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ABSTRACT
The marketing communication tool may provide the means for developing strong customer based brand equity. Among the marketing communication tools advertising and price promotion have always played a pivotal role. Prior research suggests that consumer search behavior is likely to be different across product categories. Hence, this paper examines the effect of perceived advertising spending and price promotion on brand equity across experience goods/services.
Bank, Fast Food Restaurants, Mobile Service Provider were chosen as experience products, since their quality is difficult to judge before use.
According to the analytic results of this study, it was found that advertising has an impact on brand equity for experience product. Though respondents are aware of the various price promotion tactics followed by brands, it does not impact their judgment on quality. Price promotions may not be helpful in winning the loyalty of the customers. In order to build strong brand equity effectively, managers must invest in the advertising but considering product categories when applying price promotion.
Introduction
Advertising is one of promotional strategies which are often seen in daily life. Its purpose isto attract, create interest and desire, increase purchase intention and brand awareness. Advertising is the most common marketing strategies used by businesses. Consumers may also use the pricequality relationship that exists in a market to infer quality from price. Research has shown this relationship is category specific. For instance, Lichtenstein and Burton (1989) find objective and perceived quality-price relationships are stronger for nondurables. Caves and Greene (1996) find there isa strong positive relationship between price and objective quality for frequently purchased convenience goods. Rao andMonroe (1989) argue a strong positive relationship exists for lower priced, frequently purchased product categories, but that the relationship is not well documented for other categories. A key issue in marketing is whether frequent price promotions or "deals" reduce brand equity (Aaker 1991), i.e., reduce the perceived quality of a brand, reducing consumer willingness to pay in the long-run? Using a reduced-form model, Jedidi, Mela and Gupta (1999) concluded advertising increases "brand equity" while promotions reduce it. As our model incorporates both price and advertising as quality signals, we will be able to investigate these questions explicitly.
Literature Review and Research Hypotheses
Brand equity, a measure of the overall...