The Importance of Brand Cues in Intangible Service

The Importance of Brand Cues in Intangible Service Industries: An Application to Investment Services By: Michael K. Brady, Brian L. Bourdeau, and Julia Heskel Presented by: Brett Brown Article 48

Objective To empirically test the suggestion that branding is more important for services than for physical goods and that there is a direct relationship between the level of intangibility and the importance of branding.

Previous Research Berry (1995), Bharadwaj et al (1993), and Mitra et al (1999) n Literature that suggests brand cues are more important for products high in credence properties than for products dominated by search or experience properties.

Previous Research Krishnan and Hartline (2001) n n Empirical work on the importance of branding across product types. They found that consumers tend to rely more heavily on brand equity evaluations for physical goods than services.

Intrinsic Hypotheses H 1. Intrinsic cues are more important in the purchase decisions of mutual funds than for hotel accommodations and computers purchases. H 1 a. National reputation is a more important cue in the purchase decisions of mutual funds than for hotel accommodations and computers purchases. H 1 b. Objective product rankings are a more important cue in the purchase decisions of mutual funds than for hotel accommodations and computers purchases. H 1 c. Good media reviews are a more important cue in the purchase decisions of mutual funds than for hotel accommodations and computers purchases.

Extrinsic Hypotheses H 2. Extrinsic cues are less important in the purchase decisions of mutual funds than for hotel accommodations and computers purchases. H 2 a. Personal referrals are a less important cue in the purchase decisions of mutual funds than for hotel accommodations and computers purchases. H 2 b. Price is a less important cue in the purchase decisions of mutual funds than for hotel accommodations and computers purchases. H 2 c. Advertising is a less important cue in the purchase decisions of mutual funds than for hotel accommodations and computers purchases.

Methodology A survey was administered to determine the relative importance of brand cues on consumers’ purchase decisions across three products. (Mutual Funds, Hotel Accommodations, and Computers) 101 part-time and full-time graduate business students from a medium sized university were given the survey.

Methodology 66% of the participants were male 16% were between the age of 18 and 25 76% were between 26 and 35 8% were over 35 70% were recent undergrads in grad school 30% completed grad school

Survey Participants were placed in the position of purchasing three products that varied in tangibility. n n n Computers- Very Tangible Hotel Accommodations- Less Tangible Mutual Funds- Very Intangible

Survey Respondents role played the purchasing process for each of the three products. They were asked to indicate the importance of the brand cues (national reputation, rakings, media reviews, referrals, price, and advertising) Brand cues were presented on an 11 -point scale ranging from “Not Very Important” to “The Most Important Factor”

Results Each of the 8 hypotheses were tested using a repeated measures ANOVA design. P<0. 05 (Mauchly’s test) This test was used because it is a powerful way to detect the effects of experimental manipulation and it also reduces unsystematic variability for the design. It was also used because it is easy to graph the results from an ANOVA design.

Results

Intrinsic Cues The profile plot suggests that individuals place most emphasis on intrinsic cues when purchasing mutual funds followed by computers and then hotels. Contrasts indicated that each of these differences was significant (p<0. 001) n National Reputation Most important for mutual funds, followed by computers and hotels Contrasts indicated that only the hotels/mutual funds comparison was significant (p<0. 001)

Intrinsic Cues n Objective Product Rankings: The mean scores supported that objective product rankings were more important for mutual fund purchases than hotels and computers. Contrasts indicated that all mean differences are significant (p<. 001) n Media Reviews: The means supported the expected direction Contrasts indicate that only the difference between mutual funds and hotels was significant (p<. 026)

Extrinsic Cues are less important in the purchase decision of mutual funds than hotels and computers. Contrasts indicated that each difference was significant (p<0. 001) n Personal Referrals: Least important for mutual funds purchase decisions compared to hotels and computers. n Advertising: The means support the prediction that advertising has less of an impact on purchase decisions for mutual funds. Contrasts indicated that only the difference between mutual funds and hotels was significant (p<0. 001)

Conclusion Intrinsic cues are more important for mutual fund purchase decision than for hotels and computers purchases Extrinsic cues are less important for mutual fund purchases than hotel and computer purchases. n n n All the means were in the expected direction. 6 out of 8 ANOVA were significant at p<. 05, and all 8 were significant at p<. 10 12 out of the 16 contrasts were significant.

Need For More Research Future research is needed that expands this study to other industries and other respondents. More research is also needed that applies to investment services. Future research should also examine the importance of brand cues in other intangible service industries.