Brand Influence in China’s Hotel Industry

Introduction

This paper examines the existing literature, giving a clear and brief idea to reader on the topic of brand equity. It starts with an overview of the relevant literature about brand equity, especially focused on the customer-based brand equity. The available research on the factors affecting customer selecting hotels will be examined as well. The review will synthesize literature on brand influence in China’s hotel industry and how they affect Chinese buying preferences and decisions, in order to make some constructive suggestions for future potential franchisees. Finally, the review will provide an investigation of the relationship between brand equity and customer choice.

Brand effect in China

In order to change the economy into market-oriented, China was implementing the opening and reforming policy since 1978 (Kong & Cheung, 2009). Under the influence of that policy, China’s hotel industry was developing under government assistance. Moreover, according to the hot globalization trend in the hotel industry and China’s encouraging and favorable policy for foreign investment like Holiday Inn, Sheraton, Hilton and Shangri-la, various international hotel groups were launched in China in the last decade (Pine, Zhang, & Qi, 2000). Those brands present an image of higher category (four- and five-star) of hotels in Chinese’s mind (Pine & Qi, 2004). As foreign branded hotels, they seem to obtain a higher expectation and perceived quality from the Chinese market, which brings a significant impact on brand loyalty and the satisfaction of Chinese consumers (Ha, Janda & Park, 2009).

The Chinese perception of brand and value is considered to be highly affected by the globalization trend and western culture (Wang, Vela & Tyler, 2008). As a result, the overseas-invested hotels receive higher preference than others and they are more able to charge a high room rate (Pine & Qi, 2004). In Pine, Zhang and Qi (2000) it was argued that China’s hotels are still conquered by foreign tourists. Accordingly, those hotel brands are considered more acceptable “home” brands, which are also more welcomed and appreciated in Chinese market. Influenced by the rapid economic growth in China, the income classes became varied and a huge gap was created between rich and poor (Wang, Vela & Tyler, 2008). These newly created rich people are more likely to pay for international branded hotels, since these hotels are indicators of upper-class social group. Wealthy Chinese want to belong to that group, and accordingly, be distinguished though choosing higher category hotels from those groups that can’t afford it. In that regard, “brands are used to distinguish oneself from the social group one does not belong to and brands communicate the membership of one’s own group (TANG, 2007, p. 253).

Distinguishing the Chinese consumer today, Tang (2007) argues that Chinese consumers are more focused on the aesthetic and social value of a product/service, rather than their basic need; as a result, branding can be seen as a significant element in the new Chinese society. Tang (2007) also suggested that strong brand information has a significant and positive impact on influencing Chinese consumers’ decision making.

Brand Equity

The concept of brand equity emerged in the 1980s, and became the main topic of interest for researchers in marketing literature (Aaker & Biel, 1993). Brand equity was defined by David Aaker, whose book Managing Brand Equity popularised the concept, as “a set of brand assets and liabilities linked to a brand, its name and symbol that add or subtract from the value provided by a product or service to a firm and/or to that firm’s customers” (Aaker, 1991, p. 15). It is the most valuable asset of the firm. Moreover, it shifted the focus from price as the primary competition method, since strong brand can offset the huge pressure on the price (Aaker & Biel, 1993). As a result brand equity can assist a property to be able to charge more for similar category of product or service than its competitors. In China, for example, a bottle of beer is normally charged more than double the price in a lounge of international hotel than a local one. Ogaba and Tan (2009) indicated that a strong brand with high equity will attract a big amount of committed customers, as it will create a stable and continuous bridge between the brand and its customer, and it can shape customers’ beliefs to fit the brand. The latter indicates that brand equity can heavily influence consumers’ behaviour, and accordingly, the decision making process, as it will be discussed later in this paper.

Brand Equity in Hotel industry

Since the core product of hotel industry is service, the only thing hotel guests have after their leave is the memories of their experience. According to that, to tangibles, this intangible experience is a big challenge for the hotel industry, and it can only be done by creating strong brand equity (Arasli & Kayaman, 2007). Furthermore, brand equity can assist customers to interpret process and generate lots of information of the brand in order to make customers confident in the purchase decision (Aaker, 1991). In hotel industry, strong brand equity enables customers to better understand and tangible the intangible side of the hotel products and services (Tolba & Hassan, 2009). Under the influence of strong brand equity, customers are able to generate more brand information and make their purchase choice based on that. Besides, it can also leading customers to choice specific brand due to strong brand equity can been seen as a promise of the service which provide the confidence for them (Chan & Xu, 2010). Last but not the least, according to the research of Kim and Kim (2005) on luxury hotels and chain restaurants, strong brand equity is good for charging a premium price, reducing cost and increasing revenue in hospitality sector.

Brand Equity From the Perception of Customers

Keller (1993) indicated that it is important to understand brand equity from the customer’s side because positive customer-based equity is good for raising revenue, reducing costs, and increasing profit. Keller also stated that brand equity has various effects on the brand knowledge of consumers, which affects the brand’s marketing. In that regard, Keller and Lehmann (2003) introduced the concept of customers’ mindset measure, i.e. is everything in customers’ minds including their thoughts, images, feelings, perceptions, beliefs, etc, which will be linked to a brand. Such concept covers a wide range of both qualitative and quantitative measures of brand equity. Thus, it can be stated that the determination of way brand equity influences customers is a significant task, in which it is essential to understand how customer perceive brands.

As supported by a study in Keller (1993), under the same marketing activities, a branded product/service is more easily appreciated and accordingly generates more positive brand equity from customers’ perception than a similar unbranded one. The latter shows that brand equity can explain the changes in sales that occur through customers’ brand knowledge, and which are affected by the marketing activities of a firm (So & King, 2010). Moreover, as indicated in Biel (1992), customers’ perception of a brand has a significant impact on customers’ behaviour. The perception affects the value of brand equity in customers’ mind, and in turn, influences the further buying preferences and decisions as well. Wang, Wei, and Yu (2008) thought customer-based brand equity is founded on customers’ greater confidence and belief in certain brands more than others, where such confidence and belief lead to customers’ loyalty and make them willing to pay a premium price for it. As stated in Erdem et al. (1999), brand equity is tightly linked to the customers, where customers’ perceptions of brand equity dynamic influence their choices, preferences and decisions.

Due to the importance of brand equity in today’s marketplace, customer-based brand equity is highly interesting for researchers and market participants. With numerous definitions of brand equity stated by different authors in marketing literature, one aspect these definitions have in common is the notion that the value of a brand is based on the brand’s effect on customers (Erdem et al., 1999). Aaker (1991) and Keller (1993) conceptualized brand equity with a consumer perspective, where the resulted concept is referred to as customer-based brand equity (CBBE). In that regard, such concept was defined by Aaker as “the value consumers associate with brand, as reflected in the dimensions of brand awareness, brand associations, perceived quality and brand loyalty” (1991, p.15). Referring to Aaker (2002), the asset of customer-based brand equity is divided into 4 major dimensions that form customers’ perceptions, which are brand awareness, brand loyalty, perceived quality, and brand image. On the other hand, Keller (1993) held a different opinion, where he enhanced the importance of brand knowledge in terms of brand awareness and brand image, which were suggested to have a significant effect on consumers. In this study, the author holds the same idea as Aaker.

Brand Awareness

Brand awareness was defined by Ross (2006) as the strength of a brand that existed in consumer’s mind. Additionally, brand awareness is also a vital part of brand equity, conceptualizing the construct for both product and service (Keller, 1993, Kayaman & Arasli, 2007). With brand awareness, the brand enables the potential buyer/customer to recognize or recall a brand in a product/service category (Laverie, Wilcox, Kolyesnikova, Duhan & Dodd, 2008). Moreover, it can affect customers in their further buying preferences and decision making processes through the three advantages brought by awareness. The advantages are learning, consideration and choice advantage (Keller, 2003). As suggested by Lockshin and Spawton (2001), such awareness is a necessary condition for creating a brand preference/disliking, brand loyalty and brand familiarity. Awareness has an impact on building brand equity and serving as an instruction for enhancing customer-based brand equity and formulating the brand’s strategy approach (Wang, Wei & Yu, 2008).

Brand Loyalty

The influence of brand loyalty can be seen as a broad one, where its influence expands beyond customers who continuously buy a service or a product of certain brand (Keller, 1998). Aaker (1991) stated that brand loyalty is an extremely important component of brand equity. Aaker argued that brand loyalty cannot exist without the previous buying experience, and the loyalty of these existing customers will qualify a firm with a competitive advantage to build an entry barrier for competitors. These loyal customers will enable the firm to attract more new customers, creating a positive and effective message to potential customers (Aaker, 1991). According to the aforementioned, the string brand equity will enable a firm to exploit more widely and successfully. Furthermore, the brand loyalty also acts as an essential part of brand equity, while brand association is the reason-to-buy a service or product from the customer’s point of view (Aaker, 1991).

Brand Image

Brand image is a set of brand associations that are similar in concept (Laverie, Wilcox, Kolyesnikova, Duhan & Dodd, 2008). Additionally, it can be stated that brand image drives brand equity (Biel, 1993), where it is considered as customers’ perceptions which are linked to a specific brand (Koubaa, 2008). Thus, the Four Season Hotels could be linked to a particular consumer segment, e.g. the upscale market, and a particular feeling such as luxury/enjoyable. Brand image is the outcome of psychological configuration and analysis, where both internal and external factors will have a remarkable impact on it. The internal factors which can be explained as the personal characteristics of consumers are considered more important to the brand image of the customer-based brand equity (Koubaa, 2006). Customer perception of brand image can distinctly influence consumer behaviour. Brand image can give customers a specific reason to select a brand, based on the associations delivered by such brand (Ataman & Ulengin, 2003). Additionally, Ataman and Ulengin (2003) also indicated that customers might be influenced to buy a certain brand, for the purpose of improving their self-image.

Perceived Quality

In order to understand perceived quality, two aspects should be clearly distinguished, which are physical quality and perceived quality. Although physical quality is important, it is not necessarily directly affect brand equity. The perceived quality does, on the other hand (Anselmsson, Johansson & Persson, 2007). Perceived quality is different in terms of the satisfaction that customers receive through intangible aspects of the product, and the overall feelings about a product/service in the customer’s mind (Aaker, 1991).Perceived quality provides value to customers’ purchase decision through providing them with a buying reason and distinguishing the brands, one from the other (Arasli & Kayaman, 2007). Besides, it can be stated that perceived quality has a direct impact on profitability and return on investment (Aaker, 1996). Moreover, a positive perceived quality can enable a firm to set a premium price in order to be more competitive and bring more profit (Aaker, 1991).

The relationship between brand equity and its four dimensions

With the brand equity dimensions outlined previously, a relationship exists among these dimensions, from which it can be concluded that these dimensions are not independent. Grouping the dimensions into two components, i.e. association and awareness, as being involved in characterizing brand knowledge, as stated in Keller (2003). In that regard, it can be stated that the strength of both the association and the awareness lead to stronger brand equity in general. Accordingly, spreading the aforementioned components over the four dimensions identified by Aaker, i.e. perceived quality, brand awareness, brand loyalty, and brand association, it can be seen that such relation persists. Taking the dimension of perceived quality, it was suggested in Aaker (1991) that such dimension is influential on brand equity through the creation of a brand’s value.

The influence of the perceived quality stems from such attributes as perceived value and brand attitude, leading to the formation of brand image (Aaker & Biel, 1993, p. 145). Bran image, on the other hand, can be directly related to the dimension of brand association, where the associations link to form the image. Transcending such relationship between perceived quality, brand image and brand associations, it can be stated that quality is an important dimension, the higher the quality perceived, the more positive the association created for the brand’s image and the stronger is the equity of the brand.

Linking quality perception to the hotel industry, the model demonstrated in Cobb-Walgren et al. (1995) can be used to explain the consequences of the formation of brand perception and accordingly its preference through a comparison between Holiday Inn and Howard Johnson. In that regard, the physical and the psychological features forming the brand perception in such a model can be linked to the dimensions of perceived quality and brand associations. The strength of brand equity in the analyzed hotels was positively correlated with consumers’ preferences, and consequently on their intention for purchase (Cobb-Walgren, Ruble, & Donthu, 1995).

The dimension of brand loyalty is also directly related to brand equity, where unlike other dimensions it implies an existent experience of customers with the brand. Logically, the correlation between brand loyalty and brand equity is apparent, where providing the more loyal the customers to the brand the more equity the brand has. The relation can be explained through that loyalty implies regular purchases by consumers, preventing switching to another brand, and thus, “to the extent that consumers are loyal to the brand, brand equity will increase” (Yoo, Donthu, & Lee, 2000, p. 197). A method of measurements developed by Yoo and Donthu (2001) took the concept of Aaker’s dimensions of brand equity, leading to a multidimensional consumer-based brand equity scale (MBE). MBE was calculated as the sum of the mean of the dimensions, among which brand loyalty was one of the constructs, adapted from Beatty and Kahle’s (1988) brand loyalty items (Yoo & Donthu, 2001). Accordingly, in terms of hierarchy, it was argued in Levidge and Steiner (1961), cited in Yoo and Donthu (2001), that brand loyalty is the last in such hierarchy, preceded by brand awareness, brand association and perceived quality. In that regard, considering the importance of experience in forming brand loyalty, such a hierarchy can be understood. An example can be seen through the statement that “[p]erception of high product quality leads to brand loyalty because it is the basis of consumer satisfaction” (Yoo & Donthu, 2001, p. 12).

In the hospitality industry, the aforementioned aspects can be reflected through such financial indicators as RevPAR, wherein Kim, Kim, and An (2003) the authors examined the influence of brand equity and its dimensions on the financial performance of 12 luxury hotels. The study found a direct correlation of all brand equity dimensions on the financial performance of the studied businesses (Kim, Kim, & An, 2003, p. 346). An interesting finding was in the absence of the significant correlation between perceived quality and financial performance, which being a component of the brand image might imply a direction for future researches for clarification.

Conclusion

It can be summarized from the review that brand equity is an important concept, which is utilized to shape the preferences of the customers. With the changes in the Chinese perception of the brand to match the western culture, it is interesting to see the way brand equity dimensions are prioritized among the customers. In that regard, it can be stated that the literature focuses more on the overall score of brand equity, connecting such score with the performance of the business. In that regard, the literature lacks an independent measure of each of the dimensions and their influence by extraneous factors. Accordingly, the review shows a gap in the measurement of the interconnection between the four dimensions, and the differences in each dimension’s contribution to the equity. The questions that might be derived from the review can be seen in 1) measuring each brand equity dimension’s influence on brand equity on hotel selection in China; 2) the influence of the dimensions on one another; the differences in the dimensions’ contribution toward brand equity in hotels in China and Hotels in the UK.

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