African Journal of
Marketing Management

  • Abbreviation: Afr. J. Mark. Manage.
  • Language: English
  • ISSN: 2141-2421
  • DOI: 10.5897/AJMM
  • Start Year: 2009
  • Published Articles: 153

Full Length Research Paper

Does corporate reputation affect brand preference? Application to the soft drinks industry in Egypt

Zayed Aly Mahmoud
  • Zayed Aly Mahmoud
  • Maastricht School of Management, Egypt
  • Google Scholar
Hamed Shamma
  • Hamed Shamma
  • Department of Management, School of Business, Economics and Communication, The American University in Cairo, Cairo, Egypt
  • Google Scholar


  •  Received: 31 October 2014
  •  Accepted: 29 December 2014
  •  Published: 31 January 2015

 ABSTRACT

Researchers have acknowledged the importance of corporate reputation amongst different fields of study. Scolars addressing corporate reputation in the field of marketing have acknowledged corporate reputation has a positive effect on customer loyalty and satisfaction. However, there is limited research tackling brand preference and also these studies mainly tackled developed markets. The relationship between corporate reputation and brand preference is the focus of this research. The researcher focuses on the soft drinks market in Egypt; to examine whether a significant relationship exists between corporate reputation and consumer brand preference. The researcher used the dimensions in RepTrak™ Model which are: Products and Services, Innovation, Performance, Citizenship, Governance, Leadership, and Workplace. The sample was 247 respondents mostly Egyptians middle class aged 21-29 years old. Data analyses have been conducted using selected statistical tests such as normality, autocorrelation and multi-co linearity tests to achieve the research objectives and answer the research questions. The findings showed that there is a positive significant relationship between brand preference and corporate reputation dimensions. At the end the researcher provides recommendations for further use of the model identified and areas where future research is needed.

 

Key words: Corporate reputation, corporate reputation management, brand preference, stakeholders, soft drinks industry.


 INTRODUCTION

Day by day the global connectivity is making consumers more sophisticated which led to the high importance of corporate reputation but also the hardship in its management. Corporate reputation has gained significant attention over the past two decades: as a concept, its measurement, and implications on organizations (Shamma, 2012). It has been acknowledged to have a positive direct relationship with customer satisfaction (Davies et al., 2003) and intent to purchase (Davies et al., 2003). Recent researches argue that consumers are getting more interested in what the companies stand for rather than what they sell (Cross and Morsten, 2012).

After reviewing the literature of corporate reputation, studies tackling corporate reputation in the Middle-East especially Egypt were minimal. These studies aimed to shed light on the importance of corporate reputation and the factors that influence consumers’ perception on corporate reputation. A research conducted by Marks and Spencer in 2010 found that Egyptian consumers are getting more sophisticated in their demands and expectation. They look for quality and brand reputation of the products they purchase (Al Bawaba Business, 2010). The Egyptian Carbonated Soft Drinks market is very competitive where both Pepsi and Coca-Cola are at very similar market shares (AC Nielsen Retail Audit, Dec, 2011).

What is corporate reputation?

The involvement of corporate reputation studies in multiple disciplines has caused it to have numerous definitions (Mahon, 2002; Lewellyn, 2002; Barnett et al, 2006). The most commonly used and referenced definition was that proposed by Fombrum (1996) which composed corporate reputation to be of three main characteristics; (1) It is based on stakeholders’ perception. (2)  This perception is an overall combined perception of multiple stakeholders. (3)  It is comparative which means that reputation can be compared amongst competitors. Several researchers analyzed the numerous corporate reputation definitions into clusters or groups which align with Fombrum’s definition as illustrated in Table 1.

 

 

Several academics questioned the collectivism of cor-porate reputation (Smith, 2002; Lewellyn, 2002). Building on that Walsh and Betty (2007) developed customer based reputation which is the overall customer perception of a company in a given time.

Importance of corporate reputation

Corporate reputation importance has been the subject of numerous academic studies in the fields of finance (Davies et al., 2003; Wang et al., 2008; Walker, 2010), strategic management (Fombrum and Van Riel, 2004; Bloom et al., 2006; Karim, 2006), and marketing. Table 2 summarizes the researches tackling the impact of corporate reputation on several marketing parameters.

 

 

Measures of corporate reputation

The mounting interest in corporate reputation research spurred researchers to develop a variety of different construct measures for both academic and practitioner use. The common corporate reputation measures have treated it as a formative index, however recent research in the field of strategy acknowledged modeling intangible assets as reflective indicators (Bergh et al., 2010). Corporate reputation components and measures were firstly initiated by practitioners. The most commonly used method of measuring corporate reputation is the Fortune Magazine’s   Most   Admired  Companies  Index  (FMAC)  (Fombrum, 1998; Wartick, 2002).

The academic corporate reputation measures are divided into two types; measures that reflect the overall perception of stakeholders regarding a company which are known as single faceted measures, the easiest way to measure overall reputation (Ponzi, Fombrum and Gardberg, 2011). The other type of measures is the multi-faceted, where these measures examine the perception of stakeholders for each dimension of corporate reputation. However using a single-faceted general measure of corporate reputation limits organizations from identifying the factors that affect their reputation either positively or negatively.

One of the highly common multiple facteted measures of corporate reputation is the Reputation Institute’s “Reputation Quotient SM (RQ)” developed by Fombrum and a market research firm Harris Interactive (Ponzi et al., 2011). RQ consists of 22 attributes combined in 6 dimensions which are (1) emotional appeal, (2) products and services, (3) financial performance, (4) workplace, (5) vision and leadership, and (6) social responsibility. Walsh and Beatty (2007) developed the Customer Based Reputation Scale. The scale included the 20 attributes of RQ in addition to 8 other attributes added by the researchers.

RepTrak™ is a corporate reputation measure developed by Reputation Institute in 2006 and is considered an adapted version of RQ (Vidaver-Cohen, 2007). Corporate reputation is recognized as based on four pillars which are trust, admiration, good feelings, and overall esteem. These pillars are decomposed to seven dimensions for corporate reputation in the RepTrak Index and 23 different attributes. The RepTrak™ model has inspired several researchers to create reputational measurement models derived from its dimensions and attributes such as Vivader Cohen (2007) for the educational sector and Marchiori et al. (2010) for the tourism sector.

What is brand preference?

The most recent definition was by Singh et al. (2008) where they described brand preference as the ordering of the brand or its hierarchical prioritization  in the mind of the consumers based on their understanding of what the brand stands for and whether he supports it or not. Positive feelings towards a brand are found when positive preference is noticed and vice versa (Singh et al., 2008) and capitalizing on these positive feelings might lead to customer loyalty. Brand preference is a driver for higher sales and revenues, and can later yield a loyal consumer or customer (Bailey and Ball, 2006). Customers will always have more options to choose from due to the increase in competition, and hence their preference can change over time (Marthur et al., 2003).

Factors affecting brand preference

Several studies tackle the factors that affect or impact brand preference especially in the soft drinks industry. Table 3 illustrates these studies and the factors influencing brand preference in each.

 

 

Corporate reputation dimensions and consumer preference

Corporate reputation is a significant influencer of whether prospective consumers evolve to being customers for a certain firm (Helm, 2007). In their latest press release, the Reputation Institute issued their latest study (Cross and Morsten, 2012) stating that the decision for a consumer to purchase or an investor to invest or an employee to choose to work for a certain company is driven 60% by his perception of this company and what it stands for, and 40% by the products it sells.

Consumers now are becoming more ethically con-scious in their consumption   (Hines and Ames, 2000). Research acknowledged the significance of quality in the consumer purchase decision and comparing products versus others (Olorunniwo and Hsu, 2006). Akram (2008) studied the impact of perceived risks on purchase intention. He argued that consumers’ perceived financial risk and performance risk affect negatively their choice of product and its purchase in the online industry. Authors acknowledged that consumers would prefer a product originating from a recognized company rather than an unknown one (Dinlerosz and Peireira, 2007).

The soft drinks market in Egypt

Pepsi Cola Egypt (PCE) leads the Egyptian CSD market with a value market  share  of  47.4%  followed  by  Coca- Cola (KO) (41.1%) and Al Ahram Beverages (9.9%). The rest of the companies contribute 1.6% of the total Egyptian CSD market.  Pepsi Cola is the brand that has the highest market share. The Colas segment is the largest segment in terms of value contributing 33% of the total CSD market. Also the importance in the Cola’s sector is that it includes the biggest brands in the market such as Coca-Cola and Pepsi Cola which carry the company names (Nielsen, 2011; Retail Audit, 2012).


 RESEARCH DESIGN AND THEORETICAL FRAMEWORK

The purpose of the research is to examine the relationship between independent variables “dimensions of corporate reputation” and the dependent variable “brand preference” on target consumers of the carbonated soft drink Egyptian market. The model was inspired from the RepTrak ™ Model developed by Reputation Institute where it measures the overall reputation of companies and the impact of each dimension of corporate reputation on it (Global RepTrak ™ Annual Report, 2012, Reputation Institute). Figure 1 illustrates the theoretical model of the study.

 

 

Dimensions of corporate reputation

The researcher will use the multiple facetted specific approach to shed light on each dimension for a clearer picture on the construct. This provides a more in-depth examination of the specific dimensions of corporate reputation that needs to be better managed and those that need to be retained (Shamma and Hassan, 2009). The researcher chose to examine the most commonly used measures that were used in both academic and practitioner studies in Table 4.

 

 

Researchers have validated the importance of innovation especially in highly competitive high pressure markets (Aghion et al., 2002) and oligopoly markets (Chen et al., 2005).  For that the researcher will use the dimensions of corporate reputation identified in the RepTrak ™ model which is considered an adapted version of RQ (Vindaver-Cohen, 2007). The model has been globally tested and validated across 27 different countries and 1000 companies (Global RepTrak™ Report, 2012).

The researcher omitted some attributes from the original RepTrak™ based on the interviews with marketers that are detailed later. The measure is open to adjustment according to the type of study and the targeted stakeholders (Groenland, 2002). The definitions or attributes for each dimension are shown in Table 5. 

 

 

For measuring the dependent variable, “Consumer Brand Preference” the researcher adopted a series of five Likert scale questions to measure the consumer brand preferences from Chang and Liu’s (2009) study of measuring the impact of brand equity on brand preference.

Research hypotheses

The research alternative hypotheses are formulated to test the relationships between the dependent and independent variables under study illustrated in Table 6.

 

 

Data collection and sampling

The questions of the survey were adopted from RepTrak attributes tested. The researcher used judgmental sampling and targeted an estimated sample of 900 where he succeeded to collect 306 respondents.

Qualitative interviews with industry experts

The researcher interviewed Mr. Fadl Abowafia Pepsi brand manager and Mr. Mohamed El Mahdy  Coke  brand  manager  each for 30 min, asking them a series of open ended questions to uncover their opinion on the industry, its consumers, and what influences them. The main purpose of the interviews was to get a closer look in the industry from experts’ point of view.

The cola’s marketers acknowledged the importance of corporate reputation and also the possible influence of the dimensions and attributes on brand preference. However they recommended that some attributes should be omitted as the study aims to measure corporate reputation from the consumers’ perception and each stakeholder will have a different perception and expectation than other (Walsh and Beatty, 2007). After consolidating the qualitative interviews results the researcher omitted the attributes listed in Table 7 that were not acknowledged by both interviewees.

 

 

Scale reliability

Table 8 represents the internal consistency of the questions used to measure the variables. The leadership variable will not be presented in the reliability test because this variable is composed of only one question (Hinton et al., 2004).

 

 

Sample demographics

The sample was composed of 306  respondents;  out  of  247  were

carbonated soft drinks drinkers, 50% males and 50% females. The dominant age group for the respondents is 21-29 years old (80%). 70% of the respondents have a bachelor degree and 24% have a master degree. They are mostly Egyptians (87%) and reside in Egypt (74%) and few living in the MENA region (13%). When asked what is their preferred cola soft drink brand 68% answered Pepsi while the rest answered Coke.

Correlation analysis

Both of Kolmogorov-Smirnov statistic and Shapiro-Wilk test were used to test data normality (Sekaran, 2003). All variables are not normally distributed as their sig value is less than 0.05; hence spearman rank correlation test was used and results are illustrated in Table 9.

 

 

The sig value for all variables is less than 0.05 or less than 0.01 except for workplace and leadership. There is a relationship between brand preference and all of the independent variables except workplace and leadership.

Regression analysis

It was performed to test the research hypotheses. Linear regression or multivariate analysis is  based  on  the  assumption  of  normality. Researchers have argued that this assumption can be violated if a moderate or large sample size is present (Sekran, 2003; Field, 2005) (Table 10).

 

 

The R square value is approximately 12%. The model is highly significant which proves that the variation explained by it is not by chance.

When studying the effects of all the independent variables on the dependent variable, only three variables were found to have a significant effect. X2 (Products and Services) is significant at the 0.01 level, X1 (Performance) is significant at the 0.05 level, and X3 (Innovation) is significant at the 0.1 level (Table 11). They all have a positive effect on the dependent variable Y (Brand Preference). 

 

 

 


 FINDINGS AND DISCUSSION

The linear regression analysis found that there is a significant positive relationship between firms’ X1 (perfor-mance), X2 (products and services), X3 (innovativeness) and Y1 (consumer preference). The model was highly significant and the relationships were significant at 0.05, 0.00, and 0.07 respectively. This answers the first three minor research questions identifying that a relationship exists   between   the  variables.  The  following  equation explains the relationship between the dependent and independent variables after eliminating the non-significant variables found through the analyses:

Y=α  ? + β1 X1 + β2 X2 + β3 X3 + ε

Where:

Y is Brand Preference, α ? is the constant term, β is a vector of regression slope, X1 is the Performance variable, X2 is the Products and Services variable, X3 is the Innovativeness variable, ε is the disturbance term.

The R square for the model was 12% and this shows that although corporate reputation has a significant impact on consumers’ brand preference, it resulted in explaining only 12% of its variation. Hence there are other factors that influence brand preference in addition to reputation.

Hence the model is adjusted from the tested model shown in Figure 2 to the adjusted model shown in Figure 1. However, there was a relationship that was found to be significant between other dimensions that are not in the model such as governance and citizenship. These relationships were found significant when testing each dimension separately using Spearman correlation.

 


 CONCLUSION

Innovation as argued by the experts is essential for consumers nowadays. Consumers demand more from the company and its brands. Fadl Abou Wafia stated that innovation reflects the modernity of the brand, and associate the brand with a personality that fits with the personality of the target consumers.  Experts stated that a performance of a company can reflect positively on their products perceived quality and hence their preference. Also in the economic downturn that Egypt is facing, consumers might prefer companies that contribute positively to their economy. Also when a firm with solid financial results and strong performance is perceived to be of our higher quality and lower risk, hence consumers will prefer to purchase their products (Akram, 2008).

The products and services variable showed the highest coefficient in the model variables. Competition is driving consumers to ask for more, companies must strive to produce products of high quality and value for money. The relationship between corporate citizenship and brand preference is validated by the qualitative interviews. Companies in Egypt are starting incorporate corporate citizenship or CSR in their marketing campaigns. Pepsi did it in Ramadan in 2012 and 2011, as well as McDonalds and others.  A positive relationship has been identified between brand preference and governance through the analyses. This is consistent with Hines and Ames’s (2000) study.

The model that resulted from the analysis had an R Square of 12%. They can be due to the dependence of brand preference on other factors than corporate reputation. This may reflect that the Egyptian consumer is not as sophisticated as the developed countries’ consumers. The aim of the study was not to study these factors but was to establish corporate reputation as one of those factors. The findings from this study have justified that there is a positive relationship between corporate reputation and brand preference. Literature states that brand preference in soft drinks is driven by numerous other factors such as taste, advertisement, packaging, brand reputation…etc. (Paracha et al., 2012; Gopi and Arasu, 2012). 


 RECOMMENDATIONS

Soft drink companies should focus on their reputations and their relationships with different stakeholder groups. They should leverage their resources to earn a positive reputation as this reputation impacts positively financially and non-financially

The companies must ensure that their communications reflect their true values, and their customers alongside other stakeholders understand those values. Innovation is imperative for success in the beverage industry, and companies have to position themselves not as imitators but as trend setters. Companies should focus on contributing positively to the society by supporting good causes and also being environmentally responsible. Capitalizing on these contributions in their communication will impact positively on their brand preference.

Companies should focus on communicating their financial results, growth prospects, and always strive for optimum performance. They must always be open and transparent with their customers and other stakeholders. Ethical behavior is noticed and valued not only by internal stakeholders, but external stakeholders and customers as well. Companies must always behave in an ethical manner in their communication, marketing strategies, business relationships, and public relations. Customer focus is essential to maintain a sustainable profitable business. The most important is that companies should act proactively towards the evolvement of the Egyptian consumers.

Limitations and future work

The research has the following limitations:

L1: This research is limited to Egypt and mainly Egyptians.

L2: This research is limited to the carbonated soft drinks industry.

L3: The researcher targeted a specific age group and socio economic class in his sample.

There are several opportunities to apply the model identified in this study across different contexts; it can be tested on different industries and on different stakeholder groups. Also, the model can be tested on different cultures and socio-economic classes. The study also has highlighted an area that requires future research which the difference between developed and developing markets, in terms of consumer preferences, perceptions, and expectations. This area will shed light on the applicability of numerous literature and previous studies on different markets. Corporate reputation is based on perceptions and they are liable to differ; international and multinational firms have to digest that and build on it.


 CONFLICT OF INTERESTS

The authors have not declared any conflict of interests.



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