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Leveraging Brand Equity through Third-Party Organisation Endorsement: A
Consumer Perception Survey
Babatunde Musiliu, ABINA
Department of Business Administration
Al-Hikmah University Ilorin, Kwara-State
[email protected]
Olaitan Moshood, SOWOLE
Department of Business Administration
Al-Hikmah University Ilorin, Kwara-State
[email protected]
Abstract
Using primary data from Nigerian consumer market, this paper examines the link between thirdparty organisation (TPO) endorsement and brand equity derived from consumers’ perception of
the endorsed brand. Building upon previous insights on TPO endorsements, the paper examines
the influence of TPO endorsement on consumers’ perception using five dependent measures
(Product quality, manufacturer credibility, purchase confidence, purchase intention, positive
word-of-mouth intention). A sample of 384 consumers reveals that three out of the five measures
(perceived product quality, manufacturer credibility and positive word-of-mouth intention) of
consumers’ perception of TPO endorsement have significant positive effect on third-party
organisation endorsement in obtaining brand equity for the endorsed brand. This suggests that
the potential of leveraging consumer-based brand equity through TPO endorsement is contingent
upon consumers’ perception of the quality of the product, credibility of the manufacturer, and the
positive word-of-mouth. It is recommended that more representative sampling and additional
moderating variables be used in carrying out further studies to fully understand if customers’
perception of TPO endorsements can build brand equity.
Keywords: Brand equity, consumers’ perception, product quality, manufacturer credibility,
purchase confidence.
1. Introduction
Value is an imperative asset to organisations; the value accruable to a brand determines the
performance of the brand. The value of a brand can be assessed from three perspectives:
financial market level (Simon & Sullivan, 1993; Aaker & Jacobson, 1994; Silverman, Sprott &
Pascal, 1999), company or firm level (Kapferer, 1999; Doyle, 2001; Kim, Kim & An, 2003), and
customer level (Keller, 1993; Aaker & Joachimsthaler, 2000; Chen, 2001; Bendixen, Bukasa &
Abratt, 2003; Baker, Nancarrow & Tinson, 2005; Tong & Hawley, 2009). The attainment of
value at the financial market and company or firm levels is predicated on achieving value at the
customer level. Hence, organisations adopt strategies that can help influence customers’
perception of their brands. One of such strategies is “Third-party Organisation” (TPO)
endorsement.
Third-party organization (TPO) endorsement advertisements have grown increasingly popular in
recent years. As submitted by Dean and Biswas (2001) marketers are using TPO as signal of
product quality in advertising. These endorsements may function as a signal of unobservable
product quality (performance, reliability and durability of product) thereby aiding in the
reduction consumer uncertainty and risk perception in a purchase situation. The outcome of this
is that TPO endorsement may help marketers with endorsed products position their products
against the competition. Studies on use of endorsement in building brand equity through the use
of endorsement are numerous in literatures (Pringle& Binet, 2005; Amos, Holmes & Strutton,
2008; White, Goddard & Wilbur, 2009; Ranjbarian, Shekarchizade, & Momeni, 2010; Dehradun,
2011; Al Zoubi & Bataineh, 2011). However, few studies extending to TPO endorsement can be
found. Existing studies on this area examined the effect of TPO endorsements on consumers’
perceptions of endorsed products or services (Peterson, Wilson & Brown, 1992; Dean, 1999;
Dean & Biswas, 2001).To our knowledge, studies on TPO endorsement focusing on consumers’
perceptions of endorsed products or services in Nigeria do not exist. In an attempt to bridge this
gap, the current study attempts to examine the influence of TPO endorsement from the Nigerian
consumer perspective.
The Nigerian environment is replete with its fair share of advertisements with TPO endorsement
of products spanning different sectors of Nigerian organisations as well as product types
(tangible goods and intangible services). Evident examples of TPO in Nigeria include the
endorsement of Cadbury Bournvita by Nutrition Society of Nigeria, Sensodyne Oral Care
toothpaste by Nigerian Dental Association, Unilever Pears by National Association of Nigerian
Nurses, Ric-Giko Tomato Paste by Nigerian Doctors and Reckitt Dettol Re-energize by Nigerian
Medical Association. Although marketers are using TPO endorsement as a signal of product
quality in their advertising, the literature is inconclusive as to the effectiveness of TPO
endorsements as quality signals.
Hence, this study is intended to assess how third-party organisation endorsements can help in
leveraging brand equity from the consumer perspective.To achieve this, we collect data on
consumers’ perception of TPO endorsed brand and their patronage of such brands. Our research
objective is aimed at examining the effectiveness of TPO endorsement in obtaining brand equity
for the endorsed brand. On the premise of these, the research question for this study is:
i.
Do TPO endorsement influence consumers’ perception of the endorsed brand?
The remaining of the paper is organized as follows. In section 2, a review of extant literature on
third-party endorsement and the benefits derivable from adopting it as a strategy is given.
Section 3 presents the research methodology and data, and Section 4 presents the conclusion and
recommendation.
2. Literature Review
Brand Equity
In consumer marketing, brands often provide the primary points of differentiation between
competitive offerings, and as such they can be critical to the success of companies (Wood, 2000).
This, therefore, makes it imperative to approach the management of brands strategically. A
successful brand, managed strategically, and found successful is one that can be said to have
achieved brand equity. Since the emergence of brand equity in literatures in the 1990s, great
importance has been placed on conceptualizing, measuring, and managing brand equity by
practitioners and academics alike. Brand equity can be defined in several ways and it has value
both to a branding company and to a brand’s user. In a general sense, brand equity is defined in
terms of the marketing effects uniquely attributable to the brand. That is, brand equity relates to
the fact that different outcomes result from the marketing of a product or service because of its
brand element, as compared to outcomes if that same product or service did not have that brand
identification (Tuominen, 1999). An important characteristic of virtually all definitions of brand
equity is that they focus on the incremental effect of the brand compared with some concept of
what the customer response would be to the same product or service, if it were unbranded
(Barwise, 1993).
There are three alternative ways to leverage brand equity: firstly building it, secondly borrowing
it, or thirdly buying it. Brand leveraging conveys a message to consumers about the product and
its qualities based on their existing perceptions of the parent company. Obtaining brand equity
for the product will thus be based on customers’ subjective and intangible assessment of the
utility of a brand, above and beyond its objectively perceived value. Key drivers of this are
customer brand awareness, customer brand attitudes, and customer perception of brand ethics
(Rust, Zeithaml & Lemon, 2000; 2004). Brand equity from an individual consumer’s perspective
is reflected by the increase in the strength of associations an individual has for a product by using
the brand. This result in lower uncertainty in purchasing and less need for an extensive decision
making process on the part of the customer.
Third-Party Organization (TPO) Endorsement
Organisations create secondary associations in a number of different ways by linking the brand
to various third-party sources. Endorsements such as those from leading magazines, registered
association, and experts can obviously improve perceptions of brands and attitude towards
brands (Keller, 2008). Due to the potential of credibility attached to third-party sources,
marketers often feature them in advertising campaigns and selling efforts. A common third-party
source companies have employed to effectively convey product claims to consumers and attain a
socially responsible image is the use of a third-party organisation (TPO) endorsement (Feng,
Wang & Peracchio 2008).
As advanced by Dean and Biswas (2001), TPO endorsement is “an advertisement that contains a
positive evaluation of the advertised product or service that comes from an identified third-party
organization”. These TPOs are authoritative national voices in specific segments of the products
they have endorsed. Endorsement from TPOs may take one of three general forms: (1) the
product is ranked against competing products in its class on one or more criteria, (2) the product
is awarded a seal of approval by the TPO, or (3) a subjective, non-competing statement is made
about one or more product attributes. Receiving and displaying a TPO endorsement is thought to
have a range of benefits for the for-profit company, the endorsing non-profit organisation and
even consumers, which may explain why this marketing strategy has recently become
increasingly popular (Feng, et al., 2008).
In a market consisting of products of similar price, quality and service, a TPO endorsement helps
differentiate a product from its competitors (Bronn & Vrioni, 2001). The expediency of adopting
TPO endorsement in such markets is that brand differentiation is pivotal to the brand-building
process (Aaker & Keller, 1990). Consumers perceive the endorsements as indicating greater
product quality (Ippolito, 1990), more accurate and credible advertising information (Dean et al.,
2001) and more difference from competitors, which reflects positively on the brand and enhances
its image (Boulding & Kirmani, 1993; Dean et al., 2001). Furthermore, endorsements from a
TPO have been found to be more effective in enhancing consumers’ view of a product’s quality
(Feng et al., 2008) and attitude toward the product (Fireworker & Friedman, 1977) than in
product advertisements without an endorsement or advertisements with an endorsement from a
celebrity. Perceived product quality, in this case, refers to the overall assessment of the brand’s
superiority and excellence in comparison with other brands (Dean, 1999).
Signaling Theory
According to Spence (1974), signals are activities or attributes of a firm that alter the beliefs or
convey information to other market actors. Signaling theory holds that a signal (a TPO
endorsement in this case) is a deliberate action by the firm to communicate information to the
market (Spence, 1974; Wernerfelt, 1988). Endorsements may create information asymmetry
between two game parties, sellers and buyers, in a transaction (Boulding & Kirmani, 1993;
Kirmani & Rao, 2000). In an exchange situation between sellers and buyers, sellers know the
true quality of their products, while buyers may not know (Kirmani & Rao, 2000). Hence, the
game that plays between sellers and buyers contains both cooperative and competitive elements
(Dacis, 1970). The competitive element of this game leads buyers to ignore direct claims from
sellers, e.g. the content of advertisements. However, buyers and sellers cannot get a transaction
in the case of incomplete information. Therefore, buyers need additional credible information to
predict or evaluate the quality of products. The possible route for this situation is to send signals
from sellers to buyers.
In line with the signaling theory, it is believed that if TPO endorsements function as signals, it is
expected the TPO should impact the fortune of the endorsed brand. As predicted by signaling
theory, TPO endorsements in advertising can signal high quality when TPOs endorse highquality brands. The resultant benefit of this strategy is to both the high-quality brands and the
TPO is that the brand’s manufacture will directly inform more consumers about their high
quality and enhance the perceptions of their products and increase sales while TPOs earn
reputation as well as revenues by endorsing high quality firms. This reputation gives the TPO
more power to influence firms in the marketplace, resulting in a situation that more high-quality
firms are willing to pay more for TPO endorsements. Conversely, in the case of a false signal, it
is expected that both TPO endorsed low-quality brands and the TPO would suffer. The brand’s
manufacturer may directly lose money on wrong advertising campaigns that try to boost
recognition as an award receiver because consumers may not perceive the TPO endorsement in
advertising as a quality signal. TPOs also suffer more for endorsing low-quality brands because
they may lose their reputation, perhaps the most valuable asset that the TPOs possess.
Inadvertently, a negative word-of-mouth effect is likely to occur and results in more people to
doubt the TPO.
Empirical Review
Previous research on TPO endorsement has been conducted from different perspectives.
Outcome of the studies suggests an inconsistent result on its effect on consumers. Peterson,
Wilson and Brown (1992) investigated whether print advertisements containing a TPO
endorsement were more effective than advertisements not containing an endorsement in
influencing consumers’ attitudes and purchase intentions. Outcome of the study revealed that the
presence of TPO in the advertisements had no effects on the consumer. A contrary result was
obtained in the study of Dean (1999). The study found that TPO endorsement has effects on
consumer perceived product quality, uniqueness, and manufacturer esteem and concluded that
TPO endorsements might function as an advertising cue for enhancing consumers’ perceptions of
endorsed products. Furthering the study, Dean and Biswas (2001) conducted a study which
compared advertisements containing a TPO endorsement to advertisements with a celebrity
endorsement and advertisements without an endorsement in terms of the ability to affect
perceived product quality, attitude toward the manufacturer, purchase risk, and information value
of the advertisements. The outcome of the study indicated that advertisements with TPO
endorsement were more effective than advertisements containing a celebrity endorsement and
advertisements without an endorsement in enhancing respondent perceptions of product quality.
3. Methodology and Data
The data for the study was obtained from a convenient sample of consumers with knowledge of
TPO endorsed brands within the Nigerian market. Since size of population was not available, and
population was large, sample size was assumed to be infinite. Sample size was estimated using
Cochran's formula, based on which sample size was 384 (consumers of Cadbury Bournvita,
Sensodyne Oral Care toothpaste, Unilever Pears, Ric-Giko Tomato Paste, and Reckitt Dettol
products).
Respondents were administered questionnaires containing questions on their perception of
advertisements with TPO endorsement. Next, they were asked to fill the seven-point likert scale
questionnaire, which included five dependent measures as follows: Product quality,
manufacturer credibility, purchase confidence, purchase intention, positive word-of-mouth
intention. For the purpose of this study, however, the data sourced are mainly to measure the
effectiveness of TPO endorsement in obtaining brand equity for the endorsed brand through
consumer perception. Thus, a point of difference from that Feng, Wang and Peracchio (2008)
which examined TPO influences from a separating equilibrium and a pooling equilibrium
perspective as this is only a preliminary study in this aspect in the Nigerian environment.
Table 1. Sample Profile
Characteristics
Percentages
Gender
Male
Female
67.9
32.1
Age Group
16-25
26-35
36-45
46-55
Above 55
52.3
22.1
15.1
10.4
0
Education Status
Post Graduate
Undergraduate
14.1
92.9
The result from the above table shows demographic variables of respondents, there is high
degree of male respondents compare to their female counter parts, 16-25 age group respondents
are of high degree compare to other age group of respondents, respondents with
elementary/primary school education status are of high degree compare to no formal education
with low percentage.
Table 2:
TREATMENT MEANS AND STANDARD DEVIATIONS FOR FIVE DEPENDENT MEASURES
TPO
Endorsement
Perceived
product quality
5.29
(1.594)
Manufacturer
Credibility
5.08
(1.711)
Purchase
Confidence
4.87
(1.500)
Purchase
Intention
4.44
(1.500)
Positive word-ofmouth intention
4.94
(1.284)
Note.—Standard deviations are in parentheses.
The description of score of each of the variable used in this study is shown in table 2. The table
shows mean and standard deviation for the variables. The results in the table are the summation
of all the items belong to each variable from the five-point Likert scale. Perceived product
quality has the highest mean score of 5.29, followed by manufacturer credibility with a mean
score of 5.08. Of the five dependent measures, purchase intention has the lowest mean value of
4.44. These scores mean that consumers are aware of TPO endorsement and they perceive such
endorsed products as being of quality, credible.
Presentation of Regression Result
The regression result of Leveraging Consumer-Based Brand Equity through Third-Party
Organisation Endorsement is presented below:
Table 3: Regression result
Dependent Variable: Consumer Perception
Variable
coefficients
t-statistic
Perceived
product quality
0.329
0.611
2.598
4.569
Manufacturer
Credibility
0.570
3.700
Purchase
Confidence
-0.561
-0.965
-3.959
-4.423
Purchase
Intention
-0.571
-4.195
Positive word-ofmouth intention
0.154
0.973
R-squared
0.589
Adjusted R-squared
0.548
F-statistics
14.332
Significant at 5 percent
The result shows high degree of goodness of fit. The coefficient of determination is 58 percent
and the measure of overall fitness of the model (F statistic) is significant at 5 percent. The model
result shows that proposed factors (perceived product quality, manufacturer credibility, purchase
confidence, purchase intention and positive word-of-mouth intention) have joint significant
effect on third-party organisation endorsement in obtaining brand equity for the endorsed brand.
Individually, of the five factors, only three have significant effect on third-party organisation
endorsement in obtaining brand equity for the endorsed brand. These are: perceived product
quality, manufacturer credibility and positive word-of-mouth intention.
Both purchase confidence and purchase intention are insignificant determinants of third-party
organization endorsement. The outcome of the result reveals that perceived product quality,
manufacturer credibility and positive word-of-mouth have a positive effect on third-party
organization endorsement in obtaining brand equity for the endorsed brand, while purchase
confidence and purchase intention, as shown in the result, have negative effect on third-party
organization endorsement in obtaining brand equity for the endorsed brand.
The five factors put forward are perceived product quality, manufacturer credibility, purchase
confidence, purchase intention and positive word-of-mouth intention. The study found that
factors such as perceived product quality, manufacturer credibility and positive word-of-mouth
intention have significant positive effect on third-party organization endorsement in obtaining
brand equity for the endorsed brand, while purchase confidence and purchase intention do not
have significant effect on third-party organization endorsement in obtaining brand equity for the
endorsed brand.
4. Conclusion and Recommendation
It could be deduced that all the three independent variables have power of predicting consumer
intention, consumers’ attitudes and purchase intentions. It, therefore, implies that there is need
for organisations to encourage the use of third-party in endorsing their product advertising for
them to be able to influence consumers’ attitudes and purchase intentions.
There are practical consequences of this research on the understanding of brand equity formation
from TPO endorsement. Consumers’ perception alone will not result in brand equity for a TPO
endorsed brand unless all other consumer-based brand equity drivers are attained. In today's
highly competitive marketing environment, achieving brand equity for a TPO endorsed brand;
and other brands; can only be accomplished when customer loyalty for the brand is attained. This
is an essential component in the path to attaining brand equity in the long term.
This study is limited by the sample and the use of five moderating factors. More representative
sampling and additional moderating variables may be used in carrying out further studies in this
regard to explain more fully the and, at the same time, understand if customers’ perception of
TPO endorsements can build brand equity more thoroughly.
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