. Economic Review – Journal of Economics and Business, Vol.

X, Issue 2, November 2012 ///

DIRECT AND INDIRECT EFFECT OF BRAND CREDIBILITY, BRAND COMMITMENT

AND LOYALTY INTENTIONS ON BRAND EQUITY

Veeva Mathew *, Sam Thomas **, Joseph I Injodey ***

ABSTRACT Lehmann 2006) and also motivate repeated

buying (Aaker 1996 & Keller 2001). Brand
Brand equity has been and will be an area of equity is defined as the ‘added value’ which a
interest for marketing managers. All marketing given brand endows the product (Farquhar
efforts are directed toward the development of 1989; Jones 1986; Leuthesser 1988).
brand equity. Therefore efforts are taken
among the researchers, to understand the This study tried to understand how the efforts
concept of brand equity as deep as possible. taken by the marketers get converted to brand
This paper attempts to understand the equity. The researchers tried to explain the
interrelationships among key formative hierarchy of factors in the formation of brand
indicators of brand equity, using belief- equity. For this we have looked at the role of
attitude-intention hierarchy of effects. The brand credibility, brand commitment, and
formative indicators include brand credibility, loyalty intentions. Even though the role of
brand commitment, and loyalty intentions. commitment is highly researched in the
Using Sequential Chi-square Difference Test in context of behaviour (e.g.: Cunningham 1967;
Structural Equations Modelling, the Johnson, Herrmann, & Huber 2006; Kim,
researchers identified the mediating role of Morris, & Swait 2008; Verhoef 2003), its role
brand commitment and loyalty intentions, in in the formation of brand equity is rarely
the formation of brand equity. looked into. Thus, the researchers would like
to pose the following research questions:
Keywords: brand credibility, brand What would be the direct and indirect effect of
commitment, loyalty intentions, brand equity, credibility on brand equity? What could be the
structural equations modelling (SEM), specific role played by commitment in the said
sequential chi-square difference tests (SCDT) direct and indirect effect?
JEL Classification: M31 Using attitude theory (Ajzen 1991) and
1. INTRODUCTION arguments of Atilgan, Aksoy and Akinci
(2005) and Yoo and Donthu (2001)
The most important asset of a company is the researchers have proposed a model. The
brand they own. A strong brand is a proposed model was tested among a sample
competitive advantage, a barrier for entry in of students on the purchase of the product,
some markets, easier acceptance among deodorant. The results will have direct
distributors and consumers etc. for the implications on the strategies adopted by the
organisation it owns (Farquhar 1989). For marketers.
customers, a brand can simplify the choice
process, promise quality, reduce risk (Keller &
* Department of Business Administration, Rajagiri College of Social Sciences, Kochi, India,
[email protected]
** School of Management Studies, Cochin University of Science and Technology, Kochi, India,
[email protected]
*** Principal, Rajagiri College of Social Sciences, Kochi, India, [email protected]

73 ///
/// . Mathew V., Thomas S., Injodey I.J. .

The article is arranged as follows: first we imagery, judgments, feelings, and resonance.
present the review of literature leading to the Keller also emphasized the order in which
development of a conceptual model. This is these building blocks need to be placed.
followed by the discussion on the
methodology adopted. Finally the results Brand equity has alternate definitions and
obtained are presented followed by these alternate definitions vary much (Ha,
discussion. Janda, & Muthaly 2010; Rangaswamy, Bruke,
& Oliva 1993). Majority of these definitions
2. LITERATURE REVIEW take some combination of awareness,
preference, loyalty etc. Kartono and Rao
2.1. Brand equity (2005) pointed out that there may not be a
Basically, there are two broad approaches in common method of creating an exhaustive list
defining brand equity, the first approach from of formative indicators for brand equity for all
firm perspective and other from customer. brands, while Aaker (1996); Erdem and Swait
The first approach is based on the brand (1998) pointed the need of a customized
equity outcomes such as price and market approach depending on the product. If so, how
share while the second approach has the brand equity is developed out of the
attitudinal associations (Chaudhuri 1999). formative indicators selected?
Accordingly, there are different definitions for 2.2. Loyalty intentions
brand equity (Aaker 1991, 1996; Keller 1993).
Aaker (1991) defined brand equity as “A set of Jacoby and Chestnut (1978) had considered
brand assets and liabilities linked to a brand, different researches in this area of brand
its name and symbol that add to or subtract loyalty and identified that until then, fifty-five
from the value provided by a product or a different operational definitions existed for
service to a firm and/or to that firm’s brand loyalty. They divided these definitions
customers”. Aaker (1996) also proposed a set of brand loyalty into three main categories:
of ten measures, grouped into five categories, Operational definitions falling under
namely measures in loyalty, perceived quality, behavioural approach, attitudinal approach
associations and awareness, all taken directly and the composite of both behavioural and
from customers; and a set of market attitudinal approach. Under behavioural
behaviour (market share and price and approach, brand loyalty indices are based on
distribution indices) measures which are the actual purchasing behaviour of consumer
derived from market place. While Keller or self-reporting of these actual behaviour,
(1993) defined Consumer based brand equity while under attitudinal approach are those
(CBBE) as “the differential effect that the based on the preference statements of likely
brand knowledge has on customer responses behaviour, and the composite ones are those
to the marketing of that brand. A brand is said which have some combination of behavioural
to have positive customer based brand equity and attitudinal aspects. The attitudinal indices
when customers react more favourably to a of brand loyalty are based on the statements
product and the way it is marketed when the of preference or intentions to behave and not
brand is identified, as compared to when it is actual purchase behaviour (e.g. Guest 1955;
not.” CBBE model proposed four steps to be Jacoby & Olson 1970; Johnson et.al. 2006;
taken for building a strong brand, namely Monroe & Guiltinan 1975; Reynolds et.al.
brand identity, brand meaning, brand 1974). Research conducted by Chaudhuri
responses and brand relationships. He also (1999) has found that brand loyalty has a
proposed that brand building depends on six positive effect on brand equity and also acted
building blocks - salience, performance, as a mediator between brand attitude and

/// 74 Economic Review – Journal of Economics and Business, Vol. X, Issue 2, Novembre 2012
 . Direct and indirect effect of brand credibility, brand commitment and … ///

brand equity outcome measurements. 2.4. Brand credibility

Findings by Atilgan et.al. (2005); Joseph and
Sivakumaran (2009) and Yoo and Donthu Erdem and Swait (1998) define brand
(2001) supported the view that loyalty has a credibility as the believability of product
direct positive effect on brand equity. Thus we position information contained in a brand,
propose the following hypothesis: which entails consistently delivering what is
promised. It has two dimensions,
H1: Loyalty intentions have a direct positive trustworthiness and expertise.
effect on brand equity. Trustworthiness means that it is believable
that a brand will deliver what it has promised,
2.3. Brand commitment and expertise implies that the brand is
In psychology, the concept of commitment is believed capable of delivering the promises. A
regarded as having intentional aspects, as firm might use its marketing mix strategies for
evidenced by Kiesler, (1971) and his its brand, like high price, packaging, expensive
definition of commitment: “the pledging or endorsers as signal for quality, enhancing the
binding of an individual to behavioural acts”. brand’s credibility (Kihlstrom & Riordan
Commitment level is a psychological state that 1984; Spence 1974), to communicate to its
globally represents the experience of customers. These effects in turn increase
dependence on a relationship, a long-term consumer expected utility and are considered
orientation towards it, feelings of attachment as the added value a brand gives a product
to a partner and a desire to maintain the (Erdem & Swait 1998). A customer who
relationship. Cunningham (1967) was one of a perceives higher credibility with the offering
few early researchers viewing brand stands to consider the efforts taken by firm for
commitment as an antecedent of loyalty an interaction with him/her more favourably,
intentions. A similar view of commitment was leading to commitment with the brand
also taken by: Bloemer and Kasper (1995); (Ganasan 1994).
Kim et.al. (2008); Knox and Walker (2001); H4: Brand credibility has a direct positive
Mathew, Thomas and Khader (2011) and effect on brand commitment.
Verhoef (2003). Building attitudinal
attachment is one of the major steps H5: Brand credibility has a direct positive
indentified in building consumer based brand effect on brand equity.
equity (Keller 2001) and commitment is one
of the parameters used by market research 3. CONCEPTUAL MODEL
firms for evaluating brand equity on a regular Conceptual model (Figure 3.1) posits that
basis (Winters 1991). Findings of Chaudhuri brand credibility builds brand equity directly
(1999) also support this view that customers as well as indirectly through brand
with commitment along with a sense of loyalty commitment. Brand commitment, in turn,
have enabled the brand to gain higher prices, directly contributes to the building of brand
positive word of mouth and lower advertising equity and also indirectly builds loyalty
cost in the long run. Based on these arguments intentions, while loyalty intentions contribute
we propose the following hypotheses: to brand equity. More specifically, the
H2: Brand commitment has a direct positive researchers want to test whether commitment
effect on loyalty intentions. and loyalty intention would mediate the
relationship between credibility and brand
H3: Brand commitment has a direct positive equity.
effect on brand equity.

Economic Review – Journal of Economics and Business, Vol. X, Issue 2, November 2012 75 ///
/// . Mathew V., Thomas S., Injodey I.J. .

Brand Brand
Credibility H5 Equity

H3 H1
H4

Brand Loyalty
H2 Intentions
Commitment

Figure 3.1. Proposed Conceptual Model

4. RESEARCH METHOD India. All the respondents who participated in

this survey had bought and were using a
4.1. Sample deodorant for themselves.
The sample for the study is limited to 275 During the survey they were asked about their
students doing their graduation or post favourite brand of deodorant, the one that
graduation in a major university in Kerala,

Table 4.1. Model Constructs, Survey Measures, Scale Source and Alpha Values
Scale
Alpha
Construct Survey measures adopted
value
from
1. My brand of deodorant delivers what it promises
2. My brand’s product claims are believable
credibility

3. You just can’t believe what the ads say about my brand of deodorant
Erdem
Brand

4. My experience with my brand of deodorant makes me wary of their claims

& Swait 0.837
5. My brand has a name you can trust
(1998)
6. My brand of deodorant is at the forefront of using technology to deliver a better product
7. My brand of deodorant reminds me of someone who is competent and knows what he/she is
doing.
commitment

Coulter,
1. I am really attached to the brand of deodorant that I use
Brand

Price
2. I stick with my usual brand of deodorant because I know they are best for me 0.902
& Feick
3. I am committed to my brand of deodorant
(2003)

1. I generally buy the same brands that I have always bought Lichtenstein,
intentions
Loyalty

2. Once I get used to a brand I hate to switch Netemeyer,

0.872
3. If I like a brand, I rarely switch from it just to try something different & Burton
4. I always tend to buy the same brand (1990)

1. Even if another brand has same features as my brand of deodorant, I would prefer to buy my
brand
2. If I have to choose among brands of deodorant, my brand is definitely my choice
3. If I have to buy a deodorant, I plan to buy my brand even though there are other brands as
good as my brand
Yoo &
equity
Brand

4. Even if another brand has the same price as my brand I would still buy my brand of
Donthu 0.945
deodorant.
(1997)
5. If there is another brand as good as my brand, I prefer to buy my brand of deodorant
6. If another brand is not different from my brand of deodorant in any way it seems smarter to
purchase my brand
7. It makes sense to buy my brand of deodorant instead of any other brands, even if they are
the same.

/// 76 Economic Review – Journal of Economics and Business, Vol. X, Issue 2, Novembre 2012
 . Direct and indirect effect of brand credibility, brand commitment and … ///

they have repeatedly purchased and the one reliability estimates were 0.834, 0.903, 0.944
they wanted to buy in the future. The and 0.879 respectively for credibility,
responses for the survey questions were commitment, equity and intentions and found
taken for the brand of deodorant selected to be showing high internal consistency. The
individually by each respondent. standardized factor loadings obtained from
the measurement model (CFA) shows that all
Approximately 34% of the respondents are indicators significantly loaded to the
female and the remaining ones are male and respective factors as expected. The
the sample represents a relatively standardized loading ranges from 0.514 to
homogenous age group of 19 to 26. 0.933 and all p values < 0.01. Also the Average
4.2. Survey measures Variance Extracted (AVE) values were 0.510,
0.756, 0.707 and 0.652 for brand credibility,
The measures used in the survey are given in brand commitment, brand equity and loyalty
Table 4.1. The respondents rated all measures intentions constructs respectively, showing
on Likert-type scales (Completely disagree - that there is an adequate convergent validity
completely agree). (AVE is expected to be more than 0.5). To
evaluate the discriminant validity, we checked
5. RESULTS whether AVE estimates were larger than the
corresponding squared interconstruct
The proposed model was tested in three
correlation estimates. This condition was
stages. First the reliability of the measurement
satisfied in every case. For nomological
tools was found. Second a Confirmatory
validity, the correlations between the
Factor Analysis (CFA) was performed to
constructs, were looked at and found to be
establish the overall fit of the measurement
positive and significant (p<0.01).
model, as well as for assessing the validity of
the tools used. The third test was to see The values of fit measures obtained from CFA
whether the data supported the proposed are; Goodness of Fit Index (GFI) = 0.910;
model and the hypotheses stated. Adjusted Goodness of Fit Index (AGFI) =0.881;
Normed Fit Index (NFI) = 0.937; Relative Fit
5.1. Reliability and validity
Index (RFI) = 0.926; Comparative Fit Index
The reliability of measures used is estimated (CFI) = 0.971; Root Mean Square Error of
using Cronbach’s alpha (Nunnally 1967). Approximation (RMSEA) = 0.054; Chi-Squared
Alpha value ranges from 0.872 to 0.945 except with 144 degrees of freedom, χ2 (144) =
for brand credibility where it is 0.730. Two 257.599, p<0.05 and Normed χ2 =1.789. The
items for the scale brand credibility were values show an acceptable overall fit and
found to have a very low value for item to show that the measurement model is
total correlation (0.041 and 0.084). Those two theoretically and statistically acceptable.
items were deleted and thus a substantial
5.2 Model estimation
improvement on Cronbach’s alpha to 0.837
was obtained for the scale brand credibility. The researchers have created three models
The Alpha values now ranged from 0.837 to for estimating the direct and indirect effect of
0.945 and found to be at an acceptable level credibility and commitment on brand equity:
(Davis 1964; Nunnally 1967). Construct an Unconstrained Model (Mu) including all the
reliability, convergent validity, discriminant stated hypotheses H1 to H6 and two Nested
validity and nomological validity were Models (Constrained Models). In the first
estimated using the methods suggested by nested model (Mt), the path coefficient for the
Fornell and Lacker (1981). The construct path, brand commitment brand equity is

Economic Review – Journal of Economics and Business, Vol. X, Issue 2, November 2012 77 ///
/// . Mathew V., Thomas S., Injodey I.J. .

constrained to be equal to zero, while the mediation of brand credibility and brand
second nested model (Mc) path coefficients for commitment on brand equity. The results of
commitment equity and credibility equity this analysis along with the fit measures are
are constrained to be equal to zero. Anderson given in Figure 5.3.
and Gerbing (1988) defined that “a model M2
is said to be nested in another model M1 if the The models were compared based on decision
set of freely estimated parameters in M2 is a tree frame work of Sequential Chi-square
subset of those in M1 and is denoted as M2 < Difference Test (SCDT) (Anderson & Gerbing
M1. Also a saturated structural model, Ms, is 1988), fit measures, Akaike Information
the one in which all parameters Criterion (AIC) and Bayes Information
(unidirectional paths) relating the constructs Criterion (BIC).
to one another are freely estimated and Null The Chi-square (χ2) –value with degrees of
structural model Mn is one in which all freedom (d.f) for the models were as follows:
parameters relating to one another are for Ms, χ2 = 257.599, d.f = 144; for Mu, χ2 =
constrained to be zero”. Accordingly, the five 258.839, d.f = 145; for Mt, χ2 = 259.388, d.f =
models can be expressed as Mn < Mc < Mt < Mu 146; for Mc, χ2 = 286.844, d.f = 147; and for Mn,
< Ms, based on the number of freely estimated χ2 = 4114.176, d.f = 171 with p < 0.05 for all.
parameters. Following the decision tree procedure for
A comparison of these nested models and the SCDT, first the difference in χ2 for Mt and Ms
unconstrained model brought out the (denoted as Mt – Ms) was investigated. The

Brand Brand Brand

Credibility Credibility Credibility

0.618* 0.620* 0.621*

Brand Brand Brand

Commitment Commitment Commitment

0.258* 0.280* 0.000

0.714* 0.718* 0.735*

0.059 0.000 0.000

Loyalty Loyalty Loyalty
Intentions Intentions Intentions

0.601* 0.635* 0.777*

Brand Brand Brand

Equity Equity Equity

Unconstrained Model (Mu) Nested Model 1 (Mt) Nested Model 2 (Mc)

GFI = 0.910; AGFI = 0.882; NFI = 0.937; GFI = 0.910; AGFI = 0.883; NFI = 0.937; GFI = 0.901; AGFI = 0.872; NFI = 0.937;
RFI = 0.926; CFI= 0.971; RMSEA= 0.054 RFI = 0.926; CFI= 0.971; RMSEA= 0.053 RFI = 0.919; CFI= 0.965; RMSEA= 0.059

Notes: Path coefficients represent standardized regression coefficients; * denotes p < 0.01

Figure 5.3. Model comparison: Path coefficients and fit measures

/// 78 Economic Review – Journal of Economics and Business, Vol. X, Issue 2, Novembre 2012
 . Direct and indirect effect of brand credibility, brand commitment and … ///

researchers found that Mt – Ms = 1.789 with p This shows that all the stated hypotheses
> 0.05 is not significant. Given this result, Mc – were accepted, except H3. The result proves a
Mt was evaluated in the next step, as per the mediating role of loyalty intentions among the
procedure. The value for Mc – Mt = 27.456 relationship between brand commitment and
with p < 0.05, is significant, rejecting the null brand equity and also the direct and indirect
hypothesis of no difference. This significant effect of brand credibility on brand equity.
result shows that relaxing one or more of Brand credibility has a direct effect on brand
constraints in Mc would contribute to the equity and an indirect effect through
explanation given. Thus Mt – Mu comparison commitment and loyalty intentions. The direct
was done in the next step, following the effect of credibility on brand equity is 0.280
procedure. The result, Mt – Mu = 0.549 with p and indirect effect to be 0.283 (i.e. 0.620 x
> 0.05, showed the null hypothesis of no 0.718 x 0.635) and thus the total effect as
difference is accepted. This indicates that 0.563 (0.283 + 0.280), showing the direct and
relaxing the constraint in Mt, commitment indirect effects are approximately equal. The
equity, does not significantly add to the R2 value for commitment is 0.385, while for
explanation of the construct covariance and loyalty intentions it is 0.515, and 0.641 for
parsimony. Hence the model Mt is accepted, as brand equity. This shows that the efforts
per the decision tree procedure of SCDT taken by the marketers for improving the
(Anderson & Gerbing 1988). trustworthiness and expertise (belief) in turn
develops directly the brand equity and
Further the models were compared with indirectly improves the commitment
values of fit measures, AIC and BIC. The values (attitude). The commitment improved the
of fit measures are statistically and likelihood of repeat purchase intentions
theoretically valid for Mu, Mt and Mc (figure which, in turn, resulted in brand equity.
5.3). Almost all fit measures were found to be
approximately equal. AIC value for Mu, Mt and 6. DISCUSSION AND IMPLICATIONS
Mc models were 348.839, 347.388 and
372.841; while BIC value for models were Through this study the researchers tried to
644.093, 636.081 and 654.976. Smaller values explain the role of brand credibility and brand
of AIC and BIC are preferred in model commitment in the formation of brand equity.
comparison (Hu & Bentler 1995; Ho 2006). The researchers identified that brand
The AIC and BIC values estimated were much credibility has both direct and indirect effect
smaller in case of Mt, supporting the results in developing brand equity. The indirect effect
obtained from SCDT. Thus taking the results of is mediated through brand commitment.
SCDT procedure, fit measures, AIC and BIC, Brand commitment develops loyalty
the model Mt was accepted, supporting full intentions and this in turn contributes to the
mediation of loyalty intention and partial development of brand equity. This shows that
mediation of credibility. commitment and loyalty intentions partially
mediate the relationship between credibility
The regression path coefficients shown in and brand equity. The direct effect and
Figure 5.3, for Mu, Mt and Mc, are standardized indirect effects are found to be approximately
regression coefficients. In the accepted model equal. The researchers have also checked the
Mt, path connecting commitment brand direct and indirect effect of commitment onto
equity was constrained to be equal to zero. All brand equity. The result showed that the
path coefficients which were freely estimated direct effect is not significant, while there is a
(β-values for H1, H2, H4 and H5 are 0.635, significant indirect effect through loyalty
0.718, 0.620 and 0.280 respectively) in the intentions. This implies that the effect of
nested model, were found to be significant.

Economic Review – Journal of Economics and Business, Vol. X, Issue 2, November 2012 79 ///
/// . Mathew V., Thomas S., Injodey I.J. .

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/// 82 Economic Review – Journal of Economics and Business, Vol. X, Issue 2, Novembre 2012
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