You get what you pay for

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1 UPPSALA UNIVERSITY

Department of Business Studies Master Thesis

Supervisor: Ulf Olsson Spring Semester 2012

You get what you pay for

Improved brand equity through rebranding

Kata Bordas and Linda Fägersten

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Abstract

The purpose was to investigate how the retailer ICA could transfer its brand equity when rebranding its low price private label product Euroshopper. The study also had the intention to look at the outcome of the rebranding process through examining how customers’ brand perception and their behavior was influenced by the rebranding. What made it interesting to conduct this study was that there has been a lack in research that considers rebranding and the role of brand equity in such a process. Brand equity is a very important asset for companies, since it creates value for the customers that they use as information base when making decisions. A quantitative survey was conducted and the conclusion from it is that strong brand equity can be transferred to a product that once had a negative image and that perception can be replaced by a stronger brand image.

Keywords: Brand, Brand Equity, Rebranding, Private label brand (PLB), ICA, Euroshopper, ICA Basic

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Acknowledgment

We would like to thank Hans von Heijne, Private Label Director at ICA Sverige AB for giving us the opportunity to conduct an interview, and all the help given by following teachers at Uppsala University Department of Business Studies, Ulf Olsson, Mikael Gidhagen, and James Sallis.

Furthermore, we would like to thank our families and friends who have shown us great support during this time, our 384 respondents from the customer survey, and our peers for their constructive comments.

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1. Introduction

Today consumers are exposed to information and alternatives all the time. Due to the massive noise it is harder for companies to get the customers’ attention. Companies are forced to stand out from the crowd and an investment in intangible assets is an important tool to gain market share and stay competitive on the market. During the 1980s a changing mindset was seen when more and more companies around the world started to invest in their corporation’s or their product’s brand. (Keller, Apéria & Georgson, 2008 p.9) According to Holt (2004, p.3) that is so because companies often tend to think of brands as something that can be seen as a psychological phenomenon that originates from the perception of the customer. Further Holt (2004, p.3) stresses that “ … what makes a brand powerful is the collective nature of these perceptions…”.

Results of investments made in brands can be measured in the corporation’s or product’s brand equity. This is an asset that cannot be found on the company’s balance sheet, but companies are more than willing to pay for it. For example a company was ready to pay 26 times more than the acquired company’s earnings and three times its estimated stock price.

(Kapferer, 2012, p.4). Brand equity does not have to be acquired it can also be transferred between the corporation and its products. Transferring brand equity is common when companies start to use rebranding management tools to have the possibility to revitalize the brand or create a new image (Muzellec & Lambkin, 2006).

1.1 Background and Earlier Research

As stated above brand equity can not only be acquired but it can also be transferred using rebranding management tools. A lot of research has focused on rebranding during the years in the academic world. But a topic that so far has not been researched enough is how rebranding influences brand equity (Muzellec & Lambkin, 2006; Goi, 2011) Muzellec and Lambkin (2006) mean that in order to understand why a rebranding is successful or unsuccessful, the way rebranding can change the equity of a brand has to be understood. Further, Goi (2011) suggests that future research should focus on the customers’ perception and acceptance of the rebranding process and the impact it has on customers’ buying behavior.

To illustrate what outcomes rebranding can have two of the Muzellec’s and Lambkin’s (2006) cases are included below. This can help the reader to understand why it is important to regard

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2 brand equity when rebranding and why it is worth investing in research of the topic in order to minimize unsuccessful rebranding processes in the future.

1.1.1 Two cases

The outcomes of a rebranding process depend on many different variables; from the reasons behind the rebranding, if the old brand is cherished or disliked, whether the new brand is already established and liked, to how well the company can mediate the new brand both internally and externally. Muzellec and Lambkin (2006) investigated the cases of two companies that chose to do full rebranding with two different outcomes. In one of the cases the company brand was negatively apprehended and therefore the company chose to rebrand.

The company invested in heavy marketing campaigns and the new brand was a clear break away from the former brand. Still, the company did not manage to reach strong brand value nor did it manage to keep the negative associations away. Some of the customers felt a positive difference after the rebranding. However, many of the customers could not interpret the improved brand values because of failed long term investment from the company’s side.

In the second case the customers liked the brand that was to be rebranded. The company had to rebrand because it was acquired to a more international brand. The task in this situation was to transfer the strong brand equity from the old brand to the new brand. The marketing campaigns were carefully developed so they would embrace the old brand’s values and simultaneously emphasize the new brand’s values which were aligning to the old brand. In this case the rebranding proved to be a success. (Muzellec & Lambkin, 2006)

1.2 A Recent Rebranding - Case ICA

As the two cases Muzellec and Lambkin (2006) presented the outcomes of the rebranding processes differ each time. Annually many companies implement rebranding in their marketing strategy and one recent example was the Swedish grocery retailer ICA. The company rebranded one of its private label brands (PLB).

ICA is the leading retailer on the Swedish market today and is among the companies with highest brand equities (DI, 2012; Kaikati & Kaikati, 2003). The company was founded in year 1917 and today the ICA Group is a joint venture and it is one of Northern Europe´s leading retailers, operating in Sweden, Norway, Estonia, Latvia, and Lithuania. (ICA A, 2012;

Hakoninvest Årsredovisning 2011) During the last couple of years the retailer has been able to see a positive development in sales and market share. This positive development has been a

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3 result of increased investments in marketing activities, price cuts, and development of the retailer’s own PLB assortment (DI, 2012; ICA A, 2012; Hakoninvest Årsredovisning 2011).

Through investments in it PLB range ICA increased its sales of these products from 18,4 percent in 2010 to 19,2 percent in 2011 (ICA A, 2012). During 2012 the sales of ICAs PLB assortment was increasing its sales twice as fast compared to the other products that can be found in ICA (Ottoson, 2012). One of the investments concerned the low price PLB Euroshopper that was rebranded into ICA Basic during the second half of 2011. The rebranding implied that some of the products were removed from the product range, while some new products were added. Also the package design was changed and the Euroshopper brand was replaced by the ICA Basic brand on it. (ICA A, 2012) The implementation of this rebranding process was done according to a branded house approach because of incorporating the product under the master brand. This approach is normally used when the company has strong brand equity and they want to implement the brand’s benefits on another product.

(Aaker & Joachimstahler, 2000) Doing so, it becomes easier for customers to notice an already established brand in the market noise they are surrounded by. For a strong brand like ICA the intention also was to transfer the positive association from the master brand to the product level. (ICA A, 2012)

By applying the information and reasoning above, the following research questions were formulated: What role did ICA’s brand equity play in the rebranding of Euroshopper and what influence did it have on customers’ perception? How did ICA’s brand equity influence the outcome of the rebranding process?

1.3 Purpose

The purpose of this study is to investigate how ICA’s brand equity was transferred in the rebranding process of Euroshopper and how customers’ brand perception and consumer behavior was influenced by the rebranding.

1.4 Limitations

The focus in the study is on the low price PLB Euroshopper and its rebranding with ICA’s own brand. Rebranding can be implemented on many different levels of a company, but because the focus of our study we chose to investigate the rebranding from company to product level. Another main definition in this study is brand equity which is described in a number of different ways. We chose to look at four assets that create brand equity: brand

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4 awareness, brand association, perceived quality and brand loyalty. Because of the case of ICA the focus lies on how brand equity can be transferred from company to product level.

1.5 Definitions

We have used theories about branding, rebranding, brand equity and PLBs therefore the definitions will be given of these key concepts.

Brand is defined as “a name, term, symbol, design or a combination of them intended to identify goods or services of one seller or a group of sellers and to differentiate them from those of competitors.” (Muzellec & Lambkin, 2006, p. 804).

The concept of brand equity has been defined by Aaker (1991, p.15) as following “… a set of assets (and liabilities) linked to a brand’s name or symbol that adds to or subtracts from the value provided by a product or a service to a firm and/or that firm’s customers.”

To define rebranding we have looked at Lambkin’s and Muzellec’s (2006) description that implies that something has received a new image by a new symbol, term and/or name, and by that it differentiates itself from the competitors and gets a new position in the customers’

minds.

Private label brand (PLB) is a product category owned by the retailer, and not the distributor, and is seen as an alternative to branded products. (Hoch & Banerji, 1993)

2. Theoretical Framework

2.1 Branding

Due to changes in micro and macro environmental factors companies keep on fighting over customers’ attention. As a result of this companies use different management tools in order to differentiate themselves from the competitors. One commonly used management tool is branding that offers the company a chance to be seen in the massive amount of information.

Investing in branding the company aims to strengthen its overall image.

2.1.1 Definition of Brand

A brand can be defined as “a name, term, symbol, design or combination of them intended to identify goods or services of one seller or a group of sellers and to differentiate them from those of competitors.” (American Marketing Association, cited in Muzellec & Lambkin,

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5 2006, p. 804) Using this definition of brands it is seen that its function is very important on both corporation and on product level. The brand is used as a tool to differentiate the corporation or product from competitors and substitute products. (Keller et al., 2008, p.2) 2.1.2 Brand on a Product Level

There are thousands of different products customers have access to on a market. A product is something that can be used for satisfying different needs and wants. It can occur in many different shapes such as goods, services, organizations, shops etc. As seen products can be found everywhere and almost anywhere. Brands exist so a customer can make difference among the large amount of supplied products. Thus, a brand functions as an ‘information- keeper’ by storing information for the customer. (Keller et al., 2008, p.2) The information is gathered from earlier experiences or familiarity with a brand and it tells the customer who the distributor or manufacturer of the particular product is. This information will play a major role in the final decision of which product the customer will choose. The information will either add or withdraw value for the customer when making decision about the purchase. (Aaker, 1991, p.7) Customers make assumptions and expectations of products based on what they know about its quality, product characteristics etc. This is also true for products the customer never tried. In these cases they make assumptions and have expectations based on how they perceive the brand. Keller et al. (2008, p. 7) imply that when a customer is familiar with a brand, less time and effort will be put into searching and deciding what product to choose (Keller et al., 2008 p. 7). By complementing this statement with the fact that customers have a tendency to purchase larger amount of products they rely on and are familiar with, a brand becomes vital on a competitive market (Aaker, 1991, p.12).

2.1.3 Brand on a Corporate Level

A product brand corporate brands put focus on communicating brand values both internally (within the corporation) and externally (towards its stakeholder and customers). (Muzellec &

Lambkin, 2009)

Corporate brands can be utilized in different ways and one of the Muzellec and Lambkin’s (2009) suggestions is a “branded house” approach. It is described that in a branded house there is a master brand usually used as an umbrella brand for its sub brands (Aaker &

Joachimsthaler, 2000, p.117). The role of the master brand in such a strategy is immense and thus the focus of investments in improving and creating awareness around the brand should be put on the master brand. By improving the master brand the sub brands will automatically

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6 have an increased interest among the stakeholder and customers. It is suggested that a branded house enhances clarity, synergy and leverage of a brand and hence different product markets can be associated with the master brand. Even if a branded house approach improves the three factors just mentioned, when a master brand weakens all sub brands will also be influenced and so sales and profits will be significantly affected. (Aaker & Joachimalster, 2000, p.119ff)

Fig. 1 Branded House (Aaker & Joachimsthaler, 2000, p.107) – Revised version

2.1.4 Critical Issues - Brand

The managers’ role, in building a strong brand both on corporate and product level, is crucial.

His or her accomplishment is not easy because of the fierce competition among supplied brands. All around the world there are thousands of new brands introduced annually and thus it is hard to build a brand that can be distinguished, chosen and survive the competitive market situation. It is further suggested that a falling point for many brands is when managers have their own interest prioritized instead of the brand’s long term interest. That is so because organizations are expected to deliver short-term financial performance to its shareholders.

According to Aaker (1991, p.7) this intense pressure comes because shareholders are unable of seeing and regarding a long-term vision of an organization and instead the focus is on quarterly earnings. This pressure leads to managers trying to maximize their profit and market share during their time in the position and so brands often become exploited by being extended until their core associations are lost (Aaker, 1991, p9-12).

2.2 Brand Equity

According to Keller et al.(2008) brand equity can be seen as one of the most used, popular and important concepts within marketing that arose in the 1980s. Before brand equity was looked upon as a strategic asset for corporations, it only measured the value of fixed assets as buildings, equipment, lands etc. Kaikati and Kaikati (2003) explains that the value that brand equity provides is more than just functional benefits and instead focus lies on the added value

Corporate Level

Product Level

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7 it can provide for customers. Hence, as Kapfere (2012, p.2) means, it is important to regard that the real value lies in the minds of (potential) customers (end customers, retailers and shareholders). This observation indicates that how customers’ perceive the brand influence brand equity. Brand equity can hence be defined as ”...a set of assets (and liabilities) linked to a brand’s name and symbol that adds to (or subtracts from) the value provided by a product or a service to a firm and/or that firm’s customers.” (Aaker, 1991, p. 15)

There are many suggested assets that create brand equity, but this study focus on four assets suggested by Aaker (1991; 2002). The assets, that have an important role and should be invested in by the brand management, are the following: brand awareness, brand association, perceived quality and brand loyalty. By enhancing the perceived value for customers offered through these assets, brand equity can be increased. However, in order for the assets and liabilities to underlie brand equity they have to be related to the name and symbol of the brand. (Aaker, 2002, p.8)

2.2.1 Brand Equity - Building Bricks

The four assets that constitute the level of brand equity are the building bricks for creating value of the brand for (potential) customers. The assets have a great impact on the level of the customers’ confidence when deciding which brand to choose. Familiarity and past experience will decide how the brand equity assets are perceived. (Aaker, 1991, p.16) It should also be taken into consideration that the assets create value in different ways. (Aaker, 2002, p.8) Brand Awareness: When measuring the brand awareness among customers corporations look at the presence of a brand in the customers’ minds, and usually it also includes investigating in what way customers remember the brand. Even if recognition alone can result in a more positive attitude towards the brand it does not imply that the brand is recognized because of its strength, it can also be recognized due to the weaknesses it have. (Aaker, 2002, p. 10) When corporations invest in a brand to generate higher awareness of it among the customers, they should consider that the brand is remembered of the right reasons and not the negative reasons. Additionally, the competitiveness among brands on the market makes it hard for customers to recognize and recall every brand. As a solution corporations try to invest more in brand building efforts and they try to decrease the number of brands in their portfolios. (Aaker 2002, p. 17)

Brand Association: Brand association is a vital brand building brick because it is with this asset a corporation influences the brand identity which decides where the brand should stand

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8 in the minds of customers. Association can regard attributes of products, famous people or a symbol. Thus, depending on what customers associate with a brand the brand equity is greatly influenced by this asset. (Aaker, 2002, p.25)

Perceived Quality: Perceived quality being an intangible asset drives financial performance i.e. return on investment, because the impact it has on price, customer satisfaction and market share. This asset often determines the position of brands that are price, prestige or premium connected. Hence, perceived quality can be seen upon as the core of what the actual customer is purchasing i.e. brand identity. However, customers might perceive the quality differently from the actual quality because of how they previously interpreted the image of the brand. For instance, if a brand’s quality has been improved it might still be perceived as low quality brand. Therefore, it is essential that managers understand what customers base their judgment on regarding quality. (Aaker, 2002, p.17ff)

Brand Loyalty: Brand loyalty is a state for a brand which is desirable because sales and profits are predictable and so it contributes to lower marketing costs. Brand loyalty is an important asset for competitiveness according to Aaker (2002) because loyal customers work as an entry barrier for brands that their connection is stronger with. When the three former assets - brand awareness, brand association and perceived quality – become stronger, they help the brand to reach a high level of loyalty. (Aaker, 2002, p. 21, 23)

2.2.2 Brand Equity – Connection Between Assets and Outcome

Corporations can change the brand’s identity, position or execution to increase the brand value perceived by customers (Aaker, 2002, p. 216). When such a change in the brand management is done by a manager, it should be taken into consideration that the four brand assets are linked to the brand’s name and/or symbol. Changes like that will most likely affect some or all assets (and liabilities) and in some cases these are also lost. A change can be costly, and if the outcome is not as it was expected to be, it might even damage the brand.

Thus, an attempt to improve the perceived brand value for customers is not a guaranteed success. Though one need to keep in mind that the outcome from this kind of management decision differs depending on the context since the assets and liabilities also differ from situation to situation and the actual context. (Aaker, 2002, p.216)

2.3 Rebranding - Definition

If a company wants to create a new identity, image or to enhance the brand for itself or one of its products, rebranding can be applied as a management tool. Even if there are many

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9 examples of rebranding the results are different for each occasion. When a company decides to rebrand both visible and intangible assets (value, image and feelings) are changed.

Rebranding can be divided into two terms, “re” and “brand” when defining it. The prefix “re”

is combined with verbs to give the meaning that something is done or happens more than once. Together with the term “brand”, according to how it was described earlier, rebranding implies that something has received a new identity by a new symbol, term and/or name, and by that it differentiates itself from the competitors and gets a new position from the perspective of the stakeholders, employers, and/or customers. (Lambkin & Muzellec, 2006) 2.3.1 Rebranding; Product Brand

It is essential to pay attention to the fundamental differences between corporate and product brands in what they target and what strategic focus they have. But, they can also be considered as equals, sharing the same objectives, of creating differentiation and preference.

(Muzellec & Lambkin, 2009, p. 41) In this paper the later way of looking at corporate and product brands are applied. By claiming this, the theoretical framework regarding rebranding of corporations are transferable to product level.

2.3.2 Reasons for Rebranding

Goi (2011) suggest that there can be several reasons, of both positive and negative character, behind the choice of rebranding as a way to improve brand identity or image. Moreover, the reasons are of internal (change in corporate structure and corporate strategy, mergers, acquisitions etc.) or external (increasing competitive environment, shift of market place, concerns over external perception of the brand etc) nature. When two companies merge or when the offers of a company have changed and been developed considerably can be seen as positive reasons for rebranding. Negative situations that cause rebranding are when the brand is outdated or is negatively apprehended by stakeholders or/and customers. Rebranding is needed in such a situation to erase the earlier made connections with the brand and instead implement a new message to the recipients. (Goi, 2011). Kaikati and Kaikati (2003) stress that rebranding should not be used for just covering up the problems, instead the new brand should be developed carefully to improve the real problems. Hence, rebranding is recognized as an important brand management tool and can be a strategic option to implement for corporations.

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10 2.3.3 Rebranding Strategies

Fig.2 The brand architecture management, vertical integration (Muzellec & Lambkin, 2009) – Revised version case ICA

There are different ways of implementing a rebranding process in a company and in this study the focus lies on rebranding strategies that aim to reach a branded house approach. Muzellec and Lambkin (2009) discuss a so called vertical image transfer for that purpose. They suggest that there are three ways the vertical image transfer can be accomplished through the brand hierarchy. One suggestion is when the business units, or in this case product brands, align accordingly to the corporation’s brand, it is called ‘descending brand extension’. This is done to strengthen the corporation’s brand equity. Nevertheless, such a transfer can also destroy already strong and established product brands. (Muzellec & Lambkin, 2009)

The second example can be applicable when the product brand is popular and can be used to rebrand the company’s name and thereby create a positive association to the company. It will also improve the visibility of the corporation. This way of transferring image has been named as ‘ascending brand extension. The third example given is a full corporate rebranding, when both the corporation and the product brands are replaced with a totally new brand. All three brand extension suggestions just mentioned can give the master brand opportunities but it can also imply risks in form of dilution or negative associations between products and ‘parent brand’. (Muzellec & Lambkin, 2009)

Experiments have been conducted and indicate that customers’ attitudes change towards the brand after a rebranding process. Because of this impact on customers it is important to regard that decisions on any hierarchical level will have a direct or an indirect effect on the brand’s equity. That is so because these effects have a greater resonance because of the same brand

Branded House

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11 name. Muzellec and Lambkin (2009) supports this statement by giving Danone as an example as the company previously shut down two factories and as an effect all products by Danone Group was boycotted.

The company that implements a rebranding process has to decide how they will incorporate the process. Kaikati and Kaikati (2003) propose six possible combinations:

1. Phase-in/phase-out strategy – the old brand is just phased out after having been tied to the new brand for a so called introductory phase

2. Combined branding strategy via one umbrella brand – two existing brands are combined, as umbrella branding

3. Translucent warning strategy – intensive promotion are used to make customers aware of the upcoming rebranding

4. Sudden eradication strategy – is a quick brand change, preferably used when a brand is out-dated and the company does not want to be associated with it

5. Counter-takeover strategy – us implemented often after an acquisition, the brand that is kept is usually the stronger one

6. Retrobranding strategy – is done by companies that realize afterwards that the rebranding was a mistake

2.4 PLB - The Concept

In this study the focus lies on the rebranding of a private label brand (PLB) therefore the following theories will describe this product concept.

Retailers within the grocery sector supply customers with many different alternatives. The range is wide and everything can be chosen from, low-cost products, standard to premium products both from national brands (branded products) as well as PLBs that are launched by the retailer. The launching of PLBs have increased as it is seen among companies as an“…//important source of profits for retailers and a formidable source of competition for national brand manufactures “ (Hoch & Banerji, 1993). This since private labels increase the retailers potential to gain chain profitability, increased control over shelf space, increased store loyalty, and increased level of barging power against and over manufactures (Sinha &

Batra, 2000).

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12 2.4.1 Why - PLB

In recent decades companies have started targeting different customer segments with their PLBs. There are different stages that tend to develop different characteristics for the PLBs and they can be: basic low quality/low price; average quality/smaller price advantage; high quality/high price (Ezrachi & Bernitz, 2009 p. 4). Offering these different forms of the PLB, retailers target different segments and increase the number of formats to reach a broader customer base. Further previous research in the field of PLB and consumer behavior has shown that it has been hard to identify the specific characteristics and socioeconomic factors for potential PLB customers (Ailawadi & Keller, 2004).

2.4.2 PLB - Critical Factors

According to Lange et al. (2005) there is some critical factors that need to be considered when understanding and identifying PLB customers. Those are price, familiarity, perceived risk, quality and value.

Price can be viewed as one of the most essential factors since studies show that customers tend to connect the level of quality to the actual price of the product. Further the price level is also connected to the level of risk as high price carries a higher level of risk (Lange et al.

2005). The price aspect is something that further was looked upon from a PLB perspective by Sinha and Batra (1999) where they identified two factors that affect the price aspect – perceived price level (customer perceive the price too high- increased price consciousness) and perceived level of risk (higher perceived risk – increased price consciousness)

Familiarity is a factor that has positive influence on how the customer perceives the products quality, consumption level, and attitude towards the product. The level of familiarity can according to Lange et al. (2005) be adjusted by exposure of the product to the customers and thereby increase the level of familiarity. Moreover, factors such as perceived risk, quality and value are critical and need to be considered according to Lange et al. (2005). For example Lange et al. (2005) stress that PLBs’ perceived risk is strongly connected to high functional risk (do products work correctly), high social risk (other consumers perception of chosen purchase), but low financial risk (the cost of the actual product). Further Lange et al. (2005) points out that research done within marketing shows how customers’ perception of quality is not based on the actual quality, but rather on how they perceive it. This value is something that according to Ailawadi, Neslin and Gedenk (2001) is connected to how the customers perceived the value of the product compared to the price paid.

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13 2.5 Summary of Theoretical Framework

The authors of this study developed an own model to enable the reader to understand the connection between the theories and how the different definitions are connected. The main concerns regard brand, brand equity, rebranding and PLB.

Fig 3. Own created model with the an integrated rebranding process of a PLB, the role of brand equity and the possible outcomes of such a process

A rebranding process with vertical integration aiming to reach a branded house approach is composed by several steps. Firstly the reasons behind a rebranding have to be examined in order to understand the chosen rebranding strategy (Step 1). Secondly the outcomes of the rebranding process should be identified and analyzed to see whether the expected results were reached (Step 3 and Step 4).

Rebranding focuses on improvement of a brand’s image and thus the brand equity becomes an important factor when it creates competitive advantage for the company. The value that the brand creates for the customers is the perceived brand equity. The brand equity is composed by the four brand assets – brand awareness, brand association, perceived quality and brand loyalty. To measure the perception of these it is essential to ask the customers themselves how they perceive a brand. To see the outcome of a rebranding on product level customers’

perception should be measured before (Step 2) and after the rebranding of the brand (Step 3).

Afterwards also the effects on the company can be examined to see if the expectations of the rebranding were fulfilled. (Step 4)

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14 In this research the focus lies on rebranding low priced PLBs. It was stated that factors that influence PLB customers are price and familiarity which also positively influences the perception of the other factors: product quality, consumption level and attitudes towards a brand. These factors will be applied to the four brand assets.

3. Methodology

”Not everything that can be counted counts and not everything that counts can be counted”

(Albert Einstein) 3.1 Choice of Study

The choice of study and the aim of the research were generated from personal observations in some ICA stores. After being abroad during the fall of 2011 and back in Sweden in 2012 we noted that the Euroshopper products were gone and products under the brand ICA Basic had been introduced. This replacement made us curious to look deeper into how and why such a change can be done and how consumers have perceived it. The ICA brand is well-known and has a strong position in the minds of the consumers in Sweden. (DI, 2012) The first thought was that this replacement was enabled by the strong position ICA has established in Sweden.

3.2 Choice of Method

A quantitative approach was seen as most adequate for this study in order to be able to answer the research question. With a survey many respondents can be reached and each of them gets to answer the same questions, hence it is an efficient way to collect a large amount of data.

There are different ways of carrying out a survey and in this study the so called self- administered structured interview approach was chosen. It can be compared with semi- structured or unstructured interviews, but it differs by having scheduled questions. (Saunders et al., 2009, p. 361-365) Swedner (1978, p.248) imply that meeting the respondents face-to- face the reliability of the data can be improved because one can see the identity of the respondent. The author also stresses the ability to detect if a respondent seems unsecure or misunderstands a question. Hence, risks for misinterpretations could be minimized. However, for this research the most important reason to use this method was to make sure that the respondents would answer the questions in a specific order, and that could only be guaranteed by a face-to-face survey.

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15 The approach of the study is deductive since the research questions were based on an already existing theoretical framework. (Saunders et al., 2009, p. 590). The results generated from the research will be used as a statistical base, so called descriptive statistics, to be able to understand the studied phenomenon. (Hellevik, 1984, p. 154)

3.3 The Sample

The population of this study included everyone above 18 years living in Sweden and recognizing ICA. Thus, the population size was approximately 7 700 000 people (SCB, 2012) We wanted to have a representative sample size and collected 384 responses since we found suggestions by Suanders et al. (2009, p. 219) that this gives a result with five percent margin of error for a 1 000 000 as well as a 10 000 000 population. Additionally 65 people rejected to participate. The choice fell upon conducting a so called convenience sampling. In such a method the respondents were chosen based on the easiness of approaching them to participate in the survey (Saunders et al., 2009, p. 241). The theories used in this research do not highlight the impacts geographical places can have on the perception of a brand. Thus the outcome of the survey should not depend on where it was conducted. Regarding time and other resource limitations we chose to conduct the survey at Stockholm’s central station. The main reason to conduct it there was an assumption that less people would reject to participate in the survey while having to wait for arrivals and departures of trains and buses.

3.4 Data Collection and Analysis

3.4.1 Pre-study

In order to improve the survey we conducted a semi-structured interview with the manager of ICA’s PLB. Saunders et al. (2009, p.323) supports the idea that a pre-study of this kind helps to identify possible questions that should be included in a questionnaire. The purpose of the interview was to bring answers and confirmation to some questions, statements we have found and assumptions we have created in the initial phase of this research. The interview was a key source to confirm that ICA had carried out a rebranding process as the information found on the topic was not enough to confirm this. Further, the intention was to get a deeper understanding of reasons and expectations behind the choice of rebranding Euroshopper to ICA Basic and to understand which segments they had targeted. A face-to-face semi- structured interview was applied in this case to receive answers which covered the questions we had, but also to include some flexibility to the interview as Saunders et al. (2009 p.320)

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16 indicate it. The interview was recorded and transcribed and that made it possible to listen to it as many times as needed.

3.4.2 Preparation Before the Survey

The questionnaire was based on operationalization of the theory, background information from the pre-study, information from a survey and information gathered from ICA’s homepage (about how the company wants to be perceived by its customers) (ICA B, 2012).

First a pilot study with 10 respondents was conducted. This was done in order to avoid possible misunderstandings of the questions during the actual survey. After the pilot study the layout and structure of the questionnaire was improved and questions that were misunderstood were reformulated.

3.4.3 Operationalization

The study had two focuses, one of which was the brand equity and the rebranding of ICA’s low price PLB and the other was the customer behavior in relation to these two products. The final questionnaire included 5 sections (Appendix 2). Below, the operationalization of the applied questions and variables in the data analysis will be explained.

The aim of section 1 was to generate background information concerning socioeconomic factors to see how these can influence consumer behavior. In the final analysis two variables, gender and household income, were included.

Ailiwada et al. (2001) suggested that gender could influence consumer behavior in terms of search costs and exploration of products on the market. This implication created an interest to see whether the gender of the respondents influenced their consumer behavior and perception concerning the two low price PLBs. This was done by investigating the results of the awareness of Euroshopper and ICA Basic and the tendency to purchase the two brands. To measure the respondents’ perception of the two low price PLBs the results of how they perceived the pricing and the quality level of the two brands were compared between the two genders.

Price is an important factor for the identification of PLB customers (Lange et al. 2005) as well as a core factor of low price PLBs. Therefore, we chose to investigate how different household income levels influence purchase habits and the perception of Euroshopper and

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17 ICA Basic. This was done through a question where the respondents answered what their monthly household income was. The respondents could choose between eight income groups which later were split into two groups based on a clear cut in the distribution of respondents over the income ranges. Households earning SEK 50 000 or less were defined as low income households, whereas households earning SEK 51 000 or more were defined as high income households. To investigate the consumer behavior regarding Euroshopper and ICA Basic for these two household income groups the data gathered from the variables concerning the awareness of the brands and purchase habits were compared. To see if the perception of Euroshopper and ICA Basic differed between the two income groups, their responses on how they perceived the pricing and the quality level were tested.

Fig.4 The distribution over the monthly household incomes given in SEK.

Section 2 was created in order to make it possible to either confirm or contradict the statement that ICA has high brand equity (DI, 2012; Kaikati & Kaikati, 2003). Therefore, the section included questions that could be linked to the four brand assets to determine the level of brand equity. The questions were based on how Aaker (2002) described the concepts that have been used in this theoretical framework. Some of the questions were based on factors found on ICA’s homepage (ICA B, 2012) about how they wanted to be perceived by customers. These factors concerned pricing, assortment, product quality and services and have been applied to measure brand association and perceived quality. Questions that regarded brand loyalty were about the respondents’ frequency of going to ICA stores, their overall fulfillment of expectations of ICA and their willingness to recommend the store. The brand awareness of ICA itself was not measured since all participating respondents had knowledge of the brand.

Bars show counts

20 000 o r l ess 21 000 -3 000 0

31 000 -4 000 0 41 000 -5 000 0

51 000 -6 000 0 61 000 -7 000 0

71 000 -8 000 0 80 000 o r more

House hold income

0 20 40 60

Count

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18 The same questions were asked about Euroshopper and ICA Basic in section 3 and 4, respectively. The questions were made so they could be linked to the four brand assets to be able to determine the level of brand equity (Aaker, 2002). The questions included in these two sections were also constructed upon how the different concepts of brand equity have been described in the theoretical framework and made to fit this study’s context. Brand awareness was determined by asking whether the respondents knew the two brands. Brand loyalty was indicated by the tendency of repeat purchase habits and the willingness of recommending the respective brand. The respondents were also asked what they associated with the two brands.

For measuring perceived quality the respondents had to answer questions concerning their perception of the two brands’ price and quality level. These two factors were chosen since von Heijne (2012) explained that they form the core of low price PLBs, and also because Ezrachi and Bernitz (2009, p.4) stated that price and quality characterize these products. Since the same questions were asked about the two brands the answers were comparable and gave the possibility to measure Euroshopper’s and ICA Basic’s brand equity separately. The purpose of measuring the brand equity for respective brand was to see if the level of brand equity had increased after the rebranding. The results would make it possible to determine whether ICA’s high brand equity (Kaikati & Kaikati, 2003; DI, 2012) had a positive impact on the perception of ICA Basic’s brand equity. Our intention was also to see if Keller et al.’s (2008) statement that brand equity is a strategic asset could be seen in this case. Since ICA became a master brand of ICA Basic through vertical integration (Muzellec and Lambkin, 2009) the perception of the rebranded product should improve (Goi, 2011). In an attempt to examine how the perception of ICA as a master brand directly impacted the perception of ICA Basic, the results from section 1 (ICA) concerning price, quality level and willingness to recommend the brand were correlated with the same variables from section 3 (Euroshopper) and section 4 (ICA Basic).

Section 5 focused on the rebranding process of Euroshopper. The purpose of this section was to get an insight in how aware the respondents were of the rebranding process and also how they perceived it. This was done in order to analyze the possible outcomes of this rebranding since the outcomes of rebranding can either favor or damage the master brand (Aaker &

Joachimstahler, 2000, p.117; Muzellec & Lambkin, 2009).

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19 3.4.4 Analyzing the Data

The questions had predetermined answer possibilities including either yes or no answers or semantic differential rating scales and some of them were open. The semantic differential scales ranged from 1-5 where 1 indicated the lowest score and opposite to it 5 indicated the highest score. (Trost, 2001, p.139) The answers were looked upon as following: 1 and 2 represented a weaker scoring, 4 and 5 represented a stronger scoring, while 3 was looked upon as a neutral response. For these questions the respondents were also given the possibility to answer “I do not know” represented by a 0. This alternative was given in order to reach fair results that showed the actual influence of brand equity. Forcing the respondents to choose something they do not agree with can bias the results. To better understand the respondents’

thoughts and perception of the rebranding process we included open questions. These results provided a qualitative element to the survey. The questionnaire also included some filter questions that for some respondents implied that they can skip the next question or next section depending on their answer. (Saunders et al., 2009, p. 387)

For compiling the data non-parametric statistics have been used. This technique is used preferably when random sampling has been made and the distribution is not likely to be normal. This technique does not require assumptions about underlying population distribution (Pallant, 2010, p. 213-214). For the questions where the measurement of correlation was the main interest, the Spearman’s Rank Order Correlation was ideal for analyzing data of nominal and ordinal scales (Pallant, 2010, p. 131). When comparing the difference in gender and household income the Mann-Whitney U Test was applied (Pallant, 2010, p. 227). The statistical program SPSS was used to analyze the collected data.

3.5 Method Discussion

3.5.1 Limitations With Quantitative Approach – Interviewers’ Influence

There is only one chance to meet the same respondents for a survey, therefore Saunders et al.

(2009, p. 361-364) implicate that the final questionnaire has to be able to generate the data needed to answer the research question(s). Hellevik (1984, p. 96) discuss that since questionnaires throughout a survey look the same, the survey can be conducted systematically and thus the interviewer have less influence on the respondents. In this case we were two interviewers therefore the way the questions were stressed could differ and impact the respondents. Saunders et al. (2009, p. 365) calls the attention to the fact that respondents are more likely to answer in a way which according to them will please the interviewer in a face-

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20 to-face approach. Before conducting the survey we discussed how questions should be asked and what possible answers could be to the respondents’ questions in order to minimize our influence on the respondents.

3.5.2 Limitations With Quantitative Approach – The Sample

Time has been the most limited resource when deciding how and where to conduct our survey. Saunders et al. (2009, p. 241) discuss that a convenience sampling is biased why generalization of the results should be avoided. We are aware of the fact that this approach creates bias in our sample, and thus it does not lie in our intention to generalize the results.

3.5.3 Other Limitations With the Study

The survey was conducted in Swedish so the questionnaire attached in Appendix 2 has been directly translated into English. Therefore, there might be a slight difference in how some questions and words can be understood.

On the semantic differential rating scale the option “0/I do not know” was treated as missing data. The reason to exclude these responses from the results was because they can distort and confuse the real responses since these respondents do not have a clear standpoint and thus it hard to make a correct analysis of them. The summary statistics could also be deflated or inflated if missing values would have been included. However, doing so the sample can become biased and the power of the analysis can be undermined. (deVaus, 2002, p. 64-66) Thus, for each question the results show the valid percentage without missing values. The missing values will not be presented in the results, however, the reader can view more details about these and other data in the Appendix 3.

3.5.4 Reliability

The reliability of a survey indicates to which extension the results would be identical if the same survey would have been conducted again. (Hellevik, 1984, p. 137) Factors that impact the results are many, but in this study the chosen respondents and how they understand the questions influence the final results most. Trost (2001, p. 59-60) and Hellevik (1984, p.137) discuss factors that impact on reliability as: the interviewer marks an answer incorrect, the way the interviewers ask the questions or the sentimental mood of the respondents. The two last factors would change anyway if a new set of respondents would participate in the survey.

Nevertheless, the reliability is often higher for standardized surveys according to Trost (2001, p.60), as in this case. Preparations made together before the conduction of the survey increase the reliability.

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21 3.5.5 Validity

Validity is defined by the researchers’ ability to transfer the theoretical definition into questions on an empirical level. (Hellevik, 1984, p.138) In this study validity lies in the thought-through usage of theory applied and put into real case context. The face-to-face survey gave possibility to explain a question when a respondent was unsecure about something and decrease misunderstandings. It is indicated both by Trost (2001, p.61) and by Hellevik (1984, p. 139) that increasing reliability in this way can also help and is needed to improve the level of the validity. As earlier discussed, the influence of the interviewers on the respondents is something that on the other hand can decrease the validity of the results.

4. Results

4.1 Pre-study - ICA

According to von Heijne (2012) the ICA group launched Euroshopper during the late 90s as a low price alternative, through collaboration with European grocery retailers and distributors.

In the beginning ICA introduced this product range just to have an alternative to its regular assortment of branded products. They did not intend to compete with it since ICA had a “mid- positioned” profile. During the last years the sales of Euroshopper declined simultaneously with an increased demand for low price products. This tendency increased the competition on the market. ICA wanted to be a retailer for everyone and therefore they decided to invest in their low price PLB range.

The main reason behind the decrease according to von Heijne (2012) was that customers associated the Euroshopper brand with something alienated and this lead to uncertainty about the products. ICA thus chose to rebrand Euroshopper into ICA Basic placing the product range under its master brand. Through this ICA gained increased control over its new low price PLB. The difference between the two brands was not substantial, but the packaging was changed, some products were withdrawn and some new were introduced. (von Heijne, 2012) ICA Basic was launched during the second half of 2011 and the retailer has been able to see a clear increase in sales since then. To measure the increase ICA investigated consumer habits.

When doing this, they grouped customers into different groups like “health conscious”,

“family”, “low budget” instead of looking at the socioeconomic background. von Heijne (2012) stated that the increase has most likely occurred because the customers can relate to

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22 the ICA brand. He explained that the choice to launch ICA Basic under the master brand was seen as an opportunity to increase ICA’s PLB range and thereby create a more unified product portfolio.

4.2 Customer Survey

As mentioned in the method section, for, more details of the data collected including the missing values not presented in the results, can be found in Appendix 3.

The results of our survey show that the brand awareness of ICA was 100,00 percent among the respondents. 88, 30 percent of the respondents knew Euroshopper and 60, 40 percent knew ICA Basic. Out of the respondents who knew Euroshopper 77,6 percent have purchased from the brand and out of those 79,7 percent have purchased Euroshopper repeatedly. Out of the respondents who knew ICA Basic 76,0 percent have purchased from the brand and out of those 83,9 percent have purchased ICA Basic repeatedly.

4.2.1 The ICA Brand

The questions regarding brand awareness, brand association and brand quality look at whether ICA has weaker or stronger brand equity. All the 384 respondents that participated in the survey knew ICA. The perception of the different assets (scale 1-5) is as following:

ICA’s fulfillment of: Mean

Quality 4,09

Service 3,92

Product range 4,16

Accessibility 4,23

Pricing 3,43

Overall expectations 4,01

Table 1. Mean scores on the perceived fulfillment of different factors ICA supply

To indicate loyalty two questions were asked: To the question “How willing are you to recommend ICA?” the respondents answers gave a mean of 3,93 and for the question “How often out of 10 times do you shop at ICA?” the result had a mean of 5,93 and a median of 6,0.

4.2.2 The Influence of the ICA

When examining how the respondents relate the ICA brand to Euroshopper and to ICA Basic the following results were found. The perception of pricing of the Euroshopper brand

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23 correlated negatively with how the respondents perceived ICA’s pricing in general. The perception of pricing of ICA Basic had a positive correlation to ICA’s pricing in general.

Neither of the results was significant. The perception of the quality of ICA Basic showed a significant positive correlation (r=0,234; n=176; p<.05) to how ICA can fulfill the respondents’ expectations of quality. There was no significant correlation between the perception of Euroshopper’s quality and ICA’s ability to fulfill the expected quality.

A significant positive correlation (r=0,039; n=182; p<.05) was found between the willingness to recommend ICA and the willingness to recommend ICA Basic. The willingness to recommend Euroshopper was not significantly correlated to the willingness to recommend ICA. The correlations indicated that the better ICA as a whole was perceived by the respondents the weaker they scored the perception of the rebranding process. This result was not significant.

4.2.3 Euroshopper and ICA Basic

To look how the perception changed after the rebranding among the respondents, the two factors, price and quality, for low price PLB were examined.

Figure. 5 Scores distributed over the perception of pricing of Euroshopper and ICA Basic

These results show a tendency that the respondents perceived the pricing of Euroshopper and ICA Basic quite similarly. 1 and 2 indicate a lower scoring for the perception of pricing. In the case of Euroshopper 4,0 percent chose these two scores while 3,9 percent chose these scores for ICA Basic. 78, 1 percent of the respondents scored a 4 or a 5 for Euroshopper’s pricing and 72, 9 percent scored 4 or 5 for ICA Basic. 17, 9 percent gave a neutral answer Euroshopper and 23, 2 percent gave neutral answers for ICA Basic in this question.

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24

Figure 6. Scores distributed over the perception of quality level of Euroshopper and ICA Basic

There was a bigger difference between the two brands, for the questions regarding the perception of quality of Euroshopper and ICA Basic. 17,6 percent of the respondents perceived Euroshopper´s quality level as a 1 and 39,0 percent perceived it as 2. 12,5 percent perceived it as a 4 and 1,4 percent perceived is as a 5. 29,5 percent had a neutral perception of Euroshopper’s quality. Regarding ICA Basic the respondents answered as following; the quality was perceived as a 1 by 3,4 percent; 8,5 percent perceived the quality as a 2, while 50,3 percent perceived is as a 4 and 4,5 percent perceived it as a 5. In this question 33,3 percent had a neutral perception of ICA Basic’s quality.

Figure. 7 The scores distributed over the willingness to recommend Euroshopper and ICA Basic

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25 When asked how willing the respondents would be to recommend Euroshopper and ICA Basic approximately 30 percent of the respondents gave a neutral answer for both brands. For Euroshopper 31,1 percent of the respondents scored 1; 23,0 percent scored 2; 42, 5 percent scored 4 and 3,4 percent answered 5. Among the respondents answering the question regarding the willingness to recommend ICA Basic 7, 5 percent chose 1 on the scale, 9, 1 percent chose 2; 42, 5 percent chose a 4 and 11, 8 percent answered a 5.

The respondents who purchased Euroshopper repeatedly showed a positively correlated willingness to recommend the same brand (r=0,446; n=240; p< .05). The respondents who purchased ICA Basic repeatedly also showed a positively correlated willingness to recommend the same brand (r=0,352; n=163; p< .05).

4.2.4 Associations

The respondents were asked to clarify which values they associate with the Euroshopper respectively the ICA Basic brand. Many of the respondents explained that Euroshopper was a budget brand in their opinion; they perceived it as cheap and with low quality. They also explained that the pricing in itself was good but accordingly they said that “you get what you pay for”. Some respondents on the other hand expressed that they liked to have the possibility to purchase basic products for a lower price. ICA Basic was described by many respondents as a low price product which supply the basic products needed in the household. The respondents said that they perceived the ICA Basic brand as low price but with a reasonable quality level. The respondents who knew about the rebranding and common answer was that they perceived the products from ICA Basic to be the same products as those from Euroshopper.

4.2.5 Rebranding

Out of 384 respondents 21, 1 percent were aware that ICA basic had replaced Euroshopper and 78, 9 percent did not know about it. The follow up question was if the ones aware of the change knew that it was a rebranding process. 30, 9 percent answered “Yes” and 69,1 percent answered “No”.

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26

Figure. 8 The scores distributed over how the perception of the rebranding process of Euroshopper

All the 384 respondents were asked how they perceived the rebranding process on a scale 1-5.

76, 6 percent out of 384 respondents gave a mean of 2, 52 and a median of 2, 00, while the rest of the respondents had no perception about this question. The spread of the scoring in percentage was as following: score 1 chosen by 22,1 percent, score chosen by 32,7 percent, score 3 chosen by 23,5 percent, score 4 chosen by 15,0 percent and score 5 chosen by 6,8 percent of the respondents.

The respondents that liked the rebranding procedure said that it was a good choice to remove the Euroshopper brand because it felt better to purchase the products now. The respondents with negative perceptions explained that they felt deceived by ICA and that it should have been clearer that this rebranding had happened. Some respondents said that there was no point with changing the name and package if the products were of the same low quality. The respondents that chose to score the rebranding process as a 3 said that it was hard to decide what to think of it since the information was too new.

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27 4.2.6 Socioeconomic Factor - Household Income

As explained in the method section the household income has been divided into two groups;

below 50 000 SEK and above 51 000 SEK.

Percent (%) Do you know Euroshopper?

Have you bought

Euroshopper?

Have you bought

Euroshopper repeatedly?

< 50 000 SEK 63,0 63,3 66,8

> 51 000 SEK 37,0 36,7 33,2

Do you know ICA Basic?

Have you bought ICA Basic?

Have you bought ICA Basic repeatedly?

< 50 000 SEK 63,0 63,3 64,3

> 51 000 SEK 37,0 36,7 35.7

Table 2. Brand awareness and purchase frequency divided according to household income

A higher percentage of the respondents from the low household income group recognized both Euroshopper (63,0 percent versus 37,0 percent) and ICA Basic (60,3 percent versus 37,0 percent) in comparison with the higher household income group. More respondents from the lower income group than from the higher income group have purchased both brands at repeated occasions. Respondents belonging to the high income group show a tendency to purchase ICA Basic more often than Euroshopper. On the contrary respondents belonging to the low income group purchased ICA Basic less often than Euroshopper.

It was examined whether the two income groups perceive the pricing and quality level of Euroshopper and ICA Basic differently. For the pricing of Euroshopper the results were as following: both the lower household income group (Md= 4,0; n=175) and the higher household income group (Md=4,0; n=98) gave high scores. For the same question the mean scoring for the low income group was 4,13 and for the high income group 3,83. The result was not significant (z=-2,673; p>,05). The results indicate no difference between how the lower income group (Md= 2,0; n=190) and the higher income group (Md=2,0; n=105) perceived the quality level of Euroshopper. For the same question the mean scoring for the low income group was 2,49 and for the high income group 2,26. The result was not significant (z= -1,851; p>,05).

The mean scoring of the price was identical between the lower household income group (Md=

4,0; n=115) and the higher household income group (Md=4,0; n=62) in the case of ICA Basic.

You get what you pay for

You get what you pay for

Improved brand equity through rebranding

Kata Bordas and Linda Fägersten

Abstract

Acknowledgment

Table of Contents

1. Introduction

2. Theoretical Framework

3. Methodology

4. Results