Brand stability as a signaling phenomenon ラ An empirical investigation in industrial markets

a r t i c l e i n f o Keywords: Brand stability Brand loyalty Price premium Signaling The present study investigates the interplay between brand stability and customers' response toward the brand in an industrial buying context. Based on an information economic perspective, the authors develop a conceptual framework that incorporates perceived brand stability, risk reduction, brand loyalty, and cus-tomers' willingness to pay a price premium. This framework is empirically tested based on a survey with one hundred and forty nine key informants from business units within the food industry. In order to analyze the proposed relationships, the authors employ structural equation modeling. The present research contributes to a deeper understanding of the role of brands in business-to-business contexts by highlighting the signaling effects of brands in an industrial buying context. Second, the present research empirically demonstrates that brand stability is a key factor to (1) reduce perceived risk, (2) build brand loyalty, and in turn (3) achieve a price premium. Brands and branding have been used since the earliest times to distinguish the goods or services of one seller from those of another. For customers, brands promise a particular quality level, reduce risk, and engender trust in the performance of goods and services (e. This tendency may be in particular apparent with difficult-to-assess products and thus within markets characterized by imperfect and asymmetrical information structures (Wernerfelt, 1988). Here, brands have been identified as important signals, providing benefits for customers by serving valuable functions (e. A brand signal is composed of the past and present marketing mix strategies and activities associated with the brand, reflecting a firm's As firms can control and manipulate marketing mix strategies and activities associated with the brand, they determine the content of a brand signal. Thus, a brand signal as it will be perceived by customers depends on the firm's brand positioning strategy (Sujan & Bettman, 1989) and the specific properties of the marketing mix activities and programs associated with the brand (Erdem & Swait, 1998). Considering the fact that many industries are highly competitive environments that challenge firms not only to build but also to defend already established market positions, managers might be encouraged to rethink or even change brand positioning strategies according to current trends and developments. According to Aaker (1996, p. 225), the temptation is " to dig in, diagnose the problem or trend, and take action — even when …