To invest, or not to invest, in brands? Drivers of brand relevance in B2B markets
Introduction
In addition to well-known consumer brands, such as Coca-Cola and Apple, many business-to-business (B2B) brands—including IBM, Intel, General Electric, Cisco, Oracle, and SAP—are among the world's most valuable brands (Interbrand, 2010). Brands are therefore relevant not only in business-to-consumer (B2C) markets, but also in B2B markets (for an extensive review see Glynn, in press). We interpret brand relevance as the “overall role of brands in customers’ decision making” (Fischer, Völckner, & Sattler, 2010, p. 824). Prior research conducted in B2C markets indicates differences in brand relevance across product categories (Fischer et al., 2002, Fischer et al., 2010, Hammerschmidt et al., 2008), but no previous studies addressed product category-specific brand relevance in B2B markets. Yet, B2B firms need to understand whether or not brand relevance varies across product categories, as well as what drives their brand relevance. This study addresses both of these fundamental questions.
If brand relevance differs across product categories, then information about category-specific levels should determine resource allocations for brand-building efforts. Investing in brands that operate in low brand relevance categories might be a less efficient investment than devoting resources to a brand with high brand relevance on a category level. Although we find in our empirical study that brand relevance differs significantly across categories, the small absolute amount of the differences suggests that brand relevance is not only driven by product-categories. We therefore assess additional drivers of brand relevance in a B2B context. In line with previous research, we measure the relative importance of brand functions that should determine brand relevance. In particular, brands reduce perceived purchase risks, reduce information costs involved in decision making, and evoke specific image effects, such as status. In B2C markets, image-related brand functions are the most important driver of the brand's influence on purchase decisions (Fischer et al., 2002) we test whether these results transfer to B2B markets. In contrast with findings from B2C markets, we find that risk reduction is the most important brand function for B2B settings. This might be due to the specifity of organizational buying behavior (Homburg, Klarmann, & Schmitt, 2010). This ranking regarding the relative influence of brand functions is highly important as it can determine appropriate strategies and marketing actions to increase the influence of brands and thus ultimately enhance brand equity.
Accordingly, this study is motivated by both theoretical and practical interests. From a theoretical perspective, we detail contextual factors that may influence brand relevance in B2B markets and assess the effect of the category on brand relevance. From a practical perspective, our results offer guidelines to managers with regard to focusing on specific brand functions when developing communication strategies. Finally, our study offers researchers a means to explain heterogeneity in brand-building studies.
In Section 2, we present our conceptual background and derive our hypotheses. In Section 3, we describe our study design and the methodological approach, before presenting the empirical study results in Section 4. We conclude with a discussion of our study contributions, implications for managers, and avenues for further research.
Section snippets
Brand relevance
Among other determinants, brands can influence purchasing decisions. In this context, brand relevance refers to the decision weight of a brand, in relation to other product benefits in a category (Fischer et al., 2010).1
Study
The purpose of our study is to discern the relative importance of brands during the B2B purchasing decision and how certain brand functions influence this assessment. Similar to previous studies on B2C markets, we conducted a large-scale survey of companies in B2B markets by first contacting and identifying key informants and asking them to participate in a telephone interview.
Sample
We surveyed 630 respondents from 20 industries (see Table 1). We selected the industries systematically, on the basis
Results
As stated, we assess two effects in this empirical study: whether brand relevance differs across categories and the influence of brand functions on brand relevance.
Discussion and research implications
Surprisingly little research assesses category-specific brand relevance measures. To our knowledge, only three studies appear in a B2C context (Fischer et al., 2002, Fischer et al., 2010, Hammerschmidt et al., 2008), and ours is the first study to address this issue in a B2B setting. Thus we add an important explanation of the drivers that influence a brand's importance in buying decisions to growing research on B2B brands.
With our empirical study, we assess two aspects. First, we test whether
Acknowledgements
We gratefully acknowledge the valuable support with the data collection by McKinsey & Company.
Klaus Backhaus is Professor at the Marketing Center Muenster and Director of the Institute of Business-to-Business Marketing at the Muenster School of Business and Economics. His primary interests are negotiation behavior, standards battles, and pricing.
References (88)
- et al.
Brand equity in the business-to-business market
Industrial Marketing Management
(2004) - et al.
Industrial global brand leadership: A capabilities view
Industrial Marketing Management
(2007) - et al.
The influence of brand image and company reputation where manufacturers market to small firms: A customer value perspective
Industrial Marketing Management
(2007) - et al.
Branding a B2B service: Does a brand differentiate a logistics service provider?
Industrial Marketing Management
(2008) - et al.
Brand equity as a signaling phenomenon
Journal of Consumer Psychology
(1998) - et al.
Developing and validating a multidimensional nonprofit brand orientation scale
Journal of Business Research
(2005) - et al.
Delegation of pricing authority to the sales force: An agency-theoretic perspective of its determinants and impact of performance
International Journal of Research in Marketing
(2010) - et al.
How purchasing agents handle personal risk
Industrial Marketing Management
(1987) - et al.
Brand awareness in business markets: When is it related to firm performance?
International Journal of Research in Marketing
(2010) - et al.
Organizational buying behavior: Toward an integrative framework
Journal of Business Research
(1996)
Brand familiarity and confidence as determinants of purchase intention: An empirical test in a multiple brand context
Journal of Business Research
Branding importance in business-to-business markets: Three buyer clusters
Industrial Marketing Management
An ex-ante approach to brand capability valuation
Journal of Business Research
An empirical comparison of the efficacy of covariance-based and variance-based SEM
International Journal of Research in Marketing
Assessing generalizability of scales used in cross-national research
International Journal of Research in Marketing
Marketing antecedents of industrial brand equity: An empirical investigation in specialty chemicals
Industrial Marketing Management
Managing brand equity: Capitalizing on the value of a brand name
Marketing Research
Perceived value: Mediating role of perceived risk
Journal of Marketing Theory and Practice
Leading and lagging indicators of brand health
Changing needs for brands
Journal of Advertising Research
Industrial marketing: A German view
Thexis
Strategy dynamics in industrial marketing: A business types perspective
Management Decision
On the evaluation of structural equation models
Journal of the Academy of Marketing Science
A partial least squares latent variable modeling approach for measuring interaction effects: Results from a Monte Carlo simulation study and an electronic-mail emotion/adoption study
Information Systems Research
Structural equation modeling analysis with small samples using partial least squares
Estimating trait, method, and error variance: Generalizing across 70 construct validation studies
Journal of Marketing Research
Theory of generalizability: A liberation of reliability theory
The British Journal of Statistical Psychology
Marketing universals: Consumers’ use of brand name, price, physical appearance, and retailer reputation as signals of product quality
The Journal of Marketing
The effects of ingredient branding strategies on host brand extendibility
Journal of Marketing
Latent variables in business logistics research scale development and validation
Journal of Business Logistics
Examining the cross-national applicability of multi-Item, multi-dimensional measures using generalizability theory
Journal of Business Studies
A leisurely look at the bootstrap, the jackknife, and cross-validation
The American Statistician
Differentiation or salience
Journal of Advertising Research
Self-construal, reference groups, and brand meaning
Journal of Consumer Research
Self-generated validity and other effects of measurement on belief, attitude, intention, and behavior
Journal of Applied Psychology
Reliability assessment and optimization of marketing measurement
Journal of Marketing Research
How important are brands? A cross-category, cross-country study
Journal of Marketing Research
Evaluating structural equation models with unobservable variables and measurement error
Journal of Marketing Research
Using single-item measures for construct measurement in management research: Conceptual issues and application guidelines
Die Betriebswirtschaft
Cross-cultural perspectives on the dynamics of prestige
Journal of Services Marketing
Evaluation of structural equation models using the partial least squares (PLS) approach
Cited by (58)
How does AI drive branding? Towards an integrated theoretical framework for AI-driven branding
2023, International Journal of Information Management Data InsightsManaging climate change risks and creating stakeholders' value via sustainability-focused B2B brand strategies
2023, Industrial Marketing ManagementTill the cloud do us part: Technological disruption and brand retention in the enterprise software industry
2023, International Journal of Research in MarketingCitation Excerpt :Second, middle-tier and bottom-tier brands can reduce their vulnerability to future technological disruptions by building stronger brands (Glynn, 2012; Keller & Kotler, 2012; Webster & Keller, 2004). This can be achieved, for instance, by using tactics supporting the reduction of risk and information search costs for customers considering to migrate to the new technology (Backhaus et al., 2011). Top-tier brands, on the other hand, may exploit their brand strength and leverage brand associations across technological generations to keep their vulnerability to churn low.
Capabilities for data-driven innovation in B2B industrial companies
2023, Industrial Marketing ManagementThe power of talk: Exploring the effects of streamers’ linguistic styles on sales performance in B2B livestreaming commerce
2023, Information Processing and ManagementKey account managers' identification profiles and effectiveness: A fuzzy-set qualitative comparative analysis
2022, Industrial Marketing ManagementCitation Excerpt :The industry in which the KA managers predominantly operate is the software and IT services industry. They seem to be mainly systems businesses that are not characterized by high market dynamics or competitive intensity (Backhaus, Steiner, & Lügger, 2011). Instead, the relationship with the key account tends to be stable and long-term oriented.
Klaus Backhaus is Professor at the Marketing Center Muenster and Director of the Institute of Business-to-Business Marketing at the Muenster School of Business and Economics. His primary interests are negotiation behavior, standards battles, and pricing.
Michael Steiner is Assistant Professor at the Marketing Center Muenster at the Muenster School of Business and Economics. His primary interests are branding, pricing, preference measurement, and new product development.
Kai Lügger is a Ph.D. candidate at the Institute of Business-to-Business Marketing at the Muenster School of Business and Economics. His current research interests include negotiations in B2B marketing settings and decision making processes in the buying center.