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Journal of Air Transport Management 14 (2008) 4042 www.elsevier.com/locate/jairtraman

Airline brand equity, brand preference, and purchase intentionsThe moderating effects of switching costs
Ching-Fu Chen, Yu-Ying Chang
Department of Transportation and Communication Management Science, National Cheng Kung University, 1, Ta-Hsueh Road, Tainan 701, Taiwan

Abstract This study examines the relationships between brand equity, brand preference, and purchase intentions on international air passengers decisions in Taiwan. The ndings indicate positive relationships between brand equity, brand preference, and purchase intentions with a moderation effect of switching cost affecting the relationship between brand equity and purchase intentions. More specically, the effect of brand equity on purchase intentions is not signicant for passengers with low switching costs. r 2007 Elsevier Ltd. All rights reserved.
Keywords: Brand equity; Brand preference; Purchase intentions; Switching costs; Airlines

1. Introduction Brand equity refers to the incremental utility or value added to a product from its brand name. It is often believed to contribute to a companys long-term protability. Despite airlines efforts to establish and maintain their brand equity, a clear measurement of such equity is still lacking. Because there are switching costs associated changing airlines, for example, with frequent yer programs and other customer loyalty schemes, these need to be considered when examining relationships between brand equity and customer loyalty. This study looks at relationships between airline brand equity, brand preference, and purchase intentions for air passengers, and at the potential moderating effects of switching costs using a sample of Taiwanese air passengers taking international ights. 2. Conceptual background Brand equity has been deemed as primary capital for many industries. Strong brands can increase customers trust in the produce or service purchased and enabling
Corresponding author.

E-mail address: cfchen99@mail.ncku.edu.tw (C.-F. Chen). 0969-6997/$ - see front matter r 2007 Elsevier Ltd. All rights reserved. doi:10.1016/j.jairtraman.2007.11.003

them to better visualize and understand intangible factors. According to Yoo and Donthu (2001), brand image can inuence a companys future prots and long-term cash ow, a consumers willingness to pay premium prices, merger and acquisition decision making, stock prices, sustainable competitive advantage, and marketing success. Three main aspects of brand equity are usually considered: i.e. the nancial perspective, the customer-based perspective, and the combined perspective (Keller, 1993). Here we focus on the customer-based perspective (Morgan, 2000). The operationalizations of customer-based brand equity can be divided into consumer perception (e.g. brand awareness, brand associations, perceived quality) and customer behavior (e.g. brand loyalty, willingness to pay a high price). CobbWalgren et al. (1993) develop a framework for studying various antecedents and consequences of brand equity from the customer perspective and suggest that consumers brand perceptions contribute to the meaning or value of a brand. Brand equity then inuences consumer preferences and purchase intentions, and ultimately brand choice. Hence, the causal relationship is identied: brand equity ) preferences ) purchase intentions. Switching costs between different product or service can act as moderating variable by signicantly inuence customer loyalty through loyalty determinants such as customer satisfaction and perceived value. From the brand

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management perspective, brand equity can be largely deemed as a customers perceived value. 3. Methodology Five hypotheses are examined (see Fig. 1). H1. A customers purchase intention is positively inuenced by customer-based brand equity. H2. A customers purchase intention is positively inuenced by the customers brand preference. H3. A customers brand preference is positively inuenced by customer-based brand equity. H4. The higher the level of switching costs is, the greater the likelihood will be that customer-based brand equity will lead to a customers greater purchase intention. H5. The higher the level of switching costs is, the greater the likelihood will be that a customers brand preference will lead to a greater purchase intention. The framework embraces information on brand equity, brand preference, purchase intentions, and switching costs. Brand equity is taken to have four dimensions, including brand loyalty (two items), brand awareness (ve items), perceived quality (six items), and brand associations (ve items) all measured by using a ve-point Likert-type scale. Brand preference, with four elements, using a ve-point semantic differential scale considers passengers brand preferences. Purchase intentions, with two elements, considers respondents likelihood of purchasing the brand in question by using a seven-point Likert-type scale. Switching costs with four elements looks at respondents perceived costs when they are considering switching to other airlines. A self-administered questionnaire is used to collect data from international airline passengers. The questions are based on a review of the literature and specic airline service contexts, and the questionnaire was pre-tested and revised. The questionnaires were distributed based on a

Table 1 Measurement scales and summary statistics Brand equity Mean 3.7 Reliability 0.817, ave. 0.535 Brand preference Mean 3.6 Reliability 0.862, ave. 0.611 Purchase intentions Mean 3.5 Reliability 0.810, ave. 0.680 With N 407, w2 114.85 (p 0.000), df 39, w2/df 2.93, CFI 0.95, GFI 0.95, RMSEA 0.069. Brand awareness Perceived quality Brand association Brand loyalty I feel that this airlines name is appealing to me I prefer this airline to other airlines of its type If I was to buy an air travel product, I would prefer this airline if everything else was equal In total I prefer this airline I am willing to recommend others to buy this airlines products I am willing to purchase this airlines products in the future

convenience1 sampling method and collected at Taoyuan International Airport in Taiwan during the month of March 2007. Six hundred questionnaires were distributed and 480 useable samples were obtained after excluding the incomplete ones, yielding an 80% response rate from those who agree to participate. A conrmatory factor analysis was used to validate the brand equity scale of four underlying dimensions.2 Two items relating to brand awareness, two to perceived quality, and one to brand association are removed to obtain construct validity. Table 1 lists the remaining elements.

4. Results The overall t of the model is reasonable.3 Simultaneous maximum-likelihood-estimation procedures are used to examine relationships among brand equity, brand preference, and purchase intentions (Table 2). The three hypothesized relationships are supported in the estimated structural model (Table 2). Brand equity has signicantly positive effects on both brand preference and loyalty, supporting H1 and H2. Furthermore, the effect of brand equity on purchase intentions is also signicant, supporting H3. In terms of the mediating effect, the effect of brand equity on purchase intention is 0.68, including the
1 This was done for practical reasons and the sample may thus not be random. 2 The results are available on request. 3 The ratio of the w2 value to degrees of freedom is less than the critical cut-off point of 3, while the w2 statistic is signicant (Table 1). Furthermore, the goodness-of-t index and comparative-t index are greater than the recommended value of 0.9. The root-mean-square error of approximation is 0.069, i.e. less than 0.10. In addition, the composite reliabilities of the three constructs range from 0.81 to 0.86, well above the recommended value of 0.7, and the average percentage of variance extracted of each measure ranges are all over 0.5.

Brand Pref. H1 Brand Equity H3 H2

H4 Switching cost H5

Purchase Intent

Direct effect Moderating effect

Fig. 1. Conceptual model.

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42 C.-F. Chen, Y.-Y. Chang / Journal of Air Transport Management 14 (2008) 4042 Table 2 Structural parameter estimates and goodness-of-t indices Hypothesized paths Standardized estimate Total sample Brand equity-brand preference (H1) Brand equity-purchase intentions (H2) Brand preference-purchase intentions (H3) Fit statistics (N 407) 0.67 (12.06)a 0.28 (4.96) 0.60 (9.11) w2 88.06 (p 0.000, df 29) w2/df 3.09 GFI 0.965, CFI 0.988 RMSEA 0.0652 High-switching cost 0.61 (6.61) 0.35 (4.41) 0.57 (6.15) w2 43.37, po0.01, df 29 w2/df 1.49 GFI 0.948, CFI 0.991 RMSEA 0.0558 Low-switching cost 0.68 (6.19) 0.13 (1.10) 0.76 (5.32) w2 52.31, po0.01, df 29 w2/df 1.74 GFI 0.921, CFI 0.921 RMSEA 0.0600

Denotes pp0.05.
a

The value in the parenthesis is t Value.

direct effect of 0.28 and indirect effect of 0.40 mediated by brand preference. To examine the moderating effect of switching costs, the sample is divided using the quartiles of the level of these costs. The rst and last quartiles are dened as the high and low switching cost groups, and are subsequently used for testing the casual relationships. As seen in Table 2, for the high switching cost group, all three hypothetical relationships are signicantly positive. For the low switching cost group, the effect of brand equity on purchase intentions is not signicant, while both the effects of brand equity on brand preference and brand preference on purchase intentions are positively signicant. Overall, H1 and H3 are supported for both groups, but H2 is only supported for the high switching cost group. The results indicate that the moderation effect of switching cost on the path of Brand Equity ) Brand Preference does not existthat is, H5 is not supported. However, the moderation effect of involvement on the path of Brand Equity ) Purchase Intentions does exist, supporting H4. 5. Conclusions This study not only reveals the effects of brand equity on brand preference and purchased intentions, but also shows moderating effects of switching cost on the relationship

between brand equity and purchase intentions. In addition to recognizing the importance of brand equity on airline protability, the ndings provide an implication on branding strategies for airlines to build up their sustained competitive advantages. In practice, switching costs are increasingly recognized as a means for keeping customers in relationships. Acknowledgments The authors are grateful to the National Science Council (NSC), Taiwan, for nancial support (NSC 96-2416-H006-018), and Kenneth Button, Keith Mason and two anonymous reviewers for their helpful comments on this paper. References
Cobb-Walgren, C.J., Ruble, C.A., Donthu, N., 1993. Brand equity, brand preference and purchase intent. Journal of Advertising 24 (3), 2540. Keller, K.L., 1993. Conceptualizing, measuring and managing customerbased brand equity. Journal of Marketing 57, 122. Morgan, R.P., 2000. A customer-oriented framework of brand equity and loyalty. International Journal of Market Research 42 (3), 65120. Yoo, B., Donthu, N., 2001. Developing and validating a multidimensional customer-based equity scale. Journal of Business Research 52 (1), 114.