the effect of building customer based brand equity …
TRANSCRIPT
THE EFFECT OF BUILDING CUSTOMER BASED BRAND
EQUITY ON THE FINANCIAL PERFORMANCE OF MILK
PROCESSORS IN KENYA
BY
SARAH NJERI KURIA
UNITED STATES INTERNATIONAL UNIVERSITY-
AFRICA
SUMMER 2018
THE EFFECT OF BUILDING CUSTOMER BASED BRAND
EQUITY ON THE FINANCIAL PERFORMANCE OF MILK
PROCESSORS IN KENYA
BY
SARAH NJERI KURIA
A Research Project Report Submitted to the Chandaria
School of Business in Partial Fulfillment of the Requirement
for the Degree of Masters in Business Administration (MBA)
UNITED STATES INTERNATIONAL UNIVERSITY-
AFRICA
SUMMER 2018
ii
DECLARATION
I, the undersigned, declare that this is my original work and has not been submitted to any
other college, institution or university other than the United States International
University in Nairobi for academic credit.
Signed:_____________________________ Date:_________________________
Sarah Njeri Kuria (ID. No.639402)
This project has been presented for examination with my approval as the appointed
supervisor.
Signed: _____________________________ Date: _________________________
Dr. Kefah Njenga
Signed: _____________________________ Date: _________________________
Dean, Chandaria School of Business
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COPYRIGHT
© Copyright by Sarah Njeri Kuria, 2018.
All rights reserved. No part of this project may be produced or transmitted in any form or
by any means, electronic, mechanical, including photocopying, recording or any
information storage without prior written permission from the author.
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ABSTRACT
The challenge for marketers in building strong brands is ensuring that customers have the
right type of experiences with products and services and their accompanying marketing
programs so that the desired thoughts, feelings, images, beliefs, perceptions, opinions and
so on become linked to the brand (Keller, 2003). In the world today, companies are not
only focusing on building brands but they have to leverage on these brands through a set
of assets to ensure they link the consumer with the brand and thus they continuously
improve their financial performance. These assets are referred to as brand equity.
This research focused on the effect of building Customer Based Brand Equity on the
financial performance of milk processors in Kenya. The study was guided by the
following specific objectives; to review extent to which milk processors have adopted the
concept of brand equity, to analyze how milk processors in Kenya have built Customer
Based Brand Equity and to analyze the effect of Customer Based Brand Equity on
financial performance of milk processors in Kenya.
Data was collected from the 24 licensed milk processors in Kenya through structured
questionnaires in the month of April 2017. The list of the licensed milk processors was
obtained from the Kenya Dairy Board. A census study was conducted since the population
was small. The questionnaires were all sent on email and follow up calls were made to
increase the response rate. Out of the 24 questionnaires, 22 were received duly filled for
this study.
The study adopted a descriptive research design which allowed respondents to describe
the factors that they believed attributed to their sustainability and growth. This study used
both quantitative and qualitative method of data analysis. The questionnaires were coded
and edited for completeness and consistency and entered into Statistical Package for
Social Sciences (SPSS version 20). Analysis involved descriptive statistics and inferential
analysis. Descriptive analysis technique gave simple summaries about the sample data in
quantitative descriptions and included: mean, standard deviation, frequencies and
percentages.
The study revealed milk processors have greatly adopted the concept of brand equity.
Brand awareness is high as brands are well known by the customers and are easily
identifiable. The processors strongly agreed that they aimed at retaining their customers
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and satisfying their needs every time as loyal customers tend to purchase other products
offered by the company and recommend their friends and family. The milk processors
market their brand as that of high quality and their consumers consider their brands to be
of higher quality than those of the competitors.
The study notes that milk processors have greatly adopted the concept of brand equity and
have built strong brands through CBBE. All the milk processors consider the customers
when making branding decisions and ensuring the customers have memorable
experiences with their brands.
The study concludes that there existed a positive relationship between customer based
brand equity and financial performance of milk processors in Kenya. The study noted that
higher brand awareness and loyalty provide a larger consumer base and better pricing
than competitors, higher perceived quality paves the way for premium pricing while
higher awareness, positive associations and higher quality perceptions help companies in
finding the financial resources they require more easily, hence lead to higher financial
leverage.
The study recommends that companies should differentiate their brands either through
positioning, association and segmentation. This will help build their brand equity and
enhance CBBE. The study also recommends companies to endeavor to build strong
relationships between perceived relative price and perceived product value. Finally, the
study recommends that further research should be conducted to investigate the other
factors accounting for (24.8%) effect on the financial performance of milk processors in
Kenya
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ACKNOWLEDGEMENT
First and foremost, I would like to give God all the glory throughout my entire course and
especially as I worked on this project. His grace has been sufficient to keep me going.
I would like also to acknowledge my husband, family and friends for their support and
encouragement as I worked on the project and in course of my masters.
I would also like to acknowledge my supervisor Dr. Kefah Njenga for his guidance and
wise counsel during the development of this project.
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DEDICATION
I dedicate this project to my family and friends.
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TABLE OF CONTENTS
DECLARATION ................................................................................................................ii
COPYRIGHT ................................................................................................................... iii
ABSTRACT ...................................................................................................................... iv
ACKNOWLEDGEMENT ............................................................................................... vi
DEDICATION ..................................................................................................................vii
TABLE OF CONTENTS ............................................................................................... viii
LIST OF ABBREVIATIONS ............................................................................................ x
LIST OF TABLES ............................................................................................................ xi
CHAPTER ONE ................................................................................................................ 1
1.0 INTRODUCTION ....................................................................................................... 1
1.1 Background of the Problem ...........................................................................................1
1.2 Problem Statement .........................................................................................................5
1.3 General Objective ..........................................................................................................6
1.4 Specific Objectives ........................................................................................................6
1.5 Significance of Study .....................................................................................................6
1.6 Scope of the Study .........................................................................................................7
1.7 Definition of Terms ........................................................................................................7
1.8 Chapter Summary ..........................................................................................................8
CHAPTER TWO ............................................................................................................... 9
2.0 LITERATURE REVIEW ........................................................................................... 9
2.1 Introduction ....................................................................................................................9
2.2 Brand Equity ..................................................................................................................9
2.3 Customer Based Brand Equity (CBBE) .......................................................................13
2.4 Effect of Customer Based Brand Equity on Financial Performance ...........................20
2.5 Chapter Summary ........................................................................................................24
CHAPTER THREE ......................................................................................................... 25
3.0 RESEARCH METHODOLOGY ............................................................................. 25
3.1 Introduction ..................................................................................................................25
3.2 Research Design...........................................................................................................25
3.3 Population and Sampling Design .................................................................................26
3.4 Data Collection Methods .............................................................................................26
3.5 Research Procedures ....................................................................................................27
3.6 Data Analysis Methods ................................................................................................27
3.7 Chapter Summary ........................................................................................................28
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CHAPTER FOUR ........................................................................................................... 29
4.0 RESULTS AND FINDINGS ..................................................................................... 29
4.1 Introduction ..................................................................................................................29
4.2 General Information .....................................................................................................29
4.3 Brand Information ........................................................................................................31
4.4 Building Brand Equity and Customer Based Brand Equity among Milk Processors in
Kenya .................................................................................................................................33
4.5 Relationship Between Customer Based Brand Equity and Financial Performance of
Milk Processors in Kenya ..................................................................................................39
4.6 Regression ....................................................................................................................41
4.7 Chapter Summary ........................................................................................................43
CHAPTER FIVE ............................................................................................................. 45
5.0 DISCUSSION, CONCLUSIONS AND RECOMMENDATIONS ........................ 45
5.1 Introduction ..................................................................................................................45
5.2 Summary ......................................................................................................................45
5.3 Discussion ....................................................................................................................46
5.4 Conclusion ...................................................................................................................51
5.5 Recommendation .........................................................................................................52
REFERENCES ................................................................................................................ 54
APPENDICES .................................................................................................................. 60
Appendix I: Cover Letter ..................................................................................................60
Appendix II: Questionnaire ...............................................................................................61
Appendix III: Licensed Milk Processors ...........................................................................65
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LIST OF ABBREVIATIONS
CBBE: Customer Based Brand Equity
ROI: Return on Investments
KDB: Kenya Dairy Board
xi
LIST OF TABLES
Table 4.1 Response Rate of the Study ............................................................................... 29
Table 4.2: Number of Brands the Company Has ............................................................... 31
Table 4.3: Stakeholder Influence on Brand Decisions ....................................................... 33
Table 4.4: Extent to Which Companies have Built Brand Awareness ............................... 34
Table 4.5: Extent to Which Companies have Built Brand Loyalty ................................... 36
Table 4.6: Extent to Which Companies have Built Perceived Quality .............................. 38
Table 4.7: Extent to Which Companies have Built Brand Associations ............................ 39
Table 4.8: Relationship Between Brand Equity and Financial Performance ..................... 41
Table 4.9: Regression Model Summary ............................................................................. 42
Table 4.10: ANOVAa Statistic ........................................................................................... 42
Table 4.11: Table of Coefficients ....................................................................................... 43
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LIST OF FIGURES
Figure 4.1: Department in which the Respondents Work .................................................. 30
Figure 4.2: Period in which the Company has been Operational ...................................... 30
Figure 4.3: Sectors of Operation Apart from Dairy ........................................................... 32
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Figure 4.1 Department in which the Respondents WorkCHAPTER ONE
1.0 INTRODUCTION
1.1 Background of the Problem
In today’s business world, it has become critical for every company to establish brand
equity in order to set itself apart from competition and to increase their firm value. Davis
and Dunn (2002) have described brand equity as the combination of consumer’s
awareness of the brand, the brand’s perceived quality, and associations with the brand and
loyalty to the brand. Brand equity consists of a set of advantages connected to a brand and
supplements/or removes from the firm, the worth provided by a product or service
(Karadeniz, 2010). Kardeniz adds that brand equity is a group of assets and thus the
management of brand equity contents involves investment to create and enlarge these
assets.
Brand equity stands for a brand’s capacity to generate a future value stream, either
through its ability to extract a premium price from consumers (for example, being
prepared to pay more for a Rolex watch than for an unbranded, functionally equivalent
watch) or through its ability to attract capital (for example, investors prefer to place their
funds in a company that they know and sympathize with) or otherwise facilitate relations
with interested parties (distributors, producers) (Karadeniz, 2010). Laforet (2010) states
that an organization can make profits, increase market share and enhance organizational
performance through a set of associations. These set of associations make up the brand
equity.
Fayrene and Lee (2011) cite two principal and distinct perspectives that have been taken
by academics to study brand equity – financial and customer based. From a financial
perspective, brand equity is evaluated from a financial market point of view where the
asset value of a brand is appraised while in customer-based brand equity (CBBE model)
brand equity is evaluated by the consumer’s response to a brand name. The CBBE model
incorporates theory advances and managerial practices in understanding and influencing
consumer behavior.
Laforet (2010) defines customer based brand equity as the differential effect that
consumer brand knowledge has on their response to brand marketing activity. This is
derived from the fact that the value of the brand and its equity is derived by the actions of
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the consumer as they are the ones who ultimately decide which brands are more valuable.
This occurs when the consumer has a high level of awareness and familiarity with the
brand and holds a strong, favorable and unique association in his mind.
Keller (2001) notes that the development of the CBBE model was driven by three goals
aimed at helping marketers set strategic direction and informs their brand-related
decisions. First, the model had to be logical, well-integrated, and grounded so as to reflect
state-of-the-art thinking about branding from both an academic and industry point of
view. Second, the model had to be versatile and applicable to all possible kinds of brands
and industry settings while at the same time remaining relevant. Third, the model had to
be comprehensive with enough breadth to cover important branding topics as well as
enough depth to provide useful insights and guidelines.
According to Keller (2001), the CBBE model provides a yardstick by which brands can
assess their progress in their brand-building efforts as well as a guide for marketing
research initiatives. The concept behind the Consumer Based Brand Equity Model is
simple: in order to build a strong brand, you must shape how customers think and feel
about your product. You have to build the right type of experiences around your brand, so
that customers have specific, positive thoughts, feelings, beliefs, opinions and perceptions
about it. When you have strong brand equity, your customers will buy more from you,
they'll recommend you to other people, they're more loyal and you're less likely to lose
them to competitors. Keller’s model represents a useful yardstick for interpreting
marketing strategies and assessing the value of the brand (Laforet, 2010).
A brand should thus focus on the consumers and not the organization. Armstrong and
Kotler (2009) note that successful brands should represent customers perceptions and
feelings about a product or service and its performance which is everything that the
product or service means to the consumer which is the premise of the CBBE model.
Strong brands thus form a basis to build strong and profitable customer relationships as
presented in a profitable set of customers (Armstrong and Kotler, 2009).
A brand is said to have positive customer-based brand equity when consumers react more
favorably to a product and the way it is marketed when a brand is identified than when it
is not (e.g when a product is unnamed or has a fictitious name) while on the other hand, it
has negative consumer- based brand equity when consumers react less favorably to
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marketing activity for the brand compared to an unnamed or fictitiously named version of
the product (Keller, 2003). A good example are the blind tests given for Coke and Pepsi
colas where participants tend to say they are no differences between the brands but when
the names are given most tend to change and say they prefer the coke brand. Thus brands
with a positive customer-based brand equity results in consumers being more accepting of
brand extension, less sensitive to price increases and withdrawal of advertising support
and more willing to seek the brand in new distribution channels.
One of the ways shareholders and senior management can increase the financial
performance of the firms is by creating sustainable competitive advantage among the
competition (Aydin and Ulengin, 2015). In terms of marketing management, one of the
best tools available to give firms competitive advantage is the brand. The study will be
conducted to illustrate whether or not an observable link exists between consumer based
brand equity, which can to a certain extent be managed by managers and the financial
performance of firms, which is an absolute necessity that should be provided by the
continuing operations of the firms.
Kenya has one of the most developed dairy industries in Sub-Saharan Africa and is the
single largest contributor to national GDP at 4.5% translating to a contribution of over
Kshs. 200 billion, a figure higher than that of tea and horticulture (Kenya National Dairy
Master Plan, 2010). The dairy sub-sector is regarded as a success case within the
agriculture sector in Kenya since it supports the poor, creates employment and is
commercially oriented. The dairy industry supports over 1.8 million farmers, 80% of who
are smallholders in high to medium potential areas and the entire pastoral communities of
Kenya as sources of food, employment, cash income, manure to support crop production,
green energy in form of biogas and financing cash needs for social status (Kenya National
Dairy Master Plan, 2010).
Kenya's dairy industry is regulated through the Dairy Industry Act, Chapter 336 of the
Laws of Kenya, as enacted in 1958 and under the Act, the Kenya Dairy Board (KDB) was
established in order to organize, regulate, and develop efficient production, marketing,
distribution and supply of dairy produce in Kenya.
The Kenyan dairy industry was founded during the colonial era when commercialization
of dairy production was initiated (Ministry of Agriculture, Livestock and Fisheries
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[MoALF], Kenya Dairy Board [KDB], Kenya National Bureau of Statistics [KNBS],
Dutch Development Organization [SNV, Kenya], Heifer Project International [HPI
Kenya], Eastern Africa Agricultural Productivity Project [EAAPP], Agricultural Sector
Development Support Program [ASDSP], Kenya Agricultural Productivity and Agri-
business Project [KAPAP], 2013). In 1992, the monopoly of Kenya Cooperatives
Creameries in milk processing and marketing was abolished with the liberalization of the
dairy industry. As a result, there were major dynamic shifts in milk marketing and the
emergence of new processors. Milk processing in Kenya has over the past few years been
dominated by four major processors, namely, the New KCC, Brookside Dairy Limited,
Githunguri Dairy Farmers Cooperative and Sameer Dairies.
The 2009 Kenya population was 38.6 million people and is estimated to hit 58 million in
the next 20 years. The current per capita milk consumption is estimated at 110 litres,
which is projected to increase to 220 litres by 2030 due to envisaged better incomes and
better marketing (Kenya National Dairy Master Plan, 2010). There is potential for growth
of the sub-sector both domestically and regionally as Kenya has high per capita milk
consumption, and demand within the Eastern and Southern Africa region is estimated at
two million tonnes (Tegemeo Institute of Agricultural Policy and Development, Egerton
University, 2016).
Presently, out of the 4.5 billion litres of milk produced in Kenya, 65% (2.925 billion
litres) is marketed leaving 35% (1.575 billion litres) for home consumption (Kenya
National Dairy Master Plan, 2010). Kenya National Dairy Master Plan (2010) notes that
out the 2.925 billion litres of milk marketed, 45% (1.316 billion litres) is handled in the
formal market or through the processors. According to MoALF et al. (2013) , over 40
milk processors have been licensed since the dairy industry was liberalized in 1992 but
the current number of active milk processing companies has dropped to 24 as a result of
mergers, acquisitions and insolvencies. The output products from the Kenyan processors
include white liquid milk (pasteurized and long life), flavored liquid milk, fermented milk
(yoghurt and cheese), milk powder, cheese, butter, ghee and cream
There is a rising interest in the processed milk business and the players anticipate a leap
in demand for the commodity driven by rapid urbanization, increased population and
income growth (Juma, 2015). These will boost demand for dairy products across the
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board and the entry of more players is expected to increase competition that will see firms
leverage more on their brands.
1.2 Problem Statement
Demand for milk and dairy products in COMESA and EAC countries is predicted to grow
annually at 3.5% by 2020 (Jomo Kenyatta University of Agriculture and Technology
[JKUAT], Central Artificial Insemination Station [CAIS] and Kenya Institute of Public
Policy Research Institute [KIPPRA], 2012). Billionaire investors are queuing to pump big
money into Kenya’s dairy industry, Deepak Kamani, the chairman of conglomerate Zuri
Group, has plans to build a fresh and powdered milk plant in Nyahururu while Africa’s
richest man Aliko Dangote of Nigeria has also announced plans to set up a factory in
Kenya to produce dry milk for local and export markets (Juma, 2015).
Juma (2015) observes that the rising interest in the processed milk business is seen as
preparing the players for the anticipated leap in demand for the commodity driven by
rapid urbanization, increased population and income growth. These will lead to boost in
demand for dairy products across and in turn will see an entry of more players. This will
increase competition that will see firms leverage more on pricing and product quality to
gain market share. JKUAT, CAIS and KIPPRA (2012) observe that there is need for
interventions by the processors to support growth and exploit the opportunities. One of
the ways of exploiting these opportunities is through Customer Based Brand Equity.
Chavera (2015) in her study on the relevance of customer based brand equity model in the
Geographical Information Systems (GIS) industry in Kenya noted that customer based
brand equity model has over the years been applied in various industries though some
companies are yet to adopt the concept as a whole. She calls for further studies on CBBE
within different industries to examine the extent of its adoption. In such a dynamic
industry at this time, a study on the dairy industry will come in handy.
Aydin and Ulengin (2015) note that there are few empirical studies available in the
existing literature that link consumer based brand equity and actual financial performance
of firms. This gap creates a need for this study.
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1.3 General Objective
The general objective of the study was to examine the effect of Customer Based Brand
Equity on the financial performance of milk processors in Kenya.
1.4 Specific Objectives
1.4.1 To review extent to which milk processors have adopted the concept of Brand
Equity.
1.4.2 To analyze how milk processors in Kenya have built Customer Based Brand
Equity.
1.4.3 To analyze the effect of Customer Based Brand Equity on financial performance
of milk processors in Kenya.
1.5 Significance of Study
The research will be of benefit to;
1.5.1 Management of the Milk Processors
The study will be beneficial to the management of the milk processors as it will give
insights on managerial practice insight on CBBE. Since the study will focus on all the
milk processors, it will give industry information on what the milk processors are doing.
The study look at how various marketing concepts can be adopted to grow the brand.
1.5.2 Employees of the Milk Processors
The study will help the employees appreciate the importance of CBBE and understand
that it is not the role of the marketer’s only but it encompasses the organization.
1.5.3 Future Investors
Future investors in the milk processors will gain insights from the industry on how they
can maximize their future returns through CBBE.
1.5.4 Future Researchers on Similar Topics
This study will be a source of reference to future researchers who may be interested in
further establishing more findings in this area or researching similar topics in other
industries.
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1.6 Scope of the Study
While the building brand equity is important to all organizations, a study of all the
organizations cannot be done due to the limitations of time and money. The scope of this
study was limited to the milk processors in Kenya and conclusions made can be
generalized to other organizations within different sectors. Limitations for the study
include not all the processors were willing to give information on their financial
performance and thus non-response to some questions in the questionnaire. Data
collection period was April 2017. The data was collected from marketing managers and
people handling branding decisions within the milk processors.
1.7 Definition of Terms
1.7.1 Brand
American Marketing Association define a brand as a name, term, symbol or design or a
combination of all these with the intention of identifying and differentiating goods and
services of one seller from the other (Laforet, 2010).
1.7.2 Brand Equity
Brand equity refers to the incremental cash gains which accrue to branded product over
unbranded product (Mohan and Sequeira, 2016).
1.7.3 Customer Based Brand Equity
This is the differential effect that consumer’s brand knowledge has on their response to
brand marketing activity (Laforet, 2010).
1.7.4 Brand Loyalty
Brand loyalty is the customers’ favorable attitude towards a specific brand (Pride and
Ferrell, 2009).
1.7.5 Perceived Quality
Atilgan (2005) defines perceived quality as the customer’s perception of the overall
quality of a product or service with respect to its intended purpose, relative to alternatives.
1.7.6 Brand Associations
Brand associations represent the basis for purchase decision and for brand loyalty. Brand
association refers to experiences, beliefs, perceptions, feelings, images and brand-related
thoughts linked in memory about a brand (Fayrene and Lee, 2011).
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1.8 Chapter Summary
Chapter one gives an introduction on customer brand equity which is the focus of this
study. The problem statement gives reasons why the study was necessary and justification
was given from other studies done earlier that call for more research to be conducted
within this area. The chapter also discusses the research objectives, significance and
scope of the study. All terms have been defined as they apply in this study.
Chapter two reviews literature based on the research objectives. The chapter gives a better
understanding to the overall research by elaborating further on the research objectives.
Chapter three gives the research methodology used by defining what, how and from
whom data was collected, which instruments were used and how the data was analyzed.
Chapter four gives the research findings and lastly chapter five summarizes the findings,
recommendations and conclusion of the study.
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CHAPTER TWO
2.0 LITERATURE REVIEW
2.1 Introduction
This section presented various literatures relating to customer based brand equity as given
by other scholars and researchers. The literature reviewed brand equity, examined how to
build CBBE and discussed the effect of CBBE on financial performance.
2.2 Brand Equity
American Marketing Association define a brand as a name, term, symbol or design or a
combination of all these with the intention of identifying and differentiating their goods
and services from those of their competitors (Laforet, 2010). Thus any form of distinction
given to your product will be considered as a brand. The brand name is the part that can
be spoken and it includes letters and numbers while the brand mark is the element of a
brand that includes symbols or design (Pride and Ferrell, 2009).
Davis and Dunn (2002) state that the most valuable company asset is the brand then its
people follow. Well-managed brand are assets to the organization and the world today is
placing a lot of emphasis on the value of the brand (Dibb, Simkin, Pride and Ferrell,
2006). This value is what is referred to as brand equity. According to Chernatony,
McDonald and Wallace (2011), brands are estimated to represent at least 20% of the
intangible value of businesses on major world stock markets. In the recent past,
companies have been bought off at a value higher than their tangible assets with the
difference being attributed to the brand value. For example, Procter and Gamble
purchased Gillette for £31 Billion and only £4 Billion was for the tangible assets and
Philip Morris brought Kraft for £12.9 Billion with £4 Billion being the value of the
tangible assets (Chernatony, McDonald and Wallace, 2011).
Brand equity relates to the fact that different outcomes result from marketing of a product
or service because of its brand than if that same product or service had not been identified
by that brand (Keller, 2003). Marketers should use see a brand name as an implied
promise of the level of quality that consumers can expect from a brand which they will
use as a benchmark for future purchases (Laforet, 2010).
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Through brand equity, an organization can maximize on the value of the brand using the
set of assets linked to a brand name to leverage on the value provided by a product or
service to a firm and the firm’s customers (Aaker, 2010). Armstrong and Kotler (2009)
describe brand equity as the positive differential effect that knowing the brand name has
on customer response to that product or service and thus build brand loyalty and
awareness.
Jorgensen (2013) observe that Keller’s definition of brand equity and his theory of
building brand equity should be used for the analysis but not as a measure of brand
equity. He recommends use of Aaker’s Brand Equity Ten model as the most suitable in
measuring what consumers feel about the brand. Aaker’s model proposes a multi-
dimensional model that has five different dimensions that affect the CBBE (Aydin and
Ulengin, 2015). The dimensions are; brand loyalty, brand awareness, perceived quality,
brand associations and other proprietary brand assets. Other proprietary brand assets
include patents, trademarks, and channel relationships but since these are not relevant to
consumer perception, only the first four dimensions are considered relevant to CBBE
(Mohan and Sequeira, 2016).
2.2.1 Brand Awareness
Fayrene and Lee (2011) define brand awareness as the customers’ ability to recall and
recognize the brand through their ability to identify the brand under different conditions
and to link the brand with certain associations in their memory. Recall is harder to achieve
and it is needed outside the store while recognition is needed inside the store (Kotler and
Keller, 2009). The depth of brand awareness measures how likely it is for a brand
element to come to mind and the ease with which it does so (Haglofs, 2014). A brand with
a deeper level of brand awareness is easily recalled compared to a brand that only comes
to the customers’ mind when they see it.
Brand awareness also relates to the probability that consumers are familiar with where the
brand is available and is accessible and successful brand awareness means that the brand
is highly reputable in the market (Malik et al., 2013). Brand awareness also plays a
significant role during the purchasing process of a product or service as it may control the
consumer’s perceived risk evaluation and their level of assurance about the buying
decision. This is because the consumers have knowledge about the brand and its
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uniqueness. People tend to purchase familiar brands and are prepared to ascribe different
good attitudes to products or services that are familiar to them. It therefore becomes
important for companies to investigate where their brands are placed in the customers’
consideration set and the level of awareness about the brand as this affects customers’
perceptions about a brand and may influence their tastes (Haglofs, 2014).
Brand awareness plays an important role in the consumer decision making process as it;
increases the likelihood of the brand being in the consumer’s consideration set, affects
decisions about brands in consideration set and it influences the formation and
strengthening of brand associations in the brand image (Keller, 2003).
2.2.2 Perceived Quality
Perceived quality relates to the degree to which brands consistently produce satisfaction
by meeting customers’ expectations (Harrell and Frazier, 1999). Arnould, Price and
Zinkhan (2004) note that research has found that consumers care more about quality than
the economy hence for marketers, providing evidence of incremental quality is vital to
building competitive advantage. This is because perceived quality derives judgment by
comparing performance perceptions against expectations. If consumers feel that a brand is
ranks highly than the other, they will go for the brand when making a purchase decision
from the product category.
Keller (2008) on the other hand introduces the aspect of comparison with other brands by
defining perceived quality as the customers’ perception of the overall quality or
superiority of a product or service compared to alternatives and with respect to the
intended purpose. The same is expressed by Chi, Yeh and Yang (2009) when they state
that perceived quality makes customers subjective in their judgment on product quality
thus giving a product noticeable differentiation making it a selected brand in consumers’
minds.
The concept of perceived quality is examined in two groups of factors that are intrinsic
attributes and extrinsic attributes. The intrinsic attributes examines the physical
appearance of products while the extrinsic attributes relates to all other aspects apart from
the physical aspects for example, brand name, price, store, packaging and production
information. Marketers can segment the market through various cues relating to quality as
people vary in their use of cues (Arnould, Price and Zinkhan, 2004).
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Perceived quality is different from objective quality. Perceived quality is the customer’s
judgment about a product’s overall excellence or superiority while objective quality refers
to the technical, measurable and verifiable nature of products/services, processes and
quality controls (Fayrene and Lee, 2011). Statt (1997) observes that objectivity varies
from one consumer to the other because each consumer perceives the world differently
and have constructed their own reality out of it.
Fayrene and Lee (2011) thus conclude that perceived quality is hence formed to judge on
the overall quality of a product since that quality is directly influenced by consumer
perceptions and consumers use these quality attributes to compare the quality of
unfamiliar products. When consumers have formed certain inferences about your
products, they will use this as a benchmark to judge any unfamiliar products. Perceived
quality is thus a relative concept which possesses situational, comparative, and individual
attributes.
2.2.3 Brand Associations
A brand association consists of all brand-related thoughts, feelings, perceptions, images,
experiences, beliefs, attitudes linked to the consumer’s mind about a certain brand
(Chieng and Lee, 2011). Zhu (2009) describes brand associations as the pieces of
information in consumers’ memories that are activated by a certain brand name.
Consumers respond to brands according to how they make them feel and brands have
ability to evoke feelings directly but consumers may respond emotionally depending on
how the brand makes them feel about themselves.
Brand associations can be classified into three major categories: attributes, benefits and
attitudes. Attributes are the descriptive features that characterize a brand such as what a
consumer thinks the brand is or have and what is involved with its purchase or
consumption. Benefits are the personal value consumers attach to the brand attributes,
that is, what consumers think the brand can do for them. Brand attitudes are consumers'
overall evaluations of a brand (Iglesias, 2001).
The associations related to the benefits represent a greater degree of abstraction than
those referring to the attributes and so, are more accessible and remain longer in the
consumer's memory. Benefits have a positive nature meaning if the brand value is greater,
their level will be higher. Benefits can be product or brand related. Product benefits are
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associations related to the physical or tangible attributes and so are present in all products
even in those sold without a brand or with an unknown brand. Brand benefits on the other
hand are associations related to intangible attributes or images added to the product
thanks to its brand name, that is, they represent benefits that can only be obtained from
products with a brand.
2.2.4 Brand Loyalty
Kotler and Keller (2009) define loyalty as a deeply held commitment to continuously
purchase a product or service despite situational influences and marketing efforts with the
potential to cause switching behavior. Brand loyalty is the customers’ favorable attitude
towards a specific brand (Pride and Ferrell, 2009). This means that if a brand has strong
brand loyalty, customers will purchase the brand consistently when they need a product in
that product category.
Brand loyalty is accomplished when the customer’s show repeated buy behavior towards
a particular brand and it comes as a consequence of customer fulfillment thus they are no
longer affected by the price factor and will show strong interest to purchase the product at
any expense (Karam and Saydam, 2015). Brand loyalty implies that consumers bind
themselves to products or services as a result of a deep-seated commitment.
Brand loyalty occurs when the consumer makes a conscious evaluation that a brand
satisfies their needs to a greater extent than others do and decide to buy the same brand
repeatedly for that reason (Hoyer and Macinnis, 2010). They add that consumer’s level of
commitment to a brand distinguishes brand loyalty to habit. Brand loyalty is strengthened
as the evaluation grows with time and as the evaluation is reinforced with time.
Cognitive loyalty is achieved when the brand becomes the consumer’s first choice when
making a purchase decision. Cognitive loyalty is closely linked to the highest level of
awareness (top-of-mind), where the brand becomes a matter of interest in a given
category. Thus, a brand should be able to become the consumer’s first choice (cognitive
loyalty) and is therefore it is purchased repeatedly (behavioral loyalty).
2.3 Customer Based Brand Equity (CBBE)
CBBE was developed by Kevin Lane Keller, a marketing professor. The basic premise of
CBBE is that the power of the brand lives in what the customers have learned, felt, seen,
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touched and heard about the brand as a result of their experiences over time lies in their
minds (Keller, 2003). The challenge for marketers in building strong brands is ensuring
that the brand forms the right type of experiences with the consumers and thus the
marketing programs accompanying the brand have the desired thoughts, feelings, images,
beliefs and perceptions (Keller, 2003).
Laforet (2010) defines customer based brand equity as the differential effect consumer
brand knowledge has on their response to brand marketing activity. This is derived from
the fact that the value of the brand and its equity is derived by the actions of the consumer
as they are the ones who ultimately decide which brands are more valuable. A brand has
positive CBBE when consumers react more favorably to the brand when compared to an
unnamed product and a brand has negative CBBE when consumers react less favorably to
marketing activity for the brand compared to an unnamed version of the product (Keller,
2003). A good example are the blind tests given for Coke and Pepsi colas where
participants tend to say they are no differences between the brands but when the names
are given most tend to change and say they prefer the coke brand.
Keller gives four steps to building CBBE. These are; establish proper brand identity,
create appropriate brand meaning through favorable brand associations, elicit positive
brand response and forge relationships with customers through brand loyalty.
2.3.1 Establish the Right Brand Identity
2.3.1.1.1 Brand Identity
Brand identity is what the firm wants the brand to mean as it represents a blueprint for
any marketing decision (Capon, 2012). Brands are more than just names and symbols as
they represent the consumer’s perceptions and feelings about a product and its
performance (Armstrong and Kotler, 2009). Capon (2012) differentiates products and
brands by noting that; products are made in the factory, can be outdated quickly and can
be copied by competitors while brands are bought by the customer, are unique and
successful brands are limitless.
Setting the brand’s identity rests purely on the organization as they need to specify the
brand’s meaning, aim and image (Kapferer, 2008). They decide what they want to project
to the public, how and when they want to project it. Identity expresses the brand’s
15
tangible and intangible characteristics; everything that makes the brand what it is and
draws up the brand’s roots and heritage (Kapferer, 2008).
In order to achieve the right brand identity brand salience must be created (Keller, 2001).
Brand salience relates to aspects of customer awareness of the brand. Today brands have
meaning that go beyond their outward manifestations as they are a collection of
perceptions and associations that customers hold about a product, these are the values that
create meaning for the customers and what they expect when they are in contact with the
brand (Capon, 2012). This is what is referred to as the brand salience.
Brand identity is based on a thorough understanding of the firm’s customers, competitors,
and business environment and it needs to reflect the business strategy and the firm’s
willingness to invest in the programs needed for the brand to live up to its promise to
customers (Ghodeswar, 2008). To be effective, a brand identity needs to resonate with
customers, differentiate the brand from competitors, and represent what the organization
can and will do over time (Ghodeswar, 2008). Through the brand identity, a firm is able to
position the brand, distinguish it from competitors and define its brand image. Ghodeswar
(2008) add that a brand should be a distinctive identity that differentiates a relevant,
enduring, and credible promise of value associated with a product, service, or
organization and indicates the source of that promise.
2.3.1.1.2 Brand Positioning
Brand position is the place a brand occupies in the consumers’ minds relative to their
needs and competing brands and it’s up to the decision of the marketers to intentionally
create that position (Walker and Mullins, 2011). Brand positioning aims at aligning the
brand image and brand identity. What the firm sells about the brand must tally with what
the consumers think about the brand.
A brand is the company’s promise to deliver a specific set of features, benefits, services
and experiences constantly to the buyers (Kotler and Armstrong, 2010). As such when
developing a position strategy for a brand, one needs to establish a mission and vision for
the brand. By strategically positioning a brand in the minds of the target audience, the
company can build a strong identity or personality for the brand (Ghodeswar, 2008).
16
Kotler and Armstrong (2010) note that brands can be positioned at three levels. At the
lowest level, a brand can be positioned on product attributes. This means selling the
product in terms of what it can do for the consumers. At the second level, it can be
associated with a desirable benefit. The third level is the strongest positioning as it is
based on strong beliefs and values. At the third level, brands have an emotional wallop.
Ability to endow a product, service or corporation with an emotional significance over
and above its functional value is a substantial source of value creation (Ghodeswar,
2008).
The positioning strategies adopted will depend on whether you are aiming to redefine
your current position, reposition the brand or reposition the competition (Ferrell and
Hartline, 2005). When a brand is born, there is a need to select a brand name and develop
a positioning strategy (Laforet, 2010). If you want to remain at the current position,
ensure you are constantly monitoring what the consumers want and the extent to which
the consumer’s feel your brand is satisfying their needs. When repositioning the brand,
thus means you are getting a new position for your brand and thus make fundamental
changes to your marketing mix elements. Repositioning the competition is a much easier
way as you put your competitors’ products in a less favorable light which will force them
to change their positioning strategy e.g Pepsi and Coke.
2.3.2 Create Meaningful Brand Meaning Through Brand Associations
Firms strive for brand associations that strengthen the desired brand identity and align
these associations with brand image (Capon, 2012). Brand Meaning is achieved through
favorable brand associations that involve customers so that they can try and purchase it
(Laforet, 2010).
The creation of a brand implies communicating a certain brand image in a way that the
firm's target groups can easily link the brand with a set of associations (Iglesias, 2001).
Iglesias (2001) borrows from the associative network memory model and defines brand
image as the perceptions about a brand as reflected by the cluster of associations that
consumers connect to the brand name in memory. Thus, brand associations are the other
informational nodes linked to the brand node in memory and contain the meaning of the
brand to the consumers. Brand associations have to be strong, positive and unique in
order to build brand attitude that leads to strong brand equity (Elliot and Percy, 2007).
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The two building blocks in this step are performance and imagery. Performance defines
how well your product meets your customers' needs and it consists of five categories:
primary characteristics and features; product reliability, durability, and serviceability;
service effectiveness, efficiency, and empathy; style and design; and price. Imagery refers
to how well your brand meets your customers' needs on a social and psychological level.
Your brand can meet these needs directly from a customer's own experiences with a
product or indirectly with targeted marketing or with word of mouth.
Two factors in particular strengthen brand association these are personal relevance and
consistency which has been built over time (Keller, 2008). Keller adds that the particular
associations we recall and their salience will depend not only on the strength of
associations but also on the retrieval cues present and the context in which we consider
the brand. Direct experiences with a brand create the strongest brand associations and are
particularly important during the consumer decision making process. Every aspect of the
relationship between the brand and the consumer contributes to learning that leads to
associations in memory that constitutes brand attitude (Elliot and Percy, 2007). Customer
attitudes towards the brand can range from negative effects such as hatred to simple
acceptability or attraction. Brand attachment ranges from disinterest to higher levels of
the loyalty hierarchy such as advocacy, love, and even addiction (Zhu, 2009).
Company influenced sources of information e.g adverts, form the weakest type brand
associations and as such they are easily changed (Keller, 2008). To do these, companies
must regularly and consistently communicate to the consumers over time elaborating on
the brand related information and relate it appropriately to the existing knowledge. By
this they will form retrieval cues the consumers easily relate to.
2.3.3 Elicit Positive Brand Response
Brand response refers to how customers respond to the brand, its marketing activity and
other sources of information, that is, what customers think or feel about the brand (Keller,
2001). Brand responses can be distinguished according to brand judgments and brand
feelings, meaning whether they arise more from the “head” or from the “heart” (Keller,
2001).
Keller (2001) states that brand judgments focus on customers opinions and evaluations
regarding the brand and involve how customers put together all the different performance
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and imagery associations for the brand to form different kinds of opinions while brand
feelings are customers’ emotional responses and reactions with respect to the brand and
will also relate to the social currency evoked by the brand.
The long-term success of the brand will be based on functional and psychological
attributes from customers which can be either objective or subjective in measure (Laforet,
2010). It is good to note that customer perceptions can be based on real qualities for
example product characteristics, features or style or psychological qualities for example,
perception and image (Ferrell and Hartline, 2005). Customers also respond to your brand
according to how it makes them feel. Your brand can evoke feelings directly, but they also
respond emotionally to how a brand makes them feel about themselves.
2.3.4 Forging Brand Relationships with Customers through Brand Loyalty
Brand resonance sits at the top of the brand equity pyramid because it's the most difficult
and most desirable level to reach. You have achieved brand resonance when your
customers feel a deep, psychological bond with your brand. Aaker (1996) cites that the
challenge for many brands is to develop credible and sensitive measures of brand strength
that supplement financial measures with brand asset measures. When brand objectives
and programs are guided by both types of measures, the incentive structure becomes more
balanced, and it becomes more feasible to justify and defend brand-building activities.
General progress in the measurement of brand equity will help managers develop valid
instruments for individual brands.
Greenwell (2000) defines customer acquisition cost as the dollar value required to gain
new business. Companies need to invest in building loyalty programs as the customer
acquisition cost of a new customer is six to ten times higher than that of a repeat customer
(Greenwell, 2000). Customer satisfaction is not enough to ensure repeat business.
Organizations need to enhance this customer satisfaction into customer loyalty.
2.3.4.1 Customer Relationships
Key to building lasting customer relationship is to create customer value and satisfaction
(Kotler and Armstrong, 2010). Satisfied customers are more likely to be loyal customers
and talk favorably to others about the firm and its products. Customer value represents the
customer’s evaluation of the difference between all the benefits and costs of a marketing
19
offering relative to those of competing offer while satisfaction depends on the product’s
perceived performance relative to the buyer’s expectation.
Satisfied customers are more likely to seek out other products from the same company
and companies that recognize this are keen on the customer lifetime value (Perreault,
Cannon and McCarthy, 2015). Customer lifetime value is defined as the total stream of
purchases that a customer could make to the company over the length of the relationship
(Perreault, Cannon and McCarthy, 2015). Companies go a step further and work on
building customer equity. Customer equity is defined as the total customer lifetime values
of all of the company’s current customers and potential customers (Kotler and Armstrong,
2010). Thus it becomes crucial for firms to focus on the short term and the long term
relationship with the customers.
Karam and Saydam (2015) state that branded products are powerful in forging sustainable
and profitable relationship with customer compared to regular unbranded products.
2.3.4.2 Loyalty Programs
Arnould, Price and Zinkhan (2004) note that while brand names and logos improve
memory and product recall, the use of marketing communication and loyalty programs
will emphasize the brand qualities that consumer’s value. Thus loyalty programs form a
critical role in enhancing and building of the brand.
Various loyalty programs have been developed in the market today as a way of rewarding/
enticing loyal customers and by this the organization ensures they remain the preferred
brand for their customers. The programs in place ensure the client will always think of the
brand and as such remain the preferred brand by the consumer. Aaker (2010) identifies
three groups of loyalty programs in the market these are; frequent-buyer programs,
customer clubs and database marketing.
Frequent-buyer programs provide direct and tangible reinforcement for loyal behavior
and enhance value proposition of a brand. They include British Airways’ frequent traveler
program, Nakumatt’s loyalty card and Safaricom’s ‘Bonga’ reward points. Through this
the consumer accumulates points which can be redeemed later in form of flights for
British Airways, shopping or school fees in the case of Nakumatt or talk time, texts or
data bundle in the case of Safaricom.
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Customer clubs provide a vehicle through which the customer can identify with the brand,
express his/her brand perceptions and attitudes, and experience the sharing of a brand
with like-minded people (Aaker, 2010). Customer clubs include Oprah’s book club and
Disney club. These clubs provide the organization with information about the brand
which can be used to enhance the product or service.
Database marketing takes on a targeted segmented approach where news about brands is
sent to the people who are most likely to respond (Aaker, 2010). Aaker (2010) notes that
this approach makes customers feel that the firm is connecting with them individually and
thus enhance the customer- brand relationship.
2.4 Effect of Customer Based Brand Equity on Financial Performance
Investing in brands has increasingly become a strategic priority for companies as they
have realized that one of the best ways to stand apart and be perceived unique lies in
creation and on-going management of brands which in turn increases their sales and
revenues (Trivedi, Vadher and Shah). A 2008 study by EquiTrend notes that over time, the
company’s brand equity will have an impact on the return on investment (ROI). Firms
experiencing largest gains in brand equity saw their ROI average 30% while those losing
their brand equity saw their ROI average negative 10%.
Consumer based brand equity helps companies increase the efficiency and effectiveness
of their marketing programs, enjoy higher profit margins, offers good trade leverage and
helps in implementing brand extensions (Aydin and Ulengin, 2015). Aydin and Ulengin
(2015) note that brand equity can also be used as a performance indicator for marketing
activities in a company by giving accountability and justification of marketing activities.
Higher brand awareness and brand loyalty provides a large consumer base and gives an
opportunity of better pricing than competitors, while higher perceived quality paves the
way for premium pricing which leads to higher margins and better profitability (Aydin
and Ulengin, 2015). Further, higher brand awareness, positive associations and higher
quality perceptions help companies find the financial resources they require more easily
giving them higher financial leverage.
21
From the financial market level, superior financial performance and shareholder value
creation are outcomes of brand equity (Zhu, 2009). The financial market has changed
over the years and companies are now accounting a portion of their stock market
capitalization with intangible assets. Comparing the 1970 to the 2000 stock market price-
to-book ratio, one would find that in 1970 intangible assets accounted for 50% of that
ratio, while in 2000 intangibles accounted for 80% of the ratio’s value.
Financial performance of firms may be observed directly from their financial statements
or indirectly by obtaining views of the managers on firm’s financial performance (Aydin
and Ulengin, 2015). In the indirect method, which will be used in this study, the
indicators that reflect the extent of the fulfillment of financial goals are assessed and they
include sales levels, market shares in target markets and profitability are assessed.
Aydin and Ulengin (2015), in their study found that, perceived quality appears to be the
primary dimension of CBBE that should be improved to enhance financial performance.
The second factor is the knowledge factor that appears as a composite of brand awareness
and brand association components. While the least important factor among the three is
brand loyalty. As for managerial implications, perceived quality appears to be the primary
dimension of CBBE that should be improved upon for enhancing financial performance.
The second factor is the knowledge factor while the least important factor among the
three is seen as brand loyalty.
The effects of CBBE of financial performance can be categorized as those relating to
growth and those relating to profitability.
2.4.1 Effects Relating to Growth
Brands with high CBBE have more success with brand and market extensions. This is
because consumers are more willing to accept brand extensions based on the reputation of
the established brand as the well-known brands convey certain brand attributes and
benefits (Zhu, 2009). The brand has the ability to extend into related markets or stretched
into new markets (Drummond, Ensor and Ashford, 2008). A brand like Bic has been
successfully extended from the pen market to razor and lighters. Customers are willing to
try out the products because familiar brand provides credibility, thus reducing search time
22
and costs and as a result, increases the likelihood of the purchase of a brand that shares
the same name.
With the right brand identity, companies gain competitive advantage as they differentiate
themselves from their competitors in the minds of consumers (Haglofs, 2014). It can be
said that everything that is associated with the brand in customers’ minds makes the brand
distinctive from competitors’ brands and differentiates the firm’s offering from others.
Companies that have built strong brands have seen true dollar value during acquisitions,
for example in 1997, Rolls Royce was sold to BMW and Volkswagen. Volkswagen
bought all the plant and hard capital for over $1 billion while BWM bought the rights to
the Rolls Royce brand at $66 billion (Laforet, 2010). This partly explains why brands
have become added to company balance sheet and a major reason for company’s making
acquisitions in the late 1980s, for example, in 1988, Nestlé acquired Rowntree at six
times its book values so as to acquire brand names such as Kitkat, Smarties and Rolo.
2.4.2 Effects Relating to Profitability
Profitability can be defined as the rate at which profit is generated (Wilson and Gilligan,
2005). Strong brands can increase cash flow in four ways: obtaining higher prices
(premium prices), higher volume growth, lower costs (economies of scale in marketing
and distribution) and higher asset utilization as a result of integration with suppliers and
distributors leading to reductions in inventories, manufacturing and distribution assets
(Kalicanin,Veljkovic and Bogetic, 2015).
According to Armstrong and Kotler (2009), high brand equity gives the company trade
leverage when bargaining with retailers since customers expect stores to carry the brand.
This is advantageous to the firms since they can go to as many stores as they wish.
Bennett (2001) notes the following as the advantages associated with loyalty; brand
loyalty provides fewer reasons for consumers to engage in extended information search
among alternatives, purchase decisions based on loyalty may become simplified and even
habitual in nature as a result of satisfaction with the current brand and a base of loyal
customers is advantageous for an organization as it reduces the marketing cost of doing
business.
23
Aaker (2010) notes that brands with high customer loyalty are expected to generate a
consistent and predictable revenue stream to the organization and represent a substantial
entry barrier to competitors because the cost of enticing loyal customers is prohibitively
expensive. Thus organizations have a responsibility to entice their loyal customers noting
that it costs more to entice new customers than it is to retain those you have (Keller,
2008).
Brand equity also acts as an appropriate measure for evaluating the long run impact of
marketing decisions. Raggio and Leone (2007), note that when a consumer encounters a
brand, marketing initiated or not, there arises the opportunity to change the mental
representation of the brand and the kind of information that can appear in consumer
memory. Such an encounter may occur when a consumer views only the name, logo or
packaging of the brand and automatically generates perceptions about and/or associations
with the brand.
It is believed generally that brands with high levels of equity are associated with superior
performance including sustained price premiums, inelastic price sensitivity, high market
shares, successful expansion into new categories, competitive cost structures and higher
profitability (Zhu, 2009). Strong brand equity helps achieve larger margins because the
consumer becomes less price conscious and expenses go down through more cost
effective marketing initiatives. This allows you to generate revenue through increased
sales and higher price margins.
In the short run, higher quality perceptions lead to increased profits due to premium
prices and in the long run, it leads to effective business growth as a result of market
expansion and market share gains (Sanyal and Datta, 2011).
Researchers have found that brand associations have a positive influence on consumer
choice, preferences and intention of purchase, their willingness to pay a price premium
for the brand, accept brand extensions and recommend the brand to others (Iglesias,
2001). Hawkins and Mothersbraugh (2010), note that consumers who believe a brand
delivers superior quality, is exciting to use and is produced by a company with
appropriate social values are likely to be willing to pay a premium for the brand, go the
extra mile to locate and buy it, recommend it to others, forgive a mistake or any product
flaws and engage in activities that market the brand.
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2.5 Chapter Summary
This chapter sheds more light on the concept of brand equity and CBBE. It is no longer
enough for companies to build strong brands as they have to align their marketing
strategies and efforts around the brands. The chapter focuses on four dimensions of brand
equity, which are brand awareness, perceived quality, brand associations and brand
loyalty. CBBE focuses on the customer’s perceptions and feelings about a brand. Through
CBBE, companies can build strong and profitable customer relations through the brand.
The chapter analyses the effect of CBBE on the financial performance in a firm. Financial
performance is analyzed as those relating to growth and those relating to profitability.
Growth relates to entry into new markets either through brand extensions or geographical
markets. Profitability relates to consumers willing to pay extra for a brand, loyal
customers making repeat continuous purchases and cannot be influenced by competitor
activity.
Chapter three gives the research methodology used. It tells of how and from where the
data was collected, what data was collected and how the data was analyzed.
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CHAPTER THREE
3.0 RESEARCH METHODOLOGY
3.1 Introduction
This chapter outlines the research design methodology adopted for the study. Section 3.2
discusses the research design, 3.3 defines the population and sampling procedures to be
adopted, 3.4 discusses the data collection methods to be adopted, 3.5 discusses the
research procedures and section 3.6 discusses the data analysis methods to be used in the
research.
3.2 Research Design
Research design is a blueprint for data collection, measurement and analysis based on the
research questions. It gives the structure and strategy of the whole research process.
Cooper & Schindler (2001), further say it gives the source of information, techniques to
gather data and the sampling technique used.
Selliz et al (1962) as cited by Mella (2012) define research design as a framework for
arrangement of conditions for collection and analysis of data in a manner that aims to
combine relevance to the research purpose with economy in procedure. This means the
design chosen should be in line with the purpose of the study and at the same time should
be the most economic method so as to save on time, energy and money.
The study used the descriptive cross-sectional design. Descriptive studies aim to describe
something usually market characteristic or function (Malhotra, 2007). A cross-sectional
study allows one to pick out the parameters of a phenomenon at a specific point in time
with an aim of getting accurate means of capturing a population’s characteristics at a
single point in time relating to what, where, how, who and when of a research topic
(Cooper and Schindler, 2005). The findings of the study can then be used to generalize to
the whole population. This study seeks to examine the effect of Customer Based Brand
Equity on the financial performance of milk processors in Kenya.
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3.3 Population and Sampling Design
3.3.1 Population
Mugenda & Mugenda (2009), define population as an entire group of individuals, events
or objects with a common observable characteristic. The target population for this study
was the 24 licensed milk processors as given by the Kenya Dairy Board (Appendix III). A
census study was conducted since the population was small. The questionnaire was sent
to the company’s marketing department.
3.3.2 Sampling Design
3.3.2.1 Sampling Frame
Malhotra (2007) define the sampling frame as a representation of elements in the target
population from which a sample is drawn. For this study, the sampling frame is the list 24
licensed milk processors as given by the Kenya Dairy Board (Appendix III).
3.3.2.2 Sampling Technique
The sampling technique is used to get a sample form which data can be collected. The
technique can either be probability sampling or non-probability sampling. Since the
population for this study was small, a census study was conducted.
3.3.2.3 Sample Size
Mugenda & Mugenda (1999) recommends a sample size of 30 units or 10% of the study
population be used to draw conclusions about the whole population. Since the population
for this study was small, the whole population was studied.
3.4 Data Collection Methods
Primary sources of data were used for the study. Primary data was collected from the
study population through the use of a questionnaire. Questionnaires are defined a method
used in data collection, where each person or respondent is asked to answer to the same
set of questions that have been put in the same predetermined format (de Vaus, 2002). The
questionnaire for this study contained both closed ended and open ended questions and
was divided into three sections. Section A gathered general information about the
company and section B gathered information relating to effect of CBBE on financial
performance.
27
The questionnaire was self- administered through electronic mail and the drop and pick
up later method. A cover letter accompanied the questionnaire as it explained the purpose
of the data and assured the respondents of data confidentiality. Follow-up telephone calls,
emails and personal visits were made to the respondents so as to increase the response
rate.
3.5 Research Procedures
The research started with the formulation of a questionnaire based on the research
objectives. This was the tool of data collection. Once the questionnaire had been
developed, a pilot test was conducted. The pilot tests was used to measure the reliability
and validity of the questionnaire as it helped develop and pre-test the research instrument
(Baker, 1994). Mugenda & Mugenda (2009) recommends that the ideal size of the
sample for the pilot test be 1% to 10% of the sample size.
Since the questionnaires were self-administered, they were sent out on email and others
were dropped at the respondent’s offices. A cover letter accompanied each of the
questionnaires. The data from questionnaires were coded, collated and edited for ease of
credibility and analysis.
3.6 Data Analysis Methods
Mugenda & Mugenda (1999) state that it is through data analysis that researchers can
make sense of the data collected. Data analysis entails editing, coding and analyzing data
so as to make conclusions that are easy to interpret.
The questionnaires gave both quantitative and qualitative data. The data was first coded
into meaningful categories based on the research question, then edited for completeness
and consistency and finally tabulated. MS Excel spreadsheet was used for initial
tabulations and analysis while Statistical Package for Social Studies (SPSS) Student
Version 16.0, a comprehensive package analyzed the data thoroughly and faster.
Analysis was both descriptive statistics and inferential analysis. Descriptive statistics
gave simple summaries about the sample data in quantitative descriptions and included:
mean, standard deviation, frequencies and percentages. Multiple regression and Pearson
Product- Moment correlation as forms of inferential statistical analysis was used in
determining the relationship between the dependent and independent variables.
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3.7 Chapter Summary
This chapter details the research design to be used for this study which is descriptive.
Since the target population was small, a census was conducted for the 24 licensed milk
processors. Primary data will be collected through the use of a questionnaire. The data
was analyzed through descriptive and inferential statistics.
Chapter four gives the results and findings for the study. Chapter five gives the summary
and recommendations of the study.
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CHAPTER FOUR
4.0 RESULTS AND FINDINGS
4.1 Introduction
This chapter discusses the interpretation and presentation of the findings obtained from
the field. The chapter presents the background information of the respondents, findings of
the analysis based on the objectives of the study. Descriptive and inferential statistics
have been used to discuss the findings of the study.
4.2 General Information
4.2.1 Response Rate
Response rate represents the total number of respondents who have participated in the
study and it is usually represented as a percentage. The target respondents for this study
were the 24 licensed milk processors obtained from the Kenya Dairy Board. We sent out
questionnaire to all the 24 firms and we received 22 duly filled questionnaires which is a
response rate of 92%.
Table 4.1 Response Rate of the Study
Questionnaires Administered Questionnaires Filled
And Returned
Percentage
Respondents 24 22 92%
4.2.2 Departments in which the Respondents Work
Respondents were requested to indicate the departments in which they work. Results
obtained show that 48% of the respondents worked in the marketing department, 26% of
the respondents worked in the customer service department, 13% of the respondents are
managing directors, 9% of respondents worked in the finance department while 4%
worked in the administration department. This implies that respondents holding various
job designations were equitably engaged in this research. Results are analyzed in figure
4.1
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Figure 4.1 Department in which the Respondents Work
4.2.3 Period which the company has been operational
The study sought to establish how long the company been operational. From the analysis,
52.2% of the respondents indicated that the company had been operational for over 15
years, 34.8% of the respondents indicated 5-10 years, whereas 13.0% of the respondents
indicated11-15 years. This implies that considerable number of companies has been
operational for a considerable period of time which implies that they were in a position to
give credible information relating to this study. Results are in figure 4.2 below
0
2
4
6
8
10
12
Less than
5 years
6-10 years 11-15
years
Over 15
years
Frequency
Figure 4.2: Period in which the Company has been Operational
Sales and
Marketing
48%
Managing Director
13%
Administration
4%
Customer Service
26%
Finance
9%
31
4.3 Brand Information
4.3.1 Number of Brands
The study sought to determine the number the brands that the company had. From the
analysis, the study revealed that most of the firms as shown by 31.8% had 4 brands,
18.2% of the companies had over 10 brands and 3 brands and 9.1% of the companies had
6 brands and 5 brands. Results are analysed in table 4.1
Table 4.2: Number of Brands the Company Has
Frequency Percentage
2 brands 3 13.6
3 brands 4 18.2
4 brands 7 31.8
5 brands 2 9.1
6 brands 2 9.1
over 10 4 18.2
Total 22 100.0
4.3.2 Diversification
Respondents were requested to indicate whether the company operated in any other sector
another than dairy industry. From the analysis, 48% of the respondents indicated that the
company had no other operation in any other sector, 17% of the respondents indicated
they are in the honey and jam sector, 13% of the respondents indicated they are in the
bakery and customer advisory services respectively, while 9% of the respondents
indicated they are in animal feeds production. This implies that considerable number of
milk processing firms had diversified to other sectors.Results are given in figure 4.3
32
None
48%
Honey and
Jams
17%
Customer
Advisory
13%
Bakery
13%
Animal Feeds
Production
9%
Figure 4.3: Sectors of Operation Apart from Dairy
4.3.3 Stakeholders Impact on Brand Equity
The study sought to determine the extent to which the various stakeholders influenced
branding decisions and strategies by dairy processing firms. The respondents were
required to rate the importance of the stakeholders in a five point Likert scale. The range
was ‘most important’ (5) to ‘not important’ (1). The scores of not important (N.I) and
least important (L.I) had an equivalent mean score of 0 to 2.4 on the continuous Likert
scale; ( 0≤ N.I/L.I <2.4). The scores of moderate important (M.I) had an equivalent mean
score of 2.5 to 3.4 on the continuous Likert scale; (2.5≤M.I. <3.4). The scores of
important (I) and most important (MtI) had an equivalent mean score of 3.5 to 5.0 on a
continuous Likert scale; (3.5≤ I/M.I <5.0).
A standard deviation of >1.5 implies a significant difference on the impact of the variable
among respondents. Majority of the respondents rated customers (mean = 4.87),
competitors (mean=4.24) and management (mean = 3.87) as very important stakeholders
in their branding process. The study noted that Government/ Policy makers and General
Public had moderate influence on decision making process and implementation of
branding strategies as shown by a mean = 3.35 and 3.39 respectively. Results of the
study are given in Table 4.3
33
Table 4.3: Stakeholder Influence on Brand Decisions
Stakeholder Mean Std
deviation Customers 4.87 0.34
Competitors 4.24 1.10
General Public 3.39 1.20
Management 3.87 1.14
Government/ Policy makers 3.35 1.15
4.4 Building Brand Equity and Customer Based Brand Equity among Milk
Processors in Kenya
4.4.1 Brand Awareness
This section sought to determine the extent to which various milk processors in Kenya
had implemented brand awareness strategies.
Respondents were asked to rate the extent to which their companies had implemented
brand awareness strategies in a five point Likert scale. The range was ‘strongly agree’ (5)
to ‘strongly disagree’ (1). The scores of strongly disagree (S.D) and disagree (D) had an
equivalent mean score of 0 to 2.4 on the continuous Likert scale; (0≤ S.D/D <2.4). The
scores of ‘neutral’ have been taken to represent a variable that had an impact to a neutral
extent (N.E.) with an equivalent mean score of 2.5 to 3.4 on the continuous Likert scale;
(2.5≤N.E<3.4). The scores of strongly agree (S.A) and agree (A) had an equivalent mean
score of 3.5 to 5.0 on a continuous Likert scale; (3.5≤S.A/A<5.0). A standard deviation of
>1.5 implies a significant difference on the impact of the variable among respondents.
From the analysis majority of the respondents strongly agreed that customers are familiar
with company’s brand, customer could easily identify the brand and the brand is easy to
recall. The findings are in line with Keller (2003) study which notes that, brand awareness
relates to the strength of the brand node or trace in memory and is reflected by consumers'
ability to identify the brand under different conditions. This relates to the likelihood that a
brand name will come to mind and the ease at which it does. The highest level of brand
awareness is top of mind awareness and by raising brand awareness; firms can reinforce
brand loyalty (Kapferer, 2008).
34
The study also revealed that dairy processing firms have built strong brand identities
which have been communicated and positioned well to reach the target market. The
creation of a brand implies communicating a certain brand image in such a way that all
the firm's target groups link such a brand (and thus the products sold using its name) with
a set of associations (Iglesias, 2001).
Results are given in table 4.4
Table 4.4: Extent to Which Companies have Built Brand Awareness
Statements relating to brand awareness Mean Std deviation
Our company has built a good brand identity 4.09 1.20
Our company has communicated our brand identity to our
customers
4.04 1.07
Our customers are aware about our brand identity 3.65 0.98
The brand identity our customers have is what the
company
3.70 1.02
Our brand is a reflection of the customers 3.57 1.27
We have built a consistent brand image 3.96 1.11
We consistently keep brand messaging 3.70 0.97
We have built a personality around the brand 4.04 1.11
The brand has been positioned well to reach the target
market
4.09 0.90
Our brand is easy to recall 4.22 0.85
Our brand is recognizable 3.96 1.11
Our customers are familiar with our brand 4.65 0.49
Our brand is easily identifiable to our customers 4.48 0.79
Our customers can easily identify our brand even from a
distance
4.39 0.72
Our company has done a good job in marketing the brand 4.13 0.69
When our customers go to buy dairy products, our brand is
in the list of choices
4.43 0.51
35
4.4.2 Brand Loyalty
This section investigates the extent to which various milk processors in Kenya had
implemented brand loyalty strategies.
Respondents were asked to rate the extent to which their companies had implemented
brand loyalty strategies in a five point Likert scale. The range was ‘strongly agree’ (5) to
‘strongly disagree’ (1). The scores of strongly disagree (S.D) and disagree (D) had an
equivalent mean score of 0 to 2.4 on the continuous Likert scale; (0≤ S.D/D <2.4). The
scores of ‘neutral’ have been taken to represent a variable that had an impact to a neutral
extent (N.E.) with an equivalent mean score of 2.5 to 3.4 on the continuous Likert scale;
(2.5≤N.E<3.4). The scores of strongly agree (S.A) and agree (A) had an equivalent mean
score of 3.5 to 5.0 on a continuous Likert scale; (3.5≤S.A/A<5.0). A standard deviation of
>1.5 implies a significant difference on the impact of the variable among respondents.
Majority of the respondents strongly agreed that the company aims at retaining its
customers and satisfying the customers’ needs every time, loyal customers tend to
purchase other products offered by the company, customers were happy with the
company’s purchases and customers are more likely to recommend the brand to their
friends and family. According to Ghodeswar (2008), brand loyalty influences consumer
behavior which is in line with the findings of this study. Brand loyalty implies that
consumers bind themselves to a brand as a result of a deep-seated commitment and
purchase the brand consistently when they need a product in that product category and
reduce time spent when buying a product (Pride and Ferrell, 2009).
Results are given in table 4.5
36
Table 4.5: Extent to Which Companies have Built Brand Loyalty
Mean Std deviation
When our customers go to buy dairy products, our
brand is in the list of choices
4.43 0.51
Our brand aims at building relationships with our
customers
4.13 0.92
The company takes interest on feedback given by
customers
4.35 0.49
Our company aims at retaining its customers 4.65 0.49
Our company aims at satisfying the customers’ needs
every time
4.43 1.04
Our customers are happy with their purchases 4.39 0.50
Our repeat customers tend to purchase our other
products
4.39 0.50
Our new products are taken well by our loyal
customers
4.22 0.74
Our customers will continue buying our brand at any
price
3.70 1.29
Our customers are likely to continue purchasing our
brand
4.22 0.42
Our customers would not go for another brand if I the
brand was not available at the time
3.09 1.20
Our customers are more likely to recommend the
brand to their friends and family
4.35 0.49
4.4.3 Perceived Quality
This section investigates the extent to which milk processors in Kenya had implemented
product quality strategies.
Respondents were asked to rate the extent to which their companies had implemented
brand loyalty strategies in a five point Likert scale. The range was ‘strongly agree’ (5) to
‘strongly disagree’ (1). The scores of strongly disagree (S.D) and disagree (D) had an
equivalent mean score of 0 to 2.4 on the continuous Likert scale; (0≤ S.D/D <2.4). The
scores of ‘neutral’ have been taken to represent a variable that had an impact to a neutral
37
extent (N.E.) with an equivalent mean score of 2.5 to 3.4 on the continuous Likert scale;
(2.5≤N.E<3.4). The scores of strongly agree (S.A) and agree (A) had an equivalent mean
score of 3.5 to 5.0 on a continuous Likert scale; (3.5≤S.A/A<5.0). A standard deviation of
>1.5 implies a significant difference on the impact of the variable among respondents.
Zhu (2009) notes that perception plays an important role in determining the loyalty of a
consumer in that when a buyer is convinced that his choice is the correct one and he is
buying superior products, then he will not shift his loyalty towards that product easily.
This is in line with the findings of the study as it reveals that, majority of the respondents
strongly agreed that milk processing firms market their brands as that of high quality
(mean = 4.83), milk processing firms consistently provide a high quality brand, milk
processors provides a high quality brand (mean = 4.74), the consumers consider the
brands are trustworthy (mean = 4.65), consumers believe product from individual firms
were of higher quality compared to products competitors and that the firms brand quality
is preferred by customers than that of the competitors (mean = 4.57).
The study also revealed that most of the milk processing firms have influenced the
customer perception about their brands, customers got what they expected from the firms’
brand and that customers consistently get what they expect from the brand (mean = 4.43),
customers believe that the firms provide a high quality brand (mean = 4.39) and the firm’s
management was happy with the perception customers have about the brand (mean =
4.26).
The results also indicate that establishing a value perception is critical in the buying
process. Tangible cues exhibiting high quality (e.g. packaging, shelf space, media
placement) need profound attention. Furthermore, it is suggested that risk (which plays an
important part in the consumer decision process) is minimized through optimal retail
service quality and customer reassurances. Results are analyzed in table 4.6
38
Table 4.61: Extent to Which Companies have Built Perceived Quality
Mean Std deviation
We provide a high quality brand 4.74 0.45
We consistently provide a high quality brand 4.74 0.45
Our product is of higher quality compared to our
competitors
4.57 0.51
Our brand quality is preferred to that of the competitors 4.57 0.51
Our customers believe we provide a high quality brand 4.39 0.50
We market our brand as that of quality 4.83 0.39
We have influenced the customer perception about our
brand
4.43 0.51
We are happy with the perception customers have about the
brand
4.26 0.69
Our brand delivers what it promises 4.30 0.47
Customers get what they expect from our brand 4.43 0.51
Customers consistently get what they expect from our
brand
4.43 0.51
Customers get value for my money when they buy our
brand
4.30 0.47
All our products from are of superior quality 4.52 0.51
The organization manufacturing the brand is trustworthy 4.65 0.49
4.4.4 Brand Associations
This section investigates the extent to which various milk processors in Kenya had
implemented strategies geared at formation of brand associations.
Respondents were asked to rate the extent to which their companies had implemented
brand loyalty strategies in a five point Likert scale. The range was ‘strongly agree’ (5) to
‘strongly disagree’ (1). The scores of strongly disagree (S.D) and disagree (D) had an
equivalent mean score of 0 to 2.4 on the continuous Likert scale; (0≤ S.D/D <2.4). The
scores of ‘neutral’ have been taken to represent a variable that had an impact to a neutral
extent (N.E.) with an equivalent mean score of 2.5 to 3.4 on the continuous Likert scale;
(2.5≤N.E<3.4). The scores of strongly agree (S.A) and agree (A) had an equivalent mean
39
score of 3.5 to 5.0 on a continuous Likert scale; (3.5≤S.A/A<5.0). A standard deviation of
>1.5 implies a significant difference on the impact of the variable among respondents.
From the analysis majority of the respondents strongly agreed that the company’s product
are of high quality (mean=4.65); the firm’s brand is able to meet the consumer’s needs
(mean=4.52) and the firm’s brand is reliable (mean=4.52). Respondents agreed that the
firms brand is relatable with the target market (mean=4.43); brands were dependable
(mean=4.39); consumers always counted on them (mean=4.39); the price charged by
most of the dairy company is fair for the value offered and that firms brand is good value
for money (mean = 4.39) and that most of the dairy firm’s management perceived that
their brand is stylish and attractive (mean = 4.13).
Results are analyzed in table 4.7
Table 4.7: Extent to Which Companies have Built Brand Associations
Mean Std deviation
Our brand is reliable 4.52 0.51
Our brand is able to meet the consumer’s needs 4.52 0.51
Our brand is good value for money 4.39 0.50
The product are of high quality 4.65 0.49
Our brand is stylish and attractive 4.13 0.69
Our brand is dependable and consumers can always
count on it
4.39 0.50
Our brand is relatable with our target market 4.43 0.51
Our customers are confident in our product 4.30 0.47
The price we charge is fair for the value we give 4.39 0.50
4.5 Relationship Between Customer Based Brand Equity and Financial Performance
of Milk Processors in Kenya
This section investigates the relationship between brand equity and financial performance
of milk processors in Kenya.
Financial performance of the firms can be observed directly from their financial
statements or indirectly by obtaining views of the managers on firm’s financial
performance (Aydin and Ulengin, 2015). For this study, we have used the latter method
40
where the indicators that reflect the extent of the fulfillment of financial goals, such as
sales levels, market shares in target markets and profitability are assessed.
From the analysis majority of the respondents agreed that the firm’s loyal customers make
it easy for the company to get into new markets (mean = 4.30), most of the dairy product
customers were price inelastic (mean = 4.13), loyal customers recommend their friends
and families to purchase company’s products, the firms loyal customers make it easy for
the firm to introduce new products (mean = 4.04), loyal customers give the dairy firms
continued stream of revenue (mean = 4.00).
The study also revealed that brand’s quality enable the company to charge a premium
price (mean = 3.26), brand positioning strategy gives dairy manufacturing firms leverage
with their distributors, most of the dairy firms always got value for their marketing
efforts (mean = 3.96), brand positioning gives dairy processing firms the competitive
advantage (mean = 3.87) and that most of the dairy processing firms had unique brand
identity which is difficult for competitors to imitate (mean =3.83). Results are analyzed
in table 4.8
41
Table 4.8: Relationship Between Brand Equity and Financial Performance
Mean Std deviation
Our brand’s quality enable us to charge a premium price 3.26 1.01
Our customers are price inelastic 4.13 0.81
Our loyal customers make it easy for us to introduce new
products
4.04 0.93
Our loyal customers make it easy to get into new markets 4.30 0.88
Our loyal customers recommend us to friends and
families
4.04 0.77
Our loyal customers give us continued stream of revenue 4.00 0.95
Our brand positioning gives us competitive advantage 3.87 0.92
Our brand positioning gives us leverage with our
distributors
3.96 0.93
Our brand identity makes it difficult for competitors to
imitate
3.83 0.89
We always get value for our marketing efforts 3.96 0.71
4.6 Regression
In this study, a multiple regression analysis was conducted to test the influence among
predictor variables. The research used statistical package for social sciences (SPSS V
21.0) to code, enter and compute the measurements of the multiple regressions. The
dependent variable was financial performance while the independent variables were brand
awareness, brand associations, perceived quality and brand loyalty.
The findings showed that there exists a linear relationship between the dependent and
independent variables used in the study. This is shown by a correlation (R) coefficient of
0.871. The determination coefficient as measured by the adjusted R-square presents a
moderately strong relationship between dependent and independent variables given a
value of 0.752. This depicts that the model accounts for 75.2% of the variations in
42
financial performance while 24.8% remains unexplained by the regression model. The
regression model was:
Y = β0 + β1X1 + β2X2 + β3X3 + β4 X4 + ε
Whereby Y is financial performance, β0 is the regression constant, β1 – β4 regression
coefficients, X1 is brand awareness, X2 is brand associations, X3 is perceived quality, X4
is brand loyalty and ε is the model’s error term. The model summary is presented table 4.9
below.
Table 4.9: Regression Model Summary
Model R R Square Adjusted R Square Std. Error of the Estimate
1 .871a .758 .752 .59485
a. Predictors: (Constant), brand awareness, brand associations, perceived quality and
brand loyalty
b. Dependent Variable: financial performance
The ANOVA statistics is represented in table 4.10 below was used to present the
regression model significance. From the ANOVA statistics for the study, the regression
model had a significance level of 0.000% which is an indication that the data was ideal
for making a conclusion on the population parameters as the value of significance (p-
value) was less than 5%. The calculated value was greater than the critical value
(11.817>2.50) an indication that brand awareness, perceived quality, brand associations
and brand loyalty all affect the financial performance of milk processors in Kenya. The
significance value was less than 0.05 indicating that the model was significant.
Table 4.10: ANOVAa Statistic
Model Sum of Squares df Mean Square F Sig.
1
Regression 158.532 4 39.633 11.817 .000b
Residual 60.372 62 3.354
Total 218.904 22
Critical value =2.50
a. Predictors: (Constant), brand awareness, brand associations, perceived quality and
brand loyalty
b. Dependent Variable: financial performance
43
Table 4.11: Table of Coefficients
Model Unstandardized
Coefficients
Standardized
Coefficients
t Sig.
B Std. Error Beta
(Constant) 1.147 .229 5.009 .003
Brand Awareness .691 .077 .435 8.974 .000
Perceived Quality .573 .064 .318 8.953 .000
Brand Associations .813 .093 .271 8.742 .000
Brand Loyalty .687 .094 .271 7.309 .004
From the data in the above table the established regression equation was
Y = 1.147+ 0.691X1 + 0.573X2 + 0.813X3 + 0.687 X4
From the above regression equation, it was revealed that holding brand awareness,
perceived quality, brand associations and brand loyalty to a constant zero, the financial
performance of milk processors in Kenya would be 1.147. A unit increase in brand
awareness would enhance the financial performance of milk processors in Kenya by a
factor of 0.691. A unit increase in perceived product quality would enhance financial
performance of milk processors in Kenya by factor of 0.573.A unit increase in brand
associations would enhance the financial performance of milk processors in Kenya by a
factors of 0.813. A unit increase in brand loyalty would enhance the financial
performance of milk processors in Kenya by a factor of 0. 687. All the variables were
significant as their significant value was less than (p<0.05).
4.7 Chapter Summary
This chapter sought to find out the effect of building customer based brand equity on the
financial performance of milk processors in Kenya. The study consisted of general
information of the respondents and their companies, general review of their adoption of
brand equity concept, examination of how they have built customer based brand equity
and its impact on their financial performance. The study found that brand awareness,
brand loyalty, perceived quality and brand association will affect the financial
44
performance of the milk processors in Kenya. Each of the factors has a positive linear
relation with financial performance. Chapter five will give a summary of the findings,
conclusions drawn from the findings and will give recommendations based on the
findings.
45
CHAPTER FIVE
5.0 DISCUSSION, CONCLUSIONS AND RECOMMENDATIONS
5.1 Introduction
In this chapter, the researcher provides the major summary of the study, a discussion on
the findings of the research compared with the findings in the literature review. The
findings were concluded on the basis of effect of customer based brand equity on the
financial performance of milk processors in Kenya Recommendations for further
improvement were made through identification of building customer based brand equity.
5.2 Summary
The purpose of this study was to analyze the effect of customer based brand equity on the
financial performance of milk processors in Kenya. The study was guided by the
following specific objectives; to review extent to which milk processors have adopted the
concept of brand equity, to analyze how milk processors in Kenya have built Customer
Based Brand Equity and to analyze the effect of Customer Based Brand Equity on
financial performance of milk processors in Kenya.
The study adopted a descriptive research design which allowed respondents to describe
the factors that they believed attributed to their sustainability and growth. The study
targeted a sample of 24 respondents. Primary data was collected by means of structured
questionnaires owing to its enhanced reliability. Pre-testing was done by administering
the questionnaire to 5 respondents who were not included in the actual study. This
enabled the researcher to fine tune the questionnaire for objectivity and efficiency of the
process. This study used both quantitative and qualitative method of data analysis. The
data was presented using tables. Data was analyzed using Statistical Package for Social
Sciences (SPSS).
The study revealed that all the respondents all the respondents had more 4 brands in the
markets and others had diversified into other sectors other than dairy and other regionally
and were now operating outside Kenya. The study noted that a positive relationship
existed between brand awareness and financial performance of milk processors in Kenya.
When customers go to buy dairy products, the company’s brand was always in the list of
their choices. Targeted customers can easily identify the brand even from a distance,
46
brands for dairy processing firms were easily recalled by customers and that most of the
dairy processing firms have done a good job in marketing their brands. The study noted
that the exits a positive relationship between brand loyalty and financial performance of
milk processors. The study also revealed that customers of diary firms were likely to
continue purchasing company’s brand and that new product for diary firms were taken
well by the loyal customers. The study also revealed that most of the milk processing
firms have influenced the customer perception about their brands. Results obtained show
that most companies produced products of high quality, the brands are able to meet the
consumer’s needs and the brands are reliable.
The study confirmed that the firm’s loyal customers make it easy for the company to get
into new markets, most of the dairy product customers were price inelastic, loyal
customers recommend their friends and families to purchase company’s products, the
firms loyal customers make it easy for the firm to introduce new products and that loyal
customers give the dairy firms continued stream of revenue. It was also revealed that
brand’s quality enable the company to charge a premium price, brand positioning strategy
gives dairy manufacturing firms leverage with their distributors, most of the dairy firms
always got value for their marketing efforts, brand positioning gives dairy processing
firms the competitive advantage and that most of the dairy processing firms had unique
brand identity which is difficult for competitors to imitate. It was also revealed that the
companies should conduct trade marketing campaigns; enhance advertising; enhance
customer education and awareness; expand market research, increase the bi-products of
the dairy to enhance brand equity. This will in turn enhance financial performance of
firms.
5.3 Discussion
5. 3.1 Review of Brand Equity among Milk Processors
The study noted that the milk processors considered the customer first while making their
branding decisions. Other stakeholders who were considered important were competitors
and management. Including stakeholders in brand decision making process supports the
strategic call by Askarany and Yazdifar (2012). The findings also concur with the research
by Appiah-Adu and Singh (2008) which found a link between customer orientation, new
product success and company performance.
47
The study also revealed that dairy processing firms had built a good brand identity and
that the brand has been positioned well to reach the target market (mean = 4.09), the firms
had communicated their brand identity to the targeted customers, the firm had also built a
personality around the brand (mean = 4.04) the company’s brand is recognizable .the firm
have built a consistent brand image (mean = 3.96), most of the dairy processing firms
consistently kept brand messaging (mean = 3.70), targeted customers are aware about
firms brand identity (mean = 3.65) and that the brand is a reflection of the customers
(mean =3.57) The findings are in line with the proposal by Kapferer (2008) which states
that the highest level of brand awareness is top of mind awareness and that raising brand
awareness helps to reinforce brand loyalty.
The study further revealed that brand awareness in any industry gives that company an
edge. Brand awareness accomplishes several objectives for companies seeking to increase
sales in the marketplace. A brand awareness campaign needs to be flexible enough to
grow with the company and adjust if needed. The company should seek to build customer
awareness, promote its website and add value.
The study revealed that milk processors in Kenya had implemented brand awareness
strategies to a great extent. The study also noted that customers were familiar with various
brands by milk processors (mean = 4.65), most of the brand belonging to dairy
processing firms were easy to identify (mean = 4.48), when customers go to buy dairy
products, the company’s brand was always in the list of their choices (mean =4.43),
targeted customers can easily identify company’s brand even from a distance (mean =
4.39), brands for dairy processing firms were easily to recalled by customers (mean =
4.22) and that most of the dairy processing firms have done a good job in marketing their
brands (mean = 4.13). Creating brand awareness is usually the first step in building
advertising objectives which is in line with the findings of Capon (2012).
5.3.2 Customer Based Brand Equity Among Milk Processors in Kenya
The basic premise of CBBE is that the power of the brand lives in what the customers
have learned, felt, seen, touched and heard about the brand as a result of their experiences
over time i.e. ‘power of brand lies in what resides in the minds of customers’ (Keller,
2003). The study noted that the milk processors considered the very important customer
while making branding decisions.
48
The findings of the study show that the milk processors are keen on CBBE. Keller (2003)
notes that for a company focused on CBBE, the challenge in building strong brands is
ensuring that customers have the right type of experiences with products and services and
their accompanying marketing programs so that the desired thoughts, feelings, images,
beliefs, perceptions, opinions and so on become linked to the brand. Ali (2014) notes that,
every interaction with the stakeholders affects brand equity and increases it as the more
positive the experience, the stronger is the brand and the more the organization has
positive reputation.
The study noted that milk processors in Kenya had implemented brand loyalty strategies
to a great extent, The study also revealed that most of the milk processing firms have
influenced the customer perception about their brands, customers got what they expected
from the firms’ brand and that customers consistently get what they expect from the firms
brand (mean = 4.43), customers believe that the firm provides a high quality brand (mean
= 4.39), most of the dairy processing firms’ brand delivers what it promises and
customers get value for my money when they buy company’s brand (mean = 4.30), the
firm’s management was happy with the perception customers have about the brand (mean
= 4.26). The results of the study are similar to those proposed by Keller, (2008) who
found a strong positive relationship existed between price and perceived product value
and between perceived product value and willingness‐to‐buy.
The study further noted that milk processing firms aimed at retaining their customers
(mean = 4.65), others agrees that the company aims at satisfying the customers’ needs
every time and through this the firms’ dairy brand is always among the list of choices
(mean = 4.43 ). The firms’ loyal customers tend to purchase other products offered by the
company, were happy with the company’s purchases (mean = 4.39) and are more likely to
recommend the brand to their friends and family (mean = 4.35). This study reveals that
brand loyalty has an influence on consumer behavior and is in line with the findings of a
research by (Ghodeswar, 2008).
The study also revealed that customers of diary firms were likely to continue purchasing
company’s brand and that new products for diary firms were taken well by the loyal
customers (mean = 4.22), the diary firms took keen interest on feedback given by
customers (mean = 4.35), the firm’s brand aimed at building relationships with the
49
customers (mean = 4.13), the targeted customers would not go for another brand if the
brand was not available at the time (mean = 3.09) and that the firm expected that their
customers will continue buying the brand at any price (mean = 3.70). Laforet (2010)
notes that building a strong brand image is one of the best ways to get consumers to
connect and engage with the brand which is in line with these findings.
The research revealed that various milk processors in Kenya had implemented product
quality strategies, that milk processing firms marketed their brands as that of high quality
(mean = 4.83) milk processing firms consistently provide a high quality brand, dairy
firms provides a high quality brand (mean = 4.74) the organization manufacturing the
brand is trustworthy (mean = 4.65) all the products manufactured by the firm are from
superior quality (mean = 4.52) product from individual firms were of higher quality
compared to products competitors and that the firms brand quality is preferred by
customers than that of the competitors (mean = 4.57). The findings are in line with the
findings by Zhu, (2009) Perception plays an important role in determining the loyalty of a
consumer in that when a buyer is convinced that his choice is the correct one and he is
buying superior products, then he will not shift his loyalty towards that product easily.
The results further indicate that establishing a value perception is critical in the buying
process. Tangible cues exhibiting high quality (e.g. packaging, shelf space, media
placement) need profound attention. Furthermore, it is suggested that risk (which plays an
important part in the consumer decision process) is minimized through optimal retail
service quality and customer reassurances
5.3.3 Customer Based Brand Equity on Financial Performance of Milk Processors in
Kenya
This revealed that revealed brand equity and financial Performance of milk processors in
Kenya, that the firm’s loyal customers make it easy for the company to get into new
markets (mean = 4.30), most of the dairy product customers were price inelastic (mean =
4.13), loyal customers recommend their friends and families to purchase company’s
products, the firms loyal customers make it easy for the firm to introduce new products
(mean = 4.04), loyal customers give the dairy firms continued stream of revenue (mean =
4.00). The findings are in line with the argument by Aaker (2013) that brand equity
provides value to customers. It enhances the customer’s ability to interpret and process
50
information, improves confidence in the purchase decision and affects the quality of the
user experience.
The study noted that milk processors in Kenya had implemented strategies geared at
formation of brand associations. Regression results predict that a unit increase in brand
associations would enhance the financial performance of milk processors in Kenya by
factor of 0.813,the study also note that the company’s product are of high quality (mean =
4.65), the firm’s brand is able to meet the consumer’s needs, the firms brand is reliable
(mean = 4.52) other agreed that the firms brand is relatable with the target market (mean
= 4.43) Liker and Meier 2006; Kumar et al, (2000) Positive brand association helps an
organization to gain goodwill, and obstructs the competitor’s entry into the market
The study further revealed that brands offered by most of the dairy firms were dependable
and consumers always counted on them, the price charged by most of the dairy company
is fair for the value offered and that firms brand is good value for money (mean = 4.39)
and that most of the dairy firm’s management perceived that their brand is stylish and
attractive (mean = 4.13). The findings are in line with the proposal by Kamakura and
Russell, (2011) which recommends that brands should be associated with something
positive so that the customers have a positive relationship to the brand.
The study also revealed that brand’s quality enable the company to charge a premium
price (mean = 3.26), brand positioning strategy gives dairy manufacturing firms leverage
with their distributors, most of the dairy firms always got value for their marketing
efforts (mean = 3.96), brand positioning gives dairy processing firms the competitive
advantage (mean = 3.87) and that most of the dairy processing firms had unique brand
identity which is difficult for competitors to imitate (mean =3.83), the findings are in line
with the findings by Kiraithe and others (2011) that the brand equity creates value for
both the consumer and the firm, the brand provides value to the firm by generating value
for the consumers and consumers' brand associations are a key element in brand equity
formation and management.
From the analysis, most of the dairy companies made an average annual revenue not
exceeding 300 million, most of the dairy companies made an average annual total costs
not exceeding 1001 to 1,500 million and that most of the dairy companies made an
average annual total costs not exceeding 1001 to 1,500 million.
51
5.4 Conclusion
5. 4.1 Review of Brand Equity
The study concludes that reviews on customer based brand equity influenced the financial
performance of milk processors in Kenya. Reviews on Customer-based brand equity
formed businesses foundation that creates a positive attitude toward a brand, and how to
capitalize on attitudes and loyalties of their customers. Building a strong brand with
significant equity provides milk processors with numerous benefits, such as greater
customer loyalty and less vulnerability to competitive marketing actions or marketing
crises; larger margins as well as more favorable customer response to price increases and
decreases; greater trade or intermediary cooperation and support; increased marketing
communication effectiveness; and licensing and brand extension opportunities
5.4.2 Customer Based Brand Equity among Milk Processors in Kenya
The study concludes that strategizing on Building customer based brand positively
influenced the financial performance of milk processors in Kenya. Building customer
based brand equity forms the foundation or base building block in developing brand
equity and provides three important functions. First, awareness influences the formation
and strength of brand associations that make up the brand image and gives the brand
meaning. Second, creating a high level of customer based brand in terms of category
identification and needs satisfied is of crucial importance during possible purchase or
consumption opportunities. Building customer based brand influences the likelihood that
the brand will be a member of the consideration set, that handful of brands that receive
serious consideration for purchase and that Brand awareness is also important during
possible consumption settings in terms of maximizing potential usage
5.4.3 Customer Based Brand Equity on Financial Performance of Milk Processors in
Kenya
The study concludes that there exists a strong relationship between perceived relative
price and perceived product value, as well as between perceived product value and
willingness‐to‐buy influenced customer purchase decisions. The results also indicate that
establishing a value perception is critical in the buying process. Tangible cues exhibiting
high quality (e.g. packaging, shelf space, media placement) need profound attention.
Furthermore, it is suggested that risk (which plays an important part in the consumer
52
decision process) is minimized through optimal retail service quality and customer
reassurances.
5.5 Recommendation
5.5.1 Recommendation for Improvement
5.5.1.1 Review of Brand Equity
In order for milk processors in Kenya to build customer based brand equity, it is
important for milk processors in Kenya to position their dairy product uniquely and
ensure product reliability. Milk processors should clearly explain their position, this will
be critical in ensuring that consumers can easily remember about the qualities that they
care most about the product. Milk processing companies should consistently and
continually implements tangible measures that build positive perception on their products.
This may necessarily mean working on product quality aspects like packaging, shelf
space, media placement.
5.5.1.2 Customer Based Brand Equity among Milk Processors in Kenya
The study also recommends that the management of Milk processing companies should
consider initiating campaigns to enhance their brand awareness, there is need to segment
branding efforts to target highly specific audiences. Brand awareness strategies should
continue to focus on capturing the attention of current customers. These customers can be
identified as those individuals whom have shown an interest by visiting the company
website, reading company announcements, or otherwise indicated intent to purchase. To
make the most of branding efforts, marketers should focus their attention on the brand's
identified target market.
5.5.1.3 Customer Based Brand Equity on Financial Performance of Milk Processors
in Kenya
The study recommends that the brands for milk processing firms should be associated
with something positive so that the customers relate companies brand to being positive.
Brand managers should choose between brand and line extension as the primary form of
growth for the brand. Milk processing companies should also endeavor to build strong
relationships between perceived relative price and perceived product value. In order to be
able to choose the better alternative, brand managers need to relate consumer’s
53
perceptions of the brands, in the form of brand associations, to decisions on line or brand
extension.
5.5.2 Recommendations for Further Studies
The independent variables brand awareness, perceived quality, brand associations and
brand loyalty only accounted for 75.2% changes on financial performance of milk
processors in Kenya Therefore; the study recommends that further research should be
conducted to investigate the other factors accounting for (24.8%) effect on the financial
performance of milk processors in Kenya.
54
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APPENDICES
Appendix I: Cover Letter
Sarah Njeri Kuria
USIU- Africa
P. O. BOX 14634-00800
Nairobi.
April 2017.
Dear Sir/Madam,
RE: DATA COLLECTION
I would like to first of all thank you for your time.
I am a student at am a student at United States International University pursuing a degree
in Masters in Business Administration (MBA). As partial fulfillment for my degree, I am
conducting a research on: The Effect of Building Customer Based Brand Equity on the
Financial Performance of Milk Processors in Kenya.
The questionnaire attached is part of a research and it will gather the information needed.
The findings of this study will be solely used for academic reasons and I guarantee utmost
confidentiality
Your participation is very essential for the accomplishment of this study and it will be
highly appreciated. Please respond as honestly and objectively as possible.
Yours Faithfully,
Sarah Njeri.
61
Appendix II: Questionnaire
If any question may not be appropriate to your circumstances do not answer.
Section A: General Information
1. Organization: ___________________________________
2. Department: ___________________________________
3. Designation: ___________________________________
4. How long has the company been operational?
a) Less than 5 years
b) 5-10 years
c) 10-15 years
d) Over 15 years
5. The company operates
a) In Kenya only
b) East Africa only
c) Africa only
d) Worldwide
6. How many brands does your company have? _______________
7. Other than Dairy, does your company operate in another industry? ________
If yes, which one _____________________
Section B: Customer Based Brand Equity
8. While making and implementing branding strategies, how do the following stakeholders
impact on your decisions (5 = most important; 4= important; 3= moderately important;
2= least important; 1= not important)
Stakeholder 5 4 3 2 1
Customers
Competitors
General Public
Management
Government/ Policy makers
9. Who is the main target group for your brand? ____________________
62
10. Please tick the choice that you feel suits your situation from the choices provided by
the likert scale
1 = Strongly Disagree 2 = Disagree 3 = Neutral 4 = Agree 5 = Strongly
Agree
1 2 3 4 5
Brand Awareness
1. Our company has built a good brand identity
2. Our company has communicated our brand identity to our
customers
3. Our customers are aware about our brand identity
4. The brand identity our customers have is what the
company
5. Our brand is a reflection of the customers
6. We have built a consistent brand image
7. We consistently keep brand messaging
8. We have built a personality around the brand
9. The brand has been positioned well to reach the target
market
10. Our brand is easy to recall
11. Our brand is recognizable
12. Our customers are familiar with our brand
13. Our brand is easily identifiable to our customers
14. Our customers can easily identify our brand even from a
distance
15. Our company has done a good job in marketing the brand
16. When our customers go to buy dairy products, our brand
is in the list of choices
Brand Loyalty
17. Our brand aims at building relationships with our
customers
18. The company takes interest on feedback given by
customers
19. Our company aims at retaining its customers
20. Our company aims at satisfying the customers’ needs
every time
21. Our customers are happy with their purchases
22. Our repeat customers tend to purchase our other products
23. Our new products are taken well by our loyal customers
24. Our customers will continue buying our brand at any price
63
25. Our customers are likely to continue purchasing our brand
26. Our customers would not go for another brand if I the
brand was not available at the time
27. Our customers are more likely to recommend the brand to
their friends and family
28. Our customers trust our brand
Perceived Quality
29. We provide a high quality brand
30. We consistently provide a high quality brand
31. Our product is of higher quality compared to our
competitors
32. Our brand quality is preferred to that of the competitors
33. Our customers believe we provide a high quality brand
34. We market our brand as that of quality
35. We have influenced the customer perception about our
brand
36. We are happy with the perception customers have about
the brand
37. Our brand delivers what it promises
38. Customers get what they expect from our brand
39. Customers consistently get what they expect from our
brand
40. Customers get value for my money when they buy our
brand
41. All our products from are of superior quality
42. The organization manufacturing the brand is trustworthy
Brand Associations
43. Our brand is reliable
44. Our brand is able to meet the consumer’s needs
45. Our brand is good value for money
46. The product are of high quality
47. Our brand is stylish and attractive
48. Our brand is dependable and consumers can always count
on it
49. Our brand is relatable with our target market
50. Our customers are confident in our product
51. The price we charge is fair for the value we give
64
Section C: Brand Equity and Financial Performance
1. Our brand’s quality enable us to charge a premium price
2. Our customers are price inelastic
3. Our loyal customers make it easy for us to introduce new
products
4. Our loyal customers make it easy to get into new markets
5. Our loyal customers recommend us to friends and families
6. Our loyal customers give us continued stream of revenue
7. Our brand positioning gives us competitive advantage
8. Our brand positioning gives us leverage with our
distributors
9. Our brand identity makes it difficult for competitors to
imitate
10. We always get value for our marketing efforts
11. In your opinion, what more can your firm do to raise the brand equity and in turn your
financial performance
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
........................................
THANK YOU FOR YOUR TIME
65
Appendix III: Licensed Milk Processors
Company Name Postal Address Physical Location
1 Afrodane Industry P. O. Box 46336 NAIROBI Kinale off Nairobi
Naivasha Highway
2 Aspendos Dairy P. O. Box 10202 KANGEMA
3 BioFoods Products P. O. Box 27623-00506 NAIROBI
4 Brookside Dairy P. O. Box 236 RUIRU
5 Countryside Dairy Ltd P. O. Box LUGARI, KAKAMEGA
6 Doinyo Lessos P. O. Box 169- 30100 ELDORET KENYATTA STREET
ELDORET
7 Egerton University P. O. Box 536 NJORO EGERTON
UNIVERSITY 8 Eldoville Farm P. O. Box 24390 NAIROBI
9 Githunguri DFCS P. O. Box 3 GITHUNGURI GITHUNGURI TOWN
10 Happycow Dairy P. O. Box 558 NAKURU JOSEN TRUST HOUSE,
NAIROBI-NAKURU
HIGHWAY 11 Kabianga Dairy P. O. 1595 KERICHO KERICHO
12 Kinangop Dairy P. O. Box 54954-00620 SHOWBE PLAZA
NAIROBI
13 Meru CFU P. O. Box 2919 MERU
14 New Amstrong Co. Ltd P. O. Box
15 New KCC P. O. Box 30131-00100 DAKAR ROAD,
INDUSTRIAL AREA
16 New Sameer A&L P. O. Box LUNGA LUNGA RD,
CLESOI 17 Palmhouse Dairies P. O. Box 10001-00400
18 Pamside Dairy / Lantana P. O. Box 745 01000 THIKA GARISSA ROAD,
THIKA
19 Raka Milk Processors P. O. Box 3372 00506 NAIROBI KUGURU FOOD
COMPLEX,
ENTERPRISE RD 20 Stanley & Sons P. O. Box
21 Sunpower Products P. O. Box 4111-00100 NAIROBI ST. GEORGE'S ROAD,
TIGONI
22 Uplands Premium
Dairies P. O. Box 479 – 00502 NAIROBI
KAGWE TOWN,
KIAMBU
23 Wakulima Dairy P. O. Box 232-10103 MUKURWE-INI,
NYERI 24 Wimssy Fresh Dairy P. O. Box