Examining the role of advertising and sales promotions in brand equity creation

Examining the role of advertising and sales promotions in brand equity creation☆
Isabel Buil a,⁎, Leslie de Chernatony b,c,1 , Eva Martínez a,2
a University of Zaragoza, Spain
b Università della Svizzera italiana, Switzerland
c Aston Business School, UK
a b s t r a c ta r t i c l e i n f o
Article history:
Received 1 June 2010
Received in revised form 1 November 2010
Accepted 1 February 2011
Available online 10 August 2011
Keywords:
Advertising
Sales promotions
Brand equity dimensions
This study explores the relationships between two central elements of marketing communication programs —
advertising and sales promotions — and their impact on brand equity creation. In particular, the research
focuses on advertising spend and individuals' attitudes toward the advertisements. The study also inves-
tigates the effects of two kinds of sales promotions, monetary and non-monetary promotions. Based on a
survey of 302 UK consumers, findings show that the individuals' attitudes toward the advertisements play a
key role influencing brand equity dimensions, whereas advertising spend for the brands under investigation
improves brand awareness but is insufficient to positively influence brand associations and perceived quality.
The paper also finds distinctive effects of monetary and non-monetary promotions on brand equity. In
addition, the results show that companies can optimize the brand equity management process by considering
the relationships existing between the different dimensions of brand equity.
© 2011 Elsevier Inc. All rights reserved.
1. Introduction
Both practitioners and academics regard brand equity as an
important concept (Keller and Lehmann, 2006). Elements of a brand's
equity positively influence consumers' perceptions and subsequent
brand buying behaviors (Reynolds and Phillips, 2005). Therefore, to
increase the likelihood of such positive contributions and manage
brands properly, companies need to develop strategies which encour-
age the growth of brand equity (Keller, 2007). In this context, the
identification of factors that build brand equity represents a central
priority for academics and marketing managers (Baldauf et al., 2009;
Valette-Florence et al., 2011).
Previous research suggests that marketing mix elements are key
variables in building brand equity (e.g., Yoo et al., 2000). As such, one
of the major challenges marketers face is deciding on the optimum
marketing budget to achieve both the highest impact on the target
market (Soberman, 2009) and the brand (Ataman et al., 2010).
Although considerable research examines the effectiveness of dif-
ferent elements of the marketing mix on brand equity, as Keller and
Lehmann (2006, p. 747) state, these researchers “have not typically
addressed the full breadth of brand equity dimensions”. Few studies
include consumer-based brand equity measures (i.e., mindset mea-
sures) when analyzing marketing mix effectiveness. One of the ex-
ceptions is Yoo et al. (2000) who explore the relationships between
selected marketing mix elements and consumer-based brand equity.
While their research provides new insights into how marketing ac-
tivities may influence brand equity, these authors advocate further
exploration of the impact of the different marketing mix variables.
Two marketing variables are of particular interest: advertising and
sales promotions. Compared to other forms of marketing activity, ex-
penditures on advertising and promotions are significant. For instance,
these two variables account for approximately 1.5% of the UK's gross
domestic product (West and Prendergast, 2009). Despite their impor-
tance, the individual contributions of advertising and sales promotions
to brand equity remain unclear and scholars highlight the need to
further examine the effect of these variables (Netemeyer et al., 2004;
Chu and Keh, 2006). Therefore, this study addresses this request.
Another area for improving understanding about consumer-based
brand equity is the interaction between brand equity dimensions.
Generally, researchers propose associative relationships among the
consumer-based brand equity dimensions (e.g., Yoo and Donthu,
2001; Pappu et al., 2005; Tong and Hawley, 2009). However, several
authors advocate that researchers focus on the ordering among the
brand equity dimensions (Yoo and Donthu, 2001; Keller and
Lehmann, 2006).
Journal of Business Research 66 (2013) 115–122
☆ The authors thank the following sources for their financial help: I + D + I project
(Ref: ECO2009-08283) from the Government of Spain and the project “GENERES”
(Ref: S-09) from the Government of Aragon. The authors would also like to thank
Dr José M. Pina for his insightful comments and helpful suggestions.
⁎ Corresponding author at: Department of Marketing Management, University of
Zaragoza, María de Luna s/n, Edificio Lorenzo Normante, 50018 Zaragoza, Spain.
Tel.: + 34 976 761000; fax: + 34 976 761767.
E-mail addresses: [e-mail] (I. Buil), [e-mail]
(L. de Chernatony), [e-mail] (E. Martínez).
1 Università della Svizzera italiana, Lugano, Switzerland and Aston Busines School,
Birmingham, UK. Tel. + 44 790 508 8927; fax: + 44 121 449 0104.
2 Department of Marketing Management, University of Zaragoza. Gran Vía 2, 50005
Zaragoza, Spain. Tel.: + 34 976 762713; fax: + 34 976 761767.
0148-2963/$ – see front matter © 2011 Elsevier Inc. All rights reserved.
doi:10.1016/j.jbusres.2011.07.030
Contents lists available at ScienceDirect
Journal of Business Research

Within this context, the purpose of this article is twofold. First, to
shed more light on two particular drivers of brand equity: advertising
and sales promotions. In particular, the study focuses on advertising
spend and individuals' attitudes toward the advertisements. Simi-
larly, the research investigates the effects of two kinds of sales
promotions, monetary and non-monetary promotions. Second, to
explore the relationships among brand equity dimensions.
Building on the framework proposed by Yoo et al. (2000), the current
work goes beyond research on sources of brand equity in several ways.
First, most brand equity studies have simply focused on the influence
that advertising spend and frequency of monetary promotions have
on brand equity (e.g., Yoo et al., 2000; Villarejo and Sánchez, 2005; Bravo
et al., 2007; Valette-Florence et al., 2011). By contrast, this study also
analyzes individuals' attitudes toward the advertisements and non-
monetary promotions. Despite several scholars recognizing that other
advertising characteristics beyond just advertising spend, such as
individuals' attitudes toward the advertisements, play an important
role in growing brand equity (Cobb-Walgren et al., 1995; Keller and
Lehmann, 2003; 2006; Bravo et al., 2007; Sriram et al., 2007), research
on brand equity has traditionally ignored these attitudes. Similarly,
recent literature on sales promotions (e.g., Chandon et al., 2000) stresses
the need to differentiate between two types of promotions, monetary
and non-monetary promotions. Surprisingly, academic research into the
effects of non-monetary promotions on brand equity is scarce. Second,
this article analyzes the causal order among brand equity dimensions.
Several studies suggest a hierarchy in terms of the importance of brand
equity dimensions and potential causal order (Agarwal and Rao, 1996;
Maio Mackay, 2001; Yoo and Donthu, 2001; Keller and Lehmann, 2003;
2006). However, few studies have empirically examined how brand
equity dimensions inter-relate. Analyzing all these aspects, this research
advances knowledge by providing more insight about the evolving
theory of brand equity.
This paper opens with a brief, general discussion of brand equity
and marketing mix elements followed by the hypotheses. Then, the
fourth section explains the methodology to test the model. Next
section presents the results of the study. Finally, the paper concludes
by outlining the conclusions, implications and limitations of the
research.
2. Conceptual framework
2.1. Brand equity
Brand equity is a key issue in marketing. Despite receiving con-
siderable attention, no consensus exists about which are the best
measures to capture this complex and multi-faceted construct (Maio
Mackay, 2001; Raggio and Leone, 2007). Part of the reason is the
different perspectives adopted to define and measure this concept
(Christodoulides and de Chernatony, 2010). The financial perspective
stresses the value of a brand to the firm (Simon and Sullivan, 1993;
Feldwick, 1996). On the other hand, the consumer perspective focuses
the conceptualization and measurement of brand equity on individual
consumers (Leone et al., 2006).
Adopting the latter perspective, and from a cognitive psychology
approach, brand equity denotes the added value endowed by the
brand to the product (Farquhar, 1989). Aaker (1991, p. 15) provides
one of the most accepted and comprehensive definitions of brand
equity: “a set of brand assets and liabilities linked to a brand, its name and
symbol that add to or subtract from the value provided by a product or
service to a firm and/or to that firm's customers”. Keller (1993, p. 2)
proposes a similar definition: “the differential effect of brand knowledge
on consumer response to the marketing of the brand”.
Consumer-based brand equity measures assess the awareness,
attitudes, associations, attachments and loyalties consumers have
toward a brand (Keller and Lehmann, 2006). These measures offer
considerable advantages such as the assessment of sources of brand
equity and its consequences, plus a diagnostic capability (Ailawadi et al.,
2003; Gupta and Zeithaml, 2006). In this sense, these measures act as
early evaluation signals about future performance (Srinivasan et al.,
2010). From this perspective, the two main frameworks that concep-
tualize brand equity are those of Aaker (1991) and Keller (1993).
According to Aaker (1991), brand equity is a multidimensional concept
whose first four core brand equity dimensions are brand awareness,
perceived quality, brand associations and brand loyalty. Brand equity
research omits the fifth of Aaker's dimensions, other proprietary brand
assets, since this component is not pertinent to consumers. Keller's
(1993) conceptualization focuses on brand knowledge and involves two
components: brand awareness and brand image.
Drawing on these theoretical proposals, a large number of studies
conceptualize and measure brand equity using the dimensions of brand
awareness, perceived quality, brand associations and brand loyalty (e.g.,
Cobb-Walgren et al., 1995; Yoo et al., 2000; Yoo and Donthu, 2001;
Washburn and Plank, 2002; Ashill and Sinha, 2004; Pappu et al., 2005;
2006; Konecnik and Gartner, 2007; Tong and Hawley, 2009; Lee and
Back, 2010).
Following these two approaches, this research uses a consumer-
based brand equity measure that consists of four dimensions: brand
awareness, perceived quality, brand associations, and brand loyalty.
2.2. Marketing mix elements
Marketing mix elements influence consumers' equity perceptions
toward brands (Pappu and Quester, 2008). These variables are impor-
tant not only because they can greatly affect brand equity but also
because they are under companies' control, enabling marketers to grow
brand equity through their marketing activities (Keller, 1993; Berry,
2000; Yoo et al., 2000; Ailawadi et al., 2003; Herrmann et al., 2007).
Within the discipline of marketing dynamics, numerous studies use
financial and product–market measures of brand equity to analyze the
short- and long-term effects of marketing actions and polices, such as
advertising and price promotions (Leeflang et al., 2009; Ataman et al.,
2010; Srinivasan et al., 2010).
From the consumer-based brand equity perspective, which
this research follows, Yoo et al. (2000) find that high advertising
spend, high price, high distribution intensity and distribution through
retailers with good store image would help build brand equity. By
contrast, frequent price promotions would harm brand equity. Villarejo
and Sánchez (2005) also focus their study on advertising spend and
price promotions, while Bravo et al. (2007) add to these variables the
effect of the price.
This study focuses on the role of two specific marketing com-
munications tools: advertising and sales promotions. These two
marketing elements account for at least 25% of UK marketing budgets
(Chartered Institute of Marketing, 2009). Despite their importance,
the influence of these variables on brand equity still remains unclear
(Netemeyer et al., 2004; Chu and Keh, 2006). This research responds
to this gap by exploring their effects on consumer-based brand equity.
3. Research hypotheses
Fig. 1 shows the conceptual framework underlying this research.
This study addresses how advertising spend and individuals' attitudes
toward the advertisements influence brand equity dimensions. Simi-
larly, the study focuses on two kinds of sales promotions, monetary and
non-monetary. Based on the literature, this research also hypothesizes
relationships among brand equity dimensions.
3.1. Advertising
Advertising is one of the most visible marketing activities.
Generally, researchers posit that advertising is successful in building
consumer-based brand equity, having a sustaining and accumulative
116 I. Buil et al. / Journal of Business Research 66 (2013) 115–122

effect on this asset (Wang et al., 2009). However, advertising effects
depend on both the amount invested and the types of messages
communicated (Martínez et al., 2009).
Several authors have investigated how actual and perceived
advertising spend influences brand equity and its dimensions (Simon
and Sullivan, 1993; Cobb-Walgren et al., 1995; Yoo et al., 2000; Villarejo
and Sánchez, 2005; Bravo et al., 2007). Both approaches find positive
relationships between advertising spend and brand equity. Researchers
conclude that perceptions of high advertising spend contribute to
developing a more positive perception of brand quality, higher brand
awareness and stronger brand associations (e.g., Yoo et al., 2000).
Advertising expenditure can influence brand equity dimensions in
several ways. When judging the product's quality, consumers use
different intrinsic and extrinsic cues (Rao and Monroe, 1989). Perceived
advertising spend is one such extrinsic quality cue (Milgrom and
Roberts, 1986; Kirmani and Rao, 2000). Using laboratory experiments
several studies report positive relations between perceived advertising
spend and perceived quality (Kirmani and Wright, 1989; Kirmani, 1990;
1997; Moorthy and Hawkins, 2005). This result is also evident through
work in shopping environments (Moorthy and Zhao, 2000). Thus, con-
sumers generally perceive highly advertised brands as higher quality
brands (Yoo et al., 2000; Bravo et al., 2007).
Similarly, large advertising investments can favor correct brand
recall and recognition. Brand advertising spend can increase the scope
and frequency of brand appearance, and as a consequence, the level of
brand awareness (Chu and Keh, 2006; Keller, 2007). As such, the higher
advertising spend, the higher awareness levels are likely to be (Yoo et al.,
2000; Villarejo and Sánchez, 2005; Bravo et al., 2007).
Finally, advertising can also create favorable, strong and unique
brand associations (Cobb-Walgren et al., 1995; Keller, 2007). Like brand
awareness, brand associations arise from consumer-brand contact. As
such, advertising can contribute to brand associations through its ability
to create, modify or reinforce associations with each new contact.
Hence, the higher a brand's advertising spend, the stronger and more
numerous will be the associations in the consumer's mind (Bravo et al.,
2007). All these arguments lead to the following hypothesis:
H1. Consumers' perceptions of a brand's advertising spend have a
positive influence on: a) perceived quality; b) brand awareness and
c) brand associations.
Researchers recognize that individuals' attitudes toward adver-
tisements can also play an important role influencing brand equity
(Cobb-Walgren et al., 1995; Keller and Lehmann, 2003; 2006; Bravo
et al., 2007; Sriram et al., 2007). However, these issues have received
little attention in brand equity research.
Advertising is a powerful way of communicating a brand's func-
tional and emotional values (de Chernatony, 2010). In general, the
effectiveness of this communication tool depends on its content (i.e.,
the message), the execution or how the ad conveys the message, and
the frequency with which a consumer sees the advertisement (Batra
et al., 1996; Kotler, 2000). As mentioned earlier, advertising creates
brand awareness, links strong, favorable, and unique associations to
the brand in consumers' memory, and elicits positive brand judg-
ments and feelings (Keller, 2007). However to achieve these results,
the advertising needs a suitable design and execution. In particular,
one of the main concerns devising an advertising strategy relates to
the creative strategy (Kapferer, 2004; Keller, 2007).
Through an original and innovative advertising strategy, organi-
zations may be more likely to capture consumers' attention. In turn,
consumers' attention can lead to higher brand awareness, higher per-
ceived quality and contribute to forming strong, favorable and unique
associations (Lavidge and Steiner, 1961; Aaker, 1991; Kirmani and
Zeithaml, 1993; Villarejo, 2002). In short, besides increasing consumers'
familiarity with a brand, advertising can shape consumers' perceptions
of quality and other brand associations (Moorthy and Hawkins, 2005).
The following hypothesis synthesizes the above arguments:
H2. Individuals' attitudes toward the advertisements undertaken for
a brand have a positive influence on: a) perceived quality; b) brand
awareness and c) brand associations.
3.2. Sales promotions
Sales promotions are also a key marketing tool in communication
programs that influence brand equity (Valette-Florence et al., 2011).
However, different types of promotional tools (e.g., monetary and
non-monetary promotions) may have different effects on sales,
profitability or brand equity (Srinivasan and Anderson, 1998).
Most previous researches on sales promotions focus on monetary
promotions, such as price discounts and coupons. Although some dis-
cussion about the effect of this tool on brand equity still exists
(Palazón-Vidal and Delgado-Ballester, 2005; Joseph and Sivakumaran,
2008), the empirical evidence suggests that monetary promotions have
a negative impact on brand equity (e.g., Yoo et al., 2000).
Focusing on the direct effects on brand equity dimensions, monetary
promotions are likely to have a negative influence on perceived quality
and brand associations. The reduction in the internal reference price is
one of the main reasons why monetary promotions have a negative
influence on perceived quality. Consumers use price as an extrinsic cue
to infer product quality (Milgrom and Roberts, 1986; Rao and Monroe,
1989; Dodds et al., 1991; Agarwal and Teas, 2002). As such, the influenceBrandawarenessPerceivedqualityBrandassociationsBrandloyaltyAdvertisingspendNon-monetarypromotionsMonetarypromotionsAttitudes towardadvertisementsH5H6H8H7H4aH4bH3aH3bH1aH1bH1cH2aH2bH2c
Fig. 1. Conceptual model.
117I. Buil et al. / Journal of Business Research 66 (2013) 115–122