Exploring customer attitudes on BMW

Table of Contents

Lists of Appendices

Lists of Tables

Lists of Figures

Acknowledgement

I. Introduction
1.1 Objective of the Study
1.2 Purpose of the study

II. Background of Study
2.1 Conceptual Framework
2.2 Theoretical Foundation
2.3 Development of Research Questions
2.4 Hypotheses Development

III. Research Methodology
3.1 Information Needs and Data Collection Methods
3.2 Development of Questionnaire
3.3 Sample Design

IV. Data Analysis and Findings
4.1 Descriptive Statistics
4.2 Results from Quantitative Research
4.3 Other Findings

V. Conclusion
5.1 Discussion
5.2 Limitation of Study
5.3 Future Research

References

Appendices

List of Appendices

Appendix A: Survey Weiler (2004)

Appendix B: Customer-perceived target group of BMW

Appendix C: Customer awareness of car brands

Appendix D: Driving experience of customers

Appendix E: Customer brand associations towards BMW

Appendix F: Customer-perceived uniqueness of BMW

Appendix G: Customer-perceived superiority of BMW

Appendix H: Customer judgment of the brand BMW

Appendix I: Desire of owning a car brand

Appendix J: Sympathy towards BMW drivers

Appendix K: Importance of German-made products for customers

Appendix L: Feelings towards the BMW brand

Appendix M: Customer-perceived price of BMW

Appendix N: Customer-perceived factors for customer satisfaction

Appendix O: Customer resonance towards BMW

Appendix P: Customer satisfaction and brand loyalty

Appendix Q: Regression Analysis for customer satisfaction

Appendix R: Regression Analysis for brand loyalty

List of Tables

Table 1: The world’s most valuable brands

Table 2: Distribution by gender

Table 3: Distribution by age group

Table 4: Distribution by marital status

Table 5: Distribution by income

Table 6: Distribution by highest education completed

Table 7: Descriptive statistics for customer satisfaction of existing customers

Table 8: Descriptive statistics for customer satisfaction of potential Customers

Table 9: Descriptive statistics for purchase loyalty of existing customers

Table 10: Descriptive statistics for attitudinal loyalty of customers

Table 11: Regression Analysis of customer satisfaction with all factors – Existing customers

Table 12: Regression Analysis of customer satisfaction with significant factors – Existing customers

Table 13: Regression Analysis of customer satisfaction with all factors – Potential customers

Table 14: Regression Analysis of customer satisfaction with significant factors – Potential customers

Table 15: Regression Analysis for repurchase loyalty – Existing customers

Table 16: Regression Analysis for attitudinal loyalty – Potential customers

Table 17: BMW Brand-Product Matrix

List of Figures

Figure1: Strategic groups within the world automobile industry

Figure 2: Brand Equity Framework

Figure 3: A model of customer satisfaction and customer loyalty towards BMW

Figure 4: Customer-perceived target group of BMW

Figure 5: Recall of performance brands – Existing customers

Figure 6: Recall of performance brands – Potential customers

Figure 7: Recall of luxury brand – Existing customers

Figure 8: Recall of luxury brand – Potential customers

Figure 9: Brand recognition of BMW – Existing and potential customers

Figure 10: Associations towards BMW – Exiting customers

Figure 11: Associations towards BMW – Potential customers

Figure 12: Perceived uniqueness of BMW – Existing customers

Figure 13: Perceived uniqueness of BMW – Potential customers

Figure 14: Perceived superiority of BMW – Existing customers

Figure 15: Perceived superiority of BMW – Potential customers

Figure 16: Driving experience – Existing and potential customers

Figure 17: Customer judgments towards BMW – Existing and potential Customers

Figure 18: Consideration of owning a brand – Existing and potential customers

Figure 19: Desire for performance brand – Existing and potential customers

Figure 20: Desire for luxury brand – Existing and potential customers

Figure 21: Desire for performance brands by gender

Figure 22: Desire for luxury brands by gender

Figure 23: Sympathy towards BMW drivers – Existing customers

Figure 24: Sympathy towards BMW drivers – Potential customers

Figure 25: Importance of German-engineering for existing and potential Customers

Figure 26: Customer feelings – Existing and potential customers

Figure 27: Premium price for BMW – Existing customers

Figure 28: Premium price for BMW – Potential customers

Figure 29: Factors for customer satisfaction – Existing and potential Customers

Figure 30: Customer resonance – Existing and potential customers

Figure 31: Customer satisfaction and brand loyalty – Existing and potential Customers

Figure 32: BMW brand hierarchy

Acknowledgement

I would like to extend a special thanks to Dr. Yooncheong Cho, Assistant Professor of Marketing at Hawaii Pacific University, for her opinions and guidance in completing this paper. I would also like to thank Mr. Dennis Short, General Manager and President at the BMW of Honolulu, Mr. Kevin Keppel, Sales Manager at the BMW of Honolulu, and Mr. Rocco Sciannameo, Pre-owned Sales Manager at the BMW Dealership in Honolulu, for giving me the opportunity of doing my survey at the BMW of Honolulu. Furthermore, I would like to thank Mr. David Rolf at Rolf Advertising and all the survey respondents for their support.

I. Introduction

“Building a brand is both an art and a science. It is the strategic mix of focus and risk that gives a brand its meaning in people’s lives (Dolan, 2003)”. Branding has been around for centuries as a means to distinguish the goods of one producer from those of another. Brand elements identify and differentiate the brand. However, many practicing managers refer to a brand as more than that. They define a brand in terms of having actually created a certain amount of awareness and reputation in the marketplace, which distinguishes a small brand from a big brand. Especially strong brands have a number of different types of intangible image associations that link customers emotionally to the brand. Prior research has explored differences in customer perception and evaluation of brands for example through investigating brand equity. More recent research has found out that customers differ not only in their perception of brands but also in how they relate to brands. This suggests that people sometimes even form a relationship with a specific brand (Aggarwal, 2004).

Branding and brand-based differentiation are powerful means for creating and sustaining competitive advantage (Aggarwal, 2004). Highly competitive markets like the automotive market make powerful, strong brands essential to accomplishing growth. According to Agarwal, Dahlhoff & Rao (2004), companies create brand equity by delivering quality products and by creating strong, unique and favorable brand associations. Customer loyalty, larger margins, brand extension opportunities, enhanced perceptions of product performance, and increased marketing effectiveness and efficiency among other things are possible benefits of building up brand equity.

This research paper will look at the brand BMW. BMW, which stands for “Bayerische Motoren Werke”, is a major European manufacturer of luxury cars. The headquarters of the multinational corporation BMW Group is in Munich, Germany. The company has built substantial brand equity over the years through the continuous branding efforts for high quality products. The luxury car category includes both traditional and functional luxury cars. U.S. manufacturers mainly produce traditional luxury cars, while functional luxury cars are represented primarily by European manufacturers such as BMW (Bernhardt & Kinnear, 1994).

BMW has to face a high level of competition in the markets they are present. Direct competitors for BMW include luxury car manufacturers from Japan, the U.S., and other European countries. In the US, BMW’s biggest competitor brands are Ford, Cadillac, Lincoln, Buick, and Chrysler. Japanese competitor brands include Lexus and Honda. Furthermore, BMW competes locally in Germany and globally with other European companies such as Mercedes Benz, Audi and Jaguar.

1.1 Objective of the Studies

The objective of this research paper is to find out attitudes of US consumers towards the brand BMW. Specifically, the objective is to uncover associations and attitudes of existing and potential customers towards the brand BMW. Furthermore, the objective of this study is to explore customer satisfaction and brand loyalty for existing customers, while to investigate willingness to purchase, expected satisfaction and attitudinal loyalty for potential customers. This paper will begin by introducing the concept of brand equity and what makes a strong brand. Furthermore, the researcher will discuss why building a strong brand equity is a competitive advantage in the marketplace, especially in highly competitive markets like the automotive markets.

First, this paper will explore each dimension that possibly contributes to building brand equity. These areas include the so-called brand tools, which consist of brand elements, marketing program and secondary associations, as well as the knowledge structure of the brand. The knowledge structure on the other hand includes brand awareness, brand image or also called brand associations, and brand attitudes. Some of the brand tools, and all areas of the knowledge structure of the brand BMW will be investigated from this study. Based on the findings from the survey, the objective is to find out the degree of customer satisfaction as well as the degree of customer loyalty. The degree of customer satisfaction of existing customers as well as the willingness of potential customers to purchase a BMW is used as criteria to measure the strength of the BMW brand equity. Statistical analysis, such as regression analysis will be used to measure the level of customer satisfaction and loyalty. This form of analysis will uncover a possible correlation between the level of customer satisfaction and loyalty and independent variables like customer service, price, product performance, product design, customization or the company website.

These findings will be used to build an underlying basis for recommendations of how to manage the brand BMW over time and across geographic boundaries. The objective then will be how BMW can gain and sustain a competitive advantage within the automotive industry. The researcher will form suggestions and recommendations regarding potential adjustment to the current branding strategy of BMW in order to further strengthen the brand equity.

1.2 Research Purposes

The automobile market is at the maturity stage of the life cycle, locally and globally, due to an increased number of competitors from domestic and foreign markets. Furthermore, the automobile market is characterized by a low potential for market growth, but high sales and profit potential (Murtagh, 2004). The following figure demonstrates the positioning of auto manufacturers within a global context.

Figure 1 Strategic Groups Within the World Automobile Industry (Murtagh, P. Dr., 2004)

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The overall market can be organized in geographic as well as product segments as shown in previous figure 1. BMW belongs, as mentioned before, in the functional luxury car segment. This segment, or also called strategic group, is categorized through low product diversification but a relatively high geographical scope (Murtagh, 2003).

Competitive forces and rivalry are high in each segment of the overall market. Car manufacturers are highly dependent on the moves of competitors. Additionally, cars are quite similar in terms of many product attributes, such as performance, price, exterior design etc. Therefore, car manufacturers have to distinguish their cars from competitors in form of developing cars that satisfy customer needs and wants. Over the past decade, marketers increasingly recognized the importance of building brand equity in order to accomplish growth and to gain a competitive advantage (Rao, Agarwal, & Dahlhoff). According to Aaker (1991), firms create brand equity by delivering quality products and by creating strong brand associations through appropriate communication and marketing strategies.

In times of increasing competition as well as increasing bargaining power of customers within the automotive market, BMW has to make sure that the brand BMW stays on top of the game in terms of competitiveness. Based on this, the purpose of this research paper is to explore what the brand BMW represents to existing and potential customers as well as to measure customer satisfaction and customer brand loyalty on BMW as a player of the automotive industry. Furthermore, the purpose of this paper is to provide implications to the automobile industry and particularly to BMW on how to further build and sustain a strong brand equity.

II. Background of Study

2.1 Conceptual Framework

Almost all previous studies of brand equity agree that consumers associate value added to a product or service with a particular brand name. Therefore, there are two aspects to brand equity. One aspect is from the viewpoint of the firm, which emphasizes brand related outcomes such as relative price and market share. The second aspect of brand equity appears to depend on psychological associations of customers with the brand. Several studies have suggested that these psychological associations with a brand name account for brand equity outcomes. Thus, branding efforts can create long-term benefits in form of brand equity through the customer responses they engender (Agarwal, Dahlhoff & Rao, 2004).

Furthermore, the importance of brand loyalty has been recognized in the marketing literature for the last decades. The brand equity outcomes such as greater market share and higher relative prices may also depend on various aspects of brand loyalty. For example, brand-loyal consumers may be willing to pay more for a brand because they perceive some unique value in the brand that no alternative can provide. In addition, many studies suggest other loyalty-related outcomes such as greater resistance among loyal consumers to competitive strategies, because brand loyalty includes a degree of commitment in terms of unique value associated with the brand. Many researchers have also explored that customer satisfaction is a key determinant in customer’s decision to keep or discontinue a given product or service relationship, thus indicating the degree of loyalty. Customer satisfaction has been defined in many ways by many researchers over the years. Oliver (1996) defines satisfaction as “the consumer’s fulfillment response. It is a judgment that a product or service feature, or the product or service itself, provided a pleasurable level of fulfillment.”

Previous research acknowledged that customer satisfaction might have impact on variables such as price. However, the role that variables such as price, customer service, technology, innovation or quality play in the creation of customer satisfaction has not been explicitly considered. Furthermore, there is no previous study existing that shows the potential correlation between these variables and customer satisfaction specifically for the brand BMW. This study uses a framework that specifies how the variables mentioned above affect customer satisfaction and how, in turn, customer satisfaction influences the level of customer loyalty specifically for the brand BMW.

2.2 Theoretical Foundation

The value of a firm consists of both tangible and intangible assets. Strong brand equity as part of intangible assets represents the relationship between the company and its customers and can affect its future value (Agarwal, Dahlhoff & Rao, 2004). Brand equity is usually not listed on balance sheets, but can go further in determining success than technological breakthroughs by allowing the marketer to demand premium prices (Czinkota & Ronkainen, 2004). Furthermore, a strong brand can help a company to enhance their sales through improved attitudes towards the brand.

According to the brand equity framework, the power of a brand lies in the minds of consumers or customers and what they have experienced and learned about the brand over time (Keller, 2003). Brands shape customer decisions to purchase and create economic value. Based on previous research by McKinsey (1996), on the average, brands were responsible for 18 percent of total purchase decisions. Specifically within the car industry, the brand was the major influencing factor for 12 percent of purchases. Thus, building a strong brand can be a major competitive advantage.

The process of building brand equity can be thought of in terms of sequence of steps. There is an obvious ordering of four steps, which is from brand identity to brand meaning to brand responses and finally to brand relationships. Performing the four steps is a difficult process. To provide some structure, Keller (2003) suggests six brand building blocks with customers – salience, performance, imagery, judgments, feelings and resonance. Figure 2 shows the brand equity framework and significant paths within the framework.

Figure 2

Brand Equity Framework (Keller, 2003)

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Achieving the right brand identity involves creating brand salience with customers, which in turn relates to aspects of the awareness of the brand (Keller, 2003). A number of different types of associations that relate to either performance or imagery may become linked to the brand (Keller, 2003). The brand associations making up the brand image and meaning can be characterized and profiled according to three important dimensions – strength, favorability, and uniqueness – that provide the key to building brand equity (Keller, 2003). Brand judgments focus on customers’ personal opinions and evaluations with regard to the brand, while brand feelings are customers’ emotional responses and reactions with respect to the brand (Keller, 2003). Both relate to aspects of attitudes towards the brand. According to Keller (2993), the final step of the model focuses on brand resonance, which refers to the nature of the relationship and level of identification that the customer has with the brand.

The indirect approach to building brand equity is referred by Keller (2003) to as leveraging secondary brand knowledge for a brand. By making a connection between the brand and another entity, consumers may form a mental association from the brand to an entity, and to any associations, judgments, feelings, and the like linked to that entity. In the case of BMW the country of origin could be leveraged as a secondary association. Germany has become known for expertise in car manufacturing and engineering (Keller, 2003). Consumers may pick a BMW based on their beliefs about the quality of BMW products or the image that this brand communicates. Because it is typically a legal necessity for the country of origin to appear visibly somewhere on the product, associations of Germany as the country of origin have the potential to be created at the point of purchase and to affect brand decisions there (Keller, 2003).

As the positive outcome of building strong brand equity, brand loyalty might translate into profits despite the fact that favored brands may not be superior by any tangible measure (Czinkota & Ronkainen, 2004). According to previous studies by Keller (2003), possible outcomes of building strong brand equity include the following: More inelastic to price increases and more elastic to price decreases, larger margins, brand loyalty, extension opportunities, greater trade support, licensing opportunities, lower vulnerability to crisis, enhanced product perception, and increased marketing communication effectiveness and efficiency.

How a company determines its competitive destiny depends a lot on the company and its management (Weilbacher, 1993). The goal of marketing is to satisfy the customer. Corporations have publicly accepted this marketing concept of customer satisfaction. However, in the process of real-time decision-making, this concept may receive little attention. Previous research shows that it is almost certainly true that many successful companies have become successful in the first place because of attracting customers through satisfaction gained from superior products or superior services. Though, a company can only sustain its success if it makes a series of conscious and inspired decisions about how it will serve consumers through the creating of products and services that have identifiable value for consumers. The ability of the company to maintain the clarity of its intention to deliver value to the consumer therefore determines the degree to which its success will continue (Erdem & Swait, 2004).

As previous studies have suggested, many of the marketing forces that are supposed to cause brand loyalty seem to be increasingly ineffective. A significant number of academic studies confirm the rational basis of consumer brand choice. These studies came to the conclusion that the most influential assumption in consumer-behavior research is that purchases are preceded by a rationale decision process (Weilbacher, 1993). However, if the perceived differences among brands are not great, there is little or no reason for consumers to become loyal to particular brands (Weilbacher, 1993). More recent analyses based upon the alternative non-rational explanation of consumer brand choice show that non-rationale factors influence a customer’s decision. The brand of choice is a decision usually based on the brand’s image and value, with a positive real or perceived price-quality relation (Marconi, 2000). Therefore, Marconi (2000) suggests that the decision to remain loyal to the brand over time is based on following considerations: Customer Satisfaction, value, image, customer service, and guarantee or warranty.

Customer Satisfaction is defined by Marconi (2000) as “the collective embodiment of all the other factors of brand loyalty: value, image, convenience, service, and guarantee”. Satisfaction is often the reason why customers of car manufacturers tend to replace their car with the latest version or model offered by the same manufacturer. In order to ensure customer satisfaction over time, monitoring the level of customer satisfaction is as important to the success of a brand as initially defining the target prospect. In terms of value, long-term use suggests brand loyalty, but much of the responsibility to keep a loyal customer lies with the manufacturer’s brand manager. Value is defined by Marconi (2000) and can be based on a real or perceived Price-Quality-Relation. For example, even if the price-quality-relation is perceived rather than real, a lessening of quality standards will disappoint loyal supporters, as will price change that appears unwarranted. Image of a brand can be its own personality as well as its reputation. The personality of a brand is of great importance, because it represents certain characteristics or even lifestyles. It is critical, because it helps building a public identification of oneself with the brand that may lead to strong brand loyalty. In terms of brand reputation, it is important to build a strong, unique and favorable image in order to build brand loyalty (Keller, 2003). Customer Service is one of the most overused words and under-delivered commodities in business (Marconi, 2000). One reason for a high level of dissatisfaction can be traced to over promising. Promising a level of service that can’t be delivered will leave a lasting smudge on a brand that might be otherwise worthy. Brands that are not significantly better than lower-priced competitive brands often enjoy repeat business and brand loyalty because of good service (Marconi, 2000). Finally, guarantee or warranty can create brand loyalty, because the mere fact that it is offered adds the perception of greater value to a product. Offering a guarantee gives the customer a feeling of security, because the manufacturer stands for the quality of the products.

Previous research by Chaudhuri and Holbrook (2001) went further and examined two aspects of brand loyalty, purchase loyalty and attitudinal loyalty. Behavioral, or purchase, loyalty consists of repeated purchases of the brand, whereas attitudinal brand loyalty includes a degree of dispositional commitment in terms of some unique value associated with the brand. According to the authors, purchase loyalty leads to greater market share because of higher levels of repeat purchases among their users. Research also found that consumers’ price perceptions of brands have been found to be unrelated to brand loyalty. Chaudhuri and Holbrook (2001) propose that attitudinal loyalty leads to a higher relative price for the brand. This proposition draws on the theory of brand equity as a set of customer’s associations and attitudes. In addition, Dick and Basu (1994) suggest other loyalty related marketing advantages, such as favorable word of mouth, which, in turn, might increase market share.

Finally, a shift in customer demographics is recognized. As women rise up through the corporate ranks, their influence on the business world and the automobile industry is increasing enormously. According to Gobe (2001) women are the principal buyers for 65 percent of all cars and trucks in the United States and yet there are very few car manufacturers to make a concentrated attempt to pursue women. An attempt to target women should be approached with great understanding of their true desires and needs. Previous research by Gobe (2001) has found the five most important elements regarding women’s desires and needs. These elements are respect (acknowledge that women are intelligent and informed), individuality (women are playing multiple roles today, therefore recognize their diversity), stress relief (43 percent of women feel frustrated in balancing their work life with their private life), connection (women base most of their decision making on emotions as opposed to rational elements) and relationship (women are looking for brands to trust and will often remain extremely loyal to a brand that has built on their trust consistently, even beyond price).

2.3 Development of Research Questions

As mentioned previously, Keller (2003) has suggested that brand equity can be measured indirectly by measuring the potential sources of brand equity, and directly, by measuring the possible outcomes of brand equity. In an interbrand-sponsored study that rates brands on their value and their strengths, BMW ranked on position 20 with a brand value of 14.425 billion US Dollars. Brand value has been determined using publicly available financial information and market analysis. Brand strength has been scored using the attributes market, stability, leadership, support, trend, geography, and protection. Following table shows the brand value of BMW compared to some of its major global competitors.

Table 1

The World’s Most Valuable Brands 2002 (Business Week, August 5, 2002)

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According to Keller (2003), measuring sources of customer-based brand equity requires measuring various aspects of brand awareness and brand image that can potentially lead to the differential customer response that creates brand equity. Measuring outcomes of brand equity such as brand loyalty involves the various benefits realized from creating these sources of brand equity (Keller, 2003). Therefore, this study will conduct an in-depth examination of the sources of brand equity of the brand BMW, resulting in exploring the level of customer satisfaction as well as customer loyalty.

Research questions identified include following:

- What is the level of awareness for the brand BMW?
- What are the positive, and possibly negative, associations for BMW?
- What secondary associations have contributed to the brand image of BMW?
- How has the marketing communication program been used to create brand awareness and strengthen brand associations?
- What are the overall attitudes towards the brand BMW?
- What are the factors that affect customer’s attitudes towards the brand BMW?
- How satisfied are existing customers with BMW?
- Is there desire from potential customers to purchase a BMW?
- How loyal are existing customers towards the brand BMW?

2.4 Hypotheses Development

The previous discussion outlined that the customer is crucial for the success in business as global markets move more and more into a society influenced by increasing global competition and rapid technological innovation. Therefore, the fundamental logic that underlies the theoretical framework of this study is that satisfied customers are a significant competitive force in today’s markets including the automobile industry, because it creates positive brand outcomes such as brand loyalty. The idea of satisfying customers will always be the key to creating the kind of brands that have a long-term emotionalized presence in peoples lives (Gobe, 2001). Serving the customers that leads to customer satisfaction may happen in different areas, such as excellent customer service, providing cutting-edge technology, providing innovative products, or price-quality-relation. These considerations lead to the major hypothesis of this study:

H1a: Customer perceptions of price affect the level of customer satisfaction for BMW.

H1b: Customer perceptions on customer service affect the level of customer satisfaction for BMW.

H1c: Customer perceptions on technology affect the level of customer satisfaction for BMW.

H1d: Customer perceptions on innovation affect the level of customer satisfaction for BMW.

H1e: Customer perceptions on quality affect the level of customer satisfaction for BMW.

As mentioned in the discussion previously, multiple researchers suggest that customer satisfaction is a crucial factor for brand loyalty, representing some degree of commitment toward a brand. Additionally, purchases within the automobile industry are less frequent by its nature. Brand loyalty, in turn, is important for the sustaining success and growth of a brand and is often one of the positive brand outcomes of valuing customer satisfaction. This study uses the concept of purchase and attitudinal loyalty, because attitudinal loyalty in particular plays a crucial role for the growth potential of a brand, because consumers perceive and associate value added to a particular brand name. However, purchase loyalty has to be considered as well, because it ensures a sustainable level based on valuable, existing customers. Therefore, the notion of brand loyalty in this study includes both, purchase as well as attitudinal loyalty. Purchase loyalty for BMW is defined as the willingness of the average customer to repurchase the brand BMW (Chaudhuri & Holbrook, 2001). Attitudinal loyalty on the other hand is the level of commitment of the average consumer toward the brand BMW (Chaudhuri & Holbrook, 2001). Following this reasoning, it is expected that

H2a: Satisfaction of existing customers is positively related to purchase loyalty towards BMW

H2b: Satisfaction of potential customers is positively related to attitudinal loyalty towards BMW.

Figure 3 shows the model used in this study concerning the relationships between brand attitudes towards the brand BMW and customer satisfaction as well as the relationship between customer satisfaction and brand loyalty.

Figure 3

A Model of Customer Satisfaction and Customer Loyalty towards BMW (Weiler, 2004)

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III. Research Methodology

3.1 Information Needs and Data Collection Methods

This study explores and measures attitudes of US customers towards the brand BMW. Furthermore, this study tests the willingness of potential customers to purchase a BMW at a future time, the level of customer satisfaction, as well as the degree of brand loyalty. In terms of customer satisfaction, it is tested if a correlation with variables such as perceived price, perceived customer service, perceived technology, perceived innovation, and perceived quality of the brand BMW exists.

Regarding brand loyalty, it is distinguished between purchase loyalty and attitudinal loyalty. Purchase loyalty relates to existing customers, because it describes the degree of willingness to continue the relationship with BMW and repurchase another BMW. Attitudinal loyalty relates to potential customers. Reason for this is that loyalty of potential customers could be simply based on favorable and unique associations and attitudes towards the brand BMW, which in turn could be reason for customer loyalty towards the brand BMW. For example a potential customer that can’t afford a BMW at the present time, but desires one at some time in the future, doesn’t show purchase loyalty, because of the missing current customer status, but might show attitudinal loyalty towards BMW.

In the data collection for this study only one brand within the automobile sector was used, and this brand was BMW. The brand specific data for the study were compiled from a survey conducted, handed to individuals that were used as the units of observation. Individuals surveyed were existing customers as well as potential customers of BMW. The survey was distributed at three major locations. It was handed to existing BMW customers at the local BMW dealership in Honolulu, Hawaii, and to potential customers at two major universities in Honolulu, Hawaii. The survey had only one version, for both, existing and potential customers. Format for responses included free associations, yes or no questions as well as scales in a range from 1 to 5. Desire was measured on a scale of 1 to 5, with 1 being the least desirable and 5 being the most desirable. Furthermore, the agreement with chosen statements indicating brand attitudes were measured again in form of a scale from 1 to 5, with 1 being strong disagreement and 5 being strong agreement.

As mentioned, the information indicating the strength of BMW’s brand equity, including customer satisfaction and willingness to purchase was gathered from a survey of current and potential customers. Using the survey results, the researcher tests the level of customer satisfaction and its possible correlation with the factors perceived price, perceived customer service, perceived innovation, perceived technology, and perceived quality by using regression analysis. Furthermore, the survey results are used to find out if brand loyalty in form of both, purchase and attitudinal loyalty, depends on the level of customer satisfaction.

Correlations and regression analysis are statistical techniques that can be used to show how variables are related. The first regression analysis will test the level of customer satisfaction as the dependent variable. The independent variables in this study are perceived price, perceived customer service, perceived innovation, perceived technology, and perceived quality. The second regression analysis will test customer loyalty as the dependent variable, based on customer satisfaction as the independent variable. Correlations are numerical summary measures that indicate the strength of relationships between pairs of variables (Albright, S., Winston, W., & Zappe, C, 1999). The usual notation for a correlation between two variables X and Y is rxy. The sign of the correlation – plus or minus – tells whether the two variables are positively or negatively related. A correlation equal to zero or near zero indicates practically no linear relationship. A correlation with magnitude close to 1, on the other hand, indicates a strong linear relationship. At the extreme, a correlation equal to -1 or +1 occurs only when the linear relationship is perfect, which practically never occurs in business application. However, large correlations, for example greater than 0.9 in magnitude, are not at all uncommon (Albright, S., Winston, W., & Zappe, C, 1999). Correlations are useful in indicating linear relationships, but they do not actually quantify the relationship.

The methodology, linear regression, estimates the coefficients of the linear equation (y = a + b1*x1 + b2*x2,+ … + bn-1*xn) that involves one or more independent variables x1, x2, …, xn, that best explains how the variable y depend on the independent variable x (Albright, S., Winston, W., & Zappe, C, 1999). Regression analysis is used to better understand what relationships the factors perceived price, customer service, innovation, technology, and quality have on customer satisfaction and what relationship customer satisfaction in turn has on brand loyalty.

In this study, the type of data being analyzed in the regression analysis is cross-sectional data. The cross-sectional data of the survey was gathered from a time period of 4 weeks, therefore from approximately the same period of time from a cross section of a population. In the first regression study, customer satisfaction is the dependent variable that is explained. In the second regression study, brand loyalty is the dependent variable. In the first study, the number of explanatory or independent variables in the regression analysis for measuring customer satisfaction is multiple. Multiple regression is used, although each independent variable is considered and analyzed separate based on its relationship with customer satisfaction. Reason therefore is the little need to single each independent variable out for separate discussion, because the computer software Excel, which is used in this study, can analyze each variable separate in a multiple regression analysis (Albright, S., Winston, W., & Zappe, C, 1999).

As mentioned above, the second regression analysis in this study is used for explaining the relationship between customer satisfaction and brand loyalty. However, in this case, simple regression is used, because there is only one dependent and one independent variable at a time; dependent variable being purchase or attitudinal brand loyalty and independent variable being customer satisfaction.

3.2 Development of Questionnaire

The questionnaire in this study was developed in order to provide a big picture as to how brand equity and brand value for BMW has been created. It provides valuables diagnostic insights into the collective effects of branding activities on the customer mindset in form of overall attitudes, satisfaction and loyalty. Specifically, it involves questions targeting the six building blocks, salience, judgments, performance, imagery, feelings and resonance towards the brand BMW. According to Keller (2003), the customer mindset includes everything that exists in the minds of customers with respect to the brand BMW: thoughts, feelings, experiences, images, perceptions, beliefs, attitudes, and so forth.

In terms of brand awareness, both recall and recognition measures were collected. Awareness measures in the questionnaire move from more general to more specific questions. Thus, the first questions of the questionnaire ask what brands come to their mind to identify the level of recall from their memory for the brand BMW. It is distinguished between performance and luxury in order to find out in which category customers position the brand BMW. Furthermore, a scale that measures the consideration to own a BMW compared to that of owning a competing brand measures the level of desire.

In terms of measuring brand image, the questionnaire includes questions to identify specific perceptions (i.e. what customers think characterizes the brand BMW) and evaluations (i.e. what the brand BMW mean to customers). A number of specific brand associations typically exist for a brand, depending on the richness of consumer knowledge structure (Keller, 2003). Therefore, the questionnaire includes questions asking free associations that customers have as well as questions asking for the degree of agreement with given associations. The most important specific brand associations are those performance and imagery beliefs that provide points of parity and points of difference with competitive brands (Keller, 2003). Points of parity are features that BMW must have in order to stay competitive, while points of difference provide a competitive advantage (i.e. customers might associate great German engineering with the brand BMW, which serves as a point of difference with competing brands). The specific brand associations are assessed on the basis of strength, favorability, and uniqueness.

In order to identify customer perceptions of performance as well as customer judgment of the brand BMW, the questionnaire includes scales in which customers can indicate their agreement with descriptive adjectives such as trustworthy or safe, concerning brand performance and judgment. Perceptions and judgment of innovation, customer service, price, technology and quality are included to further be analyzed in relationship to customer satisfaction, which in turn is analyzed in relationship to brand loyalty.

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