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Consumer Responses to "Rebranding". The Concept of Brand Equity Transfers and Four Different Consumer Response Scenarios

Bachelor Thesis 2014 49 Pages

Business economics - Company formation, Business Plans

Excerpt

Table of Contents

Abstract

Zusammenfassung

List of Figures

List of Tables

List of Abbreviations

1. Introduction

2. Old wine in new bottles: Principles of corporate rebranding
2.1 Brands and brains – basic branding theory from a cognitive perspective
2.2 Dimensions of rebranding
2.2.1 From color shift to brand name change: different acts and motives of rebranding
2.2.2 Distinct marketing strategies for managing the rebranding process

3. Rebranding from a consumer perspective
3.2 Brand equity transfer: re-branding is re-settling consumer associations
3.3 Consumer response scenarios with regard to consumers’ brand awareness and brand image
3.3.1 The consumer decision-making process
3.3.2 Brand agnosia or surprise effect – impacts on brand awareness
3.3.3 What the consumer thinks: impact on brand image
3.3.4 Outlined response scenarios at a glance
3.4 Derived implications for marketers to avoid brand equity loss

4. Outlook and conclusion

References

Image References

Abstract

Rebranding is a frequently used marketing measure whenever corporations strive for changes in the physical elements of their brands or their brand management. This paper analyzes how consumers’ brand awareness and brand image is affected, when consumers are confronted with altered brand names and symbols. By elaborating the concept of brand equity transfers and four different consumer response scenarios, psychological theories and effects are derived and related to prevalent findings of rebranding-caused brand equity loss.

Zusammenfassung

Rebranding ist ein vielfach-angewandtes Marketinginstrument für den Fall, dass Unternehmen Veränderungen in physischen Markenmerkmalen oder ihrem Markenmanagement anstreben. Diese Arbeit untersucht wie Markenbekanntheit und Markenimage von Konsumenten beeinflusst werden, wenn Konsumenten mit veränderten Markennamen und –symbolen konfrontiert werden. Anhand der Ausarbeitung des Konzepts von Markenwert-Transfers sowie vier unterschiedlichen Konsumentenreaktionen werden psychologische Theorien und Effekte abgeleitet und in Zusammenhang mit verbreiteten Forschungsergebnissen über Rebranding-induzierte Verluste im Markenwert gesetzt.

List of Figures

Figure 1: Structure of the paper in context of the SOR-model

Figure 2: Extract of an associative network

Figure 3: Shell rebranding in form of subtle logo changes

Figure 4: IBM logo switch

Figure 5: Gradual rebranding of D2 into Vodafone

Figure 6: Concept of customer-based brand equity

Figure 7: Construct of brand equity and knowledge transfer

Figure 8: Cognitive processing model of consumer decision-making

Figure 9: Schema of outlined response scenarios

List of Tables

Table 1: Psychological theories accountable for reactions to rebranding

List of Abbreviations

illustration not visible in this excerpt

1. Introduction

Recently Kraft Foods renamed its global snack brand to Mondelēz International. Affecting several popular product brands, such as Cadbury, Jacobs, Milka, and Oreo, it presumably will be one of the biggest executed acts of rebranding within consumer goods history. Kraft Foods hopes that the new name will reinforce the company’s global nature, and strengthen its relationships with consumers, employees and shareholders (Kraft Foods Inc. 2012). The expressed goals stand in contrast to various examples of unsuccessful rebranding endeavors and academic studies, which reveal that rebranding may arouse hostility and significant negative reactions in consumers (Kapferer 2008, 431; Keller 2008, 585). By disrupting and affecting consumer decision-making processes, rebranding – according to these findings – has the potential to damage brand equity in a most serious way (Aaker 1991, 16).

Despite this, cases of rebranding have risen disproportionately in the last two decades (Kircher 2005, 598) – in a time where brand equity has increasingly gained in importance, ever since managers realized that the most valuable assets of a company were not its tangible assets, but its brands and their value in consumers’ minds (Aaker 1991, 14; Kapferer 2008, 4; Keller 2002, 151; Meffert, Burmann and Koers 2002, 4). Particularly in today’s complex conditions of increased competition and decreased advertising effectiveness brands have become assets that provide a lasting competitive advantage for firms (Aaker 1991, 14; Pieters, Wedel and Batra 2010, 48). In order to join the game in “…contesting for scarce mental real estate in consumers’ minds” (Holt 2004, 15), companies must create strong brands that communicate unique selling propositions, and that differentiate them from competitors. Consequently, brand management has become a top priority over the last decades, and brand managers often find themselves in a need to rebrand, in order to respond to rapidly changing market conditions and consumer tastes (Aaker and Joachimsthaler 2000, 9; Fischer, Völckner and Sattler 2010, 823). Reasons for rebranding may range from a firm’s simple desire to stay ‘fresh’ to more drastic occurrences, such as mergers and acquisitions (M&As), strategy changes, legal disputes, or reputation problems (Esch 2012, 275; Muzellec and Lambkin 2006, 809).

This paper lays its focus on acts of rebranding that affect the physical elements of a brand, in particular brand name and brand symbol. Given the studies that suggest rebranding is often accompanied by negative consumer responses and a resulting loss of brand equity, this paper aims to explore the psychological processes that account for such reactions. Central for the analysis will be consumers’ brand knowledge, which consists of the constructs of brand awareness and brand image, and forms the basis of brand equity (Esch and Möll 2005, 63, Keller 1993, 2).

Understanding consumer behavior has become crucially important for marketers in recent years, as consumers have become more and more sophisticated due to the overwhelming amount of choices they are given when they consume (Bettman, Luce and Payne 1998, 187; Keller 2003, 595; Szmigin 2003, 9). Consumer responses are often illustrated with the aid of a neo-behavioral SOR-model, which depicts consumer behavior as a chain of reaction of cognitive and affective processes that are activated upon being exposed to a certain stimulus, such as a brand or a brand-related marketing activity (Kroeber-Riel and Gröppel-Klein 2013, 18). Altered brand names or symbols, as well as the act of rebranding itself, can be viewed as such stimuli, upon which consumers react. Given the limited scope of this paper, the focus will lie on the cognitive dimension of consumer behavior, which consists of information-processing variables like awareness, decision-making, learning, and memory (Kroeber-Riel and Gröppel-Klein 2013, 51). This implies a significant limitation, as affective variables1 will only be taken into consideration to minor extents. The restriction is yet reasonable, since studies reveal that rebranding mainly affects brand equity, and thus consumers’ brand knowledge – the cognitive representation of the brand in consumer memory (Keller 2003, 596; Peter and Olson 2005, 171; 182). Moreover, traditional theories of consumer decision-making consider consumers’ cognitive ability as a premise for affective processes (e.g., Greenwald 1968, 167ff; Lazarus 1991, 168f).

illustration not visible in this excerpt

Figure 1: Structure of the paper in context of the SOR-model

Source: own illustration, based on Kroeber-Riel and Gröppel-Klein (2013), p. 18; p. 52, fig. 11.

The structure and above specified research objective of this paper can be illustrated on basis of the outlined SOR-paradigm (according to fig. 1). The paper consists of two parts: In order to analyze consumer responses to rebranding, the first part will elucidate the phenomenon of rebranding as a stimulus by connecting different forms and strategies with valuable examples from the real business world. This will help to understand the concept of rebranding, and serve as a basis for the second part of the paper, which will focus on the arousing consequences of rebranding for consumers’ brand awareness and brand image. For this purpose, the concept of brand equity and brand equity transfers will be outlined from a consumer perspective. To analyze underlying reasons for brand equity loss, the second part will then explicate distinct consumer reaction scenarios that are based on a cognitive processing model, as well as on theoretical constructs of consumer psychology, such as the social judgment theory, the theory of cognitive dissonance, and mere exposure effects. All consumer response scenarios will be summarized in a final overview. Lastly, important marketing implications will be deduced and analyzed critically.

2. Old wine in new bottles: Principles of corporate rebranding

The term rebranding derives from the prefix re meaning ‘again’, and the word branding (Muzellec and Lambkin 2006, 803f). In order to understand the concept of rebranding, and to furthermore understand how consumers react to it, it is useful to first elaborate the underlying brand concept of this paper. Serving as a basis for the third chapter, the following chapter will furthermore elucidate how brands affect consumers’ minds, and give relevant insights into the phenomenon of rebranding by discussing important dimensions, such as forms and strategies.

2.1 Brands and brains – basic branding theory from a cognitive perspective

The concept of brands appears simple at first glance, but a satisfying definition is still disputed within academic circles. Seminal authors of brand and rebranding literature (e.g., Aaker 1991, 7; Keller 1993, 2; Muzellec and Lambkin 2006, 804) make use of an element-based definition given by the American Marketing Association (AMA) that defines a brand as a "Name, term, design, symbol, or any other feature that identifies one seller's good or service as distinct from those of other sellers" (AMA 1995). Other works give more consumer-based definitions (e.g., Aaker 1997, 347; Gardner and Levy 1955, 35; Fournier 1998, 345; Homburg 2012, 609; Kapferer 2008, 11; Meffert and Burmann 2000, 169): they view brands as socio-psychological phenomena that consist of a set of associations in consumers’ minds. Brands are frequently measured via customer mind-sets, most commonly through brand awareness and image rates (Mizik and Jacobson 2008, 15). If these mental variables result in positive purchase behavior, this provides an ‘added value’ for the firm, also referred to as brand equity (Aaker 1991, 15; Farquhar 1990, 7f; Keller 1993, 1). While the definition of the AMA stresses the physical and legal elements of a brand, the latter definition underlines the role of consumer perception. The present paper understands brands according to the latter, consumer-based concept, as it aims to analyze rebranding from a consumer perspective.

In the consumer goods segment firms often follow an individual product branding strategy, where goods are marketed with brand names that are different from the parent company’s name, for instance Procter & Gamble’s (P&G) Fairy dish washer (Horsky and Swyngedouw, 1987, 333). If a firm follows this strategy, the parent brand takes a backseat position in marketing communications, whereas a corporate branding or umbrella branding strategy puts the parent brand forefront (Homburg 2012, 619f). The present paper makes no distinction between product brands and corporate brands, as research shows that consumers often understand corporate brands as product brands and make no distinction as well (Liedtke 1994, 793). Rebranding of corporate brands, such as Kraft Foods into Mondelēz International, and rebranding of individual product brands, like P&G’s Fairy into Dawn, are thus equally taken into account for the purpose of the paper.

“Strong, favorable, and unique brand associations are essential as sources of brand equity to drive customer behavior” (Leone, Rao, Keller, Luo, McAlister and Srivastava 2006, 126). From this, as well as from the given consumer-based brand definition, it is evident that brand associations in consumers’ mind-sets take up a central role when it comes to consumer decision-making and brand choice (Alba, Hutchinson and Lynch 1991, 4; van Osselaer and Janiszewski 2001, 202). According to Keller (1993, 2) and Aaker (2002, 7f), brand associations are the core of brand equity. Associations are cognitive memory constructs, often simply referred to as knowledge, and are fundamental for brand success, as they form the basis consumers’ brand awareness and brand image (Nedungadi 1990, 264; Trommsdorff and Teichert 2011, 126f). Brand knowledge, therefore, is the cognitive representation of a brand, consisting of units of subjective knowledge that consumers retrieve from already stored or new pieces of information (Peter and Olson 2005, 171; 182; Trommsdorff and Teichert 2011, 75). Cognition occurs via mental activities, such as thinking, remembering, and learning – all vital for consumers to take purchase decisions, and to predict human behavior (Cacioppo, Petty and Crites 1994, 261). Many constructs of consumer behavior can be explained with the aid of cognitive elements: Traditional views of consumer decision-making, for instance, are based on the understanding “…that cognitive variables (awareness, comprehension, interest, evaluation, conviction, etc.) are the main concern of marketing and the primary controllers of behavior” (Peter and Olson 2005, 197). It is yet important to stress that this implicates a substantial limitation, since consumer behavior also largely depends on affective dimensions, and especially in low-involvement situations consumers tend to be driven more emotionally than cognitively (Celsi and Olson 1988, 221f; Esch and Möll 2005, 71).

The representation of consumer cognition, or consumer knowledge, is commonly modeled “…as a simple network in which all elements or units are nodes and the connections among them are links” (Anderson 1983, 25). This mental network is referred to as Human Associative Memory (HAM) model and depicts the associations that a consumer holds in his mind about a distinct term or image (Anderson 1983, 25; Collins and Loftus 1975, 411ff; Solomon 2013, 117). A HAM-network of a brand can be depicted exemplarily according to fig. 2.

Figure 2: Extract of an associative network

illustration not visible in this excerpt

Source: Own illustration, based on Kroeber-Riel and Gröppel-Klein (2013), p. 331, fig. 96.

The associative network in fig. 2 illustrates different pieces of information that consumers connect with the brand name Mercedes or its symbol, such as brand characteristics, brand origin, and alternative brands. If positive associations outweigh the negative, then consumers hold a favorable brand image in their minds and develop a favorable attitude toward the brand (Krishnan 1996, 392). To simplify this neuropsychological-based construct, Aaker (1991, 63) compares the mental representation of brands to a file folder stored in consumer memory: this file preserves all associations that come to consumers’ minds upon seeing or hearing a certain brand name or brand symbol. If a brand fails to evoke strong associations, or if positive associations lose their strength, then brand equity is in decline, and it is likely that the brand has reached a final stage in its life cycle (Keller 1993, 2; Müller, Kocher and Crettaz 2013, 82). To avoid this, brand managers must rejuvenate, up-date, face-lift, drastically change, or reposition their brands from time to time through acts of rebranding (Kapferer 2008, 239; Müller et al. 2013, 82). When a brand’s appearance is deliberately changed through the introduction of a new name or logo, consumers, on the other hand, may have difficulty in linking the new name or logo to their established associative network memory (Solomon 2009, 135f). These potential sources of brand equity loss will be further elaborated in the third chapter.

2.2 Dimensions of rebranding

Kraft Foods’ corporate name change into Mondelēz International is only one of many examples for rebranding. Rebranding may apply equally to umbrella brands, corporate brands and individual product brands, and occurs in consumer goods sectors just as well as in industrial goods and service firms, sports teams, non-profit-organizations, universities, political parties, and even in cities (Miller, Merrilees and Yakimova 2014, 266). There are many facets of rebranding: they may range from a brand’s repositioning via an innovative advertising campaign with the aim to attract a younger target group, over to physical changes of brand aesthetics, such as changes in a brand’s name and symbol (Muzellec and Lambkin 2006, 805). The present paper explores the latter facet. In the following rebranding will be conceptualized with regard to what brand element is being rebranded (name or logo), as well as to how it is being rebranded (abruptly or gradually, and communicated or non-communicated).

2.2.1 From color shift to brand name change: different acts and motives of rebranding

The term rebranding has been frequently used and established in journalistic language, but scarcely in academic language (Muzellec and Lambkin 2006, 803f). Muzellec and Lambkin (2006, 805) provide one of the few definitions according to which rebranding is characterized as “…the creation of a new name, term, symbol, design or a combination of them for an established brand with the intention of developing a differentiated (new) position in the mind of stakeholders (..)”. Other works that have addressed the topic use different terminology, such as brand transfer2 (e.g., Kapferer 2008, 415), brand-migration (Esch 2012, 274-278), brand evolution and revitalization (Merrilees 2005, 201), or simply brand name or logo change (e.g., Aaker 1991, 56-61; Keller 2008, 585).

As discussed above, rebranding comprehends the facet of altering one or multiple brand elements, with the result of dramatic or less dramatic changes in a brand’s identity. Keller (2002, 157) defines brand elements as “…those trademarkable devices that serve to identify and differentiate the brand (e.g., brand names, logos, symbols, characters, slogans, jingles, and packages)”. Brand names and brand symbols are two of the most visual and apparent elements for consumers (Homburg 2012, 625f; Keller 2008, 145; 155): A brand’s name or symbol plays “…an important role in the cognitive structure underlying brand equity because it serves as the central node around which these brand associations form an associative memory network” (Punj and Hillyer 2004, 124f). They are also critical in creating brand awareness, as they serve as an in-store recognition aid during consumers’ selection processes (Keller 2008, 155). Furthermore, well-established names and logos also reflect a brand’s image: upon hearing the name Mercedes or seeing its three-pointed star logo, for instance, consumers may immediately associate superior engineering, luxury and quality with the brand (Pimentel and Heckler 2003, 107). By changing a brand name or logo a firm usually wants to signal consumers that something about the brand, or the company behind it, has or is about to change (Horksy and Swyngedouw 1987, 332). When BIC Pen dropped the “Pen” in its name, it signaled that the firm was about to extend their business by entering the shavers market (Horksy and Swyngedouw 1987, 332). Muzellec and Lambkin (2006, 805) consider changes in brand symbols as weaker and more subtle forms of rebranding, while name changes are considered more radical. Both forms often go hand in hand, since in most cases name and logo design are closely coordinated to communicate a consistent message and brand meaning to the consumer (Esch und Langner 2005, 614; Klink 2003, 154).

The terms brand logo, symbol, trademark and other corporate identity designs will be used synonymously in this paper, and can be defined as “…graphic designs that a company uses, with or without its name, to identify itself or its products” (Henderson and Cote 1998, 14). For this purpose, logos are not only placed on the product itself and on its packaging, but also in print and television advertisements and many other communication measures that serve the brand’s overall awareness (Henderson and Cote 1998, 14). Since symbols can be learned, memorized and recalled easier than names (Aaker 1991, 73), they are often used in combination with names to improve and aid consumers’ cognitive performance (Esch and Langner 2005, 605ff; Henderson and Cote 1998, 15; Trommsdroff and Teichert 2011, 87). If a firm changes its symbol, it can affect consumers’ purchasing confidence in a serious way (Aaker 1991, 16). Still, periodical up-dates of brand symbols are not unusual and might even be mandatory, if a brand is in risk of being perceived as out-of-date (Aaker 2002, 232; Henderson and Cote 1998, 15): In the 1980s, for instance, many firms followed the trend to create more abstract and stylized logos, while in the 1990s the trend was toward a more traditional look (Keller 2008, 156). Often these up-dates are so subtle that consumers hardly notice them. Shell, for instance, made brand symbol alterations multiple times but in the main stuck to its signature feature, the shell.

Figure 3: Shell rebranding in form of subtle logo changes

illustration not visible in this excerpt

Source: own illustration, based on Esch (2012), p. 235, fig. 124.

Rebranding of symbols can also be the result of radical changes in the company’s or brand’s identity that render a previous logo obsolete (Kapferer 2008, 195). The IBM logo transition can be taken as a valuable example for a rebranding process that is driven by such changes of business strategy. The name IBM is composed of the initial letters of the words “International Business Machines”. However, this is not what IBM stands for anymore: in the course of the twentieth century IBM underwent a transition from being a manufacturer of all kinds of machines (ranging from complex typewriters to simple meat and cheese slicers) to a pioneer in information technology (IT) (IBM 2014). Therefore, when being confronted with IBM today, consumers do not associate machines with the brand, but IT and global network services. Unsurprisingly, IBM’s refocus on a different core business, entailed the decision to no longer use a logo that makes reference to the outdated “machines” association.

Figure 4: IBM logo switch

illustration not visible in this excerpt

Source: see image references.

Just as with logos, also brand names may change in the course of a brand’s existence. Aaker (1991, 187) and Keller (2008, 145) describe brand names as the perhaps most central of all brand elements, as they carry semantic meaning and activate consumers’ perceived quality of the product (Kroeber-Riel and Gröppel-Klein 2013, 387). Like logos, names may become outdated, and do not reflect a brand’s image in an authentic way anymore. American courier delivery service FedEx, for instance, dropped its former name Federal Express in 2000 because the term “federal” seemed too militaristic and bureaucratic for modern times (Aaker 2002, 232). Rebranding efforts as such are vital in a time where rapid changes of consumer needs and tastes not only lead to shorter product life cycles but also to shorter brand name and logo life cycles (Liedtke 1994, 795;Simon 1979, 439). Nevertheless, the renaming of a brand represents a milestone in a company’s history that is unlikely to occur more than once given its immense costs (Kalaignanam and Bahadir 2013, 457). The direct costs of name changes involve legal fees, expenses to print new packaging and stationery, as well as advertising outlays (Horsky and Swyngedouw 1987, 321). Anderson Consulting’s rebranding into Accenture, for instance, involved direct costs of about $13 million, and additional $58 million of reorganization costs (Stuart and Muzellec 2004, 479). Thus, if a company decides to change its brand name, it either expects improved long-term profitability and performance, or something in the company or brand environment has changed dramatically (Muzellec and Lambkin 2006, 808). Database analysis among 166 renamed brands found that the most prevalent reason for name changes are mergers and acquisitions (M&As) (Muzellec and Lambkin 2006, 809). Several hundred firms change their names each year due to M&As: Glaxo Wellcome and SmithKline becoming GlaxoSmithKline, Ciba and Sandoz becoming Novartis, Mannesmann becoming Vodafone, and many more examples give evidence to this trend (Esch and Langner 2005, 575; Keller 2008, 584). Another frequent cause for changing names is business restructuring and reorientation (Kalaignanam and Bahadir 2013, 459): refocusing on new markets in form of internationalization strategies for instance, often evokes firms to rename some of their brands – either to standardize and reduce the size of their brand portfolio (many different national brands becoming one global brand), or because the brand name that works for one country does not work for another (Liedtke 1994, 794). This case was experienced by UK’s state-owned post office group Royal Mail when they chose to substitute their 300-year-old name in 2000 in favor of the name Consignia. The name “Royal Mail” was thought to be problematic, firstly because the group had extended their business and was no longer a mail-only organization, and secondly because it was now operating in countries that had their own royal family or where the public held anti-royalist views (Haig 2011, 155). Despite all rebranding efforts, the name Consignia proved to be so unpopular with employees and public that Royal Mail had to reverse its £3.5-million-rebranding-project after only two years (Muzellec and Lambkin 2006, 803).

Apart from this, rebranding, at times, is also a stringently required measure when a firm loses its naming rights or suffers serious damage to its image: when in 1989 ExxonMobil’s oil vessel Exxon Valdez caused an environmental disaster along the shores of Alaska, consumers in the United States called for a boycott of Exxon gas stations (Liedtke 1994, 802). Meanwhile ExxonMobil’s gas stations in Germany were spared of the boycott because they were run under the different name Esso, and consequently not associated with the disaster (Liedtke 1994, 802). This example makes it clear that names have the power and capability to harm and enhance firms’ reputation by considerable extents.

Unsuccessful rebranding cases, like the Royal-Mail case or P&G’s failed Fairy rebranding (discussed below), support the prevalent view in literature that rebranding is not only a costly but also a risky endeavor (e.g., Kalaignanam and Bahadir 2013, 457; Kapferer 2008, 415; Miller et al. 2014, 265; Muzellec and Lambkin 2006, 803). Accenture reported a fourth-quarter loss of $370 million after its name change from Anderson Consulting, P&G’s market share for their dish washing liquid Fairy plummeted from 11.8% to 4.7% in a time span of only 18 months (Bauer, Mäder, Valtin 2003, 2). Kapferer (2008, 416) notes that risks may vary immensely depending on whether an umbrella brand or a product brand is being rebranded, whereas other authors emphasize that the implied risks largely depend on how the rebranding is being managed, thus what strategy is being used (Liedtke 1994, 810; Bauer et al. 2003, 6; Bieling 2005, 56;58ff).

2.2.2 Distinct marketing strategies for managing the rebranding process

Given the range of different causes for rebranding and its outlined costs and risks, rebranding must be managed tactically and strategically careful (Aaker and Joachimsthaler 2000, 9). In the following the two different strategic dimensions of timing and communication, will be discussed. Timing refers to the aspect of how fast a firm should change its brand, whereas communication refers to the extent that a firm informs consumers about rebranding steps.

[...]


1 Affective processes encompass activating variables, such as emotion, motivation, and attitude. Nevertheless, a clear assignment to one of the two processes can never be accomplished for any of the given variables: Attitude, for instance, is largely assigned to the activating processes but also compromises certain cognitive components (Kroeber-Riel and Gröppel-Klein 2013, 51; 234).

2 Opposed to Kapferer (2008), in many marketing handbooks brand transfers refer to brand and line extensions, and not to brand name changes (e.g., Esch 2012, 403; Homburg 2012, 624).

Details

Pages
49
Year
2014
ISBN (eBook)
9783656950523
ISBN (Book)
9783656950530
File size
780 KB
Language
English
Catalog Number
v298646
Institution / College
University of Bayreuth – Rechts- und Wirtschaftswissenschaftliche Fakultät
Grade
1,3
Tags
rebranding brand-management brands consumer-behavior purchase-behavior brand-change brand-migration brand-awareness brand-image brand-name brand-symbol brand-equity Markenwert recognition decision-making-process

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Title: Consumer Responses to "Rebranding". The Concept of Brand Equity Transfers and Four Different Consumer Response Scenarios