Intro
The “co-creation of brand value” construct, as will be described in the literature review, is at an early stage of development. Few studies has been conducted to understand how brand value is co-created, to structure the process of its
creation, or to shed light on how to improve the process from the firm. Due to this situation, we need to create our own framework based on current theories on branding, competitive advantage, adding recent findings on new sources of value creation with Internet and social technologies.
This is why a thorough view of existing theories in branding is needed as a way to create our own theoretical base to grow the model of brand value co-creation intended for this research. Without this extensive view and analysis of current theories it is not possible to create a new paradigm that can encompass the multifaceted construct of co-creation of value creation. In doing so, we try to avoid the classical bias of merely understanding brands from the traditional cognitive perspective of marketing management, and not considering other perspectives of great use when understanding the relational and social aspect of value co-creation, such as Consumer Culture Theory or Service-Dominant Logic.
This approach is unusual in current literature in branding, as researchers usually choose only one paradigm to understand the subject. However, the paradigm shift caused by Internet and social technologies, the addition of
Service-Dominant logic to branding and unprecedented competitive and market changes, set the basis and the need for a broader view of the value brands represent for firms, consumers and society.
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Understanding brands in our lives
Consumers use products and services to negotiate identity, social relationships and social-cultural meanings and value, each of which in turn makes substantive emotional and financial demands upon consumers.9 From this perspective, brands are therefore vehicles for identity, meaning and relationships that result in value for consumers.
Deep transformations in market dynamics and the development of the resource-based view for company and brand equity research have led to a new
understanding of the role and importance of brands in strategy formation by both managers and academics.10 As a result, a significant feature of contemporary marketing research and practice has been concerned with the emergence of brands as key organisational assets. This recognition has been reflected in the increasing importance of brands in marketing research and managerial practice.
From the consumption and cultural point of view, brands have become a phenomenon in both the marketing and cultural fields, affecting all economic spheres and also our daily lives. The development of the media and consumer culture and the powerful marketing discourse based on the marketing
management discipline during the second half of the twentieth century have been identified as plausible reasons for the dissemination of brands in our society.11
Perceiving brands from this triple economic, cultural and social point of view helps to better understand define and manage the process of brand building to proactively set the basis for value creation for consumers. This is essential for improving not just the marketing function but also company performance, while supporting the creation of competitive advantage.
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9 Firat and Dholakia (1998) in Peñaloza, Lisa; Venkatesh, Alladi. "Further evolving the new dominant logic of marketing: from services to the social construction of markets." Marketing theory. Vol. 6 (2006), no. 3, p. 311.
10 Louro, Maria João; Cunha, Paulo Vieira. "Brand management paradigms." Journal of Marketing Management. Vol. 17 (2001), no. 7-8, p. 849.
11 Bertilsson, Jon. The Way Brands Work: Consumers' Understanding of the Creation and Usage of Brands. Thesis, (PhD). Lund: Lund Institute of Economic Research, Lund University, 2009, p. 3.
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Theories on branding
Brands can be understood from different perspectives: as economic devices, as resources for companies, as networks of associations, or symbolic constructs for consumers. This multi-faceted construction leads to the development of different theoretical streams on the subject of branding.
Managers and researchers confront the challenge of analysing and managing brands among a cacophony of simultaneously competing and overlapping approaches to brand management”.12
The aim of this introduction to the state of the art is to have an overview of the existing perspectives and theories on branding in order to identify concepts, theories and paradigms that can better help to explore the brand value co-creation process that is the focus of this research.
Several theories on branding have been identified. Although branding is not the principal subject in all of them, their perspectives can give us useful insights into our understanding of the role of the consumer, the value creation process, the role of brands for companies, and the processes involved in decision-making.
The selected theoretical approaches to brands and branding are:
a) Marketing Management Theory b) Service-dominant logic
c) Consumer Culture Theory d) Neuromarketing
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12 De Chernatony and Dall’Olmo Riley. "Defining a ‘Brand’ Beyond the Literature with Expert’s Interpretations". Journal of Marketing Management. Vol. 14 (1998), no. 7, p. 436.
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e) Information economics
These approaches have been selected because they cover the main theoretical approaches: cognitive psychology, cultural and economic. Additionally, they also focus on the relational paradigm, which is especially interesting when defining co-creation with consumers. Neuromarketing has been chosen due to the need for a deeper understanding of the decision-making process for brands.
a) Brand Management Theory
This perspective, also referred to as the traditional goods-dominant logic of marketing, or marketing management theory has been the dominating research perspective for the formation and generation of brand theory and knowledge. It is derived from cognitive psychology.13 This is an offspring of the more traditional North American approach to marketing and marketing management and
emerged in the early 1950s with the marketing management school and authors such as Levitt and Kotler.
From this perspective, the consumer is considered as “rational”, and the process is linear and top-down. The company creates the product or service and the marketing activities, and the consumer receives them as a passive actor. The brand is understood as the result of a cognitive and rational process, and to be the identifier of a product or service, which is distinct from those of its
competitors. Brands, therefore, are managed and conceptualised as instruments appended to a product. As products they are made in factories and therefore easily copied by competitors. As brands play an important role in differentiating the company’s products.14
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13 Bertilsson (2009) p.7
14 Christodoulides, George; De Chernatony, Leslie. “Consumer Based Brand Equity Conceptualization and Measurement: A Literature Review”. International Journal of Market Research. Vol. 52 (2010), p. 48.
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This approach also defines concepts such as brand equity (Aaker15) brand leadership (Aaker and Joachimsthaler16), brand identity, brand image
(Kapferer17), which are all employed to gain a competitive advantage edge over competitors. All of these concepts will be developed in the following chapters.
Well-known marketing gurus such as Philip Kotler and Theodore Levitt have propelled this approach. They have written important books and review papers on branding that have received a large number of citations and several awards over the years and have been a comprehensive bridge between the theory and practice of branding, among them:
- Aaker, D. “Managing brand equity”18
- Keller, K. “Conceptualization, measuring and managing customer-based brand equity”19
- Kotler, P. “Marketing Management”20
b) Service-dominant logic
Academics are intensifying the attention directed toward understanding the meaning and value of brands and the process of branding in the last decades.
Some writers posited that marketing is changing from the conceptualisation of brand as a property of goods provided by the company, to brand as a
collaborative, value co-creation activity of companies and all of their stakeholders.
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15 Aaker, David. Managing Brand Equity: Capitalizing the Value of a Brand Name. New York: Free Press, 1991.
16 Aaker, David; Joachimsthaler, Erich. Brand Leadership. New York: Free Press, 2000 p. 14.
17 Kapferer, Jean-Noël. The New Strategic Brand Management: Creating and Sustaining Brand Equity Long Term. London: Kogan Page, 2008.
18 Aaker (1991)
19 Keller, Kevin Lane. “Conceptualizing, Measuring, and Managing Customer-Based Brand Equity”. The Journal of Marketing. Vol. 57 (1993), p. 1-22.
20 Kotler, Philip. Marketing Management. Englewood Cliffs. 2n ed. NJ: Prentice Hall, 1972.
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If traditional marketing management theory based on cognitive psychology viewed customers as passive respondents, a new wave of research focuses on what customers actually do in the value creation process, instead of what
customers actually buy in the marketplace.21 It has not been before the first and second decade of the 21st century and under the influence of service marketing literature that the importance of customer value has been recognised.22,23
Service-dominant logic is the emerging approach to branding management. It emphasises the importance of consumer-centricity in a company´s value creation process and discusses value-in-use, rather than value-in-transaction.
This new perspective in research argues that customers are not passive
receivers but active creators of value and these companies are facilitators of the value creation process (e.g. Payne et al.24 and Vargo and Lusch25). This shift provides a new understanding of brand value as the value in use as determined collectively by all their stakeholders.26
The conceptual foundation that links brand management to the development of sustained competitive advantage is the resource-based view.27 The resource-based approach emphasises the role of those difficult-to-imitate resources as the core of a company’s performance. Brands have, within this perspective a
significant potential to achieve and maintain a superior performance.28 ++++++++++++++++++++++++++++++++++++++++++++++++++++++++
21 YI, Youjae. Customer value creation behaviour. London: Routledge, 2014.
22 Grönroos, Christian; Voima, Päivi. Critical service logic: making sense of value creation and co-creation.
Journal of the Academy of Marketing Science. Vol. 41 (2013), no. 2, p.133-150.
23 Vargo Stephen. L.; Lusch, Robert. F. “Evolving to a New Dominant Logic for Marketing”. The Journal of Marketing. Vol. 68 (2004), no. 1 p. 1-17.
24 Payne et al. (2008)
25 Vargo and Lusch (2004)
26 Merz, Michael; He, Yi. Vargo, Stephen. “The Evolving Brand Logic; a Service-Dominant Logic Perspective”. Journal of the Academy of Marketing Science. Vol. 37 (2009), no. 3, p. 328-344.
p. 329
27 Louro and Cunha (2001) p. 851
28 Barney, Jay B. “Firm resources and sustained competitive advantage”. Journal of Management. Vol.17 (1991), p. 99–120.
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c) Consumer Culture Theory
In contrast to contemporary strategic brand management which understands brands as the results of a cognitive process (e.g. Kapferer,29 Keller 30 among others), with the research stream of Consumer Culture Theory, brands work as a cultural or social phenomenon involving more than just their understanding of various brands’ characteristics and associations.
Under this perspective brands are co-constituted through a dialectical process between the consumer culture and the companies’ branding efforts.31
This theory uses as a starting point the social constructionist perspective where most knowledge and conceptions, such as the ones formed by consumers about brands that are the basis for the creation of value, are considered to be formed on a micro level, mainly occurring and being constructed by people’s social interactions.32 From this perspective, brands are the epitome of symbolic consumption.
One additional reason why a sociological and consumer behaviour-based perspective has been chosen to understand the subject of our research is that relationships play an essential role in this co-creation process. A sociological and consumer behaviour perspective is needed in order to understand the functioning and behaviour of the structure of these relationships.
d) Neuromarketing
Neuromarketing’s main premise is the offering of a scientific method for
understanding human behaviour and the decision-making process based on its ++++++++++++++++++++++++++++++++++++++++++++++++++++++++
29 Kapferer, Jean-Noël. The new strategic brand management: Advanced insights and strategic thinking.
London: Kogan page publishers, 2008 p. 1
30 Keller (1993) p. 1-2
31 Holt, Douglas. Brands & Branding. Boston, MA: Harvard Business School Press, 2003, p. 3.
32 Winther-Jörgenson and Phillips (1999) in Bertilsson (2009)
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findings about neuronal mechanisms33. In doing so, it can provide a new perspective into how consumers feel about and view the brand. In
neuromarketing, brands are viewed as a network of associations interconnected by neural links.34
e) Information economics
Information economics is the branch of microeconomic theory that studies how information affects an economy and economic decisions. It helps us to analyse the brand in the context of information asymmetry. In this context brands are viewed as signals of quality.35
Table 1 summarised the main aspects of the selected theories on branding:
Theory View of the
brand Perspective Main related
concepts Relevant
Neuromarketing Brand as a network of
Information Brand as a Imperfect Signalling, Stigler, Brand equity as
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33 Lee, Nick; Broderick, Amanda J.; Chamberlain, Laura. "What is ‘neuromarketing’? A discussion and agenda for future research." International journal of psychophysiology. Vol. 63 (2007), no. 2, p. 199-204.
34 Walvis, Tjaco H. “Three Laws of Branding: Neuroscientific Foundations of Effective Brand Building”.
Journal of Brand Management. Vol. 16, (2008) p. 189
35 Erdem, Tülin; Swait, Jofre. “Brand Equity as a Signalling Phenomenon”. Journal of Consumer Psychology. Vol. 7 (1998), p. 131
33 economics quality signal. asymmetrical
information structure of the market.
credibility. Erden &
Swait. a signal phenomenon.
Table 1. Summary of the main aspects of the selected theories on branding (compiled by the author)
Brand value co-creation, as a differentiated focus of research, is less than ten years old. Although Sherry in 1998 was one of the first voices that pointed out the existence of brand co-creation,36 it was not until the publication of “The Evolving Brand Logic: a Service-Dominant Logic Perspective” in 2009 when the brand value co-creation appeared as an own entity of research.37 The identification of existing studies on brand value co-creation is going to be key in understanding the phenomenon and setting the basis for the creation of a new framework of brand value co-creation.
Competitive advantage
Competitive advantage has been analysed from the perspective of strategy and resource-based view for this research.
Strategy theory holds that to be successful, a company must create a distinctive value proposition that meets the needs of a chosen set of customers. The firm gains competitive advantage from how it configures the value chain, or the set of activities involved in creating, producing, selling, delivering, and supporting its products or services.38
Resource-based view provides here the perspective needed to understand resources from a firm not just as tangible assets but also intangible, and ++++++++++++++++++++++++++++++++++++++++++++++++++++++++
36 Sherry, John F. “The soul of the company store: Niketown Chicago and the emplaced brandscape”, in Sherry, J. (Ed.), The Concept of Place in Contemporary Markets. NTC Business Books, Lincolnwood, IL, (1998), p. 109-146.
37 Merz, He and Vargo (2009)
38 Porter, M. Competitive Advantage: Creating and Sustaining Superior Performance. New York: Free Press, 1985.
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therefore brands as cognitive resources capable for achieving a competitive advantage.39 From this perspective we can incorporate brands as possible sources of competitive advantage.
However, there is little research that explains and delves into the direct link between branding and competitive advantage. The literature review will help us to analyse this link in depth.
Internet, new technologies and social media
Internet has been considered to have potential to erode brand value and decrease the possibilities for business to create a competitive advantage for several reasons: the emergence of new business models based on price, the availability of large amount of information to compare produces and services and the access to a large number of suppliers. However, the opposite seems to be true: Companies can develop competitive advantage on the Internet, not merely based on cutting-edge technology or delivering systems, but also based on an appropriate brand building.
For the purpose of this study Internet, understood from the perspective of the interrelation between Web 2.0, social media and creative consumers will be analysed to identify sources of brand value for firms and consumers.
We have identified various very differentiated streams of research regarding branding. The dominant stream derives from cognitive psychology, while secondary streams draw on information economics, sociology and neuromarketing. Cognitive psychological and information economics
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39 Zablah, Alex R.; Brown, Brian P.; Donthu, Naveen. "The relative importance of brands in modified rebuy purchase situations." International Journal of Research in Marketing. Vol. 27 (2010), no. 3, p. 248-260.
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perspectives are complementary rather than competing, and the differences in perspective and focus lead to a number of contrasting conclusions.
From the point of view of information economics, the reduction in perceived risk and information costs attributable to brands are antecedents to brand value, whereas with cognitive psychology these reductions are the consequences of brand value.40
However rationalism in cognitive psychology has basically occupied the managerial ideas of the 20th century more writers question that decisions are made exclusively in terms of rationality. According to De Balanzó et al.,41 together with other researchers proposed that emotion “is the primary mechanism for rationality”.
In light of all these findings, and bearing in mind the focus of this research on the consumer’s view, we propose a combined approach that contains elements from all the selected perspectives.
From these multiple perspectives, brand value can be understood as “a set of perceptions, attitudes, knowledge and behaviours on the part of the consumers that results in increased utility and allows a brand a to earn greater volume or greater margins than it could without the brand name”.42
To understand how Internet is modifying the ways firms co-create brand value, current relevant studies of brand co-creation that use online platforms are being used for this research.
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40 Erdem and Swait (1998) p. 133.
41 De Balanzó, Cristina; Serrano, Núria; Scamell-Katz, Siemon, “A Starting Point for Integrating Neuroscience Findings into Retail Research”. ESOMAR: Congress Odyssey. September (2010) p. 1-18.
42 Christodoulides and De Chernatony (2010) p. 48
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To complete the subject of this research, competitive advantage is being analysed with contemporary theories of strategy focused on resource-based view.
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