Research Journal of Management Sciences _______________________ ______ ____ ____________ ISSN 2319 – 1171 Vol. 4( 8 ), 1 - 5 , August (2015) Res. J. Management Sci. International Science Congress Association 1 Investigating the affective factors on building brand equity in banking Industry of Iran (Case study: Tosee Saderat Bank) Esmaeili Far , Behnam 1 and Rezaei , Leila Sadat 2 Available online at: www.isca.in , www.isca.me Received 13 th May 20 1 5 , revised 30 th June 201 5 , accepted 17 th July 201 5 Abstract This research aimed at investigating affective factors (service experience, brand affinity and customer satisfaction) on building brand equity in banking industry of Iran. In order to conduct our research, we distributed a structured questionnaire among a sample of 220 customers of Tosee Saderat banks in Tehran. At last, SEM (Structural Equation Modeling) wa s used and it was found that service experience, brand affinity as the independent variables, and customer satisfaction as mediator variable, had an effe ct on building brand equity. Keywords : Service experience, brand affinity, customer satisfaction, brand equity . Introduction Business environment has witnessed a lot of fluctuations recently. Cohen and Mazzeo 1 , Tallon 2 and Bravo et al. 3 declared that as customers and governmental agencies have become more demanding and markets more competitive, banks are adopting integrated banking strategies in order to respond to these changes. One of managers’ duties is measuring brand strength especi ally in service industries. The goal of many organizations is to build a strong brand. What absorbs a customer to a brand and cause him/her to select a brand is its value that is known as brand equity. According to Reynolds and Phillips 4 brand equity has b ecome more important as the key to understanding the objectives and mechanisms of the holistic impact of marketing over the last 15 years. Jahanzeb et al. 5 , Krishnan and Hartline 6 argued that there is an abundance of research conceptualizing and measuring brand equity, but most of them are focusing on product - based brand equity, just some focusing on service - based brand equity. Banking industry of Iran has entered a competitive context with the establishment of private banks. Both private and governmental banks are trying not only to keep their brand position but also to promote it. This study examines brand equity through the lens of consumer behavior and psychology theories. The model in this paper was adopted from “Building Brand Equity in Retail Banks: the Case of Trinidad and Tobago” . Brand Equity Today, firms are trying to create strong brands in order to go one step ahead from their rivals. Because a brand is not just the firm’s name, logo, and color etc. actually the quality of firm’s product is ref lected by firm’s brand. So, firms are developing strategies in order to increase their brand’s equity 7 . Brand equity is one of the most important and well - known concepts in marketing which was introduced in 1980 for the first time. It’s important as powerf ul brands create meaningful images in the minds of customers 8 . According to Aaker 9 brand equity create added value that one product create it by means of brands name. Keller 8 declared that the value of successful brands encapsulates the essence of brand eq uity. American Marketing Association defined brand equity as: “the value of brand. From a consumer perspective, brand equity is based on consumer attitudes about positive brand attributes and favorable consequences of brand use”. Scholars have various com prehensions for brand equity. Some of them define brand equity as added value, loyalty to brand, recognition of brand, brand awareness, perceived quality, added utility, attitude fluctuation caused by brand recognition and so on 10 . Some academicians suggested that consumers create brand equity through intangible and perceptual dimensions like perceived performance, perceived value, image, truth worthiness and commitment 11 . Others mapped behavioral determinants that included loyalty, perceived quality, and brand awareness/ association 12 . Belen del Rio et al 13 and Kim and Kim 14 argued that the construct of brand equity is more subjective response to social and personal elements. Service Experience Experiences are “processes of sensory perception, brand affect, and the participatory experiences consumers seek from a brand” 15 . The literature in consumer research has already shown a significant influence of service experiences on post consumption evaluations 16,17 . Service experience affects customers’ feelings, beliefs, and behavior. Berry et al. 18 suggested that service cues have a “disproportionately larger effect on how customers evaluate service experiences and whether they chose to utilize the service again.” Luoh and Tsaur 19 , Otto et al. 20 found t hat service experience has an important influence on the consumer evaluation of and satisfaction with a given service. So they defined service experience as the subjective personal reactions and feelings by consumers when consuming or using a service. Research Journal of Management Sciences _______________________ ______ ____ ________________________ ISSN 2319 – 1171 Vol. 4( 8 ), 1 - 5 , August (2015) Res. J. Management Sci. International Science Congress Association 2 Org anization must take the quality of service experience at their center stage in order to have a competitive advantage. Experiences and expectations with service performance and quality of the services will influence customer satisfaction. As customers have a range of expectations and since expectations vary from person to person and time to time, a zone of tolerance would be confined by desired service 21 . According to Gilmore and Pine 22 , Lenderman 23 , Marconi 24 , O’Sullivan and Spangler 25 , Smith and Wheeler 26 experience marketing has become a niche area itself. Customers’ feelings and behaviors in the future will be influenced by how they experienced a service clearly. Frow and Payne 27 defined customer experience as: the physical and emotional experiences occ urring through the interactions with the product and/or service offering of a brand from point of first direct, conscious contact, through the total journey to the post - consumption stage. Driving brand success by creating a brand - based customer experience which is differentiated from its competitors and for which consumers are willing to pay is the aim of customer experience . Brand Affinity Making a powerful and potentially beneficial connection with a consumer is a good thing. Customers like what firms do and come back for more. A brand can build a powerful and potentially beneficial affinity with customers by engaging with online communities in a meaningful way and forging a personal connection with consumers. Customers’ emotional connection with the firm ’s brand shows that firm achieves brand affinity. Emotionally attached customers hold favorable attitudes toward brands which positively affect a wide range of marketing outcome 28 . The term affinity in sociology refers to “forces that cause one person to b e drawn to, and seek a relationship with another” 29 . According to De Chernatony and Dall’Olmo Riley 30 in marketing, affinity is used to describe the emotional connection between customers and brands. Brand affinity goes beyond rational economic value and r eflects the emotional affection consumer express for their preferred brands. Consumers interact with hundreds of brands but consciously develop emotional connections with only a few through feelings of love, affection, or belonging 28 . The degree of emotion al affection directed to any object is predicted by the nature of an individual’s interaction with that object. Individuals who are strongly attached to a person are more likely to be committed to, invest in, and make sacrifices for that person, and likewi se customers will depict similar behavioral traits in their brand relationships 31 . Customer Satisfaction Erevelles and Leavitt 32 , Oliver 33 considered customer satisfaction as a central concept in the marketing literature. Oliver and De Sarbo 34 , Tse and Wi lton 35 , Yi 21 identified different kinds of customer satisfaction. On the one hand, process definitions of customer satisfaction emphasize the ‘expectancy disconfirmation paradigm’. While, on the other, number of authors use advance outcome definition accor ding to which satisfaction may be perceived as a state of fulfillment which is connected to reinforcement and arousal. Satisfaction is a mental state of pleasurable fulfillment derived from consumption 36 . Oliver sees satisfaction as a fulfillment of consum ers' consumption goals as experienced and described by consumers. Satisfaction is consumers' judgment that a product or service feature, or the product or service itself, provided (or is providing) a pleasurable level of consumption - related fulfillment, in cluding levels of under - or over - fulfillment 33 . Satisfied customers create and sustain deep psychological bonds with preferred brands. Satisfied customers are able to identify preferred brands very easily and impact on market penetration and expansion stra tegies 37 . The mediating role of customer satisfaction in this brand equity model is based on the recent arguments promoted by Caruana et al. 38 suggesting that customer satisfaction is a dynamic concept that varies with intensity, time, and circumstance. P ositive thoughts and feelings toward a brand are likely to have a positive influence on the brand evaluation 39 and increase the level of satisfaction toward the brand and influence preferential responses 37 . Research Hypothesis : According to the conceptua l model of this study as shown in figure 1, affective factors on building brand equity are service experience and brand affinity(independent variables), brand equity (dependent variables), and customer satisfaction (mediator variable). The aim of this stud y is to investigate the affective factors on building brand equity in banking industry of Iran. Based on the conceptual model and main question of the paper - “What variables are affective on building brand equity in banking industry of Iran?” - the hypothes es are as follow: H1: Service experience positively and directly relates to brand equity. H2: Brand affinity positively and directly relates to brand equity. H3: Customer satisfaction positively and directly relates to brand equity. H4: Customer satisfact ion acts as a mediator between service experience and brand equity. H5: Customer satisfaction acts as a mediator between brand affinity and brand equity. Research Methodology Research type: This article in terms of objective is an applied research, and in terms of data collection is descriptive. Pierson correlation, T - test and Beta test (based on SEM) were used in order to calculate and indicate the relationship type and the goodness of fit. Structural Equations Modeling is a comprehensive statistical approach which examines the hypotheses regarding the relationship between observe d and latent variables. Data collection tools: The model of this research is derived from a model on brand equit y by Meena Rambocas, Vishnu M. Kirpalani and Errol Simms. The population of interest was defined as Tosee Saderat Banks in Tehran who had active checking account and use from the services of these banks for Research Journal of Management Sciences _______________________ ______ ____ ________________________ ISSN 2319 – 1171 Vol. 4( 8 ), 1 - 5 , August (2015) Res. J. Management Sci. International Science Congress Association 3 more than 5 years. The validity of the questionna ire was measured by some marketing experts and professors of Islamic Azad university of central Tehran (Iran), and the reliability of it was measured by Cronbach’s alpha factor which resulted in following values: 0.86 for brand equity, 0.90 for service exp erience, 0.88 for brand affinity, and 0.93 for customer satisfaction; all in the acceptable range. Results and Discussion Explanation of the structural model: As mentioned before, T - test and Beta test were calculated. These values are shown on each path in figure 2. Calculated T demonstrated that which hypothesis is accepted or rejected. The hypothesis would not be confirmed if the calculated T is less t han 1.9 6. So as shown in figure - 2, one of paths (customer satisfaction to brand equity) was not confirmed. Figure - 1 Reseach Model 37 Figure - 2 The structural model of brand equity Table - 1 Descriptive data analysis Gender % Age % Education % Male 71.8 Under 25 7.7 Diploma andUnder diploma 31.4 Female 24.5 25 to 29 24.1 BA 49.1 *** *** 30 to 34 18.2 MA 14.5 *** *** 35 to 39 31.4 Ph. D and above 2.3 *** *** 40 and bove 18.6 *** *** Table - 2 Correlation coefficient between research variables ** Meaningful in Alpha level 0.01 Brand equity Brand experience Customer satisfaction Brand affinity Variables 0.770** 0.722** 0.811** 1 Brand affinity 0.735** 0.893** 1 0.811** Customer satisfaction 0.725** 1 0.893** 0.722** Brand experience 1 0.825** 0.735** 0.770** Brand equity Service Experience Brand Affinity Customer Satisfaction Brand Equity Research Journal of Management Sciences _______________________ ______ ____ ________________________ ISSN 2319 – 1171 Vol. 4( 8 ), 1 - 5 , August (2015) Res. J. Management Sci. International Science Congress Association 4 Research hypotheses testing: At this stage, the confirmation or rejection of research hypotheses are examined by utilizing Pierson correlation and Standardized Path Coefficient. Findings are shown in table 4. Hypothesis Variables Beta t decision H1 Service experience and brand equity 0.31 3.45 Accepted H2 Brand affinity and brand equity 0.55 8.10 Accepted H3 Customer satisfaction and brand equity 0,01 0.07 Rejected H4 Service experience and customer satisfaction 0.64 17.16 Accepted H5 Brand affinity and customer satisfaction 0.35 9.34 Accepted Conclusion This study empirically examined the casual impact of service experience and brand affinity on brand equity as well as mediating role of customer satisfaction on brand equity relationships. The results show the highest positive correlation coefficient exist s, respectively, between service experience and brand equity (0.96), it demonstrates that higher service experience will result in higher brand equity and lower service experience will result in lower brand equity. This finding suggests that customers eval uate their actual experiences during consumption by subjective beliefs and connotation formed prior to consumption. The results also suggest that customer satisfaction mediates the relationship between service experience and brand equity, and also between brand affinity and brand equity. At the second step, positive correlation coefficient exists between brand affinity and brand equity (0.91), this relationship can be improved through customer satisfaction. The mediating role of customer satisfaction in our brand equity model suggests that service experience and affinity toward a bank increase customer satisfaction and in turn increase the attractiveness of banks. 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