THE INFLUENCE OF BRAND EQUITY ON SALES PERFORMANCE OF RETAIL PHARMACIES IN KISUMU COUNTY. OKANGA DIANA LIAYUGA A RESEARCH PROJECT PRESENTED IN PARTIAL FULFILMENT OF THE REQUIREMENTS FOR THE AWARD OF THE DEGREE OF MASTER OF BUSINESS ADMINISTRATION, FACULTY OF BUSINESS AND MANAGEMENT SCIENCE, UNIVERSITY OF NAIROBI DECLARATION I, Okanga Diana Liayuga, declare that this is my original work and has not been submitted to any other college, institution or university other than the University of Nairobi for academic credit.Date…22/11/2021…………………………………… Okanga Diana Liayuga D61/12036/2018 Supervisor This project is presented for examination with my approval as the appointed supervisor. Signed: Date: 03/12/2021 Dr. Victor Muya Ndambuki Lecturer, School of Business ii DEDICATION To my family and friends who supported and encouraged me throughout my MBA journey.
iii ACKNOWLEDGEMENT My heart is full of gratitude to the Almighty God for his blessings and support throughout my MBA program. Victor Ndambuki is also to be thanked for his advice and assistance. iv TABLE OF CONTENTS DECLARATION. vii CHAPTER ONE: INTRODUCTION .1 Background of the Study .4 Value of the Study.
8 CHAPTER TWO: LITERATURE REVIEW .1 Resource Based View Theory (RBV) .2 Aaker’s Brand Equity Model .3 Determinants of Brand Equity .5 Other Proprietary Assets. 20 CHAPTER THREE: RESEARCH METHODOLOGY. 26 DATA ANALYSIS, PRESENTATION AND INTERPRETATION .3 Pilot Test Results .1 Reliability Test Results .2 Validity Test Results .5 Analysis of study variable .2 Analysis of Variance. 39 DISCUSSION, CONCLUSION AND RECOMMENDATIONS .4 Recommendation for Further Research.
40 vi ABSTRACT The concept of brand equity and its effect on various business parameters has elicited much interest among scholars in the recent past. The purpose of this study was to determine whether brand equity has an influence on sales performance of retail pharmacies in Kisumu County. The brand equity determinants put under study include: brand loyalty, brand awareness, perceived quality, brand associations and proprietary assets. There is need to establish whether these brand equity determinants have an impact on sales performance in retail pharmacies in Kisumu County.
The study adopted the Resource Based View of the Firm Theory and Aaker’s Brand Equity Model. The research design used was a descriptive survey. Primary data was collected where structured questionnaires were administered to the targeted 40 respondents, achieving 100% success rate. The data was analyzed quantitatively using SPSS where both descriptive and inferential analysis was done.
The regression analysis findings showed an overall significant and positive influence of brand equity on sales performance of retail pharmacies in Kisumu County. There is also positive relationship between brand equity and sales performance. While perceived quality, brand associations and brand awareness showed a great extent in influencing sales performance, brand loyalty and proprietary assets had little significance. Marketers are therefore strongly advised to find ways of building strong brand equity for better sales performance.
Further studies can be done in other counties other than Kisumu County to find out the extent of relevance of brand equity determinants on sales performance. vii CHAPTER ONE: INTRODUCTION 1.1 Background of the Study The need for businesses to realize better performance has led to significant activity towards building strong brands and using them for creation of brand equity. A brand is the most valuable asset an organization must possess as it operates in the competitive business environment (Keller, 2002). Effective management of brands by organizations starts with having common measures of performance.
This not only refers to financial measures such as sales performance, profit margins and cost but also brand equity metrics which can be beneficial to managers as they assess their brand-building efforts. According to market share and/or sales data, customers' perceptions of a brand's success are often reflected in how well the brand performs in the market. This therefore means that a brand’s market share should increase or at least remain constant if the brand has an advantage in the consumer's perception in the marketplace (Aaker, 1996). The study will use the Resource Based View (RBV) of the firm theory and Aaker’s Brand Equity Model.
Wernerfelt (1984) and Barney (1991) demonstrate in the Resource Based View of the firm that organizations possess internal resources and potential, which if exploited effectively can guarantee long-term performance hence competitive advantage. The RBV of the firm further explains that firms should leverage on their intangible assets and build them to be valuable, rare, inimitable and non- substitutable. Aaker’s Brand Equity Model, on the other hand, gives a better understanding how firms can achieve brand equity and its management and measurement. In the Brand Equity Model, Aaker (2009) defines brand equity and lists brand associations, perceived quality, brand loyalty, brand awareness and other 1 proprietary assets (i., patents, intellectual property and trading partners) as the five of the most important elements in building a strong brand.
Aaker (2009), affirms that a combination of these five components eventually creates value to the firm. The pharmaceutical industry in Kenya is divided into manufacturers, distributors and retailers and is highly regulated by the Pharmacy and Poisons Board (PPB). Kisumu County is divided into seven sub counties which contain more than forty retail pharmacies all combined. More and more pharmacies are opening in retail locations in Kisumu County in the recent years owing to the perceived profitability of the business.
Most of the retail pharmacies are concentrated in Kisumu Central, Kisumu East and Kisumu West. The locational concentration of the retail pharmacies coupled with the strict PPB regulations requires that they leverage on brand equity to set themselves apart and achieve better performance. Furthermore, there is intense competition among the retail pharmacies hence the need to build and position themselves as strong, recognizable and trusted brands.1 Brand Equity Assets and liabilities associated with a brand equity, such as its name and symbol, may increase or deduct from the value of a product or service to the company or its consumers. Both the business and its customers can benefit from brand equity (Aaker, 1991).
Brand equity is built on five categories of assets and liabilities, including brand awareness, brand loyalty, perceived quality, brand connections, and other intellectual assets such as patents, trademarks, and channel partnerships. The assets provide value to the customers of a firm by helping them in comprehension and information processing, hence increasing their confidence in their purchasing choice and 2 contentment with their usage experience. On the other hand, when these assets are used to enhance the efficiency and efficacy of marketing initiatives, brand expansions, and brand loyalty, the business is able to achieve larger profits and premium pricing. Brand equity assets therefore, are very important to a firm because they provide competitive advantage hence a barrier to potential competitors (Aaker, 1991).
Aaker (1996), outlines the Brand Equity Ten, which he uses as an evaluation and a metric for measuring the equity of a brand. The four aspects of Brand Equity Ten - brand awareness, brand associations, perceived quality and brand loyalty- to portray the brand's image in the minds of consumers. Brand loyalty influences both the price premium and customer satisfaction whereas perceived quality is associated with brand leadership/ popularity and brand usage. Brand associations measurements may be made on that basis of its influence on perceived value of a product/service, brand personality and organizational associations.
Customer attitudes and impressions of a brand are affected by brand awareness. Lastly, brand equity ten outlines measures of market behavior, such as the share of the market and indexes for prices and distribution. It is possible to gauge brand performance by looking at market share (and/or sales), which provides a reflection of a product's position in the eyes of customers.2 Sales Performance A firm’s sales performance is one of the key indicators that managers need to put a keen interest on since it is directly pegged to financial and ultimately the overall organizational performance. Sales performance is used by a company that sells its goods to determine the value of its brands in the market place.
According to Verbeke, Dietz, and Verwaal (2011), sales performance has five antecedents. These include: the 3 ability to market relevant information, the degree of adaptability, and the ambiguity of roles, cognitive ability, and the level of job commitment. An understanding of these drivers of sales performance by managers, how they vary across different contexts and their effect on the organization’s brands is essential. Furthermore, marshalling intra- organizational resources, sales person creativity, buyer-seller interaction and ethics and multilevel performance are crucial aspects towards better sales performance (Richard, et al.
The extra income that a branded product (or a brand) will accrue to a corporation will become a measure of sales performance of that organization (Motameni & Shahrokhi, 1998). Sales performance therefore can be determined using a variety of monetary and non-monetary metrics spanning from income quantity, profitability, revenue growth and revenue expansion by new customer to customer retention and brand activation. Kaplan & Norton (1993), indicate that Critical Success Factors (CSFs) are common point of reference to measure success in a business and list them as competitiveness, resource utilization, customer satisfaction, quality of service and innovation. They suggest possible measurement of Critical Success Factors by organizations through creation of Key Performance Indicators (KPIs).
They go ahead to show that sales growth and market share as Key Performance Indicators directly linked to competitiveness. Furthermore, Return on Sales is one of the ratios used to monitor profitability of a business.3 Retail Pharmacy Business in Kisumu County Retail pharmacies give basic healthcare assistance to the general population while also dispensing prescription and over-the-counter medications. The pharmaceutical industry 4 in Kenya is highly regulated by the Pharmacy and Poisons Board (PPB). The first edition on the guidelines of good distribution practices for pharmaceuticals by the PPB in 2006, outlines the minimum requirements in terms of buildings, stock handling, personnel, transport, record keeping and sales of medicines.
Basically, the position of the building, the floor plan and the display of pharmaceutical brands in retail pharmacies is outlined by the PPB. Retail pharmacy personnel have to be registered by the PPB too and have to carry out their daily activities while strictly observing guidelines set out in Cap 244 of the Kenyan constitution. The pharmaceutical industry in Kisumu County comprises of distributors/wholesalers and retail pharmacies. In this study, I am going to focus on the retail pharmacies.
There are more than forty retail pharmacies in Kisumu County spread across the seven sub counties. Just like the rest of retail pharmacies in Kenya, retail pharmacies in Kisumu County have to observe PPB guidelines. In spite of the strict rules, recently, there has been an increase in the number of retail pharmacies. To attract new customers or retain the existing ones, these retail pharmacies have had to go an extra mile in their marketing strategies.
Retail pharmacies are more intentional now in positioning themselves as brands that customers would relate or want to be associated with. They are more concerned not only with how well they are known to their customers, but also the perception Kisumu residents have on the quality of brands and services they offer. Retail pharmacies are also working to enhance their channel relationships with stakeholders in the healthcare sector in Kisumu i., hospitals, clinics, distributors and doctors. All this is an effort by the pharmacies to increase their market share and performance given the rising competition in the field.2 Research Problem 5 Significant brand equity is important as it assures firms of a competitive advantage and a barrier to entry by their competitors (Farquhar, 1989).
A firm's long-term competitive advantage over its rivals can be attributed to Shamma & Hassan (2011)'s comprehensive approach to Total Brand Equity (a convergence of Corporate Brand Equity and Customer-Based Brand Equity), which shows that Total Brand Equity, customer satisfaction, and market performance are all linked. Increased amounts of sales growth and customer loyalty have been found to be achieved by companies with more valuable brand assets than liabilities.