Factors influencing brand loyalty in pharmaceutical industry evidence from vietnam

UNIVERSITY OF ECONOMICS HO CHI MINH CITY
International School of Business
------------------------------

LA THI HONG LOAN

FACTORS INFLUENCING BRAND LOYALTY IN
PHARMACEUTICAL INDUSTRY:
EVIDENCE FROM VIETNAM

MASTER OF BUSINESS (BY HONOUR)

Ho Chi Minh City-Year 2015


UNIVERSITY OF ECONOMICS HO CHI MINH CITY
International School of Business
------------------------------

LA THI HONG LOAN

FACTORS INFLUENCING BRAND LOYALTY IN
PHARMACEUTICAL INDUSTRY:
EVIDENCE FROM VIETNAM

STUDENT ID: 22120129

MASTER OF BUSINESS BY HONOUR
SUPERVISOR: DR. TRẦN HÀ MINH QUÂN

Ho Chi Minh City-Year 2015

ACKNOWLEDGEMENTS
I would like to express my sincere gratitude to Dr.Tran Ha Minh Quân who has
supported me a lot with the thesis preparation and motivated me throughout
the journey of the thesis. I strongly believe that I could have not completed
this thesis without the assistance from all of my friends who helped me to
guide the customers to do the survey and chased for data submission. And
finally my special thanks to my family who was always with me to show their
empathy and encourages me to complete this thesis.
December 8, 2014
Ho Chi Minh City, Viet Nam


Abstract
The pharmaceutical industry is more different than others, because product is the more
specific and varies than products in other market. Most of the pharma companies pay
attention to research and development in order to launch a new drug which can compete
with the rivals. In addition, almost pharma companies are successful due to they have a
powerful sales to marketing their medication to the doctor. By this mean, they will spend
time and money to create these factors mentioned above. Therefore, Pharmaceutical
branding is an important way to create awareness among potential benefits of drugs and
medicines. In the fact that, they neglected to establishing brand and specially building
brand loyalty, because the benefit of customer loyalty bring to pharma companies is very
much, for example it can help pharma companies reduce six times costs to find a new
customers, this research aimed to explore elements influencing brand loyalty and
examining the effect of country of origin on those factors. This study is a quantities
research, 349 questionnaires were delivered to respondents who were going to hospital for
treatment. Collecting Data are used to assess the scale and test hypotheses. Through
Cronbach Alpha coefficients analysis to test reliability of scale, explore factor analysis

(EFA) and confirmatory factor analysis (CFA) were used to test validity of scale and
finally, SEM was used to test hypothesis.
The result showed that marketing managers should be pay attention perceived quality,
brand awareness if they would like to establish customer loyalty toward pharmaceutical


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brand. Besides, the country of origin has no impact to brand loyalty because they don’t a
habit about self-medication, they strongly respect and believed that doctors will treat them
better.
Keywords: Brand awareness, perceived quality, brand loyalty, country of origin,
pharmaceutical companies.


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Tables of content

INTRODUCTION........................................................................................................... 1

CHAPTER I
1.1.

Background to the study: ........................................................................................................... 1

1.2.

The statement of problem: ......................................................................................................... 2

1.3.

The research objective: ............................................................................................................... 3

1.4.

The significant of research: ........................................................................................................ 3

1.5.

The scope of the study: ............................................................................................................... 4

1.6.

Structure of the study: ................................................................................................................ 5

CHAPTER II LITERATURE REVIEW AND THEORICAL MODEL ............................................... 6
2.1.

Definition of brand: .................................................................................................................... 6

2.2.

Definition of brand equity: ......................................................................................................... 7

2.3.

Customer based perspective of brand equity (CBBE): ........................................................... 8

2.3.1.

Brand awareness: ................................................................................................................ 9

2.3.2.

Brand image: ....................................................................................................................... 9

2.3.3.

Perceived quality: .............................................................................................................. 10

2.3.4.

Brand loyalty: .................................................................................................................... 11

2.3.5.

Country of origin: ............................................................................................................. 12

2.4. The relationship between brand awareness, brand image, perceived quality and brand
loyalty. .................................................................................................................................................... 13
2.5.

The relationship between country of origin and customers base brand equity: ................. 14

2.6.

The relationship between COO and brand loyalty: ............................................................... 15

2.7.

The conceptual research model: .............................................................................................. 15

CHAPTER III
3.1.

METHODOLOGY.................................................................................................... 18

Research process: ...................................................................................................................... 18

3.1.1.

Methodology research: ..................................................................................................... 18

3.1.2.

Procedure of research:...................................................................................................... 18

3.2.

Sample design: ........................................................................................................................... 19

3.3.

Measurement scales: ................................................................................................................. 20

3.3.1.

Brand Awareness: ............................................................................................................. 20

3.3.2.

Brand image: ..................................................................................................................... 21


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3.3.4.

Brand Loyalty: .................................................................................................................. 22

3.3.5.

Country of origin: ............................................................................................................. 22

3.5

. Data analysis method:............................................................................................................. 23

3.5.1

Reliability Analysis ........................................................................................................... 23

3.5.2

Exploratory Factor Analysis (EFA): ............................................................................... 23

3.5.3

Confirm factor Analysis (CFA): ...................................................................................... 24

CHAPTER IV DATA ANALYSIS .......................................................................................................... 25
4.1.

Descriptive data analysis: ......................................................................................................... 25

4.2.

Measure scale assessment:........................................................................................................ 26

4.2.1.

Cronbach alpha reliability analysis:................................................................................ 26

4.2.2.

Exploratory factor analysis (EFA): ................................................................................. 28

4.2.3.

Confirm factor analysis (CFA): ....................................................................................... 30

4.2.4.

Test hypothesis with SEM analysis: ................................................................................ 30

4.2.5.

Discussion: ......................................................................................................................... 32

4.2.6.

Summary: .......................................................................................................................... 33

CHAPTER V: CONCLUSION AND IMPLICATION ......................................................................... 35
5.1.

Conclusion: ................................................................................................................................ 35

5.2.

Key findings and contribution of study: ................................................................................. 35

5.2.1.

Key finding: ....................................................................................................................... 35

5.2.2.

Contribution of study: ...................................................................................................... 36

5.3.

Managerial Implications: ......................................................................................................... 36

5.4.

Limitation: ................................................................................................................................. 37

References .................................................................................................................................................. 38

Appendix 1 ................................................................................................................................................. 42
Appendix 2 ................................................................................................................................................. 46
Appendix 3:................................................................................................................................................ 50


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Lists of table
Table 2.1 List of hypothesis .............................................................................................. 16
Table 3.1 procedure of research ........................................................................................ 19
Table 4.2 Reliability analysis results ................................................................................. 26
Table 4.3 The Result of EFA:............................................................................................ 28
Table 4.4 Show the result CR and AVE after CFA analysis:............................................ 30
Table 4.4: Regression weight and standardize regression weight: .................................... 31
Table 4.5: Standardized Regression Weights .................................................................... 31
Table 4.5 Summary hypothesis and results: ...................................................................... 32

Lists of figure
Figure 1. Research model .................................................................................................. 16
Figure 2. CFA result .......................................................................................................... 53
Figure 3. SEM result .......................................................................................................... 53


1

CHAPTER I

INTRODUCTION

This chapter introduces the background to the study, problem statement of research, the

objective research, the scope research purpose of this study and the other contents such as
the rationale of the research, structure of the study.

1.1.

Background to the study:

According to Ministry of Health, pharmaceutical sales in 2013 is approximately
2.775 million USD, domestic medicine occupied 1.300 million USD, with the growth
CAGR in 10 years later will be 16%. Although international economy industries were
impacted by international crisis but pharmaceutical industry still gradually increase with
impressive number 18.8% per year from 2009-2013. There are many reasons which lead
to upward trend but it couldn’t be denied is product of pharmaceutical is a special drug,
not instead the others, adjacent to being awareness of people about health care is more and
more improvement and last reason is the Vietnamese viewpoint about using domestic or
imported medicine significantly change.
Firstly, the development of education which leads to perceive high about health care
of Vietnamese. Therefore, when people have a chance which approaches international drug
and pharmaceutical market, their needs will be increase entailing pharmaceutical industry
will be develop. According to World Bank, take into account to 2012, Health expenditure
per capita of Vietnamese is 95 USD , is compared with region is still quite low for example
Singapore $2.286 , Malaysia is $346 , this organization hope the numbers will be go up in
the future.
Secondly, doctors and pharmacists who have a favorite prescribe import medicine
because they supposed that the import ones is better than others, statistic data show that
only 20-30% doctor prescribe domestic drug per total for patients. However, Vietnamese
perception about using domestic and imported drugs have been exchanged dramatic,
according to Ministry Of Industry And Trade statistic data, it show that consumer ratio who

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using domestic is up to 70%, thus, it could be said that pharmaceutical industry is expected
substantial growth.

1.2.

The statement of problem:

The pharmaceutical industry is more different than others, because product is a
specific and varies product in other market. According to Rafiq and Saxon’s research
(2000), a pharmaceutical drug before launching the market, pharmaceutical companies
have to spend nearly 12 years for research and development process as well as applying
for commercial licenses and certifications. Unfortunately, the drug can only have 8 year
time in order to sell on the market before patent expires and initiate price competition.
Therefore, it can be said that the success of the industry relied on three factors: strong
research and development (R&D), aggressive defense of patents and use of the dominant
promotional tool - powerful sales forces (Veloutsou & Panigyrakis, 2001; Moss &
Schuiling, 2004; Moss, 2007). In other hand, the industry has been concentrated on R&D
and product factors and not market drive. In addition, introducing a new blockbuster drug
to the market is becoming even more expensive as the costs of R&D increase (Veloutsou
& Panigyrakis, 2001; Moss & Schuiling, 2004; Moss, 2007; Rod et al,). Besides, there is
an existence of generic drug has also been developing rapidly and constitutes an
increasingly real threat for the industry. Generic companies benefit, not only from patent
expiration, but also from the cost reduction pressures evident in every healthcare system
around the world. However, the picture has changed, industry growth has been slowing
down and firms have been searching for ways to maintain it. To acquire new competitive
advantage, Moss and Schuiling (2004) suggest that pharmaceutical companies should start
paying more attention to building brands than simply products, therefore transferring from
research-oriented,

product-centric

strategy

to

brand

and

consumer

centricity.

Simultaneously, Moss and Schuiling (2004) as well as Griffiths (2007) clearly state that
pharmaceutical companies ought not to solely rely on their sales force and R&D anymore
– the emphasis needs to be put on marketing and branding, in particular, it is need to
establish brand loyalty in pharmaceutical. According to Aaker (2007), the benefits of brand


3

loyalty for the companies could be great. For example: Levins (2009) says that companies
which with a high rate of loyal consumers reduce the marketing costs of the firm instead
of the cost of appealing a new customer. Indeed, according to Sanz (2009), he supposes
that the cost of seeking new customers is about six times higher than the cost of
retaining an old one.
Besides that, since 1960s, there has been an extensive literature on country-of-origin
and how that influenced consumer attitudes (Bilkey and Nes, 1982; Khachaturian and

Morganosky, 1990; Ahmed and d’Astous, 1993; d’Astous and Ahmed, 1999) and
purchasing intentions (Morello, 1984; Han, 1990; Lawrence et al., 1992; Lin and
Sternquist, 1994; Ahmed and d’Astous, 1995) towards foreign products and services.
However, there is a little research about the effect of country of origin on brand loyalty and
components of brand equity. Therefore, this study attempt to examine the effect of COO
on three items of brand equity and brand loyalty in pharmaceutical industry.

1.3.

The research objective:

This study attempts:
+ To explore elements influencing brand loyalty in pharmaceutical industry in
Ho Chi Minh City
+ To investigate the effect of country of origin on brand loyalty in
pharmaceutical industry in Ho Chi Minh City.
+ To examining the effect of country of origin on brand Awareness, brand
Image and perceived quality in pharmaceutical in Ho Chi Minh City.

1.4.

The significant of research:

The research provides valuable insights to managers of pharmaceutical companies
can use factors impacting brand loyalty such as Country of origin to direct advertise
consumers and retain consumer brand loyalty. Moreover, marketing managers can use
strategic relate to brand attributes in order to create and maintain customer’s loyalty and
increase profitable and reduce costs which will be useful for companies?

4

1.5.

The scope of the study:

Firstly, this study is only conducted by selecting convenience sample for researcher
and the purpose research in order to define factors affecting brand loyalty depend on
customers based brand equity ‘s view, therefore, the respondents is consumers who used
to go hospital for treatment. Hence, consumers of the district eleventh, Tan Phu district,
district fifth hospital in Ho Chi Minh City were choose random for this study.
Secondly, this study is only focus on over the counter market in which is also in
short OTC, because of a couple of additional concerns:
Adapted from DeLorme et.al.

(2010), OTC medication can be defined as

medication that does not require a prescription from a medical practitioner; it can be
purchased freely and it is regulated by health authorities through OTC monographs which
contain the approved ingredients, dosage, instructions, formulation and labelling of
medication. Griffiths (2008) defines that for many companies, focusing on OTC products
is an approach of building sales and developing new business value, which has resulted in
some companies to switch from POM to OTC brands
In addition, OTC medication can be used by consumers to treat certain conditions
that do not require the approval or regulation by a medical practitioner (DeLorme et al.,
2010). By this mean, consumers are looking for easing their pains and other symptoms by
using OTC products for self-diagnosed diseases (Ashman et al., 2007), after searching on
the Internet a cause for their symptoms. In fact, Blackett and Harrison (2001) claim that
over 90 percent of consumers in the US are in favor of switching more brands to OTC.
Finally, The OTC market also has the ability to help the pharmaceutical companies

with patent expires and increased generic competition by offering a new, consumer, and
brand-based market.


5

1.6.

Structure of the study:

The structure of this research report consists of five chapters. Chapter 1 introduces
the overview of the research topic. Chapter 2 presents the theoretical basis of the concepts
involved, theoretical modeling with the proposed hypothesis. Chapter 3 presents the
research methodology to test the scale and theoretical models offered. Chapter 4 presents
the results of the implementation of the testing and analysis of information and data
from which to draw conclusions for the research hypotheses proposed in Chapter 2.
Chapter 5 summarizes the main results of the study, the contribution of management
theory and practice and also mentioned the limitations of research to guide subsequent
studies.


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CHAPTER II LITERATURE REVIEW AND
THEORICAL MODEL
This chapter, the researcher focus on defining the construct of brand, components
of brand equity based on Customer based perspective of brand equity (CBBE), for example
brand awareness, brand image, perceived quality, brand loyalty, as well as country of
origin. In addition, some relevant studies will be introduced, research model will be
established depend on the relationship of components in the conceptual framework. This

chapter is arranged as: definition of brand, definition of customer based brand equity,
definition of country of origin, the relationship brand loyalty and components of brand
equity, including brand awareness, brand image, perceived quality, country of origin and
final is conceptual framework presented.

2.1.

Definition of brand:

Branding has existed for centuries as a way which helps consumers can distinguish
the goods of one producer from those of another. However, according to Nguyen & Nguyen
(2011), there are two viewpoint about brand, named is traditional and synthetic view
Firstly, the leading traditional viewpoint about brand, it could be omitted is the
definition of the American Marketing Association (AMA), they defines a brand as a name,
term, sign, symbol, design, or a combination, which is aimed to identify the goods and
services of a firm in order to differentiate them from competition. By this means, brand is
understood to be one component of products and main character of brand are used to
make different this product from other product. However, this view has been change later
because some scholars suppose that this perspective is not general the role of brand in the
international economic market turning into global economic market (cited Tho et al.
(2011)). Therefore, the second viewpoint about brand is emerged, which is complement
for that definition. The synthetic perspective in short it is said that product is a component
of brand. Indeed, some scholars represent for this viewpoint as Keller, Davis, Schuiling
and Moss,…in particular, Keller (2003), he states that a brand was seemed to be a product


7

that adds other dimensions that differentiate it from other products and services designed
to satisfy the same need.

Besides, Davis (2002) supposes that a brand is not only intangible asset but also
critical component of a company and that is a set of promises. According to Schuiling and
Moss (2004), a brand is a name that will register the product in the consumer's mind as a
set of tangible, that is rational, and intangible, that is irrational, benefits. A product on its
own delivers tangible benefits, whereas a brand offers additional values that arc both the
tangible and intangible benefits. For example, apple brand is shaped in the consumers’
mind as a brand offering both of benefits, which are tangible and intangible. The tangible
benefit is quality, fashion and durable of the products and the intangible benefits increases
the status and the success of customers when having been used the product of the company.
Nevertheless, in the highly competitive market environment, it is very difficult
for consumers to distinguish between products of company and rival company. So,
brand name acts as a resource for companies that allow consumer to identity its
preferred product which perceived benefits. Brand is not only benefit’s consumers, but
also benefit’s manufacturers because they can protect trademark from imitation. Thus,
brand name refers to a name, symbol, message, form or combination of these to indicate
the product or service of a seller or group of sellers to differentiate from competitors
(Kotler,1997).

2.2.

Definition of brand equity:

The concept of brand equity has begun to receive attention from academics since
the 1980s and has been developed until now. Brand equity was defined by various
scholars such as: Auken (2002) who described that “it is the value of the business and
the expectations of consumers has to the organization, products and services, including
the experience of communication and awareness of the brand”. According to leading
authors about brand management (Keller, Aaker, Lassar, Sirvastava, Shocker, Prasad and
Dev, etc.), brand equity can be considered as three different perspectives: customers-based

8

perspective, financial perspective and combined perspective. However, the scope and main
reason of study is the research want to from consumer perception identify elements
influence retain and attract customer loyalty. Therefore, this research focus on
understanding brand equity is considered as customer based perspective.

2.3.

Customer based perspective of brand equity (CBBE):

Keller (1991) defined customer based brand equity as “the differential effect of
brand knowledge on consumer response to the marketing of the brand” and it happens when
the customers get used to the brand and hold some favorable, strong, and unique brand
association in memory.
There are many classifications and dimensions proposed in the analysis of
brand equity.

Aaker (1991), conceptualized brand equity as a set of assets (or

liabilities) suggesting the five categories of brand equity: perceived quality, brand
loyalty, brand awareness, brand association, and other proprietary brand assets. Keller
(2002) separated into two components: awareness and association, Schocker and
Weitz (1988) establish brand equity in function of loyalty and image. Agarwal and Rao
(1996) consider overall quality and choice intention as the main dimensions of brand
equity. Vazquez et al. (2002) indicate the importance of stored associations expressing both
functional and symbolic utilities, etc. Yoo and Donthu (2001) referred to consumer-based
brand equity as cognitive and behavioral brand equity at the individual consumer level
which can be described and measured by four dimensions of brand: perceived quality,

brand loyalty, brand awareness, and brand association.
In this study the researcher uses definition of Aaker whose components have been
broadly and accepted by many researchers (Keller, 1993; Low and Lamp, 2000; Prasad and
Dev, 2000; Yoo and Donthu, 2001).
According to research mentioned above, brand loyalty is also dimension of brand
equity but some other researches show between components of brand equity seem to
become a results of interrelationship among these components. Taylor, Celuch, & Goodwin


9

(2004) conducted a study on the importance of brand equity to brand loyalty. The study
was conducted in a large office equipment industry. The result suggested that brand equity,
reliability and trust are the first important factors before the behavior and attitude of
customer loyalty. For this study, research methodology and framework is based on
the equity concept of Aaker and Keller through which we analyzed the four dimensions of
brand equity & firm performance. By this mean, it can be found that there is a relationship
between components of brand equity and brand loyalty. Besides, in the study of Nguyen
and Nguyen (2002), the research is conducted in shampoo market in order to explore
antecedents of brand loyalty in emerging market. The results show that there is relationship
between perceived quality and brand awareness to brand loyalty.

2.3.1. Brand awareness:
Brand awareness means the ability of a consumer can recognize and recall a brand
in different situations (Aaker, 1996). Brand awareness consists of brand recall and brand
recognition. Brand recall means when consumers see a product category, they can recall a
brand name exactly, and brand recognition means consumers has ability to identify a brand
when there is a brand cue. Aaker and Keller (1990) mentioned that a brand with high
awareness and good image can promote brand loyalty to consumers, and the higher
the brand awareness is, the higher brand trust and purchase intention are to consumers.

Peng (2006) indicates that brand awareness has the greatest total effects on brand loyalty.
When businesses develop a new products or a new market, they should promote
their brand awareness in order to receive the best result because brand awareness is
positively related to brand loyalty (Aaker & Keller, 1990; Peng, 2006; Wu, 2002; Chou,
2005).

2.3.2. Brand image:
According to Keller (1993), he defined brand image as a summation of brand
associations in the memory of the consumer which leads him towards brand


10

perception and brand association including brand attributes, brand benefits and brand
attitude. Hsieh, Pan, & Setiono (2004) argued, brand image helps consumer in recognizing
their needs and satisfaction regarding the brand, it also distinguishes the brand from other
rivals motivating customers to buy the brand. Kotler (2001) defined image as the attitude,
thought and feelings of a person for a particular thing or object. Roth, (1995) defined that
the essential part of the company’s marketing program is to sustain the brand image and
strategy of the brand (Keller, 1993; Aaker, 1991). Aaker (1991) found the Image can
create importance and it helps consumers with gathering information, distinguish the
brand, creates a reason to purchase, and also creates constructive feelings and
provides the basis for brand extension.

2.3.3. Perceived quality:
Perceived quality is the consumer’s judgment about a product’s overall excellence
or superiority. It is not real quality of the product but the customer’s perception of the
overall quality or superiority of the product with respect to its intended purpose,
relative to alternatives (Zeithaml, 1988). The best way for a brand to increase perceived
quality is to invest in improving its real objective quality moreover the firm has to

communicate the quality of its brands through quality signals in its marketing actions.
Thus, consumers perceive brand quality through their direct experiences with the brand
and the information obtained in the environmental factors (Yoo et al 2001).
Consumers often judge the quality of a product or a service on the basis of a variety
of information cues that they associate with the product. Some of these cues are intrinsic
to the product or a service, others are extrinsic. Either singly or together, such cues provide
the basis for perceptions of product and service quality.
Cues that are intrinsic concern physical characteristics of the product itself, such as size,
color, flavor, or aroma. In some cases, consumers use physical characteristics to judge
product quality. Consumers like to believe that they base their evaluations of a product
quality on intrinsic cues, because that enables them to justify their product decisions (either


11

positive or negative) as being “rational” or “objective” product choices. Adapted from
Judith and Richard (2002), he indicate that perceived quality and brand loyalty have a
highly connection, they will positively influence purchase intention.

2.3.4. Brand loyalty:
In general, brand loyalty means the repeat purchase of a product or service based on
consumer satisfaction. Brand loyalty is a major factor in increasing the market share of a
firm because when consumers are loyal to the brand they purchase and promote that
specific brand which results in higher market growth and profitability. As Schiffman &
Kanuk (2004) defined that brand loyalty represents a commitment of the consumer to the
brand which makes it as an intangible asset that reflects the company's price of the product
or service. Generally brand loyalty has been considered either an attitude or behavior. From
an attitudinal perspective, brand loyalty is defined as “the tendency to be loyal to
a focal brand as demonstrated by the intention to buy it as a primary choice (Oliver,
1997). From behavioral perspective, it is defined as the degree to which a buying

unit such as a household concentrates its purchases over time on a particular brand
within a product category (Schoell & Guiltinan 1990).
One of the factors that are widely believed to have a high influence on customer
perception toward a specific product, or brand, is the country of origin (O’Cass and Lim,
2002). There is many research in both the areas of country of origin effects and brand
equity, but not many empirical research to date has evaluated how country image may
affect brand equity. Understanding the relationship between consumers country of
origin and consumer-based brand equity is important for some reasons. Globalization
and increased international business activity have facilitated the availability of brands
from one country to consumers in other countries (Hsieh, 2001). Besides companies
in developed countries are increasingly shifting production to other countries to
benefit from cheaper labor or reduced transportation costs (Haubl, 1996). Further,
firms are introducing their brands in other countries for strategic reasons, such as


12

leveraging economies of scale. A Better understanding of the relationships between and
consumer- based brand equity would assist marketing decision- makers seeking to improve
marketing productivity (Kleppe et al., 2002). Therefore, the purpose of study can explore
the impact of country of origin effect on brand equity and brand loyalty.

2.3.5. Country of origin:
Country-of-origin is one of the most important factors that significantly
influence the purchasing decision of consumers. It is defined as comprising the subjective
perceptions of a consumer about the products that provide an important observation that
such belief, ideas and impressions before making buying decisions. Therefore, the country
of origin “made in label” has been used as an important function in meeting with today’s
competitive and global environment in order to increase product sales.
Adapted from Lusk et al. (2006), he state that consumers can use country of origin

is instead of product information, it mean that consumers can use a country’s reputation to
forecast the quality of products. Actually, many studies are recognized that consumers
have significantly different perceptions about products made in different countries,
and that these general perceptions have important effects on consumers’ evaluation of
the products manufactured in a particular country.
Regardless of the direction of the influence of country of origin, empirical evidence
suggests that country of origin perceptions may result from stereotyping, it means that there
is a positive relationship between country image and levels of economic development
and home country biases (Bannister and Saunders, 1978; Nagashima, 1970; Schooler,
1965; Yaprak, 1978). There are hints in the literature of possible link between country of
origin and brand loyalty. For example Kim (1995) suggested that favorable country image
could lead to brand popularity and hence to consumer loyalty. Paswan et al. (2003) have
demonstrated that consumers tend to be loyal towards a country just as they are loyal to
brands.


13

2.4.

The relationship between brand awareness, brand image, perceived
quality and brand loyalty.
Kan (2002) further suggest that the higher the brand awareness is, the higher

the consumers’ quality evaluation is. Besides, Aaker and Keller (1990) mentioned
that a brand with high awareness and good image can promote brand loyalty to
consumers, and the higher the brand awareness is, the higher brand trust and
purchase intention are to consumers. Peng (2006) indicates that brand awareness has the
greatest total effects on brand loyalty.
When businesses develop a new products or a new market, they should

promote their brand awareness in order to receive the best result because brand
awareness is positively related to brand loyalty (Aaker & Keller, 1990; Peng, 2006; Wu,
2002; Chou, 2005). Therefore, the hypothesis one is expected as the following:
H1: there is a positive relationship between brand awareness and brand loyalty.
Most of the research has indicated that product image/brand image has significant
impact on loyalty intention i.e. Customer repurchases intention. According to the
Vazquez-Carrasco and Foxall (2006) explained that the social, confident and special
brand/ product image has a positive impact on loyalty intention, Reynolds and Beatty
(1999) found that if the customer received high social benefit from the salesperson then he
will be more loyal with a salesperson. So, linking the image of the brand is clearly
reflected in the increased value priced over competitors (Debra Grace & Aron O’Cass,
2002). Based on previous research, consumer perception about brand image was
predicted by product-related attributes, benefits and attitudes of consumers towards that
product or service. The second hypothesis is anticipate as:
H2: There is a positive relationship between brand image and brand loyalty.
Judith and Richard (2002) further indicate that perceived quality and brand
loyalty have a highly connection, they will positively influence purchase intention.


14

According to Baldauf, Cravens, & Binder (2003) perceived quality is evaluated about the
product for varied individual consumers that according to their satisfaction. The perceived
quality is used as a key factor by many firms to create their competitive advantage in their
relative industry. So, Keller (1993) concluded some features on which perceived quality
can be measured which consists of performances, conformance quality, reliability,
durability, serviceability and style and design. Chi, Yeh and Chiou (2009) a new view and
evidence to the study of brand loyalty that customer perceived quality will influence brand
trust and brand affect, and further to influence brand attitude and purchase behavior. Thus,
perceived quality and brand loyalty are positively correlated, and brand loyalty will

increase if perceived quality increases. The third hypothesis is state as:
H3: There is a positively correlated between perceived quality and brand loyalty

2.5.

The relationship between country of origin and customers base brand
equity:
Sanyal and Datta (2011) analyzes the relationship of country of origin image

with the components of brand equity. It has been found that both brand strength and
brand awareness lead to a strong formation of country of origin image. Papu et al (2006)
examined the impact of the country of origin of a brand and three of the dimensions
of its consumer based equity. Each of these three consumer-based equity dimensions of a
brand, which composite of brand image, perceived quality and brand loyalty, was
expected to vary significantly by the country of origin their empirical results confirmed
this. He also posit that the relationship between consumers’ macro and micro images
of country and the equity they associate with brands originating from that country.
Result showed that the relationship between these two set of constructs was found to be
positive as well as product category specific. Li et al. (2009) investigate that the effect of
country of origin on brand equity. The result of this study proved that country of origin can
positively influence brand equity. Yasin et al. (2007) also examined the effects of country
of origin image on the development of brand equity. The result showed that brand’s country


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of origin positively and significantly influences dimensions of brand equity. Therefore,
three following hypothesis are predicted as:
H4: there is a positive relationship between COO and brand awareness.
H5: there is a positive relationship between COO and brand Image.

H6: there is a positive relationship between COO and perceived quality

2.6.

The relationship between COO and brand loyalty:

Rave et al. (2006) believed that country of origin affects customer loyalty towards
the brands originating from the country. There are evidences in the literature of possible
link between country of origin and brand loyalty. For example Kim (1995) suggested
that favorable country image could lead to brand popularity and hence to consumer
loyalty. Paswan et al. (2003) have demonstrated that consumers tend to be loyal towards a
country just as they are loyal to brands. Thus, the hypothesis is presented as following:
H7: There is a positive relationship between COO and brand loyalty.

2.7.

The conceptual research model:

The purpose of this research is help marketing manager plan a strategic in order to retain
customer loyalty to brand from components of brand equity. Hence, the author assume research
model in which country of origin, brand awareness, brand image and perceived quality as
independent variables, brand loyalty as dependent variable. Base on literature review above, it is
find that there is a relationship between Brand Image, Brand awareness, and perceived quality on
brand loyalty. Simultaneously, there is a link between Countries of origin on components of brand
equity from customer’s perception and also there is a relationship between country of origin and
brand loyalty.


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Brand
H4
Country

H5

of origin

awareness
H1
Brand

Brand

H2

loyalty

image
H6

Perceived

H3

quality

H7

Figure 1. Research model

Table 2.1 List of hypothesis
Hypothesis

Statement of hypothesis

H1:

There is a positive relationship between brand awareness and brand loyalty.

H2:

There is a positive relationship between brand image and brand loyalty.

H3:

There is a positively correlated between perceived quality and brand loyalty.

H4:

There is a positive relationship between COO and brand awareness.

H5:

There is a positive relationship between COO and brand Image.

H6:

There is a positive relationship between COO and perceived quality.

H7:

There is a positive relationship between COO and brand loyalty.

This chapter presents some constructs of dependent variables and independent
variables, the relationship between COO and brand awareness, image, perceived quality,
brand loyalty. Besides, the correlation of components in customers based brand equity as
brand awareness, image, perceived quality and brand loyalty is also explain detail. The


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following chapters will present how we develop measurement scales for each
constructs in the research model. The research methodology, and data analysis procedure
before having conclusion for the results of each hypothesis with empirical data.