand onto the product brands. This thesis will focus on the forward effect, i.e. how strong brands and their configuration impact the evaluation of a newly communicated corporate brand. Within the FMCG industry, it is observed that most companies market multiple brands, i.e. a brand portfolio. For such firms, the successful management of multi-brand systems belongs to 5 the most relevant issues (Chailan, 2008), which requires a holistic view of the entire brand portfolio (Gylling & Lindberg-Repo, 2006; Kwun & Oh, 2007). Yet the area of brand portfolios has received very little attention from researchers up to now (Chailan, 2008). Having a look at companies that communicate a corporate brand in the FMCG market, it is observed that distinct branding strategies are pursued: The German FMCG corporation Henkel, for instance, historically associated with washing detergents, carefully selects the categories for which it stresses the corporate brand: As validated in one of our initial expert interviews with Prof. Dr. Hans-Willi Schroiff (former Head of Market Research Henkel), the company would never communicate its haircare brands (such as Schwarzkopf or Schauma) under the Henkel corporate brand. In contrast, Unilever has started to endorse the corporate brand for products as diverse as showergel, convenience food and cleaning detergents. In the light of such different branding strategies, the question emerges across which portfolio of brands a newcomer in the corporate branding world should position its corporate brand. Examining the coexistence and the balance between several brands that ar
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