Increment Strategy of Brand Equity of Time-honored SMEs

Increment Strategy of Brand Equity of Time-honored SMEs
ZHANG Ying 1,2, SUN Minggui 1
1 School of Business and Management, Donghua University, Shanghai P.R.China, 200051
2 School of Business, Anhui Finance and Economics University, Bengbu, P.R.China, 233030
[email protected]
Abstract: Brand equity increment is urgent and necessary at present because most Chinese timehonored small and medium enterprises (SMEs) decay and brand equity drained ceaselessly. This
research focuses on the increment strategy of time-honored SMEs’ brand equity using empirical method.
This research establishes the primary obvious and recessive factors of brand equity increment according
to literature and results of expert-consulting, and makes certain actual situation of these factors based on
consumer survey and expert-consulting, and proposes concrete strategies of innovation and nostalgia
such as enterprise system innovation, marketing innovation and some nostalgia tactics. The findings
support that, for time-honored SMEs, combination of innovation and nostalgia should be the sensible
choice to enhance brand equity.
Keywords: brand equity, time-honored SMEs, innovation, nostalgia
1 Introduction
Chinese time-honored small and medium enterprises (SMEs) have long history and famous products or
technique passed down among generations, and their brands are full of traditional cultures, but their
production and operation are small and medium-sized. They have some characteristics of SMEs such as
small scale, lack of funds, the lower management level, the relative lack of talent, as well as high
operating flexibility, business with specialty and feature[1]. However, these time-honored SMEs are
different from other SMEs which are in the stage of OEM or start-up brand, they have possess their own
product brands or business brands, and have long history of brand management, and have good
reputation at least in regional market. In addition, they are the most important part of time-honored
enterprises. The vast majority of 430 time-honored enterprises recognized by China Ministry of
Commerce are SMEs, moreover, there are many old SMEs have not been certified, which their brands
have the typical characteristics of time-honored ones. However, these time-honored SMEs decay
manifestly because of the change of environment and bad operation, some of them have exited the
market gradually, for example, Wang Mazi scissors founded in 1651 declared bankruptcy in 2003; And
many time-honored SMEs are operating in market hardly with brand assets draining ceaselessly. From
the brand value, the results brand values assessed by Chinese Academy of Brand showed brand value of
most time-honored SMEs was below 10 million, and even some of them devalued. Thus, it is urgent and
necessary to enhance time-honored brand equity. Based on domestic and overseas scholars’ research,
innovation and nostalgia are the right choices to revitalize time-honored brands[2]-[5]. Although
rejuvenation of old brands is paid more attention at present, theoretical research of time-honored SMEs
is still relatively weak. This study focuses on concrete increment strategy of brand equity based on the
characteristics of these companies and consumers’ response.
2 Literature Review on Increment Approaches of Brand Equity of Old Brands
The recession of time-honored SMEs essentially derives from the decrement or drain of its brand equity.
The key to revive old brand is to activate its brand equity. Literature of revitalizing Brand equity also
stresses that innovation and nostalgia play an important role in rejuvenating old brands.
The scholars of cognitive psychology, Keller as the typical representative, argued that activation of
brand equity should search sources from brand awareness and brand image, then construct them to
571
improve brand awareness and image[2]. In effect, it is a usage of innovative strategy which is to reform
the existent elements or introduce new elements in the structure of brand equity. Innovation has become
the permanent drive to develop enterprises, and is wildly applied to various aspects of enterprise
development since Schumpeter put forward innovation in 1912. Michael Porter also argued that
innovation was technological improvement or better methods to work. According to the definition,
innovation could be done by updating product and technology, changing marketing mixture, applying
new selling method, developing new market, and so on[6].For Chinese time-honored SMEs, purpose of
innovation is to seek new elements of brand equity into company development. Specifically, there are
many innovative manners to choose, such as marketing innovation, management innovation, technology
innovation, market innovation, and so on.
The scholars of social psychology, Brown, Kozinet and Sherry as the typical representatives, argued that
brand revitalization should be based on brand affection, and old brands could be revitalized by
emphasizing to awake the nostalgia connection of consumers and old brands in order to rejuvenate
brand meaning[3]. This is the use of nostalgia strategy through excavating existing elements of brand
equity. Nostalgia is a kind of normal human affection, and consumer nostalgia is defined as a preference
towards experiences associated with objects that were more common when one was younger[7]. In
modern commercial times, nostalgia is not only seen as culture, social and psychology phenomenon. It
is already penetrated into various aspects of personal consuming and corporation marketing. Domestic
scholars also think that nostalgia is useful and effective marketing strategy to revitalize old brand, and
Chinese old brands can apply consumer nostalgia to practice long-term brand management. Facing
declination of old brands, enterprises can make use of consumers’ nostalgic preference and maintain
some classical and unchangeable elements of old brands to recall consumers to positive feelings, so that
enterprises can awake unique brand equity of time-honored brand and revive brand[3]-[4].
Both innovation and nostalgia can be used to enhance brand equity at the same time. Cognitive scholars
argue that enterprises should retain the brand soul when introducing new elements into brand equity.
The scholars of social psychology also propose that enterprises should renew products to meet consumer
demands when using nostalgia. However, for time-honored SMEs, how to enhance brand equity through
innovation with nostalgia? Enterprises should choose key factors of brand equity increment, and make
decisions depending on market survey and considering these enterprises’ actual conditions.
3 Factors of Influencing Brand Equity Increment of Time-honored SMEs
We determine primary factors of brand equity increment of time-honored SMEs based on literature and
expert-consulting in this study. We invite five experts who have engaged in teaching and research of
marketing to identify the key factors of influencing brand equity increment of time-honored SMEs.
Brand equity is popular in the marketing research in recent years, but no consensus has been achieved
on primary factors of forming brand equity, and brand equity model proposed by Keller is a typical
viewpoint generally accepted. According to Keller’s theory, brand equity refers to the differential
reactions on company marketing efforts caused by brand knowledge in customers’ brains, consisting of
brand awareness and brand image. Brand awareness reflects that how well brand mark exerts its effect.
It refers to customers’ abilities to identify brands under different situations, including brand cognition
and brand memory. Brand image reflects consumers’ brand association arisen from enterprises’
marketing mix, which consist of function, emotion and symbol association[8]. Fan Xiucheng and Chen
Jie summarized various research about brand image, and proposed an comprehensive model of brand
image, including product dimension, enterprise dimension, personality dimension and symbol
dimension[9].Based on the suggestions of keller and Fan Xiuchen, this study integrates the main index of
brand awareness and brand image into brand name and logo, brand affection, brand personality and
brand attitude, and so on. These factors are analyzed from the perspective of consumers’ reaction, which
can be seen as obvious factors of brand equity increment of time- honored SMEs.
572
Because brand equity in essence is a kind of response in consumers’ mind arisen from enterprises’
marketing efforts, many factors in the enterprise level also can influence brand equity increment of these
companies. Based on analyzing relevant information of time-honored SMEs and integrating opinions
from five experts, we propose primary factors of influencing brand equity increment in enterprise level:
enterprise technology level, marketing channel, marketing communication, enterprise system. They are
factors of influencing brand equity increment in the deep-seated level, can be seen as recessive factors
of brand equity increment. Although brand culture is one of brand equity elements, it makes impact on
consumers’ brand awareness in deep-seated level and is regarded as recessive factor. As a result,
primary factors of brand equity increment of time-honored SMEs are established, shown in Table 1.
Table 1 Primary factors of brand equity increment of time-honoured SMEs
Concrete Indexes
brand name, brand sign, product perceived quality, brand popularity, brand love degree, brand
trust, brand loyalty
Recessive factors
technical level of the enterprise, modern marketing concept of the enterprise, marketing
channel, marketing communication, enterprise system, brand culture, brand personality
Factors
Obvious factors
4 Empirical Analysis on Brand Equity Increment of Time-honored SMEs
4.1 Research design
We choose Xinghualou, Nuts Zhang, Wangzhihe and Zhangxiaoquan which comparatively are familiar
to consumers as research object. In terms of questionnaire designing, we used most items from
Xiucheng and ChenJie[10], in the meanwhile, we also designed some items based on results of expert
interview. The scale is composed of 15 items. All items were measured by Likert seven-point which
higher scores indicated better performance. We sent 87 questionnaires to graduate students in a
university and some consumers in a store, and recycle effective 82 questionnaires. In addition, because
the two indexes of enterprise system and technological level are not suitable for consumer surveys, we
determine their actual performance through carrying out expert interview above-mentioned.
4.2 Data analysis
We use SPSS13.0 to test every index of the scale. The results from the statistical analysis show that there
are 6 indexes more than 4 score with total 7 score, mainly focusing on brand name and brand culture,
perceived quality and brand trust, etc., while some indexes such as brand communications, marketing
channel, modern marketing concept, brand personality, etc. are given less than 4 score (shown in table 2).
The results from expert-consulting reveal enterprise system and technical level of these time-honored
SMEs are obviously not conducive to the enterprises development and need to reform.
Table 2 Data analysis on indexes of brand equity increment
Mean
Std.
Item
Deviation
familiarity with the brand name
5.026
0.961
modern marketing concept
high product perceived quality
4.879
0.866
using modern media
rich brand culture
4.346
0.898
brand popularity degree
knowing brand story
3.172
1.125
brand love degree
Brand’s fashion and modernity
3.042
0.925
brand trust degree
Brand loyalty degree
3.017
1.225
profound impression on the
brand sign
product features
4.213
1.126
think of the brand when buy the
3.827
1.012
Convenience of buying the
kind of product
product
Item
Mean
3.532
2.962
3.962
4.232
4.454
2.954
Std.
Deviation
1.065
0.942
1.025
1.077
0.892
1.103
2.877
0.866
4.3 Approach of Brand equity increment
4.3.1 Improving brand equity by innovation
First, innovating enterprise system. Enterprise system whose core is property rights’ structure and
573
property rights’ relationship is most basic factor affected these time-honored SMEs’ development.
Experts who take part in the interview agreed that these enterprises have old enterprise system and
backward management and need to set up modern enterprise system. These companies can build
appropriate structure of property rights and arrange rationally the control right, usufruct and disposal
right of corporate assets through reforming enterprise system. In particular, for most time-honored
SMEs, the key of enterprise system innovation is to solve principal-agent problem, namely to clear
property rights and establish effective incentive mechanism for operators. For some private
time-honored SMEs, they need to introduce modern enterprise elements such as introducing “outsiders”
with technology and management capacity, absorbing social capital and other social resources, etc.
Second, having marketing innovation. The results of market survey indicate consumers do not believe
the enterprises have completely set up modern marketing concept, and consumers can not easily buy
products of these time-honored SMEs, and these enterprises are used to communicate by word of mouth
and use little in modern media, too. Therefore, enterprises should carry out marketing innovation
including marketing concept, marketing channel, communication and brand personality to ensure brand
equity increment, as follows: These enterprises should establish customer-orientated concept and regard
consumers as the core of operation, and bring consumers’ suggestion into company. They need to
consider consumer long-term interest in product design and manufacturing, and combine the old brand
with modern consumers’ psychology and demands; These enterprises can choose the medium and
content of advertising that can promote brand association, use internet and other modern media, attempt
to establish brand community which strengthens interactive communication between consumers and
enterprises or among consumers, and so on; Because products of these enterprises mainly meet the
demands of daily life, these enterprises should establish long and broad marketing channels, Moreover,
the types of sales channels can be abundant, for example, some wholesale and retail stores can be
developed gradually into their sales network; these enterprises also try to establish new sales channels
such as internet, and so on; In addition, these enterprises should innovate brand culture and enhance
brand personality to promote brand loyalty. Despite their brands have already contained plentiful
traditional culture, products must adapt themselves to modern consumption ideas, brands should
continue to enrich its culture on the basis of passing down its traditional cultural, for example, some new
elements such as fashion and modern can be introduced into brand personality.
Third, innovating enterprise technology and products. The results of expert consulting show that
products of these enterprises are low technology, and enterprise technology level needs to be improved.
Thus, these enterprises should update products and technology in the situation of maintaining product
quality and features, as follows: Time-honored SMEs should try to establish effective management
mechanism of attracting, motivating technical talents; They can set up technology development centers
to engage in product development; They should realize the standardization of production process, for
example, using ISO9002 international quality control system certification standards to ensure the
product quality, and so on.
4.3.2 Passing down time-honored SMEs’ unique brand equity by nostalgia
First, considering nostalgia value of brand name and history. Results of market survey shows that
consumers are very familiar with brand names of these enterprises, moreover, these brand names often
contain the "hall", "blessing", "room" "moral", "benevolence" and so on, they can indicate a mental state
of good luck, wealth and security, and also reflects value orientation in pursue of stability and peace. All
these are easily accepted by consumers. From the perspective of brand history, these old brands own
splendid business culture during long-term brand management, which form advantage unmatched by
modern brand. Moreover, the unique process technics and product features of time-honored SMEs
support the development of the brand. Thus, it is necessary to excavate and spread history and culture of
old brands, cause consumer strong psychological resonance, and to awake consumers’ nostalgic bonding
with brands to promote brand rejuvenation.
Second, passing down the good brand reputation and excellent perceived quality of products. The result
of the market survey indicates that the consumers give high evaluation on the brand reputation and
574
perceived quality, and also have profound impression on product features. These are the essence of these
brands and core elements of their brand equity. Additionally, from the perspective of brand affect,
time-honored enterprises often own extra intimacy because they possess good reputation and high social
recognition during the long operation. All these effectively create consumers’ intimacy and brand
association to time-honored SMEs which are worthy to be passes down.
Third, Using brand story to deepen consumer brand awareness. Brand story is often characterized by
symbolic content. It could be the personal legend of the brand founder, and moving story during the
brand development, as well as the relation with the historical events and social celebrities. Most
time-honored brands possess many brand stories during long-term operation. For example, Wanglaoji
develop its brand story of the TV series “Medicine Man in Lingnan”; “Grand Mansion Gate”--brand
story of Tongrentang is well known; former Cambodian state prince Norodom Sihanouk came to Tianjin
and tasted the Guifaxiang serratula, and appreciated the Guifaxiang serratula very much. These stories
are widely spread and have already become affection bonding between old brand and consumers, and
also deepen consumers’ brand awareness and memory. They are worth to excavate.
5 Conclusion and Discussion
This research focuses on the increment strategy of time-honored SMEs’ brand equity based on theory of
innovation and nostalgia. For time-honored SMEs, the combination of innovation and nostalgia should
be the sensible choice to increase brand equity. When these enterprises only seek innovation and not
mind history and tradition, they will waste brand equity and lead to high cost. If they are confined to
tradition and not innovation, they feel hard to meet the market demands. The key is to identify what
elements of brand equity should be innovated and adopted nostalgia. According to literature and results
of expert-consulting, this research establishes the primary obvious and recessive factors of brand equity
increment respectively from consumer level and enterprise level, and makes certain actual situation of
these factors based on consumer survey and expert-consulting, and finally proposes concrete strategies
of innovation and nostalgia. In this study, we analyze time-honored SMEs, however, different types of
enterprises have different characteristics and situations, future research can be carried out at different
types of time-honored SMEs in order to better serve the development of these enterprises.
References
[1]. YAO Jie, GONG Zizhu. Research on Small-Medium Enterprise Marketing Innovation, Journal of
Northeast Dianli University, 2007,27 (5): 17~20(in Chinese)
[2]. Keller, Kevin Lane. Managing Brands for Long Run: Brand Reinforcement and Brand
Revitalization Strategies, California Management Review, 1999, 41(3): 102~124.
[3]. Brown Stephen, Rovert V Kozinets, John F. Sherry Jr. Teaching Old Brands New Tricks: Retro
Branding and the Revival Brand Meaning, Journal of Marketing, 2003, 67(3):19~33.
[4]. LU Taihong, GAO Hui. Review of Brand Aging and Brand Revitalization, Foreign Economics &
Management, 2007, 29(2):17~23(in Chinese)
[5]. HE Jiaxun, QIN Xiyan, YANG Qingyun, WANG Ying, Innovation or Nostalgia? The Paradoxes
Reflected in Managing Brands over Time and the Segmentation Orientation of Old Brands -An
Empirical Study from Three Cities in China, Management World, 2007,(11) :96~108(in Chinese)
[6]. Mi. Porter,The Competitive Advantage of Nations, New York: The Free Press, 1990.
[7]. Morris B.Holbrook, Robert M. Schindler. Nostalgic Bonding: Exploring the Role of Nostalgia in
the Consumption Experience, Journal of Consumer Research,2003,3(2) :107~127
[8]. Keller, Kevin Lane. Conceptualizing Measuring and Managing Customer- Based Brand Equity,
Journal of marketing, 1993, 57(1): 1~22.
[9]. FAN Xiucheng. CHEN Jie. Measurement of Brand Image: A Brand Identity Based Integrated
Model and Empirical Study. Journal of Nankai University (Social Science), 2002,(3):55~71(in
Chinese)
575