Master's Thesis Klaming Gunnar CLV1960 Changing Role Of Brands 2006

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University of Lugano
Faculties of Communication and Economic Sciences

The changing role of
brands in the age of
empowered consumers
Master’s Thesis
of
Gunnar Klaming
Matriculation Number: 04-983-862

Supervisor: Prof. Andreina Mandelli
Co-Supervisor: Prof. Ivan Snehota
August 2006

Informationen zum Autor

Page I

Informationen zum Autor
Der Verfasser der vorliegenden MasterThesis, Herr Gunnar Klaming, ist Absolvent der
Fachhochschule Aachen und der Universität
Lugano (hier schloss er im November 2006 als
einer der drei besten Absolventen seines Jahrgangs mit einer Note von 9,24 von 10 ab). Der
28-jährige Absolvent studierte in Aachen Wirtschaftswissenschaften mit den Schwerpunkten
Marketing und Logistik, und absolvierte anschließend in Lugano ein Master-Studium der
wirtschafts- und der kommunikationswissenschaftlichen Fakultäten mit der Bezeichnung „Master of Science in Communication
and Economics, Major in Marketing“. Seine Kenntnisse vertiefte er im Rahmen des
Studiums u. a. bei Unternehmen wie der BMW Group und der BBDO Consulting
GmbH. Aktuell arbeitet er als Unternehmens- und Marketingberater in Düsseldorf bei
der Firma JP | KOM GmbH.
Die Hauptmotivation für seine Arbeit schöpfte Herr Klaming aus der bislang nur
sehr bruchstückhaften wissenschaftlichen Forschung zur Rolle von Marken im Kontext des Internet. Außer einigen sehr generellen strategischen Papiere liegen kaum
Arbeiten vor, die Handlungsrahmen oder Stoßrichtungen für die praktische Markenführung verschiedener Produkt- und Leistungskategorien beschreiben. Ziel der vorliegenden Arbeit war es, einen ersten Leitfaden für die Auseinandersetzung mit diesem Thema zu liefern.
Die vorliegende Master-Thesis wurde mit einer Note von 10 (von 10) bewertet; betreut wurde die Arbeit durch:
•

Prof. Andreina Mandelli (Università della Svizzera italiana, Lugano, Schweiz &
SDA Bocconi, Mailand, Italien),

•

Dr. Thomas Schwetje (Principal bei BBDO Consulting), und

•

Prof. Ivan Snehota (Università della Svizzera italiana, Lugano, Schweiz).

Für weitere Fragen steht Ihnen Herr Gunnar Klaming gerne unter der E-MailAdresse gunnar.klaming@googlemail.com zur Verfügung.

Table of contents

Page II

Table of contents
List of abbreviations................................................................................................... IV
Figures and Tables ..................................................................................................... V
1.

Introduction...........................................................................................................1

2.

The research area – The changing role of brands in the age of
empowered consumers ........................................................................................5
2.1

Brands...........................................................................................................6

2.1.1

The role of brands ..................................................................................8

2.1.2

Functions of brands..............................................................................11

2.2

Functions of the Internet on markets ...........................................................15

2.3

Brands in the online environment ................................................................18

2.3.1

The relative importance of the Internet as a touchpoint with
the brand ..............................................................................................19

2.3.2
2.4
3.

4.

Particularities of branding in the Internet ..............................................22

The changing role of brands and the empowerment of consumers.............23

Purchase decision process.................................................................................27
3.1

Problem recognition ....................................................................................33

3.2

Information search.......................................................................................34

3.2.1

Manufacturers’ and dealers’ homepages and online shops .................38

3.2.2

Experts’ homepages ............................................................................40

3.2.3

Cybermediaries ....................................................................................41

3.2.4

Consumer-to-consumer communities ..................................................43

3.3

Evaluation of alternatives ............................................................................46

3.4

Purchase .....................................................................................................50

3.5

After-purchase evaluation ...........................................................................53

Effects of consumer empowerment ....................................................................56
4.1

Information as a substitute for functions of the brand..................................57

Table of contents

5.

Page III

4.1.1

The frame of reference.........................................................................59

4.1.2

The empirical study ..............................................................................63

4.1.3

Synopsis of primary and secondary research results...........................73

4.2

The changing role of intermediaries and online retailers .............................75

4.3

Impacts on price and quality........................................................................78

4.4

Implications for brand management ............................................................81

Conclusions........................................................................................................90
5.1

Summary and key findings ..........................................................................90

5.2

Limitations and future research issues ........................................................93

Appendix....................................................................................................................96
Bibliography.............................................................................................................118

List of abbreviations

Page IV

List of abbreviations
CERN ................................................... Conseil Européen pour la recherché nucleaire
CLV .......................................................................................... customer lifetime value
e.g. ....................................................................................exempli gratia / for example
e-brand ................................................................................................ electronic brand
e-commerce..................................................................................electronic commerce
ed .........................................................................................................................editor
eds...................................................................................................................... editors
e-mail......................................................................................................electronic mail
et al................................................................................................... et alii / and others
etc....................................................................................................................et cetera
i.e..............................................................................................................id est / that is
m-commerce..................................................................................... mobile commerce
n.d. ....................................................................................................................no date
Net .....................................................................................................................Internet
p. ...........................................................................................................................page
PC ................................................................................................... personal computer
pp. ....................................................................................................................... pages
URL ........................................................................................ uniform resource locator
vs........................................................................................................................ versus
Web ..............................................................................................................see WWW
WWW .................................................................................................World Wide Web

Figures and Tables

Page V

Figures and Tables
Figure 1: A brand is more than a product ..................................................................10
Figure 2: The functions of brands ..............................................................................13
Figure 3: Elements of the consumer brand experience .............................................19
Figure 4: The relative importance of communicating image and delivering
value by touchpoint....................................................................................21
Figure 5: The five-stages-model of the purchase decision process...........................28
Figure 6: A continuum of buying decision behavior ...................................................30
Figure 7: Value and availability of information relevant for purchase
decisions....................................................................................................35
Figure 8: The relationship between amount of information search and
product knowledge ....................................................................................36
Figure 9: Distinction between total set, available set, and consideration set .............47
Figure 10: Clustering of products and services..........................................................61
Figure 11: Weighted importance of the three brand functions for three
markets......................................................................................................68
Figure 12: Likelihood of offline purchases and online purchases ..............................69
Figure 13: Priority of branded over non-branded goods in offline and online
purchases ..................................................................................................70
Figure 14: Tendential impact of brands and information on purchase
decisions....................................................................................................74
Figure 15: Evaluative factors for consistent brand management ...............................83
Figure 16: Dimensions of Internet-specific customer benefits ...................................88

Introduction

Page 1

1. Introduction
It is easier for consumers to consummate transactions when they are aware of
sellers and, moreover, when they have confidence that sellers will deliver as promised. The reputation of sellers – or the brand – is one means by which businesses
have traditionally promoted buyer awareness and bonded their promises to deliver
(Klein & Leffler, 1981). Brands as "a collection of perceptions in the mind of the consumer" (Bates, 2006) are relevant for many choice and purchase decisions (Meffert,
2000). Consumers link a range of associations to a brand, from associations that
include characteristics which can be perceived by the senses (e.g., an engine’s
horsepower, a product’s design, or a brand’s visual presence in visual or promotional
campaigns) to characteristics associated with a brand’s identity (origin, reputation,
and personality); and from perceived rational benefits (the product and its functions,
the transaction process, or the relationship between the consumer and the
brand/supplier) to emotional benefits which consumers perceive to be related to a
brand (self-expression, image transfer, or self-realization) (Perrey et al., 2003; see
also Aaker, 1996). By delivering all this information to consumers, brands can facilitate consumers’ purchase decisions.
At the same time, information provided by sellers and by third parties can be an alternative mechanism for making consumers willing to undertake transactions.
Through the Internet1, an ever-increasing amount of information from branded sellers, unbranded competitors, and third party information providers (“information intermediaries”) is provided to consumers. Consumers are now able to obtain objective,
trustworthy information on retailers’ existence and reliability as well as products and
services in real-time, at any time from virtually any place in the world – markets be-

1

The Internet is the worldwide, publicly accessible network of interconnected computer networks that
transmit data by packet switching using the standard Internet Protocol (IP). It is a network consisting of
millions of smaller networks, which together carry various information and services, such as e-mail,
online chat, file transfer, and the interlinked Web pages and other documents of the World Wide Web
(synonymously: the Web). Contrary to some common usage, the Internet and the World Wide Web are
not synonymous: the Internet is a collection of interconnected computer networks, linked by copper
wires, fiber-optic cables, wireless connections, etc.; the Web is a collection of interconnected documents, linked by hyperlinks and URLs. The World Wide Web is accessible via the Internet, along with
many other Internet services, such as e-mail, file sharing and others. (http://en.wikipedia.org/wiki/
Internet)
Despite these deflections in definition, the two terms will be used interchangeably throughout the
present paper, because the WWW is the most commonly used user interface in the Internet.

Introduction

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come increasingly transparent and information asymmetries between sellers and
buyers decrease. The so empowered consumers may, as a consequence, become
willing to patronize lesser-known, rather than branded, retailers (Deregatu, Rangaswamy & Wu, 2001).
Both brands and the Internet play crucial roles in consumers’ purchase decision
processes (Doubleclick, 2005; Meffert, 2000; Häubl & Trifts, 2000) with each having
its strengths and weaknesses. While strengths of brands might be perceived differently by different consumers, a commonly agreed-on disadvantage of many brands is
the relatively higher price that is charged for a branded product compared to a nonbranded one. Moreover, as many products and services are becoming more and
more equal from a technical-qualitative point of view, they become increasingly exchangeable.2 Dramatically shorter product life cycles and constantly accelerating
product aging are further challenges for companies that they must deal with (Gorchels, 2000; Kotler et al., 1996). And the combination of a growing multitude of
brands and a homogenization of objective brand attributes leads to increasingly
competitive communication. As a result, consumers are inundated with innovations,
product concepts, information, and advertising messages. The Internet’s strength is
its technology which – besides making this enormous amount of information available
– even makes it possible to offer personalized goods to consumers, based on their
past behavior (Smith & Brynjolfsson, 2001; Alba et al., 1997). Nonetheless, the Internet has also weaknesses. Many consumers are very skeptical about the credibility
and reliability of both information provided and sellers providing products or services
through the Internet (Ward & Lee, 1999). Foremost, they are afraid of privacy infringements and the non-fulfillment of non-contractible parts of an offering (such as
service quality, delivery times, reliability, higher willingness to accept returns, etc.).
Incidentally, strong brands reduce these risks, because they indicate reliability, trust,
and recognition.
To recapitulate, on the one hand, both Internet technology and brands provide
consumers with information in their purchase decision processes, which may weaken
2

In the years 1987, 1993, 1999 and 2004, BBDO Consulting conducted a representative survey on
German consumers’ perceptions of brand parity. The aim of the study was to find out how exchangeable brands are for consumers. In average, 62% of the German consumers perceive brands to be
exchangeable. In some categories (energy suppliers, tissue handkerchiefs and gasoline brands) this
value is as high as 80% (BBDO Consulting, 2004, pp. 5-6). However, this report does not examine the
reasons for this exchangeability.

Introduction

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the position of brands. On the other hand, manufacturers and retailers are provided
with several means to strengthen consumers’ identification with their brands (e.g.,
personalized offerings) by means of Internet technology (Klein-Bölting & Busch,
2000).3
There is a wide range of contributions to the role of brands for companies and
consumers – ranging from strategic brand management (e.g., Aaker, 1996; Aaker &
Joachimsthaler, 2000; Brandmeyer, Deichsel & Otte, 1995; Esch, 2003; Kapferer,
1992 and 1997; Keller, 1998 and 2003; Meffert, 2002; Tybout & Calkins, 2005) over
the role of brands as intangible competitive advantages (e.g., Aaker, 1997; Barney &
Hansen, 1994; Barney, 2001; Fournier, 1998; Lemon, Rust & Zeithaml, 2001; Mandelli, 2005; Peteraf, 1993; Porter, 1980; Prahalad & Rangaswamy, 2004) and the
relevance and functions of brands (e.g., Aaker, 1996; BBDO Consulting, 2005;
Fischer, Meffert & Perrey, 2004; Meffert, Perrey & Schröder, 2002; Tybout & Calkins,
2005) to brand equity and other brand-related issues (e.g., Kapferer, 1992 and 1997;
Keller, 1993, 1998 and 2003; Chiagouris & Wansley, 2000; Hagel & Armstrong,
1997; Kalita, Jagpal & Lehmann, 2004; Klein-Bölting & Busch, 2000; Mellerowicz,
1963; Muñiz & O’Guinn, 2001; Ogilvy, 2004; Simon & Sullivan, 1993; Wernerfelt,
1991). And there are many contributions to the role of information for consumers –
ranging from general elaborations on consumer behavior (e.g., Bauer, 1960; Blackwell, Miniard & Engel, 2005; Havlena & Holbrook, 1986; Holbrook & Hirschman,
1982; Howard & Sheth, 1969; Kroeber-Riel & Weinberg, 1999; Solomon, 2003; Foxall
& Goldsmith, 1994) over the purchase decision process (e.g., Ajzen & Fishbein,
1977; Häubl & Trifts, 2000; Nicosia, 1966; Peter & Olson, 1999; Smith & Brynjolfsson, 2001) to the impacts of the Internet on markets (e.g., Alba et al., 1997; Bakos, 1997 and 1998; Brynjolfsson et al., 2001, 2003, and 2004; Deregatu, Rangaswamy & Wu, 2001; Gulati & Garino, 2000; Hoffman & Thomas, 1996; Kumar, 2000;
Lee & Lee, 2004; Mathwick & Rigdon, 2004; Varian, 1999; Ward & Lee, 2000; Zyman
& Miller, 2001).

3

Brand owners can for instance establish virtual communities as a central point of communication that
enables actual and potential customers to discuss about the brand, its products, its competitors, and
all topics and problems related to these (Klein-Bölting & Busch, 2000). Virtual communities can deliver
word-of-mouth information – which is perceived to be a very authentic form of brand communication –
to potential customers, and by the same token they enable the brand owner to gather detailed information about their customers and other market participants (Klein-Bölting & Busch, 2000; Hagel &
Armstrong, 1997).

Introduction

Page 4

Some of these contributions marginally discuss the changing role of brands in the
context of increasing availability of information (Lee & Lee, 2004; Brynjolfsson et al.,
2001, 2003, and 2004; Kumar, 2000; Ward & Lee, 2000), however, research comparing the changing role of functions that both brands and Internet technology fulfill for
consumers is yet lacking. Does the Internet empower consumers in a way that
strengthens or weakens functions that brands have formerly performed? Can Internet
technology actually lead to the substitution of functions of brands? Or are brands
becoming even more important in the age of empowered consumers? Will this development have an impact on prices and product quality? And what are the possible
implications for brand managers? These are the main questions that are discussed in
the following paper.
The thesis is divided into three sections. First, the research area, namely the original role and functions of brands, functions and impacts of the Internet, and the
changing role of brands in the age of empowered consumers are discussed. The
second part deals with the five stages of the purchase decision process. Hereby, it is
examined to what extent consumers orientate their purchase decisions on a brand
promise, and to what extent information available in the Internet can obviate this
brand promise.4 Furthermore, it is analyzed in this section, if online functions, such as
for instance virtual communities, can strengthen the user’s bond with a brand. Third,
the empirical study is introduced. Deriving from the respective findings, the effects of
consumer empowerment on brands, on intermediaries and retailers, and on price and
quality are described. This section concludes with implications for branding, derived
from the empirical study and from secondary academic research. The paper completes with a brief discussion and suggestions for future research.

4

Purchase decision behavior differs among administrations, businesses, and consumers acting as
buyers. This paper will focus on B2C-markets. Furthermore, the present paper focuses on the western
European market. It should be kept in mind that consumer behavior varies among countries according
to their different cultural environments (Fournier, 1998; Solomon, 2003).

The research area – The changing role of brands in the age of empowered consumers

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2. The research area – The changing role of brands in the
age of empowered consumers
At a time when consumers are inundated with innovations, product concepts and
advertising messages, it is important for companies to provide information and orientation (and possibly even experiences and feelings) to consumers in order to make
them purchase and re-purchase their products and services.
Many markets have reached such a degree of saturation today that market potential is often virtually exhausted. Increasingly, growth can be achieved only at the
expense of competitors. Hence, in order to make a company’s products stand out
from the diverse range available, suppliers are attempting to hone competitive edge
through increasing differentiation of their brands, emphasizing how they meet the
specific needs and wants of their target customer groups and market segments –
through brands that are unique in the market place (Lemon, Rust & Zeithaml, 2001).
Brands play a vital role in consumers’ purchase decisions. Brands can provide information in the purchase decision process, reduce risks related to a purchase, and
they can even serve support to the buyer’s image and feeling. Brands can be built
and established by means of advertising, providing information, sponsoring, etc. –
usually, brand building includes a combination of several means.
The advent of the Internet in the past several years has given consumers the opportunity to access a huge amount of information – from companies, from other organizations, from other consumers, etc. As an effect, market places become more
transparent and information asymmetry between different market actors decreases.
Furthermore, consumers cannot only gather, exchange, and compare information
online, they can even purchase products and service goods in the Internet.
However, the Internet does not only change markets for consumers, it changes
markets for all market participants and will continue to do so. Due to certain factors of
digital media, such as cost efficiency and interactivity, companies can now engage in
ongoing dialogue with their customers and prospects (Deighton & Barwise, 2000;
Peppers & Rogers 2004). Being in touch with consumers more frequently can be a
basis to increase the level of personalization and interactivity at relatively low costs.
The goal of personalization is to increase customer retention simply by making loyalty

The research area – The changing role of brands in the age of empowered consumers

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more convenient for the customer than non-loyalty (Holland & Baker, 2001). Thus,
this is a vital opportunity for brand owners, as spending time with a brand is a key
factor in strengthening brand relationship and loyalty (Holland & Baker, 2001). Finally, customers who are in regular contact with a brand may even begin to perceive
the brand as a person, a trusted friend who is part of their everyday life (Fournier,
1998; Aaker, 1997).
Obviously, the digital environment has many benefits for businesses and for consumers. At the same time, the continuous inundation with communication messages
from a multitude of brands increasingly confuses consumers and makes it more difficult for brands to stand out from the mass and thus get enough attention in consumers’ purchase decision processes. The information overflow in the Internet even exacerbates this situation (Lee & Lee, 2004).
Considering the focus of this paper on the changing role of brands in the context of
Internet technology, chapter 2.1 explains the role of brands as a differentiator in markets. Then, chapter 2.2 describes the functions of the Internet in market places. Consequently, chapter 2.3 elaborates on the role that brands fulfill in the online environment, explaining in particular the relative importance of the Internet as a touchpoint
with the brand, and the specialties of branding on the Internet. Finally, chapter 2.4
describes the changing role of brands and the empowerment of consumers in the
age of the Internet.

2.1 Brands
Brands in the field of marketing originated in the 19th century with the advent of
packaged goods. In times of industrialization the production of many household
items, such as soap, moved from local communities to centralized factories. These
factories, generating mass-produced goods, needed to sell their products to a wider
market – to a customer base familiar only with local goods. It quickly became apparent that a generic package of soap had difficulties competing with familiar, local
products. So, the packaged goods manufacturers needed to convince the market that
the public could place just as much trust in the non-local product – the manufacturers
wanted their products to appear and feel as familiar as the local farmers’ products.
From there, with the help of advertising, manufacturers quickly learned to associate

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other kinds of brand values, such as youthfulness, fun or luxury, with their products.
This kickstarted the practice we now know as branding.
From a today’s marketing point of view, a brand can be defined as the symbolic
embodiment of all the information connected with a product or service, or as David
Ogilvy put it, “the consumer’s idea of a product [or a service]“ (Ogilvy, 2004).5 A
brand typically includes a name, a logo, and other visual elements such as images,
fonts, color schemes, or symbols. Furthermore, it encompasses the set of expectations associated with a product or service which typically arise in the minds of people
(Aaker & Joachimsthaler, 2000). Such people include employees of the brand owner,
people involved with distribution, sale or supply of the product or service, and, ultimately, consumers.
Brands serve to differentiate products, services, and the companies providing
these products and services (Aaker & Joachimsthaler, 2000). A successful differentiation strategy will move a product or service from competing based primarily on
price to competing on non-price factors (such as product characteristics, distribution
strategy, or promotional variables). The resource-based view of strategic management6 points to intangible resources as the main drivers of the sustainability of competitive advantages (Barney & Hansen, 1994; Mandelli, 2005). As Itami (1991: p. 1)
observes:
„…intangible assets, such as a particular technology, accumulated consumer information, brand name, reputation and corporate culture, are
invaluable to the firm’s competitive power. In fact, these invisible assets
are often the only real source of competitive edge that can be sustained
over time.”

5

This definition does deliberately not distinguish between products and services, although there are a
number of differences between products and services, such as the intangibility and the heterogeneity
of service delivery systems (Ostrom, Iacobucci & Morgan, 2005). Brand building and brand management always need to refer to the specific characteristics of the particular brand. This makes clear that
the basic concept of brands as “the consumer’s idea of a product“ is independent of aspects such as
tangibility.
6
Scientific literature provides many books and papers on the resource-based view of strategic management. For further reading see: Peteraf, 1993; Porter, 1980; Wernerfelt, 1984; Barney 2001.

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2.1.1 The role of brands
Brands are gaining more and more in importance. Only the combination of convincing products and strong, authentic brands permits long-term differentiation from
competitors. Consumers are steadily inundated with innovations, product concepts
and advertising messages; here, strong brands supply useful orientation when coming to a purchase decision.
From the consumer’s point of view, branding is an important value added aspect of
products or services, as it often serves to denote a certain attractive quality or characteristic (Anholt, 2003). In order to create distinguishable value for consumers, differentiation is crucial, as already mentioned earlier. The value must be unique, i.e.
separate the company’s offer from the competition, and it must be sustainable over
time (Aaker & Joachimsthaler, 2000). Increasingly, marketing managers realize that it
is difficult to compete just on product or service differentiation (Schultz, 2003). In the
end, it is not the product or service the customer has a relationship with – it is the
brand, “the emotional tie the customer has with what he or she perceives to be the
value, benefit, and, yes, even psychological comfort that a strong brand brings to the
marketplace” (Schultz, 2003: p. xix). While mere products and services can more or
less easily be imitated, this is incomparably more difficult – if not impossible – with
brands (Aaker & Joachimsthaler, 2000).
Hence, in order to create strong brands that deliver meaningful and long-term
value to consumers, the marketing view should not be too product-centric, because
such a product position might be too similar to the positionings of competitive products. Marketing needs to be more basic. According to Calder and Malthouse (2003:
p. 13) it “must conceive of an idea that could make the [corporate] strategy work in
the mind of the consumer (customer)” – the brand concept7. The brand concept
drives consumer thinking (Calder & Malthouse, 2003). Calder and Malthouse (2003:
p. 14) state that “the concept is not merely a positioning that highlights aspects of the
product. In a sense, it is the product. It is the idea that defines how the consumer
should experience the product. But for this to happen, we must manage contacts with

7
In line with the scientific literature, the terms “brand concept“ and “brand identity” are used synonymously in this paper.

The research area – The changing role of brands in the age of empowered consumers

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the consumer so that these contacts in fact produce an experience that matches the
concept.”
The corresponding value for the brand owning company might be profitable customers, valuable customer relationships, effective and efficient use of its resources,
and in the end the ability to gain profits in order to survive or even to grow in the
future (Aaker & Joachimsthaler, 2000; Kapferer, 1997). Brands can be a means to
increase profits, because branded products or services usually enable brand owners
to charge higher prices (Aaker & Joachimsthaler, 2000; Keller, 2003; Kotler et al.,
1996). Where two products resemble each other, but one of the products has no
associated branding (such as a generic, store-branded product), people may often
select the more expensive branded product on the basis of the quality promise of the
brand or the reputation of the brand owner – assets that the no-name product does
not have, although it might in fact be of the same objective quality (Kalita, Jagpal &
Lehmann, 2004). Brands can be seen as the primary competitive differentiator for
products, services, and organizations that build on-going relationships with customers and consumers. As long as the benefits provided by a brand are not substitutable
by any other benefit, it might be the brand, not the product or service, that a customer
or consumer has a relationship with (Schultz, 2003). A brand is therefore one of the
most valuable assets of a company, building a competitive advantage that will result
in long-term profitability.8
The product includes characteristics such as product scope (BMW makes cars),
product attributes (VOGUE has fashion news), uses (APPLE computers are great for
graphical applications), quality/value (NESTLÉ delivers quality products), and functional benefits (W AL-MART provides extra value). Additionally to these characteristics,
a brand includes also a user imagery (those who wear ARMANI clothes), country of
origin (AUDI has German craftsmanship), organizational associations (3M is an innovative company), brand personality (CREDIT SUISSE is a banking brand expressing
reliability and integrity), symbols (the bottle shape represents ABSOLUT VODKA),
brand/customer relationships (HENKEL is a “brand like a friend”), and self-expressive
8

An amazing example for the financial pay off of strong brands is the case of Coca Cola. As of January 1998, Coca Cola had annual sales of $19 billions, assets of $17 billions, and profits of $4 billions,
while General Motors had annual sales of $166 billions, assets of $229 billions and profits of $7 billions. Yet in January 1998, Coke had a market value more than four times that of GM, in part because
the value of the Coke brand equity was over twice the value of the entire GM firm. (Aaker & Joachimsthaler, 2000)

The research area – The changing role of brands in the age of empowered consumers

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(HARLEY-DAVIDSON is more than a motorcycle) and emotional (MASERATI makes its
driver feel sporty and sophisticated) benefits (Aaker & Joachimsthaler, 2000). Figure
1 illustrates this distinction between a product (analogously: service) and a brand.
Thus, from an overall business point of view, the price premium that consumers
may be willing to pay for strong brands generates added value for the firm in terms of
higher contribution margins. Moreover, the price premium and other aspects of
brands increase customer loyalty (Kotler et al., 1996; Aaker & Joachimsthaler, 2000;
Keller, 2003). Thus, brand building and brand management can create assets that
are necessary for the success of the company in the competition and that will pay off
financially in the long run (Aaker & Joachimsthaler, 2000).9
Figure 1: A brand is more than a product

Note. From: Brand Leadership (p. 52) by David A. Aaker and Erich Joachimsthaler (2000), London:
Free Press Business

Nonetheless, it cannot be assumed that brands are relevant in all markets or
product categories, because brands do not always create value for consumers and
9

The benefits that brands offer to consumers and to companies are displayed in the appendix on pp.
96-97.

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companies. Like all investments also expenditures on brand management must be
financially accountable.10 Rust, Lemon and Zeithaml (2004) as well as Meffert, Perrey and Schröder (2002) emphasize that it does only make economic sense to spend
money on branding, if this investment results in positive return on marketing investment, or in other words, if brands are relevant for consumer behavior in this specific
market. Brands are relevant for the consumer, if they take over important functions in
the consumer’s purchase decision process (Meffert, Perrey & Schröder, 2002;
Fischer, Meffert & Perrey, 2004).
The following chapter describes the functions of brands.

2.1.2 Functions of brands
A brand’s identity compounds of psychological and experiential aspects. The experiential aspect is known as the “brand experience” and consists of the sum of all
points of contact with the brand. The psychological aspect – also referred to as the
“brand image” – is a symbolic construct created within the minds of people and consists of all the information and expectations associated with a product or service. The
basis for the development of a brand identity is an in-depth understanding of the
firm’s customers, competitors, and business strategy (Aaker & Joachimsthaler,
2000). To be effective, a brand needs to resonate with consumers, differentiate the
brand from competitors, and represent what the organization can and will do over
time (Aaker & Joachimsthaler, 2000).
In this context, marketers aspire to develop or align the expectations comprising
the brand experience through building a new brand respectively managing an existing brand, so that the brand carries the promise that the good has a certain quality or
characteristics which make it special or unique (Aaker & Joachimsthaler, 2000). A
brand image may be developed by attributing a “personality” to or associating an
“image” with a product or service, whereby the personality or image is “branded” into
the consciousness of consumers by means of the marketing mix variables. Finally, it
is a holistic brand identity that marketers seek to create.
Products and services have certain objective, functional characteristics. This is
valid for branded products and services as well as for no-name – i.e. non-branded –
10
Rust, Lemon and Zeithaml present a broad framework on financial accountability of marketing
investments in their paper “Return on Marketing”, 2004.

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ones. These characteristics are one part of the “consumer’s idea of a product (or a
service)”. In addition and supplementary to the functional attributes that can inherently be compared objectively, a brand offers also subjective, emotional or experiential benefits to its users. Altogether, a brand can offer one or more of three core values to its customers11:
•

Efficiency of information. Brands facilitate the information process, because they
provide information regarding the manufacturer and the origin of a product or service. Additionally, the recognition effect helps consumers to repeatedly find
trusted brands quickly and easily. As a result, brands increase the efficiency of information processes in early stages of the purchase decision process (Fischer,
Meffert & Perrey, 2004). The assumption that consumers strive to facilitate or accelerate proceedings is corroborated by various economic and psychological
theories and models, such as transaction cost economics (Coase, 1937 and Williamson, 1975), the evaluation cost model of consideration sets (Hauser &
Wernerfelt, 1990), or Sujan’s (1985) paper about the effects of consumer knowledge on the evaluation strategies mediating consumer judgements.

•

Reduction of risk. Furthermore, brands help to reduce the consumer’s risk of
making a wrong purchase decision. According to Solomon (2003) and Meffert
(2000), risks – both real and perceived – of a wrong purchase decision can be a
monetary risk (the product or service could be cheaper in another store), a functional risk (qualitative insufficiencies of the product or service), a physical risk
(e.g., allergies resulting from the use of the product or service), a social risk (e.g.,
lacking acceptance in social groups due to the choice of wrong brands), and a
psychological risk (dissatisfaction with the purchased product or service or potentially negative consequences for a person’s self image). Brands provide assurance regarding possible negative effects of the purchase. They create trust in the
expected performance of the product and they bring on continuity by making

11

Contributors to marketing literature have developed many different theories concerning the functions
of brands. Aaker (1992), Kapferer (1992) and Keller (1998) mention the identification of products due
to branding. Bruhn (1994) and Koppelmann (1994) add functions such as recognition, distinction, and
orientation. Many papers emphasize the brand’s function as a quality assurance that was brought up
already in 1963 by Mellerowicz. Further functions that are mentioned refer to risk reduction (Aaker
(1992); Dichtl (1992); Kapferer (1992); Keller (1998)) , and to the psychological and sociological functions (Kapferer (1992); Koppelmann (1994); Meffert, Burmann & Koers (2002)). For this paper the
described three core functions, proposed by Fischer, Meffert and Perrey (2004), summarize all these
in three distinct brand benefits.

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product or service benefits predictable (Fischer, Meffert & Perrey, 2004). Bases
for this function can, for instance, be found in Schmalensee’s (1982) theory on
consumer risk aversion or in the theory of perceived risk (Bauer, 1960; Cunningham, 1967).
Figure 2: The functions of brands

Note. From: Lohnen sich Investitionen in die Marke? Die Relevanz von Marken für die Kaufentscheidung in B2C-Märkten [Do brand investments pay off? The relevance of brands for the purchase decision in B2C markets] (p. 19) by McKinsey and MCM (2002), Düsseldorf and Münster:
McKinsey and Marketing Centrum Münster

•

Image benefit creation. Additionally, the value proposition can include emotional
and self-expressive benefits (Aaker & Joachimsthaler, 2000; Fischer, Meffert &
Perrey, 2004; for particularities of consumption with regard to the consumer’s selfconcept also see Solomon, 2003: pp. 154-82). These two dimensions are usually
very closely linked. When directed inward, the image benefit serves for the purpose of self-realization or identification with personal values and ideals. These
emotional benefits exist for instance when the buyer or user of a brand feels
something during the purchase process or use experience, such as for instance,
the way a customer feels safe in a VOLVO, strong and rugged when wearing LEVI’S

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Jeans, or comfortable and “at home” when drinking a coffee at STARBUCK’S. The
image benefit can also be directed outward to the public to allow consumers to
use the brand to cultivate an image for themselves. Such a self-expressive benefit
relates to the ability of a brand to provide a medium by which a person can proclaim a particular self image. Each of the multiple roles a person plays in life will
have an associated self-concept that the person may want to express, for example, the self-concept of being adventurous and daring by owning ROSSIGNOL skis,
hip by buying clothes from DIESEL, sophisticated by wearing RALPH LAUREN fashions, or successful and in control by driving a BMW. The purchase and use of a
brand is a way to fulfill these emotional and self-expressive needs. Theoretical
bases regarding the image benefit creation relate to the theory of utility (Vershofen, 1959), the means-end chains (Olson & Reynolds, 1983; Peter & Olson,
1999), and the theory of self-congruity (Sirgy, 1986).
However, these three brand functions do not necessarily have to be equally relevant to consumers. Empirical research by the Marketing Centrum Münster (Germany)
and the consultancy McKinsey (Fischer, Meffert & Perrey, 2004) revealed that, for
instance, designer sun glasses create self-expressive image benefits, because they
help a person to express a particular self-concept in public. Meanwhile, fast-moving
consumer goods, such as e.g. cigarettes and beer rank high on information efficiency
in this study, as cigarette boxes are virtually built only of elements that display the
brand. Brands in the field of high-value products and services (e.g., long-distance
package holidays or washing machines) may reduce the risk of financial damage
(Fischer, Meffert & Perrey, 2004).
All in all, the stronger a consumer’s decision behavior is guided by a brand compared to other relevant criteria, the stronger is the relevance of the brand (Fischer,
Meffert & Perrey, 2004). Depending on individual characteristics of the buyer and the
product category the importance of each function may be perceived differently. Thus,
the relevance of a brand for the consumer’s purchase decision should be evaluated
with regard to the particular three functions that underlie this decision (Fischer, Meffert & Perrey, 2004).
The Internet is a means that many consumers use for different purposes, ranging
from business over information search to entertainment. As such, it fulfills certain
functions on markets, which are described in chapter 2.2.

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2.2 Functions of the Internet on markets
Originally, the Internet was designed for the exchange of data between decentralized computers, and has evolved into the World Wide Web.12 The ease of publishing
on the Internet has facilitated the adoption of this technology both by consumers and
producers of goods. With the help of search engines like GOOGLE and FIREBALL or
portals like YAHOO! and AOL, consumers can obtain information about products and
services, and make purchases with much less effort than through other distribution
channels. Likewise, with the low cost of Web publishing, businesses can offer more
product information through this medium than through most others. This results in
more product information, on balance, being supplied to consumers than ever before.
(Ward & Lee, 2000)
Increasingly, also the Internet fulfills certain functions during consumers’ purchase
decision processes. Consumers can gather information about almost everything in
the Internet, they can manage their investment portfolio, order pizza and interact with
people from all over the world. Solomon (2003: p. xiv) states that “consumers and
producers are brought together electronically in ways we have never before experienced.” For consumers, the Internet can reduce information asymmetry, i.e. deliver
information that they would not have been able to obtain without the Internet or would
have only been able to obtain at much larger cost in terms of time, effort, and money.
Increasing information transparency is the central function of the Internet for consumers. By use of the Internet they can significantly reduce time and costs spent on
their search for information. They can compare a huge variety of offers online by
means of search engines, shopping portals, price comparison services, online communities, etc. However, the availability of information differs in online and offline
environments, as certain search attributes can only be experienced – as opposed to
those attributes that can be objectively compared. It is difficult or impossible for many
products to be experienced by mere use of the Internet. Accordingly, search costs for
obtaining information about the non-sensory characteristics listed in online markets
are lower online than offline, and vice versa, search costs for obtaining information
about sensory attributes are assumed to be higher online than offline (Degeratu,

12

For a good and authentic history of the World Wide Web, visit CERN, which is the “birthplace“ of the
Internet (at www.w3.org).

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Rangaswamy & Wu, 2000). As to the distinction between sensory and non-sensory
product attributes, Deregatu, Rangaswamy and Wu (2001: p. 61-2) define sensory
attributes as “those attributes that can be directly determined through our senses,
particularly, touch, smell, or sound, before we purchase the product”. By non-sensory
attributes, they mean “those attributes that can be conveyed reasonably well in words
(e.g., nutritional information)”, excluding brand name. They point out that for product
categories with a large number of sensory attributes (such as fruits and vegetables),
the offline environment provides more information, while for product categories with a
large number of non-sensory attributes (such as cars, consumer electronics, and
industrial products), more information is offered in the online environment (Degeratu,
Rangaswamy & Wu, 2000). Hence, the total amount of available information in a
shopping environment varies by product category.
Nevertheless, purchasing online involves various risks that consumers perceive.
Depending on the type of product, it might not be possible to evaluate its performance solely in the Internet. Due to the relative anonymity that is inherent in the Internet, other risks may be that consumers may not feel secure whether the company will
really carry out its orders of products and services as it claims, whether there are
product guarantees, or whether the company will allow the return of products. Furthermore, many consumers hesitate to buy items over the Internet because they may
not feel secure that their personal information (e.g., credit card information, name and
address) will remain private. To counter this risk, many companies publish privacy
statements on their Websites. However, in the anonymity of the Internet, the risk of
privacy infringements remains.
On the other hand, the Internet can also reduce risks for consumers. The monetary risk may, for instance, be reduced by means of price comparison Websites.
Functional, physical, and even social risks may be reduced by better information.
Simple objective product-specific data may help consumers to reduce functional and
physical risks. In the case of perceived social risk, virtual communities or other related information may help consumers feel safer in making their purchase decisions.
As the Internet enables consumers to spend more time with their brands, it can
also help to create image benefits. Consumers may use the Internet “to sharpen their
consumption knowledge, to socialize, to organize, and to play” (Kozinets, 1999: p.
262). Company Websites offer new ways to consumers to spend time with their

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brands, such as playing games, participating in online-activities, or learning interactively about the product, service and brand they are using. Virtual communities are
online platforms on which consumers can exchange their experiences and other
information related to specific products, services, companies, brands, or any other
issue (for detailed information on virtual communities see chapter 3.2.4). Besides
creating interactive ways to come and stay in touch with a brand, which is is a key
factor in strengthening the bond with a brand, marketers can create more personal
brand communication in the Internet, based on consumers’ behaviors and preferences based on traditional market research findings and on monitoring their online
behavior (which is called clickstream analysis). This can in turn increase communication effectiveness by making consumers perceive communication as more relevant
and interesting (Simonson, 2005).
As has already been described, a Website has various characteristics, such as
around-the-clock communication, access from people with a purpose, fulfillment from
awareness to consumption, transmission of global information, and interactive characteristics that are difficult to achieve with other media. It is possible to change a
Website according to the purposes and actions of the users. For instance, with the
financial industry, it is possible to transfer, make payments, and to check account
balances online. In the travel industry, flights and hotel reservations can be booked
online. One-to-one correspondence is accomplished by displaying the name of a
registered user on the Website. None of the various purposes that a Website can
achieve can be done with other media types. Thus, for marketers, a Website as a pull
medium opens different opportunities compared with push media, such as television
commercials or outdoor advertisements, where information is sent in a one-way direction from the source. The tools for brand building shifted from a unidirectional
persuasion logic to a more collaborative approach to brand-consumer relationships –
introducing a crucial opportunity for a new brand management logic (Mandelli, 2005;
see also Reinartz, Thomas & Kumar, 2005). Prahalad and Ramaswamy (2004) state
that this interactivity has actually changed the role of customers in some markets
from mere receivers of products or services to co-producers of value.
Finally, coming back to the issue of availability of information, there is also another
type of information asymmetry. Compared to those companies that sell products,
individual consumers have a lot more information about their own tastes and pur-

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chasing behaviors (Kumar, 2000). To include the Internet into strategic brand management enables a company to take advantage of Internet-specific interactive elements (Reinartz, Thomas & Kumar, 2005). By analyzing the history of how a person
surfs the web, sellers are becoming more knowledgeable about the individual consumer. Internet technology enables companies to communicate to consumers on an
individualized level and to generate customer profiles that can be refined continuously after each customer contact. Consequently, they can proactively suggest products to their customers and prospects.13 As a result, consumers might even contingently reward the vendor for an accurate and timely “push“ of appropriate products
and services, instead of embarking on a price search (Kumar, 2000: p. 4). All of these
opportunities might be a basis for intense brand-consumer relationships.

2.3 Brands in the online environment
A prerequisite for building a strong brand is the understanding of consumers’
wants, needs and desires (Aaker & Joachimsthaler, 2000). The Internet as a new
medium did not change this fundamental idea. The challenge for organizations is
rather to master marketing on this new platform. Theories that were valid in the offline
world are not dispensable, they only need to be adjusted to the new environment.
Particularly, the integration of online and offline communication is still difficult for
many businesses. The Internet channels should not be treated independently from
other communication channels. In order to communicate clearly defined brand identities and homogenous brand images, companies need to create consistency between
the Internet – as one touchpoint for consumers with a brand – and the other touchpoints such as advertisements, mailings, or stores. This topic is described in the first
part of this chapter.
In the early years of the Internet, there was considerable discussion about branding in the new environment. Apart from those companies that were created as mere
Internet brands, the question was basically, whether to create new brands for the
new environment or to rely on established brand names. These particularities of
branding in the Internet will be explained in the second part of this chapter.

13

For instance, Amazon.com recommends books that the consumer may be interested in, based on
previous purchases, and alerts him or her about the release of a new book by their favourite author.

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2.3.1 The relative importance of the Internet as a touchpoint with the
brand
For consumers, a brand is an experience; they experience brands in many different ways. Every marketing message they see or hear creates an impression of what
the brand stands for – the brand image. And every interaction with a product or its
maker provides tangible proof of the real value the brand delivers – its action. The
sum of all these impressions and interactions adds up to the brand experience.
(Manning, 2005; Aaker & Joachimsthaler, 2000; Meyer & Pagoda, 2000)
Figure 3: Elements of the consumer brand experience

Note. From: How brands succeed online (p. 4) by Harley Manning (2005), Cambridge, Massachusetts, USA: Forrester: Business View Best Practices.

The brand image was a previous topic in the present paper. In order to show the
relative importance of the Internet as a touchpoint with the brand, the main focus of
this section is the action part. In line with the brand logic described earlier in this
paper, Manning (2005) states in his Forrester Research paper that companies define
the experience they want to deliver for their brand through a process that goes along
three stages (see Figure 3):

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• The company’s business strategy (mission, vision and values) creates a context
for the brand. For instance, Virgin, with businesses as diverse as airlines and mobile phones, shows that it is even possible to form the basis of a masterbrand
transcending product lines with a powerful sense of corporate purpose.14
• The brand positioning statement describes how the company wants its customers
to perceive the brand. The typical characteristics (intended benefits, personality,
and expected behavior) “become the game plan against which the company executes”.
• Finally, consumers experience the brand and form their actual perceptions on
each touchpoint with the brand. To be successful, the brand must deliver consistently on the plan defined by the positioning statement.
According to Manning (2005), touchpoints with a brand have two roles for consumers in support of the brand positioning statement. They have to communicate the
image specified by the positioning statement, and they have to deliver the value
promised by it. The relative importance of these two roles varies depending on the
inherent capabilities of each touchpoint (see Figure 4). For instance, a television
commercial can promise that Coca Cola will taste refreshing, but the spot can actually not quench a person’s thirst. This role must be fulfilled by the product itself. The
drink must finally deliver a refreshing taste, as the advertisement has promised.
Compared with a 30-second television spot for a beverage, the Website’s role is
far more complex (Reinartz, Thomas & Kumar, 2005; Manning, 2005). On the one
hand, a company’s online appearance is a communication medium that conveys
image. This means that in order to take advantage of the inherent strengths of the
Internet (e.g., endless depth and two-way communication) Websites must provide
content and function that support brand image. For instance, to deliver on its claim to
“lead the industry in innovation”, APPLE’s Website must describe the innovative aspects of APPLE products and provide standout function like a best-in-class configurator. Furthermore, elements like language, imagery, typography, and layout must be
consistent with regard to positioning and style over different media in order to reinforce multichannel marketing campaigns. On the other hand, the company’s online

14
see Virgin’s brand positioning at http://www.virgin.com/aboutvirgin/allaboutvirgin/whatwereabout/
default.asp

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appearance is a delivery channel that enables action. Television advertisements just
appear before a consumer. But if a consumer enters a homepage, he typed a URL or
clicked a link, which means that he has a clear goal in mind such as finding specific
information, making a purchase or getting service. To avoid a frustrating or even
annoying experience the Website must supply the content and function the customer
needs in order to achieve his or her goal. To support the brand experience, Websites
must both communicate a consistent image and actively deliver value. Figure 4 illustrates the relative importance of both of these functions by consumer touchpoints with
a brand.
Figure 4: The relative importance of communicating image and delivering value by touchpoint

Note. From: How brands succeed online (p. 5) by Harley Manning (2005), Cambridge, Massachusetts, USA: Forrester: Business View Best Practices.

While, on the one extreme of the scale, traditional communication media mainly
communicate image, on the other end of the scale products primarily deliver value.
Basically, the more interactive a channel becomes, the more value it delivers to consumers.
As a general rule, it is important for a business to deliver consistent appearance
and performance over all touchpoints of a consumer with a brand.

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2.3.2 Particularities of branding in the Internet
In the early years of Internet technology, scientists and practitioners distinguished
between Internet brands15 and brands of the offline world. The belief was that traditional, established brands were not suitable for the new online environment. Hence,
new online brands have been created at considerable expenditures, such as e.g.,
MYW ORLD created by the German KARSTADT or the ADVANCE BANK created by HYPOVEREINSBANK.

Along with the new economy’s crash, companies realized that it is

not only very expensive to build up new brands (and correspondingly trust in the new
brands), they also became aware of the fact that existing brands were already established in the minds of many consumers (Porter, 2001). There were existing relationships that just needed to be expanded to the online environment. Smith and Brynjolfsson (2001) state that consumers use brand names as a signal of reliability and
credibility, especially regarding non-contractible aspects of a product bundle, such as
shipping or promised delivery times. Consumers are more willing to engage in ecommerce with known brands than with brands they do not know (Smith & Brynjolfsson, 2001). Hence, established brands initiated hybrid forms of marketing – so
called “click-and-brick-strategies”16 – working both in the online and the offline environment (also referred to as enabled e-brands). At the same time, also brands that
have been created in the Internet (so-called generated e-brands), such as for instance AMAZON, YAHOO! or GOOGLE, were able to gain trust among consumers over
time.
Basically, brand management is rather similar for brands that have been created in
the Internet and brands that have been created in the real world (Chiagouris & Wansley, 2000). The scientific literature offers various books and papers on the ways and
extents to which enabled e-brands can be transformed for their online appearance
(Porter, 2001; Kumar, 2000; Bakos, 1998; Reinartz, Thomas & Kumar, 2005; Ward &
Lee, 1999). As both generated and enabled brands accomplish the same functions
for consumers, this issue is not essential for the present paper. The topic of this paper is to examine, whether features of Internet technology strengthen or weaken

15

Different contributors to the branding literature have used different terms, such as “virtual brands”,
“online brands”, “e-brands” or “electronic generated brands”, to refer to brands in online environments.
These terms can be used synonymously (see Carpenter, 2000; Baumgarth, 2001).
16
“Click-and-brick” refers to the connection of online (“mouse-clicks”) and offline (“bricks-and-mortar”)
elements (Gulati & Garino, 2000: pp. 107-109.)

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these functions – for all brands. In order to fulfill this objective, it is useful to successively go along the different steps of the consumer’s purchase decision process,
which are presented in chapter 3.
Nevertheless, the Internet is a very powerful brand-building tool, because it can be
tailored to the needs of the brand and the relationship between the customer and the
brand; it can transmit information, impart experiential associations, and leverage
other brand-building programs. And all these experiences and associations can be
largely controlled. (Aaker & Joachimsthaler, 2000)

2.4 The changing role of brands and the empowerment of consumers
Basically, markets (electronic or otherwise) have three main functions: (1) matching buyers and sellers; (2) facilitating the exchange of information, goods, services,
and payments associated with market transactions; and (3) providing an institutional
infrastructure, such as a legal and regulatory framework, that enables the efficient
functioning of the market (Bakos, 1998). This mechanism works best in the case of a
perfect market, which is influenced by high (perfect) market transparency and low
(no) product differentiation (Porter, 2001). However, consumers used to be disadvantaged in markets due to two facts: there are only few homogenous products, and
prices for comparable goods can only be compared spending considerable amounts
of time, efforts, and money (Bakos, 1998). Based on this information-asymmetry,
companies were able to achieve higher margins with inferior goods (Kumar, 2000).
Moreover, manufacturers and retailers have always been better organized than consumers. They work on a global scale, while consumers were restricted to local offers.
Manufacturers and retailers were able to arrange mutual price agreements. And
traders could purchase larger quantities and in this way realize economic prices
compared to consumers. On many markets, rivalry among existing firms was low due
to lacking information compared to the present situation. Consumers were not able to
keep track of markets and they did not have sufficient market potential to be able to
achieve market equilibrium (Kumar, 2000).
The opportunity for almost everybody to gather information online increasingly
changes this situation. Lower search costs and greater availability of information can

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improve the extent of searching done and the amount of information gathered, allowing the online consumer to consider a lot more alternatives. Hence, markets become
more transparent and bargaining power of buyers grows (Porter, 2001). Consumers
can now compare products and prices and interact with other consumers easily and
independently of time and place (Bakos, 1998). Even information on attributes that
can only be experienced during or after consumption (e.g., the taste of food, the
usage of products, or a company’s customer service) might be obtained through the
Internet through trusted third party sources, such as for instance virtual communities
or forums. This kind of information is of crucial importance to consumers’ purchase
decisions. In the age of the Internet, consumers can concretize their needs and
wants in precise ways and search for that specific company offering their ideal bundle
of products and services. In this way, they can make better purchase decisions (Peterson & Merino, 2003), not necessarily needing to rely on value promises of brands
anymore. Likewise Ward and Lee (2000: p. 10) state that “brands are only one
source of information; most consumers also conduct some form of product search.”
In the end, information might substitute functions that also brands accomplish in the
eyes of consumers (chapter 4.1 will give answers to this question).
Furthermore, in the age of e-commerce, prices are not fixed anymore (Varian,
1999). In contrast, prices can be adapted flexibly to the demand of consumers. Websites can be updated more quickly than catalogues, where prices are fixed for a certain period of time (Varian, 1999). Shankar, Rangaswamy and Pusateri (1999) elaborate on the fact that online marketing can have significant impact on the nature and
degree of customer price sensitivity. According to them, companies’ pricing decisions, which are central to a brand’s marketing strategy, should depend on consumers’ price sensitivity towards that specific brand. On the one hand, online markets are
likely to increase price competition between sellers and lead to lower prices, because
of reduced customer search costs – even for differentiated products (Bakos, 1998).
On the other hand, online markets can also dampen price sensitivity by enabling
customers to find products that best fit their needs (Bakos, 1998). For instance, ecommerce could lead to lower price sensitivity when quality-related information is
important to customers and brands are differentiated. Consumers may become less
price-sensitive and even willing to pay a price premium for higher service levels,
customized offerings, recognized brands, etc. This might be an explanation for the
ongoing success of AMAZON, which is not necessarily the cheapest vendor of books

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(In chapter 4.2, the changing role of intermediaries and retailers in online markets is
elaborated). A considerable amount of research has been conducted on the effects
that the Internet has on prices (Bakos, 1997 & 1998; Shankar, Rangaswamy &
Pusateri, 1999; Varian, 1999; Alba et al., 1997; Brynjolfsson, Dick & Smith, 2004;
Ailawadi, Lehmann & Neslin, 2003). The effects of consumer empowerment on prices
and on quality are discussed in chapter 4.3.
Altogether, the ability to shop world-wide in relative anonymity at any time from virtually any location, combined with the availability of real-time information about products, services, companies, brands, and prices can serve to increase consumers’
sense of freedom and power. In combination with the interactivity that is inherent in
the Internet, this empowerment allows consumers to more effectively fulfill their desires and fantasies. The changing role of brands in online contexts and the empowerment of consumers through the Internet have decisive implications for brand management, which are discussed in detail in chapter 4.4.
To sum up, the Internet significantly increases market transparency and thus empowers consumers to consider and compare a lot more options during their purchase
decision processes. Functions that brands used to fulfill, such as increasing information transparency, risk reduction, and even image benefit creation, may be endangered to be replaced by functions of the Internet. The Internet primarily delivers information about non-sensory product attributes. But it also offers means by which
consumers can obtain information about sensory or experiential characteristics of a
good. Whether consumers perceive this information to be reliable or not depends on
several aspects that are explained in the section dealing with the research that was
conducted as part of this work. While, on the one hand the Internet may weaken
brands by making competitive offerings comparable on a global scale, it may on the
other hand provide a platform for brands to be promoted and experienced in new
ways, as the Internet is not used to obtain information, but also for fun and entertainment (Mathwick & Rigdon, 2004; Wolfinbarger & Gilly, 2001). Besides, shopping
does not only serve utilitarian needs of consumers, but also hedonic needs (Holbrook
& Hirschman, 1982). This means, that to many consumers, shopping is often not
simply a task but also a form of entertainment and social interaction. It is not unreasonable to assume that consumers may as well have similar expectations of online
shopping – especially those consumers who already use the Internet for entertain-

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ment and interaction (Wolfinbarger & Gilly, 2001). And last but not least, brands may
deliver values that cannot be simply displaced, such as feelings and emotions.

Purchase decision process

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3. Purchase decision process
Brands fulfill important functions for consumers during the purchase and consumption process: prior to a purchase decision, the existence of brands increases the
consumer’s efficiency of perception, processing, and storage of information; risk
reduction influences the actual decision-making activity; and in the subsequent phase
of consumption, the image benefits of brands emerge, i.e. the brand provides benefits to the consumer that an unbranded offering could not fulfill. In order to be able to
understand the role of brands and of the Internet during the purchase decision process, all potential steps of this process are discussed in the current chapter.17
Consumers are faced with purchase decisions almost every day. But these decisions can be very different – from situation to situation, from purchase item to purchase item and from consumer to consumer. Some decisions entail great efforts,
while others are mady on a virtually automatic basis (Solomon, 2003; Häubl & Trifts,
2000).
In order to be able to understand the behavior of consumers from the problem
recognition to the actual choice of a product or service or a brand various models
have been developed.18 These models try to explain the purchase decision process,
and at the same time they try to predict future behavior (Foxall & Goldsmith, 1994).
As to that, the purchase decision is not considered as a single purchase action, but
as a process. One of the most popular and most recognized models is the fivestages-model by Engel, Blackwell and Miniard (1986: p. 25). This is the model that is
applied to the study in the present paper as discussed in a later section.
According to this model, the consumer typically passes through five stages (see
Figure 5):
• Initially, the consumer recognizes that he is not satisfied and wants to improve his
situation. Depending on his internal drive (motivation) to satisfy the need, want or
desire, the process will continue to the next step.

17

As this paper focuses on the particularities of brands and the Internet as influencing factors of
consumers’ decision making, this chapter will point out and explain only the relevant aspects of consumer behavior with regard to this perspective.
18
Marketing scientists have developed various models on the consumer’s purchase process. The
most well-known may be the ones by Howard and Sheth (1969) Theory of Buyer Behavior; Nicosia
(1966) Consumer Decision Processes; and Engel, Blackwell and Miniard (1986) Consumer Behavior.

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• Assuming the consumer is motivated to improve his situation, he will next search
for information on possible solutions. Depending on such factors as the importance of satisfying the need, familiarity with available solutions, and the amount of
time available for search, the sources used to acquire this information may be as
simple as remembering information from past experience (i.e., memory), or the
consumer may expend considerable effort to locate information from outside
sources (e.g., Internet search, talk with others, etc.).
Figure 5: The five-stages-model of the purchase decision process

Note. Based on: Consumer Behavior (p. 25) by James F. Engel, Roger D. Blackwell and Paul W.
Miniard (1986), 5th ed., New York: Holt, Rinehard & Winston.

• If the consumer engaged in search, probably, his search efforts result in a set of
options from which he can make a choice. At this stage, the consumer will evaluate options on two levels. At level one he may create a set of possible solutions to
his needs (i.e., product or service types), while at the next level the consumer may
evaluate particular products (i.e., brands) within each solution.
• In many cases the consumer may chose to purchase that product or service,
whose evaluation is the highest. However, when it is actually time to make the
purchase, the choice may change. At the time of purchase the intended purchase
may be altered for many reasons such as: the product is out-of-stock, a competitor offers an incentive at the point-of-purchase (e.g., a price comparison Website

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shows that a competitor’s offer is much cheaper; a store salesperson mentions a
competitor’s offer), the customer lacks the necessary funds (e.g., credit card does
not work), or members of the consumer’s reference group take a negative view of
the purchase (e.g., friend or virtual community member is critical of purchase).
• After the purchase the consumer is faced with an evaluation of the decision. He
may re-evaluate satisfaction with the decision, if the product performs below his
expectation. This, at its extreme may result in the consumer returning the product,
while in less extreme situations the consumer will retain the purchased item, but
may take a negative view of the product. Such evaluations are more likely to occur in cases of expensive or important purchases.
Typically, the decision process involves all of the five steps. However, research in
the field of behavioral economics unveiled that decision making does not necessarily
always comprise all five steps.
Whether the consumer will actually carry out each step depends on the type of
purchase decision that is faced. Solomon (2003) summarizes consumer researchers’
results on types of consumer decisions in terms of a continuum, which is anchored
on the one extreme by habitual decision making and at the other end by extended
problem solving. Depending on what kind of decision has to be made, consumers
may only scan their memory to determine how they resolved the problem in the past;
they may simply rely on mental shortcuts, such as brand names or price; they may
imitate other people; they may respond impulsively to an offering; or they may engage in a search process, comprising one to many sources to obtain new information
that they can use in their evaluation and their purchase decision stages.
The extended problem solving process is usually initiated by a motive that is rather
important for the consumer’s self-concept (i.e., the beliefs a person holds about his
own attributes, and how he evaluates these qualities), and a wrong decision is perceived to have considerable effects (risks) for the consumer. The degree of cognitive
control is high. Accordingly, brands might in this case reduce risks that are related to
an important purchase decision, and they might create image benefits.
Habitual decision making comprises choices made with little to no conscious effort.
In this case, the purchase decision may be habitualized or the result of an emotive

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impulse. Cognitive involvement19 in the decision process is low and an intensive
information search and evaluation of alternatives do not take place. Consumers may
then skip several steps in the purchasing process since they know exactly what they
want. This allows them to move quickly through the steps. Accordingly, brands might
here increase information efficiency for consumers, who can consequently rely on a
trusted brand instead of having to engage in an extensive search process. In this
case, brands might also limit the risk of a wrong decision for a non-branded product
or a brand that the consumer does not yet know.
Decisions that fall in between of these two extremes are characterized by limited
problem solving efforts. Buyers are not as motivated to search for information or to
evaluate each alternative rigorously as they are in the case of extended problem
solving. Instead, they use simple decision rules to choose among alternatives. It can
also be a decision rule to rely on a particular brand. Brands might here fulfill the functions of increased information efficiency and potentially also risk reduction.
Figure 6: A continuum of buying decision behavior

th

Note. From: Consumer Behavior (p. 295) by Michael R. Solomon (2003), 6 ed., Upper Saddle
River: Prentice Hall

For consumers, the development of habitual, repetitive behavior allows to minimize the time and energy spent on many purchase decisions (Solomon, 2003). This
may be positive for the chosen brands. On the other hand, habitual decision making
presents marketers with a problem. They must convince those consumers, who are
not customers of their own brand, to change their habits and preferably replace them
with new ones (Solomon, 2003).
19

Involvement is defined as “a person’s perceived relevance of the object based on their inherent
needs, values, and interests“ (Solomon, 2003: p. 124, citing Judith Lynne Zaichowsky (1985) ‘Measuring the Involvement Construct in Marketing’, in: Journal of Consumer Research, Issue 12, pp. 341-52).

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However, this approach cannot explain all purchase decisions. Therefore, Holbrook and Hirschman (1982) propose to supplement and enrich this view with an
“admixture” of the experiential perspective. According to the described behavioristic
approach, consumers evaluate the effort required to make a particular decision (consciously or unconsciously), and then they choose a strategy best suited to the level of
effort required, when a well-thought-out, rational approach is required, while otherwise, they use shortcuts or fall back on learned responses that “automate” these
choices (Solomon, 2003: p. 293; see also Simon, 1955). According to the experiential
approach, the choices of consumers who are involved in a purchase decision may be
elicited by the totality of the purchase and consumption experiences (Holbrook &
Hirschman, 1982; Solomon, 2003; Wolfinbarger & Gilly, 2000; Mathwick & Rigdon,
2004).20 In line with this view, shopping and the consumption can also involve “playful
leisure activities, sensory pleasures, daydreams, esthetic enjoyment, and emotional
responses” (Holbrook & Hirschman, 1982: p. 132; see also Csikszentmihalyi, 1990).
If these experiences are memorable or extraordinary, they produce emotions, which
increase the consumer’s involvement and create subjective benefits that may finally
affect choices between instrumental alternatives that are functionally equivalent in
other respects (Havlena & Holbrook, 1986). In this case, brands create inward directed emotional benefits for customers. Considering also a learning effect as a response to such experiences in the sense that consumers know more about the products they have tried than about the products they have not tried, brands may later
increase information efficiency for consumers and even exhibit brand loyalty
(Wernerfelt, 1991; Huffman & Houston, 1993). Basically, the experiential perspective
emphasizes the importance of hedonic response (Hirschman & Holbrook, 1982), and
broadens the perspective on how consumers make decisions (Holbrook & Hirschman, 1982) and consequently also on how consumers’ decisions can be influenced.
Consumers have limited processing capacity, i.e. they generally cannot process all
of the available information in a particular situation (Bettman, Luce & Payne, 1998),
and not all consumers are similarly able to gather information. As to this, Schwartz
(2005) states that consumers can be partitioned in two ways. The first groups comprises of the naïve consumers, i.e. those who make cognitive errors without realizing
20

The distinction between rational versus experiential consumer behavior can analogously be found in
the distinction between directed search (for goal-oriented reasons) and general search (for experiential reasons) (Hoffman & Novak, 1996), which will be described in more detail in chapter 3.2.

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they do so. The second group are the sophisticated consumers, i.e. those who do not
make errors or are self aware. Thus, consumers’ capabilities to search and find relevant and credible information useful for the purchase decision differ (Ward & Lee,
2000). Accordingly, naïve consumers need more time for information search, resulting in higher search costs in terms of time and efforts. Ward and Lee (2000: p. 10)
argue that navigating and evaluating information found in the Internet are “skills developed with use”. Proficiency in searching the Internet increases with experience or
over time. Increased proficiency then decreases the cost of gathering and evaluating
information (Ward & Lee, 2000). Consequently, search costs decrease over time with
increasing experience in online search. Nonetheless, there may always be information that not all Internet users can understand, such as specific expert know-how.
Information processing is generally limited by the consumer’s education and cognitive capabilities. Depending on the particular consumer’s cognitive capabilities and
opportunity costs, he or she may rely on brands as an “expensive source of information” (Ward & Lee, 2000: p. 11).
To sum up, in the case of low cognitive control of a purchase decision, one function of brands is to increase information efficiency. On the other end of the scale,
brands rather fulfill the functions of risk reduction and even image benefit creation.
Brands can also serve as simple decision rules for limited problem solving. In this
case, the customer might, for example, already know about the low risks that are
connected (or better: are not connected) to the purchase of a particular brand; for this
customer, elements of the brand (e.g., shape, color) or the brand itself serve as key
signals increasing information efficiency.
In the case of higher cognitive control, brands may not be the only source of information that consumers rely on during a purchase decision process. They may
often search for information from additional sources. The Internet is such a source
that has tremendously grown in the past years and still continues to grow. Due to its
ability to deliver information from any place at any time, the Internet is a very popular
source of information. Consequently, the influence of the Internet is particularly high
in the case of high cognitive control. Also for the case of limited problem solving, the
Internet can play a vital role, as it can support consumers in coming to quick decisions. And the Internet provides many opportunities for consumers to make experiences. Experiential behavior is especially likely in categories where shoppers have

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an ongoing, hobby-type interest (Wolfinbarger & Gilly, 2001). Furthermore, having
time available and desiring stimulation result in more experiential shopping behavior
online. Apparently, the higher playfulness associated with experiential behavior results in a more positive mood, greater shopping satisfaction, and a higher likelihood
of impulse purchasing compared to goal-oriented shopping (Hoffman & Novak, 1996;
Wolfinbarger & Gilly, 2001).
The following chapter describes the five steps of the purchase decision process
with particular regard to the functions that both brands and the Internet fulfill for consumers in each of the five stages.

3.1 Problem recognition
“Problem recognition occurs whenever the consumer sees a significant difference
between his or her current state of affairs and some desired or ideal state.” (Solomon, 2003: p. 296)
This problem can arise in one of two ways. There is no problem, if the actual state
and the ideal state are in line. However, if the actual state moves below the ideal
state, need recognition occurs, i.e. the consumer lacks of a product or service that
has run out, or he has bought a product or service that turns out not to adequately
satisfy his needs, or new needs may be created. On the other hand, the consumer’s
ideal state can move upward. The gulf between his new ideal state and the actual
state is called opportunity recognition. This may occur when the person’s frame of
reference shifts, i.e. the consumer’s circumstances have somehow changed and the
new purchases are to be made to adapt to the new environment (Solomon, 2003).
Problem recognition occurs naturally. However, it is often stimulated by marketing
activities, i.e. marketers attempt to create a demand for products or brands. The
ways of doing this are different for the traditional marketing channels and the online
channels – basically because in the online channels consumers are more actively
involved. Many Internet users surf the Internet in order to gather information about
their specific fields of interest. Plenty of them arrive at their desired information by
using search engines. During this surf and search processes, consumers are subjected to a variety of stimuli that can trigger a need or a want (McGaughey & Mason,
1998). This need or want can be triggered by objective information as well as by

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advertising (Peterson & Merino, 2003). Advertisements can be located exactly at
those places where consumers search for related information. A publisher of guidebooks could, for example, advertise on Websites dealing with travel. And the search
engine GOOGLE displays content-related advertisements next to its independent
search results. The arising brand owner’s benefit is the opportunity to link his offerings with those places where his potential customers search for related information.
A major benefit for consumers is the possibility to access and compare a huge variety of information world-wide, in real-time, regardless of opening hours.
Increasingly, contents and services of Websites can only be seen and utilized after
the consumer has registered and signed in. In doing so, Website operators try to
collect personal information about users, such as data on their age and fields of interest. This information in turn enables them to place individualized advertisements
and to send newsletters to registered users in order to trigger needs and wants by
means of personalized, directed stimuli (Simonson, 2005).
When the consumer realizes that there is a significant difference between his ideal
state and his actual state, he will – depending on the type of purchase decision –
either directly switch to the purchase decision step or engage in information search.

3.2 Information search
Once a problem has been recognized, the consumer needs adequate information
to resolve it. In the information search process the consumer surveys his environment for appropriate data to make a reasonable decision (Solomon, 2003).
Therefore, the consumer first needs meta-information, i.e. information or knowledge about where he can find adequate information. Every person has a certain
degree of knowledge about many products already in memory. When confronted with
a need, this person may then engage in internal search by scanning his own memory
to collect information about different alternatives (Solomon, 2003). Trusted brands
can be such alternatives that the consumer has already in memory. Usually, though,
even well-informed people need to supplement their knowledge with external search,
by which information is assembled from advertisements, other people, or from the

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Internet.21 Sources for the external search process can be impersonal and marketerdominated sources (such as catalogues, retailers’ homepages, manufacturers’
homepages), unbiased third parties (such as consumer reports, experts’ Websites,
online comparison shopping services, intelligent agents), and friends and family
members (online equivalents might be online consumer-to-consumer communities,
portals, or hubs). (Solomon, 2003)
Figure 7: Value and availability of information relevant for purchase decisions

Note. From: Mundpropaganda im Internet. Bezugsrahmen und empirische Fundierung des Einsatzes von Virtual Communities im Marketing [Word-of-mouth in the Internet. Frame of reference and
empirical basis for the use of virtual communities in marketing] (p. 48) by Jörg Meyer (2004), Hamburg, Germany: Verlag Dr. Kovac

While there is a wide range of possible information sources, consumers assign different value to these sources. As to this, Wasmuth and Kalkowski (2000) explain that
this value finally depends on each source’s goal of communication. This means, the
less biased and commerce-oriented the communication is, the higher is the value of
a source and the more likely it is that this source influences consumers’ purchase
decisions (see Figure 7). Consumers can, for example, obtain information most easily directly from manufacturers. This information however is of low value for them,
because it is intended to promote and sell the manufacturers’ products. The increasing impartiality of the information provider and the increasing number of third parties’
21

According to Nielsen//Net Ratings, 94% of all German households with Internet connection use the
Internet for purchase decisions. Price comparisons are most important to 81% of users, 68% search
for product information and test reports. Four of five interviewees stated that their search efforts for
product and price information were successful. (Nielsen//Netratings, 2004)

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evaluations finally result in overall higher value of information. Although it might seem
reasonable to assume that from an objective point of view test reports (e.g., the U.S.
CONSUMER REPORTS or the German STIFTUNG WARENTEST) are the most profound and
comprehensible sources of information, empirical research surprisingly showed that
consumers do not necessarily act rationally and in fact call on different sources of
information than the ones they rate highly (Meyer, 2004). Hence, the importance of
the sources that consumers call on for information may most strongly depend on the
resources that they actually use. One can assume that these sources correspond to
those of the offline world where personal communication is the most important
source of information (Meyer, 2004). Thus this information is rated even higher than
experts’ reports. This is valid for both the offline environment and the online environment – aside from the fact that through the Internet far more sources are available for
information search than in the traditional environment (Brynjolfsson & Smith, 2000).
Figure 8: The relationship between amount of information search and product knowledge

Note. From: Consumer Behavior (p. 303) by Michael R. Solomon (2003), 6th ed., Upper Saddle
River: Prentice Hall

As Figure 8 shows, the external search effort depends strongly on the consumer’s
present knowledge. Consumers with moderate knowledge about the product or service tend to conduct extensive search, while novices and experts conduct fairly limited search (Solomon, 2003). The reason therefore is that people with very limited
expertise may not be capable of searching extensively, because they may not know
where to start and which product attributes to pay attention to. To distinguish among
alternatives, novices are likely to rely on opinions of other people and non-functional

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attributes, such as brand name and price. In contrast, experts may know where to
search and they may have better sense of what information is relevant to the purchase decision. As an effect of their more selective search, their efforts are more
focused and efficient, and they may rely more on information resulting from their
search than on brands. (Solomon, 2003)
Generally, search activity is higher when the purchase is important, when there is
a need to learn more about the purchase, or when the relevant information is easily
obtained and utilized (Solomon, 2003). The amount of search a consumer undertakes varies regardless of the product category in question. Ceteris paribus, younger
and better-educated people tend to conduct more information search, because they
enjoy the shopping and fact-finding process. With particular regard to the Internet,
Peterson and Merino (2003) state that the Internet is not only used for the purpose of
information search, but also for entertainment (see also Wolfinbarger & Gilly, 2001;
Hoffman & Novak, 1996; Häubl & Trifts, 2000). As to this, they distinguish between
the search for specific product or service information in anticipation of a purchase
and general information about a brand or product or service category. The directed
search (also: goal-oriented search) for specific information has already been described. However, even more interesting is the impact of the Internet on what they
call general searching (also: experiential search). Due to decreased efforts to obtain
information and the manifold ways to display them, some consumers search even
more extensively. The Internet search process becomes a way of entertainment,
substituting time spent in front of television or other spare time activities (Peterson &
Merino, 2003). As consumers also learn during general search, the time and efforts
spent on directed search do not dramatically increase. General search increases
users’ proficiency in searching and at the same time facilitates their directed search
(Peterson & Merino, 2003). It is up to marketers to understand this behavior and to
design Websites that meet the needs of consumers with respect to both groups (Holland & Baker, 2001).
After having talked about consumers’ motivation to search, the value of different
information sources, different kinds of search, and the extent of search activity, the
boundaries of information search are discussed subsequently. Boundaries to the
information search are the costs caused by the consumer’s search process. These
costs can be caused by efforts and time spent on the search as well as by the mone-

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tary costs incurred for the usage of the Internet or – in the offline world – for a busride, a taxi-ride, a parking space, etc. connected to the search. A rational consumer
expects economics of information, i.e. the consumer might gather as much information as needed to make an informed decision as long as the costs of search do not
exceed the utility (Solomon, 2003). Thus, one could assume that the consumer will
search until the marginal benefits from doing so equal the marginal costs (Peterson &
Merino, 2003).
However, consumers do not necessarily act rationally (Solomon, 2003). Regarding
the economics of information, analytical research and empirical research findings
suggest that consumers rather stop searching when they reach some reference price
(which might change as search progresses) or stop on the basis of total cost, not
marginal cost (Peterson & Merino, 2003). Furthermore, consumers with lower income, who have more to lose by making a wrong purchase decision, actually search
less prior to buying than more prosperous people (Solomon, 2003). Another example
for irrational consumer behavior is that consumers often visit only one or two stores
and rarely seek out unbiased information sources prior to making a purchase – this
pattern mainly occurs in the case of products that represent significant investments,
such as appliances or cars. On the other hand, when consumers consider the purchase of symbolic items (such as clothing), they tend to engage in much more extensive external search, because these self-expressive decisions may be seen as having considerable social consequences in the case of a bad purchase, although financial stakes may be lower than in the former case. Furthermore, many consumers
switch brands even if they are satisfied with their current brand. Consumers may
have a repertoire of some favorite brands, instead of sticking to only one. And in
addition, they may sometimes be interested in variety seeking, i.e. they may seek to
vary their product experiences or just try to reduce boredom. (Solomon, 2003)
Figure 7 has shown that not all information sources are equally valuable to consumers. The role and impact of different online information sources and the respective role and impact of brands are explained in chapters 3.2.1 to 3.2.4.

3.2.1 Manufacturers’ and dealers’ homepages and online shops
Websites of producers of products or services usually provide detailed information
on product or service characteristics. Price information usually confines to recom-

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mended retail prices, which are in most cases not identical with actual market prices.
However, recommended retail prices can serve consumers as benchmarks.
Due to the manufacturer’s objective to sell his products or services, his Website
cannot be rated as an objective source of information. Normally, he may not unveil
product deficiencies. On the contrary, he may praise his own products, in order to
differentiate them from competitive offers and to stimulate purchase. As a tool to
display complex products, various Websites offer product configurators (e.g., BMW’s
Car Configurator22) that provide the opportunity to individually assemble the desired
product. Hereby, also price information for a complex product can be obtained rather
easily.
Additionally, product information can be gathered through dealers’ homepages.
Often, the displayed information is just a copy of the producers’ published data.
Sometimes, dealers offer also complementary data in terms of pros and contras.
Further information offered by retailers may be consumers’ valuations on the dealer’s
homepage. Many retailers’ homepages also offer the possibility to view a comparative presentation of different products. That way, consumers can easily compare
alternatives with regard to their particular characteristics. However, also dealers’
homepages may be biased, as dealers’ margins on different products they sell may
usually vary.
Online shops work similar as dealers’ Websites. Attention should here be paid to
the fact that online shops offer a limited range of products that does not represent all
products on the market, but only those products that are sold in this particular shop.
Hence, also online shops are no unbiased source of information.
The central problem of these information sources is that they are biased – or at
least perceived to be biased – and consequently are not suited to deliver a reliable
overview or reliable comparative information. As a consequence, consumers are not
likely to rely on manufacturers’ or retailers’ homepages for the purpose of information
search. Nonetheless, they may finally rely on a branded retailer for the purchase.
Brynjolfsson and Smith (2001) found out that although branded retailers are substantially weakened due to increased information transparency in the Internet, brand

22

See http://www.bmwusa.com/vehicles/byo_landing for the U.S. version. Other countries’ versions
can be accessed through http://www.bmw.com and then selecting the specific national Website.

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name and retailer loyalty strongly influence consumers’ online purchase behavior
giving such retailers a significant price advantage over their competitors.

3.2.2 Experts’ homepages
In many countries there are independent, non-profit testing and information organizations serving only consumers, such as for instance the U.S. CONSUMERS UNION
or the German STIFTUNG W ARENTEST. These organizations give unbiased advice
about products and services, and other consumer concerns. The mission of these
organizations is to test products and services, inform the public, and protect consumers. They are financed solely by selling their consumer reports, other services, noncommercial contributions, grants, and fees. They buy any products they test on the
open market and they do not earn money with advertisements in their publications in
order to remain impartial (Consumers Union, n.d./2006; Stiftung Warentest,
n.d./2006). This kind of experts’ services provides consumers with manifold information that would otherwise not be available on markets.
Also other organizations publish test reports rating products, both in magazines
and on the Web, such as for instance car magazines or other special interest publications. However, if these services are financed also by advertising revenues, their
impartiality cannot be guaranteed. Unlike the former experts, these information providers may be beholden to commercial interests.
There is only little scientific research on the influence of experts’ ratings on consumers’ purchase decisions. However, regarding the findings of Wasmuth and
Kalkowski (2000) it can be assumed that these information sources are perceived to
be very reliable and mostly do not only provide overall ratings for tested products, but
also comparative overviews of competitive offerings. Accordingly, these services can
either affirm characteristics that companies promise to be related to their brand (e.g.,
high quality, or a particularly good cost-benefit-ratio), or they can make consumers
aware of other offerings that might fit their needs even better. However, experts’ test
reports are usually limited to only a certain number of offerings on a market. Thus,
information from test reports might rather not be a threat respectively might not be
appropriate to obviate brands; it only helps to increase information efficiency for consumers.

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3.2.3 Cybermediaries
Intermediaries are market brokers, facilitating market transactions by providing intermediation services (Bailey & Bakos, 1997). Likewise, cybermediaries are intermediaries that help to “filter and organize online market information so that customers
can identify and evaluate alternatives more efficiently” (Solomon, 2003: p. 310).23
There are different kinds of cybermediaries (Solomon, 2003):
•

Directories and portals that supply general services connecting a large variety of
different Websites (e.g., YAHOO!). These are reviewed in chapter 3.2.4 (discussing
consumer-to-consumer communities), because they rather provide a platform for
consumers to exchange information than actually mediate information between
businesses and consumers.

•

Forums, fan clubs, and user groups provide product-related discussions, helping
consumers to come to decisions by connecting them to other people whom they
can interact with (e.g., STA TRAVEL). These virtual communities are discussed in
detail in chapter 3.2.4 for the same reasons as mentioned above.

•

Financial intermediaries authorize online payments (e.g., PAYPAL). This kind of
intermediaries is not relevant for consumers’ search behavior and is therefore not
discussed in the present paper.

•

Intelligent agents (analogously: shopping robots, or shopbots24) are sophisticated
software programs using collaborative filtering technologies either to learn from
past user behavior in order to recommend new purchases or to simply recommend products or services based on consumers’ prior input. Intelligent agents are
discussed subsequently in more detail.

23

Hagel and Singer (1999) refer to “cybermediation” as “infomediation”, which they define as services
provided by intermediaries, enabling Internet users to use the information that is available in online
environments in effective ways. Typically, infomediaries are search engines, virtual agents, online
portals, online dictionaries, electronic libraries, etc. Accordingly, both terms can be used interchangeably. Throughout the present paper the term “cybermediary” will be used.
24
The term “bot“ originates from “robot“. A bot is an autonomous software that operates as an agent
for a user or a program or simulates human activity. On the Internet, the most popular bots are programs (called spiders or crawlers) used for searching. They access Websites, retrieve documents and
follow all the hyperlinks in them; then they generate catalogs that are accessed by search engines. A
shopbot searches the Internet to find the best price for a product. By the way, users entering
www.shop bot.com in their browser’s address field are directly forwarded to www.amazon.com.

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Intelligent agents provide, for instance, shopping comparison services that display
prices and other product or service attributes (e.g., shipping costs and times). In
some cases, even vendor reliability information from a variety of sellers is displayed
on these sites in order to impart the quality of the displayed shops. Additionally,
shoppers’ reports about their previous experience with the product in search and
results of experts’ tests can be displayed if they are available.
Typically, online comparison shopping service providers comb the Internet with
automated “bots” to find the prices and other characteristics of items on offer. Consumers can view the information in different modes. They can, for instance, search
for the cheapest shop for a specific item, or they can sort the items of different
brands of one group of products according to price. Different cybermediaries include
different vendors, and some of them accept compensation to present particular vendors’ information favorably (Jones, n.d./2006). Usually, shopping comparison sites
provide solely information services and therewith enable the initiation of transactions
on their platform. The purchase follows afterwards via the vendor’s Website. A service that cybermediaries provide to companies is to sell them information, such as for
instance customer profiles or market analyses they were able to compile based on
their research on their own Websites. Examples of shopping comparison sites are
BIZRATE, PRICESCAN, PRICERUNNER, DEALTIME, and FROOGLE.
While branding is often considered an aid to consumer search that helps customers find a vendor for a given product, this rationale is largely eliminated in the shopbot setting (Smith & Brynjolfsson, 2001), because shopbots enable consumers to
improve the quality and the efficiency of their purchase decisions (Häubl & Trifts,
2000). Nonetheless, there are many possible reasons why branding still remains
important to consumers’ choices even when better prices and delivery times are
plainly listed and just a mouse click away at competing retailers. One possible explanation might be that customers care not only about the product they are buying, but
also about so-called non-contractible items, such as service quality, delivery times,
reliability, higher willingness to accept returns, etc (Deregatu, Rangaswamy & Wu,
2001). To stand out from other competitors, retailers may promise to deliver such
services, and consumers might reasonably pay a premium for such services that are
not easy to enforce. This promise can become a brand that then can serve as a signal, or bond, that consumers can use to identify retailers with higher service quality

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(Smith & Brynjolfsson, 2001). Consumers may pay a price premium therefor (Brynjolfsson & Smith, 2001).
Brynjolfsson, Smith and Hu (2003) mention the fact that e-commerce in general,
and especially intelligent agents, increase available product variety tremendously.
“While some of these products may be available from specialty stores or special
ordered through brick-and-mortar stores, the search and transaction costs to locate
specialty stores or place special orders are prohibitive for most consumers. In addition, the enhanced search features and personalized recommendation tools offered
by Internet retailers allow consumers to locate products that would have remained
undiscovered in brick-and-mortar stores“ (Brynjolfsson, Smith & Hu, 2003: p. 1581).
Accordingly, the emergence of online retailers places ”a specialty store and a personalized shopping assistant at every shopper’s desktop“ (Brynjolfsson, Smith & Hu,
2003: p. 1581).

3.2.4 Consumer-to-consumer communities
Virtual communities are “social aggregations that emerge from the net when
enough people carry on public discussions long enough, with sufficient human feeling, to form webs of personal relationships in cyberspace” (Rheingold, 2000: p. 5).
The term virtual communities refers to online groups of people who “communicate
social information and create and codify group-specific meanings, socially negotiate
group-specific identities, form relationships which span from the playfully antagonistic
to the deeply romantic and which move between the network and face-to-face interaction, and create norms which serve to organize interaction and to maintain desirable social climates” (Clerc, 1996: pp. 45-6). As online interactions are becoming an
important supplement to social and consumption behavior – although they are not
likely to replace physical encounters or information from traditional media (Kozinets,
1999) – virtual communities are becoming increasingly important for both consumers
and companies.
Mostly, users have to register before they can actively use the community homepage. Virtual communities deliver word-of-mouth information (i.e. information that is
shared among consumers), which consumers perceive to be very reliable (compare
Figure 7). The value of virtual communities is to provide a platform for consumers (or
people with similar interests) to exchange opinions about companies, products, ser-

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vices, brands, or other issues. This way, consumers can obtain information even
about sensory attributes and experiences, which they can neither get from manufacturers’, dealers’, or experts’ Websites nor from shopping in the real world.
There are several subgroups of virtual communities. For instance, Armstrong and
Hagel (1996) have termed groups of consumers united by a common interest communities of interest. Solomon (2003: p. 384) describes virtual communities of consumption as “a collection of people whose online interactions are based upon shared
enthusiasm for and knowledge of a specific consumption activity”. All definitions have
in common that the members of these communities meet virtually, i.e. in the Internet.
Some virtual communities, though, organize “real” meetings for their members occasionally.
Another community-related definition is the one by Muñiz and O’Guinn (2001),
who define brand communities. Accordingly, a brand community is a “specialized,
non-geographically bound community, based on a structural set of social relations
among admirers of a brand” (Muñiz & O’Guinn, 2001: p. 412). Members of brand
communities, in contrast to members of virtual communities of interest or consumption, usually meet in person regularly. These meetings, called brandfests, are often
organized or at least sponsored by the concerned brand, such as e.g. the “MINI
United” festival in Misano (Italy) in 2005, or the many HARLEY-DAVIDSON Events25.
Also TUPPERWARE created a very well-known brand community. Crucial relationships
in brand communities include those between the customer and the brand, between
the customer and the firm, between the customer and the product in use, and among
fellow customers (McAlexander, Schouten & Koenig, 2002; Muñiz & O’Guinn, 2001).
Basically, brand communities are a concept to enhance customer attraction, loyalty,
and retention. Being a member of a brand community can have a significant positive
effect on a member’s brand loyalty. Brand loyalty does not simply result from a positively perceived relationship quality with the brand alone, but it is also significantly
influenced by the quality of the social experience that a customer has with other
customers involving the brand. Muñiz and O’Guinn’s (2001: p. 427) conjecture that
“developing a strong brand community could be a critical step in truly actualizing the
25

On its European Websites, Harley-Davidson emphasizes the experience and community dimension
of its brand by letting consumers directly navigate to its “upcoming events” calendar with one click
(e.g., for the Italian part of Switzerland, the direct link is: http://www.harley-davidson.com/EX/HTR/
ECAL/events/ComingEvents.asp?locale=it_CH&bmLocale=it_CH).

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concept of relationship marketing. A strong brand community can lead to a socially
embedded and entrenched loyalty, brand commitment […] even hyperloyalty”. This
relationship aspect is what also Mandelli (2005) and Lemon, Rust and Zeithaml
(2001) refer to as a crucial driver of customer value for brand owners.
There are commercial and non-commercial communities. Members of noncommercial communities do not have the intention to make money on these Websites. Here, communication is stimulated only by common interests. Thus, information from non-commercial community sites can be rated as very authentic and reliable. However, also commercial communities are attended during consumers’ search
for information. Here, communication is stimulated by commercial aims rather than
common interests. Commercial virtual communities give the opportunity to choose
the product category that the particular consumer is interested in from a range of
product categories. As many of the information intermediaries described in chapter
3.2.3 do not only offer product information and price comparison on their Websites,
but also ratings by users (community members), they likewise fall under the definition
of virtual communities with commercial aims.
Other examples of commercial virtual communities are AMAZON and EBAY. In contrast, GEOCITIES, YAHOO!-GROUPS, ICQ, and THE W ELL are non-commercial virtual
communities. Many brand owners have established online brand communities, such
as the DUCATI community on DUCATI.COM, or the APPLE community on APPLE.COM.
Besides the described effects of brand communities, these platforms enable brand
owners to gather information about the behavior of their customers and of prospects
on their Website. At the same time, there are non-commercial brand communities
that are independent from brand owners, such as the forum of BMW fans
(http://www.bimmerforums.com) or THE UNOFFICIAL APPLE W EBLOG (www.tuaw.com).
Credibility and reliability of the information provided on community Websites depend on the community’s commercial interests. If the community is non-commercial,
the information provided may be perceived to be unbiased. A variance of function
may be predicted for directed as opposed to general search in the Internet. In terms
of increasing efficiency in the attainment of goals, virtual communities can provide
access to information not available by any other means (Holland & Baker, 2001). Just
as people usually value personal recommendations above all other information
sources, online consumers may obtain the same types of experience based evalua-

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tions from the virtual community. For this reason, the word-of-mouth information
shared among consumers in virtual communities may by many users be perceived to
be very reliable (Holland & Baker, 2001). Hence, consumer-to-consumer communities can serve to reduce risks and increase information efficiency – especially with
regard to sensory attributes (e.g., taste or smell) of an offering, which other information sources cannot provide and brands can only promise.
Those consumers who participate in a virtual community with an experiential orientation, i.e. during general search, reap additional benefits (Holland & Baker, 2001).
While they gain functional benefits from the provision of useful information, the social
aspects of participating in a community produce both emotional and self-expressive
benefits (Holland & Baker, 2001). Hence, depending on the user’s orientation, virtual
communities can even create image benefits and build stronger relationships with
consumers (Holland & Baker, 2001; Kozinets, 1999).

3.3 Evaluation of alternatives
The result of the information search is a set of alternative products or services
(see Figure 9). In some cases, this set comprises hundreds of different brands (as in
cigarettes) or different variations of the same brand (as in shades of lipstick). The
sample of alternatives that may be considered during a consumer’s choice process is
his or her consideration set26 (Solomon, 2003).
The consideration set includes those alternatives that the consumer indeed actively considers (accept set) and those options that he does not consider (reject set).
Usually, the consideration set comprises products that are already in memory, and
products that are prominent in the retail environment (Solomon, 2003); it is an intersection of the total set and the available set.
The number of products or services considered as alternatives to be evaluated
depends on the type of decision-making. A consumer engaged in extended problem
solving may, for instance, carefully evaluate several offerings. Likewise, someone
making a habitual decision may not consider any alternatives to his or her normal
brand (Solomon, 2003).

26

The term “evoked set” is used synonymously.

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Figure 9: Distinction between total set, available set, and consideration set

Basically, consumers evaluate alternatives with regard to many factors. First, they
may evaluate the product or service attributes. These can, for instance, be quality,
price, functions and other technical characteristics (such as color or size), or the time
that is needed to perform a service. Coming back to the distinction between sensory
and non-sensory product attributes (Degeratu, Rangaswamy & Wu, 2000), Alba et al.
(1997) propose a distinction of product characteristics with regard to the purchase
decision process: they distinguish search and experience goods (see also Ward &
Lee, 2000). Hereby, the quality of a search good is verifiable upon inspection. An
experience good’s quality, in contrast, can be revealed only upon the purchase and
experience of this good, i.e. an experience good delivers the experience not before
consumption, and it is difficult to judge its quality upon inspection. Accordingly, a
company advertising a search good can easily inform consumers of the product’s
quality, whereas information regarding the benefits of experience characteristics may
not seem credible to consumers, because it is inherenty unverifiable before usage.
Manufacturers of experience goods can seek credibility from third party sources,
such as word-of-mouth or independent and unbiased experts. Such information may
be hard to find for new products and services (Ward & Lee, 2000). While services are
inherently experiencial, all goods have some combination of search and experience
attributes (Alba et al., 1997). For a search good the consumption benefits that are
most important to consumers are predicted reliably by attribute information available

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to them before purchase. This reasoning implies that the same product can be a
search or an experience good, depending on the benefits that are important to consumers and the inferences that consumers make about how well those benefits are
predicted by information available prior to buying (Alba et al., 1997). To sum up,
certain product characteristics – apart from brand name and price – can be compared objectively (non-sensory attributes, search goods), while others can only be
compared after experience (sensory attributes, experience goods).
Nonetheless, marketing (not only brand management) can create or emphasize
experiential aspects – of both search and experience goods – during the decisionmaking stage (from giving away samples to true worlds of experience like NIKETOWN)
in order to increase consumers’ involvement and therewith make the decision more
relevant for them (Havlena & Holbrook, 1986).
A consumer may attach different levels of importance to each the different attributes of a good, depending on what creates value for him or her. Additionally to the
functional attributes of a product or service, consumers probably have certain beliefs
about the brands that they are confronted with in their purchase decision processes
(Holbrook & Hirschman, 1982). These beliefs refer to both the product or service
brand, and the retailer’s brand. They may be influenced by individual personal factors
(e.g., preferences, taste, image benefits, perceived risk), but also by attitudes of
others and unanticipated situational factors. The brand beliefs control whether a
brand will be considered as an acceptable alternative in the consumer’s consideration set. Finally, the consumer may evaluate, if the product will satisfy his or her
needs, based on what he or she is looking for (Solomon, 2003) – however only if the
purchase decision process actually comprises the stage of alternative evaluation,
which might, e.g., not be the case for impulse or habitual purchases.
However, decision-making is not always strictly rational, as has been described
previously. Decisions can be influenced by the way a problem is posed (called framing) and whether the problem is put in terms of gains or losses. Consumers may use
decision rules to make a product choice from among alternatives. Contributors to
scientific literature have developed manifold models on consumer choice behavior,
such as, for instance, the Theory of Reasoned Action (Ajzen & Fishbein, 1977), and
other compensatory and non-compensatory evaluation rules. Compensatory decision
rules, which are more likely to be applied in high-involvement situations, are charac-

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terized by the fact that the consumer considers each alternative’s good and bad
points carefully to arrive at the overall best choice. Non-compensatory decision rules
eliminate those alternatives that are insufficient on any of the criteria the consumer
has chosen to use. And, to simplify decision making, consumers often use heuristics,
which – although leading to a quick decision – may not always be in consumers’ best
interests (Solomon, 2003). Heuristics may, for instance, be the belief that products
are better if they cost more (Kalita, Jagpal & Lehmann, 2004), the country-of-origin
as a product signal, such as Germany quality, Swedish design, French fashion, or
the familiarity of certain brand names.
The Internet and all other media can be used to disseminate or make available information about a product, a service, a brand, or any other issue. This information
can be general, it can increase awareness or perceived importance of specific aspects or characteristics, and it can also influence basic consumer attitudes (Solomon,
2003). At the same time, the size of consideration sets is affected by Internet-based
information search (Peterson & Merino, 2003; Häubl & Trifts, 2000). According to
Peterson and Merino (2003: p. 114), “the consideration sets of consumers who use
the Internet when searching for information will tend, over time, to become more
stimulus driven than memory driven” due to the continuously changing and increasing number of competing offerings. This means, consumers who use the Internet for
information search are likely not to base repeat purchases on their consideration
sets, but on a repeated evaluation of product alternatives (see also Häubl & Trifts,
2000). This in turn impacts customer retention.
To sum up, consumers usually focus on certain product or service dimensions to
judge the merits of competing options (also called evaluative criteria). These criteria
range from very functional attributes to very experiential ones. Consumers put more
weight on criteria on which products differ from one another than on those where the
alternatives are similar (Solomon, 2003). Finally, the attributes actually used to differentiate among alternative choices are determinant attributes. Depending on the kind
of choice to be made, consumers may undergo a procedural learning process, resulting from a series of cognitive steps (e.g., identifying important attributes, remembering whether competing brands differ on those attributes, etc.), before making a
choice (Solomon, 2003). The choice process comprises decisions on product, service, brand, vendor, channel, quantity, timing, payment-method, etc.

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The evaluation stage and the actual purchase decision are very strongly related. In
the evaluation stage, the consumer chooses that product or service out of all alternatives that he – consciously or unconsciously – perceives to deliver the highest value
to him (Rust et al., 1999). His decision to buy the one alternative usually also includes the decision not to buy the other alternatives (Bettman, Luce & Payne, 1998).
Which brand the consumer decides to purchase depends on the product or service,
on prior experience with this or a similar product or brand, on information present at
the time of purchase, on beliefs about the brand that have been created by advertising, and on the characteristics of the individual person (Rust et al., 1999).

3.4 Purchase
Of the five steps of the purchase decision process, only two steps require considerable action of the consumer – the information search and the purchase. These
seem to be the important steps in which the Internet can provide more efficiency and
effectiveness to consumers than traditional marketing channels. Accordingly, this
chapter discusses the impacts of brands and the Internet on actual purchase decision-making.
Consumers always make decisions on consumption related information search,
brand choice, and product usage (Moon, 2004). Sometimes, these decisions are
difficult because there are too many alternatives or limited time (Moon, 2004). The
degree to which information is useful to consumers in terms of facilitating or speeding
up their purchase decision depends on the nature of the information provided and on
its reliability (Alba et al., 1997). Alba et al. (1997: p. 43) state that “the quality or usefulness of information is determined by the degree to which consumers (or their
agents) can use the information obtained prior to purchase to predict their satisfaction from subsequent consumption, which in turn depends intimately on consumers’
inference rules and consumers’ confidence in the reliability of these rules.” Accordingly, for experience goods, there seems to be at first a low subjective correlation
between product attributes observable prior to purchase and benefits at the time of
consumption. At the same time, brand names enable highly reliable inferences about
consumption benefits for an experience good already after one purchase and use. As
retail formats differ greatly in their capability to provide information about attributes

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linked to consumption benefits, search attributes in one format might be experience
attributes in another (Alba et al., 1997).
Alba et al. (1997: p. 43) illustrate this statement with an interesting example: “If the
key attributes of ice cream relate to experienced flavor, BEN & JERRY’S CHERRY GARCIA

might be a search good at BEN & JERRY’S store, which allows a consumer to taste

the ice cream prior to purchase. It would be an experience good at first if a person
were buying at a supermarket that sells ice cream only in cartons and does not allow
tasting prior to purchase. Consequently, the BEN & JERRY’S store initially would have
an informational advantage over the supermarket. However, when the consumer
learns that CHERRY GARCIA on the carton label reliably predicts experienced flavor,
the supermarket no longer would be a disadvantage.“ The same principles regarding
the relative advantages or disadvantages of store-based retailers apply also for nonstore retailers such as online sellers (Alba et al., 1997).
Hence, consumers make inferences about the attractiveness of a good based on
information provided by online and offline information providers (manufacturers, retailers, experts, cybermediaries, friends, etc.), and different information provider formats compete on the information they provide as cues for these inferences (Alba et
al., 1997). Furthermore, different consumers possess different decision rules, which
in the end affects the extent to which the information provided by any particular format leads to competitive advantage over other formats. Consequently, the cues that
are considered to provide a reliable basis for inferences are likely to change with
experience with the brand (Alba et al., 1997).
A brand is a search attribute assuring consumers of a consistent level of product
or service quality or other dimension of differentiation (Alba et al., 1997). If a brand
will be included in the consumer’s consideration set during the information search
stage, this part of the decision making process presents a brand with a unique opportunity to act as an influencer by providing relevant, informative, and reassuring communication that the consumer may use when evaluating alternatives. However, one
and the same brand can be compared easily across different sellers by means of
cybermediaries. This may have different outcomes. Price might become more important for stores offering one and the same brand (Alba et al., 1997). An alternative
decisive evaluative criterion to price may be the seller’s brand, as different online

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offerers may be perceived to be differently reliable or may deliver different levels of
service quality with respect to the non-contractible aspect.
The Internet makes a huge amount of information available for consumers and
provides the efficient mechanisms for identifying, retrieving, and organizing that information (Peterson & Merino, 2003). As a consequence, consumers learn about a
lot of offerings that they may not have known before. If these offerings can be compared on search attributes and if brands provide no additional value to consumers,
then other (better) offerings may obviate brands that customers used before.
Consumers do not only have to make a decision on where to search, but also on
where to buy. They have to decide whether they will search information through offline channels or the Internet, whether they will search information through the Internet and then buy in a non-Internet store, whether they will search information through
offline channels and then buy online, or whether to use the Web for both information
search and product purchase (Moon, 2004). If the purchase takes place in the Internet, they have to decide in which particular shop to buy. Apart from trusted branded
online sellers, multi-channel retailers may have certain advantages compared to
single-channel retailers regarding the consumer’s perceived risk in online environments. Consumers can, for instance, pick up bulky products in the non-Internet store,
and they can have a close look on high-priced products and pay in the offline store
without having to send payment-information through the Internet. In addition, after the
purchase, consumers can directly go to the retail store in case they have questions
or want to return a product. In this way, multi-channel retailers can reduce the consumer’s perceived risks (Levin, Levin & Heath, 2003). However, multi-channel retailers face the challenge to deliver consistency over all channels in order to provide a
seamless shopping experience across all channels. This may be difficult especially
with regard to the problem of explaining price differences between the online and the
offline channel.
Basically, the consumer’s decision which channel to choose depends on the total
risk the consumer perceives to be connected to this decision. This risk is influenced
by person-related and product-related factors, such as prior experience in ecommerce, Internet-affinity, self-confidence and socio-demographics, financial and
functional aspects, and the risk to lose time if the product is deficient and has to be
returned (Bauer, Mäder & Fischer, 2003). The consumer’s prior experience in e-

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commerce results from the frequency and satisfaction with prior online purchases.
The higher this frequency is, the more secure the consumer may feel in e-commerce,
which in turn leads to higher self-confidence in online environments (Bauer, Mäder &
Fischer, 2003). This may finally decrease the total perceived risk and increase the
probability of further online purchases (Shankar, Smith & Rangaswamy, 2002;
Chiagouris & Wansley, 2000). While perceived benefits of the online channel are
time saving and convenience, the risks of an online purchase such as product reliability, delivery or refund related uncertainty reduce consumers’ intention to purchase
through the internet (Moon, 2004). These findings suggest that if consumers perceive
these risks to be related to online buying, they may avoid the Internet and choose
offline channels for product purchase – even after they have searched information
through the Internet. In other words, the more convenient the procedure regarding
non-contractible aspects of the purchase is, the higher is the consumer’s intention to
buy through the channel (Smith & Brynjolfsson, 2001; Moon, 2004).
The purchase decision actually closes the purchase decision process. Whether
consumers consider the same brand for a re-purchase depends – among other aspects – on their subsequent evaluation.

3.5 After-purchase evaluation
After the purchase, the consumer feels satisfied or dissatisfied with the purchased
product or service. As has been described in chapter 3.1, the purchase decision
process begins when a consumer recognizes a significant difference between his or
her current state of affairs and some desired or ideal state. Accordingly, the consumer’s (dis)satisfaction results from the difference between the expected and the
perceived product performance. If customers feel satisfied they may purchase the
same product or brand again and tell other people about their positive experience. If
they do not feel satisfied they may not purchase again and tell even more people
about their dissatisfaction (Kotler & Bliemel, 2001). A common rule of thumb is that
dissatisfied customers tell up to ten times as many people about their experience as
satisfied customers do (Kotler & Bliemel, 2001). This number may increase significantly due to the Internet, as consumers can now post their opinion in online portals
that are accessible for thousands of other consumers.

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Ideally, consumers should first talk to the manufacturer of the purchased product
or service in the case of dissatisfaction. Nonetheless, only around five percent of all
dissatisfied customers complain at all (Stauss & Seidel, 2005). All other customers
feel that complaining is not worth the effort or do not even know where to complain
(Kotler & Bliemel, 2001). The Internet is one possible means to resolve this problem.
To complain through a manufacturer’s or vendor’s homepage, or by e-mail could be a
more comfortable way to complain than having to walk to the postbox or having to
talk on the phone (Stauss & Seidel, 2005).
To sum up, both brands and the Internet fulfill important functions during the purchase decision process: increase of information efficiency, reduction of risks, and
creation of image benefits. While the Internet increases information transparency –
especially during the stage of information search – it also entails certain risks due to
its relative anonymity. As opposed to this, the main objective of brands is to differentiate competing offerings. Brands are cues in consumers’ consideration sets to
known or even trusted solutions to problems. And brands can even create image
benefits for customers. The Internet offers several means to businesses to weaken
competing brands and to enforce their own brands. A crucial option made available
through Internet technology is the personalization of offerings. Holland and Baker
(2001: p. 39) state:
“Personalization, as the ultimate form of customization, is the final result
of understanding and meeting the unique needs of the customer. Oneto-one marketing is a fundamental concept of interactive marketing and
is key to customer retention and creating brand loyalty. … Personalization can be thought of as a specialized form of product differentiation.”
This personalization can either take the form of product modification incorporating
features designed to more fully meet individual needs, or it may take the form of an
extension to the consumer’s search and evaluation capabilities through choice assistance technology (e.g., product recommendations at AMAZON.COM). Personalization
not only provides functional benefits by meeting the needs of customers more fully,
but also is traditionally a sign of status (providing emotional benefits) and uniqueness
(providing self-expressive benefits) (Holland & Baker, 2001).
Depending on the degree of cognitive involvement in the purchase decision, the
type of good (search good versus experience good), and the risks and benefits of an

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online purchase, of certain functions of the Internet and of brands might be more
important than others. This is explored in the following chapter.

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4. Effects of consumer empowerment
„Consumers generally suffer from a condition referred to as information
asymmetry, which exists when sellers have valuable information about
price and quality differences that is not readily available to their customers. For example, manufacturers often know which outlets and
countries offer the lowest prices for their products. Because search
costs – the time and effort required – are relatively high, most consumers pay the seller’s asking price. Not surprisingly, customer ignorance is
often the biggest profit center in many companies.“ (Kumar, 2000: p. 1)
As price transparency increases, it becomes increasingly difficult for companies to
conceal margins behind what Kumar calls “customer ignorance”. This development
reveals the need for many businesses to overhaul their global pricing strategies and
to reduce costs in any kind of business processes (Kumar, 2000).
Global sourcing, with all its associated cost savings and quality enhancements,
which was previously only an option for corporate buyers, is now put within the clicks
of individual consumers (Kumar, 2000). The Internet decreases information asymmetry by giving power to obtain information about price and quality differences to consumers. Besides obtaining information from traditional independent information media, such as consumer protection organizations’ publications, and word-of-mouth
from acquaintances, consumers can now use shopping robots to compare offerings
on their own, and they can spread and receive a far larger quantity of word-of-mouth.
Shopping robots dramatically reduce search costs for consumers and give them an
unprecedented level of price and quality information (Kumar, 2000).
Furthermore, there is considerable discussion about the Internet’s impact on the
balance of power in the distribution chain (Porter, 2001; Kumar, 2000). As to that, an
impact on manufacturers may be that transparency in price and quality could possibly
lead to decreasing value of brands – maybe even turning brands into commodities.
An impact on distributors could be that manufacturers might bypass them and deliver
their products directly to their customers by means of online channels.

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All in all, the empowerment of consumers has considerable effects on markets:
“The Internet is a nearly perfect market because information is instantaneous and buyers can compare the offerings of sellers worldwide. The
result is fierce price competition, dwindling product differentiation, and
vanishing brand loyalty.” (Robert Kuttner in Business Week, May 11,
1998)
Market structures have changed and are still changing. And market actors have to
adapt to those changes. The effects of consumer empowerment on brands – namely
the ability of information to obviate brands – are described in chapter 4.1, based on
an empirical study. The two subsequent chapters then deal with the effects of the
observations from the empirical study and secondary academic research on
intermediaries, online retailers, price, and quality. Hereafter, chapter 4.4 will discuss
how brand management should adapt to this development.

4.1 Information as a substitute for functions of the brand
This chapter will analyze, which functions of brands are vulnerable due to the increased information transparency. The underlying idea is that information can probably substitute brands that provide mainly functional benefits, while brands that provide mainly emotional or self-expressive benefits can rather not be obviated easily.
On the one hand, the Internet provoked an information overload. Some scientists
argue that brands are becoming increasingly important because of this overload
(e.g., Lee & Lee, 2004; Deregatu, Rangaswamy & Wu, 2001). Intelligent agents,
price comparison services, shopping portals, search engines, blogs, virtual communities, etc. continuously increase the number of information sources – and therewith
the amount of available information – for consumers. Accordingly, being able to
gather additional information and having to digest this vast amount of data may increase the consumer’s feeling of uncertainty, which might result in cognitive dissonances – i.e., already before purchase, the consumer might feel even less certain of
choosing to buy a product or service because of the apprehension to choose the
wrong product or service. On the other hand, the adaption of new technologies, increasing proficiency in using these technologies, and therewith the capability to focus
(almost) only on useful information increases efficiency and effectiveness of search

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for many consumers. Those consumers who increase their proficiency in using the
Internet and already gather a lot of information during their general search might
notably reduce the time actually needed for search and enhance the quality of search
results (Ward & Lee, 2000). As a result, one could assume that consumers could now
base their purchase decisions on price and quality, and consequently would not have
to rely on brand promises anymore. As to this, Ward and Lee (2000: p. 11) argue that
“as the ‘price’ of searching, relative to using brands, falls with increasing Internet
experience, and if there are more substitutes, more experienced consumers should
rely on brands less.” Thus, in an information overloaded environment, brands may
become more important only for those consumers who are not able to effectively
select information in order to make it valuable to their decision-making process (Peterson & Merino, 2003). In other words, a basic requirement to be able to obviate
brands through information is the particular consumer’s proficiency in using the Net.
Generally, brand names become less valuable, when more total information about
product attributes is available online (Deregatu, Rangaswamy & Wu, 2001; Häubl &
Trifts, 2000). This is particularly likely for products for which online stores can give
detailed attribute information, as well as comparative information, and it is very likely
if the product category contains few sensory attributes (search goods). Brand names
become more important in product categories that are differentiated on brand image
and other attributes that do not lend themselves to be easily summarized by an
online store (experience goods) (Deregatu, Rangaswamy & Wu, 2001). However,
though objective information strongly promotes rational choice, objective information
does not eliminate suboptimal choices, which might be due to uncertainty, experiential influences, or other intrinsic or extrinsic factors (Tellis & Gaeth, 1990; Häubl &
Trifts, 2000).
It appears to be more difficult to substitute brands, when consumers use products
or services to cultivate a particular image, or for self-realization or identification purposes (Deregatu, Rangaswamy & Wu, 2001). If the function of the brand is to create
a self-expressive image benefit, functional characteristics or prices may in many
cases only supplement or limit the consumer’s purchase decision (a common example for this kind of brand benefits are clothes). For this kind of goods, increased market transparency may probably not result in a decision for or against a certain brand;
it might rather lead to search for the lowest possible price for the chosen brand (Ba-

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kos, 1998; Brynjolfsson, Dick & Smith, 2004). However, as the survey and secondary
research results show, many consumers prefer to purchase image benefit creating
goods offline, which is often not the cheapest option.
The first part of this chapter sets a frame of reference for products and services.
Then, the empirical study and its research results are discussed. This will be followed
by a synopsis of the primary and secondary research results.

4.1.1 The frame of reference
As has been described, the increased availability of information has shifted a considerable amount of power from firms to consumers. Consumers can receive and
disseminate an enormous quantity of information by means of the Internet. They do
not necessarily have to rely on information gathered from local retail stores, friends,
unidirectional media (such as television, magazines, or radio), own product trial, or
brands; now, they can get information about product trials from a wide range of people from all over the world, additionally engage in (real-time) dialogue with businesses, and obtain data from manufacturers, retailers, and third party sources on a
global scale.
Yet, can information substitute brands? There is considerable debate about this
topic (e.g., Brynjolfsson et al., 2001, 2003, 2004; Bakos, 1998; Deregatu, Rangaswamy & Wu, 2001; Shankar, Smith & Rangaswamy, 2003; Alba et al., 1997), albeit
not leading to a common and general answer. In order to facilitate understanding, the
following explanation and graphical presentation will set a frame of reference, before
recent scientific research results will be explained.
•

Involvement is one of the dimensions that guide the way a purchase decision is
approached by consumers. Gilles and Kapferer (1985: pp. 41-53) distinguish five
components determining consumer involvement: (1) personal interest in a product
category; (2) perceived risk associated with a poor choice of the product; (3)
probability of making a bad purchase; (4) pleasure value of the product category;
and (5) sign value of the product category. These components correspond to the
described brand functions. One can assume that the higher the weight of one of
these involvement dimensions (i.e., the higher the consumer’s involvement in the
purchase decision), the more extensive – or at least intensive – will be the purchase decision process (Solomon, 2003). For instance, if a consumer needs to

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buy tooth paste, which probably might neither create high pleasure value nor
have a any sign value, involvement may be low, as also the perceived risk of
making a wrong choice is not high respectively can easily be coped with. The
same consumer may on the other hand place much higher value on the purchase
of a durable product, such as consumer electronics or a computer, because here
the risk of poor choice is much higher. The purchase of clothes or designer accessories creates high sign value (Fischer, Meffert & Perrey, 2004); thus these
products are likely to be high involvement products. Furthermore, experiential aspects during the purchase or usage process appeal to the pleasure value and are
likely to increase consumer involvement (Holbrook & Hirschman, 1982; Csikszentmihalyi, 1990).
•

On the other hand, the level of homogeneity (respectively differentiation) of products influences the extent of research a consumer needs to conduct in order to
achieve a status of knowledge that enables him to come to a prudent purchase
decision. The more homogenous a product or service is, the easier it can be
compared to other products or services of the same or a substitutive category; the
same logic applies for differentiated products and services. For instance, consumers who want to search for a book “must first choose the specific book they
are interested in buying, which reduces their selection to a unique and physically
homogenous product, leaving item variation solely in terms of the retailer’s conditions for price, shipping and product availability” (Brynjolfsson, Dick & Smith,
2004: p. 6). On the other hand, flights or clothing are rather differentiated services
and products that can be compared only at higher cost in terms of effort, time, and
possibly money.
Hence, the higher the consumer’s involvement in the purchase decision, the

higher the importance of the three (or at least one of the three) brand functions (on
the abscissa in Figure 10), and consequently, the more intensive and extensive the
information search. The degree of differentiation depicts the degree of knowledge
that a consumer must have or achieve in order to be able to rather objectively assess
a product’s or service’s cost-benefit-ratio as compared to the competition (on the
ordinate in Figure 10). However, in the case of low involvement consumers might not
be likely to engage in extensive search because of the low(er) importance of the
purchase decision. Low involvement decisions rather rely on habitual or impulse

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buying behavior. It is reasonable to assume that in the case of high involvement
decisions regarding homogenous goods, price sensitivity will be higher than for differentiated high involvement goods (Smith & Brynjolfsson, 2001). Nonetheless, it
must be acknowledged that, according to recent studies, there may be systematic
differences in customer attitudes and behavior regarding products chosen online
versus offline – for example with regard to price sensitivity, brand name impact on the
purchase intention, or the impacts of the Internet on customer satisfaction and loyalty
(Shankar, Smith & Rangaswamy, 2003; Deregatu, Rangaswamy & Wu, 2001). Thus,
future research should explore whether these attained research results are true for
online, offline, or both market environments.
Figure 10: Clustering of products and services

! "
#

$

The previous explanations already lead to first resulting propositions regarding the
present paper’s research question.
To sum up, the lower the involvement in the purchase decision, the lower will be
the extent of information search, i.e. the less important is information; and the higher
the degree of differentiation, the greater will be the importance of brands. Hence, in
the field of rather differentiated low involvement goods information is not likely to
obviate brands.

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Meffert, Perrey and Schröder (2002) claim that in the case of rather homogenous
low involvement products brands mainly fulfill the function of increased information
efficiency; reduction of risks and the creation of image benefits are not important
here. Consequently, it is reasonable to assume that, if the brand serves to increase
information efficiency, information could possibly substitute this function. However,
also other factors such as habits, prices, or for some goods a low general relevance
of brands might influence the purchase decision. Future research should explore this
field.
Brynjolfsson and Smith (2000, 2001, and together with Hu, 2003) have scrutinized
the field of homogenous high involvement products, namely the online book market.
Their research findings suggest that in this market consumers are rather price sensitive; nonetheless, they found some possible reasons why branding would remain
important to consumers’ choices even when products are homogenous. One possibility is that consumers do not only care about the product they are buying, but also
about non-contractible aspects of the purchase (Smith & Brynjolfsson, 2001). That
leads them to the conclusion that consumers may use retailers’ brands as a signal for
reliability in service quality for non-contractible aspects of the product bundle (Smith
& Brynjolfsson, 2001). The authors say, “while books are a relatively well-specified,
homogenous commodity, the fact that branding is important even here suggests that
the branding will be even more important in Internet markets for less homogenous
goods and services, especially when they have important non-contractible characteristics“ (Smith & Brynjolfsson, 2001: p. 556). Thus, in the field of rather homogenous
high involvement goods neither information nor the product’s brand seem to be crucial regarding the purchase decision. Rather, the retailer’s brand seems to be a determinant factor.
Neither of the hitherto described research results covers the field of differentiated
products and services including high involvement in the purchase decision process.
The empirical study will analyze this combination. Furthermore, it would be interesting to know, whether the outcomes are generally true or if they are true only for a
very specific product or service category fulfilling very specific functions. It might be
beneficial to manufacturers as well as to sellers to know which particular functions a
certain brand fulfills (or could possibly fulfill) for consumers in order to either apply a
more effective focus to marketing communication or to know if information could

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indeed possibly obviate brands in the particular field of goods. Thus, the present
paper will also give general recommendations.

4.1.2 The empirical study
In order to explain which brand functions are crucial regarding the possibility that
information might obviate brands, an empirical study has been conducted among the
students of the Università della Svizzera italiana (USI)27 in July 2006. The study focuses on rather differentiated goods including rather high involvement. 122 respondents have completed the online-questionnaire (see Appendix 3, pp. 98-111) asking
them about the importance they assign to each of the brand functions in two product
markets (consumer electronics and clothes) and one service market (flights). Accordingly, the empirical study evaluates perceived information efficiency, perceived risk
reduction, and perceived image benefit creation of brands in each of the three markets. Refering to a study by Fischer, Meffert and Perrey (2004)28 and its preliminary
findings regarding the design of such a survey, each of the three dimensions is
measured through two items (as the function of image benefit creation represents two
directions of orientation – inward and outward – this function is here split into two).
Using only two items is advantageous regarding research economics and is in line
with the procedure of other present studies on brands (e.g., Fischer et al., 2004). As
long as specific thresholds are exceeded, a reduced set of indicators has no significant effects on reliability. Cronbach’s Alpha is an established threshold, which is for
this case set to 0.7 (Fischer et al., 2004). All of the three functions exceed this threshold, except one item out of the subdimensions of image benefit creation, which thus
had to be eliminated. Consequently, the image benefits are measured with three
indicators (Fischer et al., 2004).
All of the three markets are assumed to be rather differentiated and to include high
involvement in the purchase decision process. Consumer electronics are search
goods, because their quality and value to the consumer can be assessed easily prior
to purchase. Clothes are experience goods; it is difficult to assess their quality prior to
purchase and usage. Flights could be both; it is difficult to assess the quality prior to
27

The Università della Svizzera italiana, which is the university of the Italian speaking part of Switzerland, is located in Lugano in Southern Switzerland.
28
In 2002, Fischer, Meffert and Perrey conducted a representative survey among 2,252 persons that
provides empirical evidence on the relevance of brand management in 45 product and service markets.

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the flight; however, flights could also be search goods, if the main objective to
achieve with the flight is to move from one place to another, regardless of any experiential aspects of the flight.
Furthermore, the survey briefly asked the respondents about their purchase decision behavior in both the online and the offline environment for each of the three
markets.
Assuming that information efficiency and risk reduction display rather rational aspects of a purchase decision (referring also to the category of search goods) and
image benefit creation displays rather emotional aspects (referring to the category of
experience goods), the function of risk reduction and the function of information efficiency are together put in contrast to the function of image benefit creation in the
statistical model.29
According to the presented basis, the following hypotheses will be analyzed by
means of the empirical study and relevant secondary research:

29

Basically, the image benefit creation function is purely emotional, the information efficiency function
is rational, and the risk reduction function is trust-based. However, the general thesis of this paper
suggests that only emotionally loaded brands are strong enough to stand against the increased information transparency, while information could possibly substitute brands that are rationally loaded. That
means emotion is confronted with rationality. Consequently, the three brand functions have to be
grouped according to this logic. Previous academic research (e.g., Kapferer, 1992; Keller, 1998)
confirms the thesis that – while trust is partly rational and partly emotional (inward directed) – the risk
reduction function is rather (not merely) rational than emotional, interpreting the risk reduction function
in terms of a sign of quality or guarantee. A factor analysis (see Appendix 4, pp. 112-116) provides
proof of this reasoning.
Regarding the consumer electronics market, an exploratory factor analysis (with Varimax rotation and
Eigenvalues over 1 considered significant) revealed that the answers to the questions concerning the
functions of information efficiency and risk reduction load on one factor (the loads below 0.5 have
throughout the analysis not been considered significant), and the answers regarding the questions
concerning the function of image benefit creation load on a second factor. Also the factor analysis
regarding the airline market produced two factors with an equal result as before. As the exploratory
factor analysis regarding the clothes market brought up only one factor, a confirmatory factor analysis
has been conducted. This analysis revealed that also here the functions of information efficiency and
risk reduction load on the first factor and the function of image benefit creation loads on the second
factor. Thus all factors give good measurements of the latent variables. As before, also here Cronbach’s Alpha has been computed for each factor in order to analyze the reliability of the measurements. Coefficient Alpha is greater than 0.7 for all factors which indicates that the measurements are
reliable (see Appendix 4, pp. 112-116).
Hence, conceptually, the factor loads show that the functions of information efficiency and risk reduction can be put together as the first factor, which represents the rather rational aspects of a purchase
decision. The variables regarding the function of image benefit creation correlate with each other and,
as the second factor, represent the rather emotional aspects of the purchase decision.

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H1: Consumers, who place high value on mainly the functions of information
efficiency and risk reduction while searching for a specific product or service, tend
to rely more on information obtained from search than on brands.

•

H2: Consumers, who place high value on mainly the function of image benefit
creation while searching for a specific product or service, tend to rely more on
brands than on information obtained from search.
The following model depicts the coherency between the relevance of the brand in

general for a purchase decision in a specific product or service market and the factors influencing this relevance30:
BRij =

1IEij

+

2RRij

+

3IBij,

with i = 1, …, N and j = 1, …, K,

and
BRij – brand relevance judgement by consumer i for product or service market j
IEij – increased information efficiency perceived by consumer i for product or
service market j
RRij – risk reduction perceived by consumer i for product or service market j
IBij – image benefit creation perceived by consumer i for product or service
market j
1-3

– parameters of the brand functions to be estimated

N

– number of interviewees who completed the questionnaire (= 122)

K

– number of product markets (= 3)

This model comprises the three functions of brands. Each of these three functions
has a particular weight representing the relative importance of each function (Fischer,
Meffert & Perrey, 2004). In line with a calculation proposed by Fischer et al. (2004:
pp. 19-23) that bases on a likelihood-ratio-test31, the relative weight of image benefit
creation (ca. 42%) is significantly higher than the relative weights of information efficiency (ca. 37%) and risk reduction (ca. 21%). This supports the common assump-

30

Fischer, Meffert and Perrey (2004) use a similar regression model in order to estimate consumers’
perceptions of the general relevance of brands based on the perceived importance of the three brand
functions.
31
A likelihood-ratio test is a statistical test relying on a test statistic computed by taking the ratio of the
maximum value of the likelihood function under the constraint of the null hypothesis to the maximum
with that constraint relaxed. If that ratio is (lambda) and the null hypothesis holds, then for commonly
occurring families of probability distributions, -2 log has a particularly handy asymptotic distribution.
Many common test statistics such as the Z-test, the F-test, Pearson'
s chi-square test and the G-test
can be phrased as log-likelihood ratios or approximations thereof. (Lehmann, 2005)

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tion that image benefit creation is the strongest leverage for the importance of a
brand. However, also the information efficiency of brands is considerably important in
a society with a supersaturation of offerings. This means that
1

= 0.37,

2

= 0.21, and

3

= 0.42.

Considering the hypotheses, the objective of this work is to estimate the importance of information efficiency and risk reduction relative to the importance of image
benefits in the purchase decision process. The two hypotheses can thus be expressed in statistical terms as follows:
•

H1: If ( 1IEij +

2RRij)

/2>

3IBij,

then TIij > TBij,

with i = 1, …, N and j = 1, …, K
•

H2: If ( 1IEij +

2RRij)

/2<

3IBij,

then TBij > TIij,

with i = 1, …, N and j = 1, …, K
and for both H1 and H2:
TIij – attitudinal tendency of consumer i to rely more on information obtained
from search than on brands in product or service market j
TBij – attitudinal tendency of consumer i to rely more on brands than on information obtained from search in product or service market j 32
IEij – information efficiency perceived by consumer i for product or service
market j
RRij – risk reduction perceived by consumer i for product or service market j
IBij – image benefits perceived by consumer i for product or service market j
1-3

32

– parameters of the brand functions to be estimated

N

– number of interviewees who completed the questionnaire (= 122)

K

– number of product markets (= 3)

TIij and TBij represent perceptive self-reported measures – or in other words: attitudes – of the
respondents. It is not clear whether these attitudes will result in likely behavior or not. It might be
interesting to examine this in further research entailing experimental research methodology.

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The equations now include a condition. If both propositions are true, then the respective hypothesis is true. Thus, both components of the condition will be discussed
separately for each hypothesis, starting with the first part (the “if”-part).
Regarding the relative importance of each brand function on the three distinct
markets, the study revealed the following key findings:
•

Consumer electronics: On a five-point-scale, the respondents of the questionnaire
rank consumer electronics high on information efficiency (average: 3.3) and risk
reduction (average: 4.0). Meanwhile, the function of image benefit creation ranks
relatively low (average: 2.1).

•

Flights: Flights rank relatively low on information efficiency (average: 2.6), higher
on risk reduction (average: 3.1), and low on image benefit creation (average: 1.8).

•

Clothes: Clothes rank high on information efficiency (average: 3.3) and risk reduction (average: 3.3). The average score regarding the function of image benefit
creation is significantly higher than for the two other items that have been surveilled (average: 2.5).
Applying the specific weights to each brand function (

1

= 0.37;

2

= 0.21; and

3

=

0.42) reveals the following results with regard to the two research hypotheses:
•

H1: If ( 1IEij +

2RRij)

/2>

3IBij,

then TIij > TBij,

•

H2: If ( 1IEij +

2RRij)

/2<

3IBij,

then TBij > TIij,

with i = 1, …, N and j = 1, …, K for both H1 and H2.
Regarding exclusively the first part of the equation, this is on average over all
consumers and markets …
… for consumer electronics:
(0.37 x 3.3ij + 0.21 x 4.0ij) / 2 > 0.42 x 2.1ij
⇔ (1.22 + 0.84) / 2 > 0.88
⇔ 1.03 > 0.88
… for flights:
(0.37 x 2.6ij + 0.21 x 3.1ij) / 2 > 0.42 x 1.8ij
⇔ (0.96 + 0.65) / 2 > 0.76
⇔ 0.81 > 0.76

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… for clothes:
(0.37 x 3.3ij + 0.21 x 3.3ij) / 2 < 0.42 x 2.5ij
⇔ (1.22 + 0.69) / 2 < 1.05
⇔ 0.96 < 1.05
Figure 11: Weighted importance of the three brand functions for three markets

Comparing these findings, it becomes apparent that for the respondents of this
survey the brand functions are differently important, depending on the kind of product
or service. For both consumer electronics and flights, brands mainly fulfill the function
of increased information efficiency. Taking increased information efficiency and risk
reduction together as the rather rational brand functions as opposed to image benefit
creation, also the average of those two functions overweights the function of image
benefit creation. The results are different for clothes. This is not surprising, because
clothes fulfill emotional functions – they can make people feel comfortable, and
moreover, clothes are visible to everybody in public, in contrast to consumer electronics and flights. Based on the hypotheses, it must be assumed that TIij is greater than
TBij for consumer electronics and flights, and that TBij is greater than TIij for clothes.
This will be examined subsequently.
Regarding the purchase decision behavior in both the online and the offline environment the survey revealed the following key findings for the three markets (see
also Figure 12):
•

35% of the respondents have never bought consumer electronics through the
Internet, and only 9% have never bought consumer electronics in a non-internet

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store. 32% of the online shoppers and 24% of the offline shoppers prefer brands
over no-name products or retail brands (vs. 53% of the online shoppers and 54%
of the offline shoppers who do not prefer brands over no-name products or retail
brands, and 15% of the online shoppers and 22% of the offline shoppers who answered that they were neutral in this case).
•

23% of the respondents have never booked a flight through the Internet, and 16%
have never booked a flight in a non-internet store. 38% of the online shoppers
and 41% of the offline shoppers prefer brands over other offers (vs. 47% of the
online shoppers and 45% of the offline shoppers who do not prefer brands over
no-name airlines or rather unknown airlines, and 15% of the online shoppers and
14% of the offline shoppers who answered that they were neutral in this case).

Figure 12: Likelihood of offline purchases and online purchases

•

62% of the respondents have never bought clothes through the Internet, and 2%
have never bought clothes in a non-internet store.33 44% of the online shoppers
and 40% of the offline shoppers prefer brands over no-name clothes or retail
brands (vs. 33% of the online shoppers and 31% of the offline shoppers who do
not prefer brands over no-name products or retail brands, and 24% of the online
shoppers and 29% of the offline shoppers who answered that they were neutral in
this case).

33

There might be a reason to doubt that there are respondents who have never bought clothes in a
non-internet retail store (namely 2%). However, this value is very low and does not impact the overall
percentages. Therefore, further computations in order to eliminate improbable answers are considered
to be not necessary.

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Obviously, the respondents’ likeliness to purchase offline is rather high for all of
the three goods. Nonetheless, both consumer electronics and flights also show relatively high rates of online purchases, while the percentage of online purchases is very
low for clothes. This implies that consumers are rather willing to purchase consumer
electronics and flights through the Internet channel, while they definitely prefer the
offline channel for the purpose of buying clothes.
The probability is high that consumers who purchase online also search for information online prior to purchase (Moon, 2004) and that the consumers who search for
information online are able to base their purchase decision on information rather than
on brands (Brynolfsson & Smith, 2000; Häubl & Trifts, 2000); it can be assumed that
the buyers of consumer electronics and flights (if search good) base their purchase
decision on information rather than on brands. On the other hand, the same logic
implies that the buyers of clothes and flights (if experience good) base their purchase
decision rather on brands than on information. Accordingly, the empirical study reveals that, on average, the respondents’ tendency to prefer brands over no-name
products or retail brands is significantly higher for clothes (online: 43% prefer brands
vs. 33% do not prefer brands; offline: 40% vs. 31%) than for consumer electronics
(online: 32% vs. 53%; offline: 24% vs. 54%) and flights (online: 38% vs. 47%; offline:
41% vs. 45%) (see Figure 13).
Figure 13: Priority of branded over non-branded goods in offline and online purchases

Note. The findings from the five-point-scale have been transformed into a three-point-scale for reasons of easier presentability, as only the tendency is important here. The answers “agree very
much“ and “agree somewhat“ have been transformed into “agree“, and the answers “agree less“
and “do not agree“ have been transformed into “do not agree“.

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Hence, TIij (i.e., the attitudinal tendency of consumer i to rely more on information
obtained from search than on brands in product or service market j) can be expressed as the average percentage (online and offline) of consumers who do not
prefer brands regarding the particular good. Accordingly, TBij (i.e., the attitudinal
tendency of consumer i to rely more on brands than on information obtained from
search in product or service market j) is the average percentage of consumers who
prefer brands regarding the particular good. Accordingly, the values are:
•

for consumer electronics,
TIi1 = (0.53 + 0.54) / 2 = 0.535
TBi1 = (0.32 + 0.24) / 2 = 0.28

•

for flights,
TIi2 = (0.47 + 0.45) / 2 = 0.46
TBi2 = (0.38 + 0.41) / 2 = 0.395

•

for clothes,
TIi3 = (0.33 + 0.31) / 2 = 0.32
TBi3 = (0.43 + 0.40) / 2 = 0.415

Thus, coming back to the two hypotheses:
•

H1: If ( 1IEij +

2RRij)

/2>

3IBij,

then TIij > TBij,

with i = 1, …, N and j = 1, 2
For consumer electronics:
If 1.03 > 0.88, then 0.535 > 0.28 (true)
For flights:
If 0.81 > 0.76, then 0.46 > 0.395 (true)
•

H2: If ( 1IEij +

2RRij)

/2<

3IBij,

then TBij > TIij,

with i = 1, …, N and j = 3
For clothes:
If 0.96 < 1.05, then 0.415 > 0.32 (true)
Both hypotheses prove to be true.

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It appears that consumers tend to rely significantly more on information than on
brands when buying consumer electronics. This might be due to the fact that consumer electronics can be easily compared, especially by means of comparison services available through the Internet. When booking flights, people prefer information
over brands on average; however the ratio is not as high as for consumer electronics.
There are two possible explanations for this outcome: (1) consumers prefer to
choose for brands, because they believe that then the risk of technical problems
during a flight might be relatively lower; (2) there are relatively few no-name or rather
unknown airlines, thus there are few options to choose against brands. When buying
clothes, consumers rely more on brands than on an active search for comparative
information. This might be due to the fact that clothes are experience goods. First of
all, it is difficult to assess their quality prior to purchase and usage. Second, many
clothing brands create emotional or self-expressive benefits for those who wear
them. These image benefits might be perceived to be more important than other
characteristics.
Also other scientific research findings suggesting that the relevance of brands and
consumers’ search behavior differ over different product and service markets
(Fischer, Meffert & Perrey, 2004; Ward & Lee, 2000; Smith & Brynjolfsson, 2001;
Andrews & Currim, 2004; Levin, Levin & Heath, 2003) support the validity of the two
hypotheses. Those consumers who place relatively high value on mainly the functions of information efficiency and risk reduction in the field of differentiated high
involvement goods (e.g., consumer electronics and flights), tend to rely less on
brands than on other information, while those consumers who place relatively high
value on mainly the function of image benefit creation regarding this type of goods
(e.g., clothes) tend to rely more on brands than on other information.
The present empirical study is, of course, limited by the sample that has been
used. The study represents only students of the Università della Svizzera italiana (the
University of the Italian-speaking part of Switzerland) in Lugano, i.e. it is restricted to
students approximately between the ages of 18 and 30 years who mostly live and
study in or close to Lugano. As the survey has been conducted online, it is furthermore reasonable to assume that the respondents are Internet-affine. Future research
should aim to incorporate other consumer segments and product and service mar-

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kets in order to better conceptualize the changing role of brands in the age of empowered consumers and to validate the described results on a broader basis.

4.1.3 Synopsis of primary and secondary research results
A useful frame of reference has been set by clustering goods according to their
degree of differentiation (or homogeneity) and the typical degree of involvement in
the corresponding purchase decision. Accordingly, the higher the degree of differentiation, the more information consumers need in order to come to a prudent decision.
This information can be either delivered through brands or obtained through a search
process. However, if the purchase decision is perceived to be not very important to
the consumer, the consumer may not be likely to engage in extensive search. Decisions might then be based on habits (possibly relying on brands that guarantee a
constant level of quality) or impulses. The higher the consumer’s involvement in
decision-making, the higher is the probability of an active search process. The results
of a search process might finally help the consumer to increase information efficiency
and to reduce risks – functions that also brands can fulfill. In this case, information
may obviate brands. Figure 14 brings together the primary and secondary research
results and shows, in which fields of products or services – according to the used
clustering-model – the likelihood of consumers to rely more on information obtained
from search than on brands tends to be smaller or greater than the likelihood of consumers to rely more on brands than on information obtained from search.
However, these findings are only true, if brands are generally relevant for purchase decisions concerning a particular kind of goods. If brands are generally not
relevant, purchase decisions are likely to be based either on pure information and
prices (in the case of high involvement decisions), or on prices alone or habits / repeat purchases (in the case of low involvement decisions). Habits or repeat purchases can also be the result of branding.
Research results imply – especially with regard to the increased information transparency through Internet technology – that if brands significantly influence purchase
decisions in a particular market and the functional brand functions are more important
than the emotional ones, the importance of brands depends on the availability of
objective information. The more reliable and unbiased information is available about
a good, and the easier it is to summarize this good’s attributes, the less important

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become brands. If it is easy to summarize a goods attributes, but not much objective
information is available, then brands increase information efficiency for this good and
possibly reduce risks that might be related to a purchase. Hence, in this case, information could substitute brands, if enough reliable information was available; then,
brands are in danger. If it is difficult to summarize a good’s attributes objectively, it is
unlikely that much objective and credible information is available or could be made
available. In this case, information can probably not substitute brands.
Figure 14: Tendential impact of brands and information on purchase decisions

The extent of search done during a purchase decision depends on the degree of
involvement in this decision (Solomon, 2003). Based on secondary research, it can
thus be assumed that the primary research results are true also for rather homogenous high involvement goods. Due to the high involvement in the purchase decision,
consumers are also here likely to include directed search for information. However,
this assumption should be validated in future research and is therefore not included
in the scheme in Figure 14.
Low involvement purchase decision processes do inherently not include as much
efforts as high involvement decision-making. Therefore, consumers may probably not
engage in considerable search processes. Instead, they may rather rely on known
brands or on price. If goods are differentiated, brands may be rather important attrib-

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utes as they elicit certain associations, such as for example, a superior product concept or creative advertising presence. Brands may also be differentiating factors in
the field of homogenous low involvement goods, but it must be assumed that factors
such as price, habits, or impulses have also considerable impact on purchase decisions here. It is therefore not clear whether the research results are true also for the
left two clusters.
Due to internet technology, an enormously greater amount of information is available for consumers, today, than until some years ago. For consumers, it can be difficult to retrieve relevant and credible information. STANFORD UNIVERSITY, CONSUMER
WEBW ATCH (a project of the independent CONSUMERS UNION), and SLICED BREAD
DESIGN (an Internet marketing consultancy) have conducted a survey regarding the
issue of credibility and reliability of online offerings. Their findings suggest that people
usually assess an e-commerce Website’s credibility mainly based on name recognition and reputation, and customer service. In general, consumers approached
e-commerce sites with more suspicion than other Websites (Fogg et al., 2002). Accordingly, well-known brand names can serve as a guarantee for service quality,
reliability, and credibility of an online offerer (see also: Smith & Brynjolfsson, 2001;
Ward & Lee, 2000). The role of online retailers and other intermediaries will be described in the following chapter.

4.2 The changing role of intermediaries and online retailers
It has already been mentioned previously, that besides the product’s and the
manufacturer’s brand also the retailer brand may influence purchase decisions – this
is particularly important for online markets, because here the non-contractible aspects of an offering appear to be more important than in the offline market environment (Smith & Brynjolfsson, 2001). In line with the definitions in chapter 3.2.3, the
task of intermediaries is to offer intermediation services between two trading parties.
Going more into detail, Bakos (1998: p. 13) describes the role of intermediaries as
“matching buyers and sellers, providing product information to buyers and marketing
information to sellers, aggregating information goods, integrating the components of
consumer processes, managing physical deliveries and payments, providing trust
relationships and ensuring the integrity of the markets”. Besides offering some added
value to a transaction that may not be possible to offer by direct trading, intermediar-

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ies were long in a position to take advantage of information assymetries and greater
bargaining power than individual consumers (Kumar, 2000).
In the age of the Internet, this is becoming more difficult. Which effects electronic
markets will have on the organization of value chains is heavily discussed among
researchers (Malone et al., 1987; Chircu & Kauffman, 1999; Bakos & Bailey, 1997;
Bakos, 1998). On the one hand, information technology enables suppliers to pass
over intermediaries, and this way to establish direct contact to their customers, because ”with information flowing freely there will be no need for middlemen in those
industries where the primary role of the middleman is providing information and establishing contacts“ (Kumar, 2000: p. 4). This could reduce coordination costs in a
transaction. Chircu and Kauffman (1999: p. 2) have termed this effect “disintermediation”. On the other hand, the online environment promotes the growth of new types of
electronic intermediaries (Bakos, 1998), namely cybermediaries. Evolving from the
lacking information transparency on online markets, cybermediaries enable Internet
users to use the information that is available in online environments in effective ways
and thus help consumers to facilitate orientation in the Web and facilitate decisionmaking. Accordingly, Bakos (1998) states that intermediaries compete in online environments by adding value for buyers and sellers rather than by exploiting information
asymmetries.
In the Internet, the role of intermediaries has evolved into two main scopes of function: (1) cybermediaries that offer information intermediation services; and (2) online
shops that offer intermediation services regarding the exchange of goods. While
online shops are inherently retailers, also cybermediaries may actually act as retailers.
Due to the problem of verifiability of reliability and credibility that is inherent in the
Internet, branding of e-commerce retailers becomes an important issue. The brand of
an online retailer – be it an intermediary or an online shop – influences the consumers’ likeliness to purchase. According to a study by Smith and Brynjolfsson (2001),
even consumers who are fully informed of product prices and characteristics from
other competing retailers strongly prefer offers from well-known online retailers. This
is even more remarkable considering that shopbot customers are likely to be among
the most price sensitive consumers in the Internet. A possible explanation is that
“consumers use brand name as a signal of reliability in service quality for non-

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contractible aspects of the product bundle such as shipping. These results may derive from service quality differentiation, asymmetric market information regarding
quality, or cognitive lock-in among consumers” (Smith & Brynjolfsson, 2001: p. 556).
These two authors state that branding of online retailers might be particularly important in markets that have important non-contractible, sensory, and/or experiential
characteristics.
The following excursus shows an interesting approach of a company to enhance
trustworthiness and credibility of its advertisements and offerings by combining advertising and a very reliable online source.
Excursus:
On its homepage, Google says that its “mission is to organize the world’s information and make it universally accessible and useful” (Google, n.d./2006). Google
founders Larry Page and Sergey Brin have developed the world’s largest search
engine, which is also one of the world’s best known brands. This status has been
reached almost entirely through word-of-mouth from satisfied users (Google,
n.d./2006). Google users can find information in many different languages, check
stock quotes, maps, and news headlines, look up phonebook listings for every city
in the United States, search billions of images, and peruse the world’s largest archive of Usenet messages for free. Google provides advertisers with the opportunity to deliver online advertising (called AdWords) that is relevant to the information
displayed. This service enables marketers to count how many Internet users click
from a text advertisement to the company’s Website. Advertisements are always
distinguished from (the non-commercial) search results on the Google homepage.
In January 2006, General Motors started an advertising campaign including a
Google mention and a screenshot of someone entering the word Pontiac into the
Google search box with a voice over saying: “Don’t take our word for it, Google
‘Pontiac’ to find out!”34 The idea behind this advertisement is explained by GM sales
and marketing chief Mark LaNeve: “We’re touting Google, frankly, because it stands
for credibility and consumer empowerment, and we like the association.” (Kiley,
2006)

34
The television spot can be seen on: http://www.youtube.com/w/Google-Pontiac-Commercial?v=gE2
DXLfrFD4&search=google%20pontiac.

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While the manufacturer’s brand can fulfill any of the three functions for consumers,
the retailer’s brand probably only provides the reduction of risks connected to an
online purchase. Those consumers who already gained experience in doing business
with a specific online retailer may be more likely to buy also products by other brands
from this retailer. Also consumers without experience with a particular retailer may
rely rather on well-known retailers for reasons of credibility and reliability. Hence, by
virtue of increasing information efficiency and reducing risks for consumers, online
retailers increasingly take over functions of brands for consumers. This way, intermediaries become trusted online brands that enable them to charge a price premium on
their offerings (Smith & Brynjolfsson, 2001).

4.3 Impacts on price and quality
This chapter describes the effects of the Internet on price and quality of products
and services.
“Internet technology provides buyers with easier access to information
about products and suppliers, thus bolstering buyer bargaining power.
The Internet mitigates the need for such things as an established sales
force or access to existing channels, reducing barriers to entry. By enabling new approaches to meeting needs and performing functions, it
creates new substitutes. Because it is an open system, companies have
more difficulty maintaining proprietary offerings, thus intensifying the rivalry among competitors. The use of the Internet also tends to expand
the geographic market, bringing many more companies into competition
with one another. And Internet technologies tend to reduce variable
costs and tilt cost structures toward fixed cost, creating significantly
greater pressure for companies to engage in destructive price competition.“ (Porter, 2001: p. 66)
Thus, due to lower costs for online shops, as opposed to the costs to open a store
in the real world, entry barriers to online markets are relatively low for many companies. The increasing number of online vendors leads to increasing competition, which
in turn results in pressure on prices – especially for homogenous products. Furthermore, increasing information transparency enables consumers to consider and compare a tremendously larger number of offerings. This again puts pressure on prices.

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Consumers on highly transparent markets facing lower search costs become increasingly demanding and are less willing to make compromises concerning their ideal
product (Bakos, 1997). Therefore, Bakos (1997) argues that if search costs are low
enough, consumers have an overview of all offerings and are able to purchase the
one that best fits their needs. In this market system, consumers enjoy lower prices
due to increased competition among sellers; they enjoy allocational efficiencies,
because they are better informed about all available products, thus being able to
make better purchase decisions; and, even though they increase their number of
inquiries, they incur lower total search costs (Bakos, 1997).
When prices and functional aspects of offerings become transparent, the challenge for companies is to be perceived as having fair pricing policies, i.e. providing,
or at least having, a reasonable business explanation for any price differences35
(Kumar, 2000), because consumers are willing to pay only the expected value of the
products or services offered for sale (Ward & Lee, 2000). Considering the distinction
between search and experience goods, the value for customers (namely the relation
of costs and benefits) can be communicated more or less easily solely through the
Internet. Information symmetry is high for search goods, thus manufacturers of
search goods can make the value their products provide comparable to the value that
competitors’ products provide. If the characteristics of a product can be compared
objectively, the Internet increases the amount of comparable information, which increases competition among sellers on online markets and finally leads to lower prices
(Bakos, 1997).
The same is more difficult for experience goods. While the brand of a search good
may serve to increase information efficiency during the search process and reduce
the risks of a wrong purchase, manufacturers of experience goods provide emotional
or self-expressive values to their customers (Ward & Lee, 2000). The information
promised through the brand remains hidden or subjective until the customer has
finally experienced it, and thereafter evaluated the good’s value for himself (Wernerfelt, 1991). Consequently, if the characteristics of a product or service cannot be
compared easily, the Internet may not remarkably influence prices of these goods.
35

An explanation could be different points of time for booking a flight (a person booking a flight two
months in advance will receive a better price than a person booking only two days before the date of
flight) or different dates of a flight (prices for flights on weekends will be higher than those for flights on
weekdays).

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Brynjolfsson, Smith and Hu (2003) argue that lower prices are not the only positive
effect of online markets for consumers. They state that the value of increased product
variety (i.e., the increased online availability of previously hard-to-find products)
represents a positive on consumer welfare that is even “seven to ten times larger”
(Brynjolfsson, Smith & Hu, 2003: p. 1592). They assume that “ultimately the most
important benefits of Internet retailing are not fully reflected in lower prices, but rather
are due to the new goods and services made readily available to consumers“, which
does not only increase the quality of search results, but might even increase prices
for differentiated goods (Brynjolfsson, Smith & Hu, 2003: p. 1593).
Increasing information transparency, on average, affects product quality in two
ways. On the one hand, pressure on companies grows to enhance the quality of
products or services they offer because of the increased number of equal or substitutive offerings. Intensified rivalry among existing firms and the growing number of new
competitors due to the expansion of global markets and new substitutes through the
Internet thus foster quality improvements (Ward & Lee, 2000). On the other hand,
decreasing prices force companies to reduce costs in order to remain competitive. In
fact, this is a vicious circle, in which only those firms can survive that perform efficiently (Ward & Lee, 2000).
Furthermore, higher market transparency does not only impact online markets, it
has also impacts on traditional markets in the real world (Deregatu, Rangaswamy &
Wu, 2001; Bakos, 1997). As has been described, many consumers may search for
information in the Internet and finally purchase in a non-Internet retail store. This way,
consumers can evaluate an amount of information retrieved online that they would
not have been able to find offline – at least not at equal cost and effort. And they may
purchase in a regular retail store in order to avoid possible risks and disadvantages
inherent in the Internet, such as, for example, having to submit credit card data or
having to pay shipping costs. In real world shops, consumers expect to find products
at equal prices as in online shops. Consequently, price pressure evolving from the
Internet is transferred into the real world (Shankar, Rangaswamy & Pusateri, 1999).
Assumingly, this behavior might be predominant for search goods and products with
important non-sensory attributes – i.e., products that consumers can easily compare
without necessarily having to physically see or experience them. Price differences for
differentiated goods can be justified more easily.

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Vice versa, many consumers search for information – namely advice from sellers –
in non-Internet shops and then purchase online at a lower price. This is ineconomic
for traditional non-Internet sellers, because they do not generate sales this way. This
behavior might be predominant for experience goods and products with important
sensory attributes. In this case, it is difficult for consumers to retrieve adequate or
sufficient information in the Internet. However, the concerned products are available
in online shops at lower cost. Seeking to maximize their own welfare, many consumers change channels during their purchase decision processes (Bakos, 1997; Anfuso, 2004).
Last but not least, the decreasing information asymmetry is not only beneficial to
consumers, but can also create value for businesses. First, companies can, of
course, use the information they receive about consumers to differentiate their offerings from those of competitors with regard to tangible and intangible aspects by either underlining advantages of their own offerings, or changing their offerings, or
putting emphasis on their low prices compared to competition. Furthermore, they can
make personalized offers to consumers (Smith & Brynjolfsson, 2001). Finally, lower
search costs for consumers make them capable of retrieving more efficient and less
expensive alternatives, leading to a “weeding out” of inefficient firms (Ward & Lee,
2000: p. 18).
As has been described, the purchase decision process of consumers depends on
many variables, such as the product category, price and additional costs, objective
information about qualitative aspects, brands, prior experience with the same or
similar goods or brands, other consumers’ opinions, situational variables, etc. While
this multitude of influencing factors might appear confusing, the presented research
results suggest that a clear categorization of products and services according to their
general brand relevance, the particular relevance of each brand function, the type of
a good, and the degree of differentiation and involvement can help brand managers
to develop successful brand strategies. Consequently, the following chapter will describe the implications for brand management that evolve from these insights.

4.4 Implications for brand management
Internet technology empowers both consumers and businesses. In order to efficiently meet the inherent new challenges and chances of the Internet and to remain

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meaningful to consumers, brands need to be adapted to the online environment. The
current chapter recapitulates the key findings of the primary and secondary research
and provides recommendations on brand management aspects.36
With regard to the topic of this paper, a crucial objective of brand managers should
be to find out, whether their brands impact consumers’ decision making at all. If
brands are generally not relevant for purchase decisions in the respective market,
investments in brand building should be carefully scrutinized (Meffert, Perrey &
Schröder, 2002; Rust, Lemon & Zeithaml, 2004). Only if brand relevance is high, high
advertising intensity can be justified. Yet, if brands are generally relevant in a particular market, the importance of each of the three brand functions should be determined,
i.e. it should be analyzed which brand function is most important for consumers in
this particular market. This might depend on the type of good (search good versus
experience good), on the degree of differentiation or homogeneity of offerings on the
particular market, on the degree of cognitive involvement in the purchase decision,
and on the availability of comparable information. For example, it is rather easy to
communicate a search good’s attributes through the Internet, while it is far more
difficult to deliver meaningful communication about an experience good’s attributes
through this channel. This observation leads to different strategic frameworks for both
types of goods. Figure 15 displays the factors to be evaluated in order to come to a
consistent brand management. Combining the previous considerations leads to the
following general implications for brand managers:
•

If brands are generally relevant for the purchase decisions of consumers on a
particular market, companies should invest in brand building, accentuating the
particular important brand functions (Fischer, Meffert & Perrey, 2004). In case of
low brand relevance, other marketing mix variables (e.g., pricing, placement,
product features) should be taken into consideration in order to differentiate the
own offering from competitors’ offerings and to reach the company’s goals
(Fischer, Meffert & Perrey, 2004).

•

The brand of an experience good should try to make the experience experienceable already before the purchase decision, as the inherent problem of an experi-

36

See also Appendix 5 (p. 117) for an overview of the influencing factors of consumer information
search and buying behaviour through the Internet.

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ence good is that its quality can be evaluated only upon usage or consumption
(Alba et al., 1997). In order to make the consumption experience appealing already before a possible purchase decision and to deliver a consistent experience,
brand management should aim to develop means that support the experiential
characteristic of the good both in the online and the offline environment (Mathwick
& Rigdon, 2004; Hoffman & Novak, 1996). This can for instance be supplementary information and supplementary experiences (games, short sound clips, virtual
communities, etc.) (Wolfinbarger & Gilly, 2001; Aaker & Joachimsthaler, 2000). It
might be beneficial to emphasize the emotional side (emotional brand functions)
of the offering in marketing communication. And if the experience goods that the
company offers are of relatively high quality, then also the technical-qualitative
superiority (rational brand functions) should be accentuated in communication
(Fischer, Meffert & Perrey, 2004).
Figure 15: Evaluative factors for consistent brand management

•

As still many people are wary regarding online sellers (Smith & Brynjolfsson,
2001; Fischer, Meffert & Perrey, 2004), companies offering experience goods with
a brand that is not represented through offline channels or with a brand that is not
(yet) a strong online brand should focus on communicating the reduction of risks
connected to a mispurchase. An experience good’s quality cannot be tested be-

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fore purchase (if the consumer sticks to the online channel, and in many cases
even if the consumer supplementary uses the offline channel), and thus the consumer has to rely on third persons’ experiences or on brand names (Alba et al.,
1997; Smith & Brynjolfsson, 2001). Hence, it might be useful to communicate that
the brand stands for both the experience good and the non-contractible product
attributes, like relatively better service quality and a money-back guarantee.
•

The increased information transparency is a threat for brands of search goods,
because the quality of a search good is verifiable upon inspection, and thus it can
be easily compared to substitutive offerings (or at least to other equal products). If
a search good does not deliver emotional values to its consumers, it is likely that
only the rational brand functions are relevant for this good. As explained previously for the case of experience goods, the risk reduction function can be a crucial brand function in the online environment, as it could here provide continuity in
the predictability of the product benefits or non-contractible benefits (Fischer, Meffert & Perrey, 2004). If the information efficiency function is dominant, the brand
name can facilitate search in the enormous thicket of information in the Internet,
as bundling information about the manufacturer and, for instance, the origin of a
product in the form of a brand helps consumers find their way in a new or confusing product environment (Aaker & Joachimsthaler, 2000). Moreover, brands can
help consumers repeatedly find trusted brands quickly and easily (Aaker, 1996).
In this case, it might be useful to appear on high ranks on homepages of comparison service providers (Brynjolfsson & Smith, 2001). However, also a search good
can deliver emotional benefits, and thus it might be useful to emphasize also the
emotional component in brand management in order to build or strengthen consumers’ bonds with the brand (Smith & Brynjolfsson, 2001).

•

In industries, in which the rather rational brand functions are dominant from a
customer perspective, information can possibly substitute brands. Brand management has to find ways to overcome this problem and keep its brands valuable
to consumers. One way could be to add experiences to the brand in order to
make the purchase decision or even the consumption or usage situation more
appealing, memorable, or extraordinary, and to create subjective benefits that
may finally affect choices between instrumental alternatives that are functionally
equivalent in other respects (Havlena & Holbrook, 1986; Csikszentmihalyi, 1990).

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•

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In industries in which emotional brand functions dominate consumers’ purchase
decisions it is unlikely that information obviates brands. The experience should
however be consistant over the different touchpoints with consumers (Manning,
2005), as has been shown in chapter 2.3.1.

•

In today’s network world, it is useful for businesses to connect the online and the
offline environments – both for communication and for delivery purposes – and to
use each channel according to the features it provides (Porter, 2001). Chapter
2.3.1 provides a general framework therefor. Furthermore, the potential benefits
of multi-channel providers have been discussed in chapter 3.4. What is important
for brand management is to transform brands to both the online and the offline
environment in a way that is coherent with their inherent values and characteristics (Aaker & Joachimsthaler, 2000). It is commonly agreed on that also brand
names should be coherent online and offline (Aaker & Joachimsthaler, 2000).
Particularly well-known and approved brands can use their competitive edge regarding trust and confidence, which are critical aspects in the anonymity of the
Internet (Porter, 2001). This can reduce the specific risks of online purchasing for
consumers.

•

Depending on the pricing strategy, it might be useful to actively increase information transparency. That is to say that price comparison services could be used to
win new customers, as in the Internet consumers become very quickly aware of
low prices (Shankar, Rangaswamy & Pusateri, 1999). Refering to the frame of
reference (Figure 10), the pricing strategy should basically correspond to the degree of differentiation – i.e., the more differentiated a good is, the more differentiated should be the price, not only because it is more difficult for consumers to
compare prices for differentiated goods due to inherent product- or brand-related
benefits, but also because offerings can be differentiated on prices (Kalita, Jagpal
& Lehmann, 2004). A high price could, for example, implicate high quality for
many consumers (Kalita, Jagpal & Lehmann, 2004).

•

Although the Internet decreases search costs for consumers, searching for information still entails efforts with respect to time and money. These costs vary
among consumers. Considering opportunity costs as one factor of these costs,
Ward and Lee (2000) state that advertising of brand owners should consequently
be directed toward consumers with higher search costs, or those without Internet

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access, because for those consumers brands reduce search costs. For them,
brands are a time-saving way to purchase quality. Likewise, “advertising on the
Internet, where consumers have relatively low search costs, may not reach levels
comparable to other media, e.g., television, newspapers, magazines“ (Ward &
Lee, 2000: p. 18).
•

Regarding online advertising, companies can focus advertisements to target
groups more easily through relevant Websites presenting special interests or by
displaying relevant advertisements on search engine sites (e.g., GOOGLE’s ADWORDS). Businesses can furthermore use the Internet to maximize their benefits
by using information obtained from tracking consumers’ online behavior (e.g., in
virtual communities or from other activities requiring consumers’ registrations,
such as online-competitions, forums, etc.), and information bought from third party
sources (e.g., cybermediaries), in order to analyze consumers’ needs, wants, and
desires (Kumar, 2000; Smith & Brynjolfsson, 2001). They can use all this information in order to communicate with consumers on individualized levels and this way
(further) differentiate their offerings (Totz, 2005).

•

Moreover, not only marketing communication can be personalized, also product
development and product assembly can be lifted to an individualized level. By
means of product configurators, companies can offer individualized products, and
thereby increase consumer benefits (Smith & Brynjolfsson, 2001). Usually, individualized products cause higher production costs than standardized products.
However, they can also protect companies from information transparency. Because individualized offerings become less comparable, companies personalizing
their offerings can charge higher prices for their products and services.

•

Businesses can additionally use the Internet as a more comfortable communication channel for complaints. The easier it is for a consumer to get in contact with a
business, and the more satisfactory this communication and the subsequent solution are likely to be, the more likely the consumer will be to get in touch with this
business. This in turn can on the one hand strengthen the consumer’s bond with
the brand; on the other hand, the company can use the information gathered
through complaint management in order to improve its products and services
(Stauss & Seidel, 2005).

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To sum up, there is no universal strategy for brands in the context of high information transparency. Which strategy is appropriate for a brand depends on the benefits
the particular brand can provide to consumers. What can be said is that if brands do
not create value for consumers, they become less important for consumers’ purchase
decisions – especially in the age of the Internet (Porter, 2001). And here it has to be
mentioned that the question for businesses is not whether to use Internet technology
or not; the question is how to use the Internet, in order to take advantage of its inherent opportunities and leverage existing strengths of a business (Porter, 2001).
A crucial opportunity provided through the Internet that manufacturers and sellers
of products and services should take advantage of is the possibility to establish
bidirectional, collaborative relationships with consumers. These can be beneficial for
both consumers and businesses (Mandelli, 2005). This way, companies can differentiate their offerings from other competing offerings on a reliable and long-term basis
(Mandelli, 2005). As to this, Mandelli (2005: p. 101) states that “network technologies
change not only the media platforms that we use for building and transferring the
meaning of brands, but also the brand relationship logic”.
Thus, coming back to the elements of the consumer brand experience (Figure 3),
the starting point of the brand positioning is the definition of the brand‘s promise to
deliver certain specific values. In the context of the Internet, the goal is to develop a
brand positioning that is consistent over all channels and that delivers Internetspecific customer benefits. These benefits can be ascribed to functional, processual,
and relationship-oriented aspects (see Figure 16) (Totz, 2005).
Funtional benefits of usage are based on the superior technical-qualitative design
of services provided through the Web. However, these benefits rest upon standardized software solutions that can hassle-freely be used or imitated by competitors, and
thus are not viable for the purpose of differentiation (Totz, 2005).
Processual benefits evolve from a simpler, quicker, lower-priced, and more comfortable handling of transactions and information exchanges between the brand
owner and users of the brand (Totz, 2005; Porter, 2001). Benefits are the independency from time and place regarding the request for information and transactions
inherent in the Internet, and the support of specific business processes through the
Internet. The provision of information and transactions can be performed in real-time,
appealing to consumers’ desire for convenience. Processual benefits can differenti-

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ate a company from competitors that are not represented in the Internet. Differentiation from competitors in the Web can be achieved only through better performance in
terms of simpleness, speed, convenience, reliability, etc. of processes. However,
both functional and processual benefits evolving from using the Internet are not practicable for building long-term, sustainable competitive advantages (Totz, 2005). Porter (2001: p. 78) argues that “as all companies come to embrace Internet technology,
[…] the Internet itself will be neutralized as a source of advantage. Basic Internet
applications will become table stakes – companies will not be able to survive without
them, but they will not gain any advantage from them. The more robust competitive
advantages will arise instead from traditional strengths such as unique products,
proprietary content, distinctive physical activities, superior product knowledge, and
strong personal service and relationships.”
Figure 16: Dimensions of Internet-specific customer benefits

Note. From: Interaktionsorientierte Markenführung [Interaction-based brand management] (p. 74)
by Totz, Carsten (2005), Göttingen, Germany: Cuvillier Verlag.

Relationship-oriented customer benefits are those aspects of the Internet that can
be turned into lasting and sustainable competitive advantages. On the one hand,
businesses can establish personalized relationships to their customers, on the other
hand, the interactivity and personalization of offerings involves the potential to create
instrumental relationship benefits, i.e. to obtain data about customers which can in
turn be used to improve processes and offerings (Totz, 2005; Alba et al. 1997). This
way, the brand can in the Internet attain a “quasi-social“ role (Totz, 2005: p. 76) that

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enables the establishment of personalized relationships (Fournier, 1998; Aaker,
1997).
The establishment and existence of robust and long-lasting relationships to customers differentiates and protects the brand in competition, because the relationship
advantages are based on repeated interactions that competitors cannot simply imitate (Totz, 2005).
It has been shown that testing the general relevance of brands is important in order to not invest in brand management if these investments are not likely to pay off
financially. It has furthermore been shown that testing the relative relevance of the
three brand functions leads to results that can serve as a guide for consistent brand
management. Whether goods in the particular market are search or experience
goods, low or high involvement goods, or rather homogenous or rather differentiated
goods, and whether comparable information is available are additional indications for
the development of consistent branding strategies. The Internet appears to be a
threat only to goods that deliver rather rational benefits to consumers. The increased
information transparency does not significantly affect products and services that
provide rather emotional benefits to consumers. Rather, Internet technology can
serve as a means to strengthen the emotional values that consumers perceive to be
related to those brands.

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5. Conclusions
5.1 Summary and key findings
The general goal of the present paper was to analyze and describe the effects of
the Internet on the functions of brands.
The Internet makes an enormous amount of information available to Internet users. This information is provided to consumers in convenient ways (e.g., through
information intermediaries), so that consumers can actually compare many kinds of
products and services based on individual attributes and prices. Furthermore, Internet technology provides means to create additional value for brands through offering
platforms for consumers to engage in brand-related behavior for fun and entertainment during their free time and through offering businesses the opportunity to personalize offerings for their customers – either by physical product modifications or by
extending consumers’ search and evaluation capabilities through choice assistance
technology. Thus, on the one hand, the Internet increases information transparency,
which might be a threat for brands; on the other hand, the Internet provides opportunities to companies to strengthen consumers‘ bonds with their brands. At the same
time, a fundamental problem of e-commerce is that many people are still skeptical
about the credibility and reliability of information, products, and services provided
through the Internet. They are mainly afraid of privacy infringements, and the nonfulfillment of non-contractible parts of an offering, such as the service quality of Internet retailers or online information providers (see also Appendix 5, p. 117).
In this context the virtue of brands becomes apparent: strong brands reduce the
adduced risks, because they indicate reliability, trust, and recognition, and often
serve as a sort of quality warranty. Further benefits that brands provide to consumers
are increasing information efficiency and the creation of inward and outward directed
image benefits. While part of these brand functions can be characterized as offering
rather rational benefits (increased information efficiency and risk reduction), another
part (image benefit creation) can be characterized as delivering rather emotional and
self-expressive benefits. Putting this in context to the matter of information, two hypotheses have been examined by means of an empirical study. The first hypothesis
states that consumers, who place high value on mainly the functions of information

Conclusions

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efficiency and risk reduction while searching for a specific product or service, tend to
rely more on information obtained from search than on brands. Opposed to this, the
second hypothesis states that consumers, who place high value on mainly the image
benefit creation function, tend to rely more on brands than on information obtained
from search. Empirical research substantiated that both hypotheses prove to be true.
Thus, depending on the relative importance of each brand function, information can
obviate brands.
As a general rule, it is important for a business to keep its promises and to deliver
consistent appearance and performance over all touchpoints of a consumer with a
brand. The more emotional, sensory, and experiential aspects are related to the
purchase and usage and are linked to the brand, the more these aspects are appropriate to differentiate the respective offerings from those of competitors – without
necessarily having to differentiate on technical-qualitative attributes. After all, memorable or extraordinary experiences during the purchase decision process and consumption produce emotions, which increase the consumer’s involvement and create
subjective benefits that may finally affect choices between instrumental alternatives
that are functionally equivalent in other respects.
These key findings of the present master’s thesis bring about the following general
implications:
•

When consumers place high value on mainly the functions of information efficiency and risk reduction while searching for a specific product or service, tend to
rely more on information obtained from search than on brands (hypothesis 1).
Hence, manufacturers and sellers of products and services whose brands mainly
fulfill the functions of information efficiency and risk reduction have to be aware of
the fact that information can substitute their brands. For those businesses, increasing information transparency is a threat to their brands. Thus, they should either be better (with regard to quality, performance, or price) than their competitors
and emphasize these particular aspects in marketing promotion, or they should
create image benefits that differentiate their offerings from those of competitors.
However, they should always keep in mind that investments in their brands are
only justifiable, if brands are generally relevant to consumers in the respective
market.

Conclusions

•

Page 92

When consumers place high value on mainly the function of image benefit creation while searching for a specific product or service, tend to rely more on brands
than on information obtained from search (hypothesis 2). Hence, information cannot substitute image benefits for these brands. For businesses offering brands
that create image benefits, the Internet is rather another channel to promote these
image benefits and make them experienceable. They should focus their marketing
efforts on emphasizing the image benefits that their brands (can) create. Investments in brand management might be very beneficial in this case.

•

Nonetheless, increasing information transparency and decreasing information
asymmetry might erode image benefits of some brands that are comparable on
functional attributes. The iPod, for example, is a strong brand delivering image
benefits to its customers. However, there are many MP3-players available on the
market delivering the same functions with an equally high quality and performance at vastly better prices. Basically, information makes these products comparable on a technical-qualitative level, and as a consequence, image benefits of
such product categories might loose value over time.37 The more complex and diversified markets (or market segments) are, the less this is likely to be the case.
Consequently, when more total information about product attributes is available
online, brand names become less valuable. Thus, when product categories are
differentiated on brand image and other attributes that cannot be easily summarized by an online store, then brand names will be more important online; and
when product categories are differentiated on functional aspects for which online
stores can give detailed attribute information and comparative information, then
brand names will be less important online (see also Deregatu, Rangaswamy &
Wu, 2001).
Hence, when brands are generally important for purchase decisions in a particular

market, the availability of objective information and the degree of sensory, emotional,
and experiential aspects related to the purchase and usage of a product or service
determine whether information can substitute brands or not. In order to remain competitive in fields in which information can substitute brands, companies should either
37

The same happened to IBM that offered the first personal computers in 1981. Originally, the brand
stood for PCs. After the advent of numerous manufacturers offering computers of equal quality levels
at better prices, the benefits offered through the brand IBM – and thus the brand itself – tremendously
lost in attractiveness and value.

Conclusions

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not focus on a branding strategy or deliver additional benefits that increase the offering’s value for consumers and differentiates them from competition.
Generally, all companies should adapt to Internet technology to make traditional
activities better and find and implement new combinations of virtual and physical
activities that were not previously possible (Porter, 2001). Those companies that
were generated in the Internet need to create and maintain strategies that involve
new hybrid value chains encompassing other activities besides those conducted over
the Internet, and to bring together virtual and physical activities in unique configurations (Porter, 2001).
“While a new means of conducting business has become available, the fundamentals of competition remain unchanged. … Only by integrating the Internet into overall
strategy will this powerful new technology become an equally powerful force for competitive advantage.” (Porter, 2001: p. 78)

5.2 Limitations and future research issues
The present paper has some limitations. First of all, it is restricted to B2C-markets,
i.e. consumer behavior in this paper focuses on individual consumers, not businesses. As search, choice, and purchase behavior is different for institutional buyers,
it might be interesting to conduct similar research also for B2B-markets. A second
limitation regards the results of the empirical study, which queried only a very narrow
group of people, namely the students of the USI. Besides, the survey was conducted
using an online questionnaire, which limits the results to rather online-affine respondents. Although the study is not representative, it led to useful results that prove to be
consistent and reliable for the examined set of people. The limitations regarding the
empirical study are due to time limitation in its realization. In order to obtain more
representative results the same study could be conducted among a representative
set of people in future research.
A third limitation is that the empirical study tested only attitudes, not likely behavior. It might be interesting to test also likely behavior in future research, using experimental research methodology, and to integrate the attitudinal and the behavioral
components in a holistic concept.

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Although numerous articles, books, and working papers have been published that
examine and try to describe the effects of Internet technology on consumer behavior
with regard to consumer attitudes, consumer search behavior, evolving opportunities
for businesses, and other issues that have been discussed in the present master’s
thesis, this field is still not sufficiently explored.
According to the current paper’s logic, an important field of future research should
be to explore the impact of the three brand functions also in other product and service categories in order to bring about a valid general systematic to support brand
managers.
While the present paper researches the impact of Internet technology on brand
functions, it does not answer the question, in which situations consumers prefer the
Internet as a shopping channel and in which situations they prefer non-Internet retail
stores. This might be dependent on the functions and characteristics of the particular
good or brand. However, also other factors might influence this decision. It might be
interesting to explore the issue of channel choice according to the systematic applied
in the present paper.
In this context, it might also be interesting to research whether the pure availability
of information changes the type of purchase decision. It might for instance be the
case that – as a result of the availability of much information – some consumers
might engage in extensive search processes related to a purchase decision that was
formerly based on limited problem solving or even habits.
Furthermore, future research could examine, in how far mobile Internet communication at the point-of-purchase impacts consumer behavior, and which impacts mobile commerce (m-commerce) will have on consumers’ purchase decision processes.
Mobile devices might enable consumers to connect the online and the offline world,
and search for relevant information in the Web in non-Internet retail stores. Maybe
companies could even provide personalized prices to consumers then.
It might also be interesting to analyze, if online sellers should apply personalized
prices for individual consumers based on these consumers’ socio-demographics,
attitudes, behaviors, and other relevant data. This way, businesses might be able to
(re-)diversify markets and reduce transparency.

Conclusions

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Another issue to be addressed in future research could deal with the effects of the
described development of markets due to Internet technology on brand equity. Depending on the functions that a brand fulfills for consumers, its brand equity might
significantly increase or decrease.
Also customer equity might be influenced by consumer empowerment. As customers become more volatile, their long-term value might significantly decrease for
companies offering goods that are easily comparable on their attributes. Businesses
that offer reliable services in the (anonymous!) online environment might at the same
time be able to increase retention rates and customer long-term value (CLV).
Last but not least, future research should continue to explore the differences in
consumer attitudes and behavior regarding choice in the online versus the offline
environment, and further idiosyncrasies of online and offline consumer behavior.

Appendix

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Appendix
Appendix 1
Benefits brands offer to companies
Keller (2003: pp. 9 & 46) provides a comprehensive list of benefits that brands offer to companies. He points out that brands
•

serve as a means of identification to simplify handling or tracing,

•

legally protect unique features of a product or service, and they

•

can endow products with unique associations,
leading to

•

increased customer loyalty,

•

less vulnerability to competitive marketing measures or crises,

•

larger margins,

•

a more elastic response to price decreases,

•

a more inelastic response to price increases,

•

greater trade co-operation and support,

•

increased marketing communication efficiency and effectiveness,

•

possible licensing opportunities, and

•

a more favorable evaluation of brand extensions.

Appendix

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Appendix 2
Benefits brands offer to consumers
Kapferer (1997: p. 30) highlights that from a consumer perspective brands
•

permit the quick identification of sought-after products,

•

allow savings of time and enervy through identical repurchasing and loyalty,

•

guarantee finding the same quality no matter where or when a product or service
is bought,

•

ensure the consumer that the best product in its category or the best performer for
a particular purpose is bought,

•

confirm the self-image of the user and the image that is presented to others,

•

bring contentment through the familiarity and intimacy with a brand that has been
consumed for years,

•

convey satisfaction linked to the attractiveness of the brand, to its logo, to its
communication, and possibly

•

bring appreciation linked to the responsible behaviour of the brand in its relationship with society (ecology, employment, citizenship, advertising which does not
shock).
Anholt (2003: p. 3) adds that brands

•

represent a promise to deliver the expected quality,

•

are an open invitation to complain if expectations are not met,

•

generally ensure that dissatisfaction will be remedied, and they

•

provide a means of assessing product quality in fields where the consumer lacks
the knowledge on which to base an objective judgement.

Appendix

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Appendix 3
The empirical study
Subsequently, all questions from the survey conducted among the students of the
USI are displayed, including the possible answers and the respective total number
and percentage of responses.
The first eleven questions deal with the purchase of consumer electronics; questions twelve to twenty-two analyze the interviewees behavior regarding booking
flights; and the last eleven questions concern the purchase of clothes.
Introduction:
Hi,
presently, I am writing my master'
s thesis. I analyze the role of brands in purchase
decisions. Therefore, I would like to ask you some questions about which role brands
play in your purchase decisions - online and in the "real world" (non-internet stores).
You would be a great support, if you would answer the following questions. You will
need about 5-7 minutes for the whole survey.
Thank you very much!!! ;-)
Text 1:
First, I will ask you some questions about consumer electronics (e.g., laptop, MP3player, iPod, DVD-player, etc.). Please indicate, which answer you most strongly
agree with.
Question 1:
On average, how often do you buy consumer electronics in a period of one year?

Appendix

Page 99

Question 2:
When I buy consumer electronics, the brand is not as important to me as other
things.

!
"
!

#

"

Question 3:
Searching for my favored brand facilitates the purchase of consumer electronics for
me.

$
%
%
%
!
"
!

$

Question 4:
When I buy consumer electronics, I pay attention to the brand logo or characteristic
brand colors in order to find or retrieve the product that I am searching for.

%
#
!

Appendix

Page 100

!

%

Question 5:
When I buy consumer electronics, I prefer brands, because brands reduce the risk to
be displeased afterwards.

#
%

$

!
#
!

#
"
%

Question 6:
When I buy consumer electronics, I prefer brands, because I know that I buy good
quality when I choose for a brand.

$

%
$
!

!

#
"
%

"
%

Question 7:
Regarding consumer electronics, I care about the brand, because it has to fit well
with myself.

Appendix

Page 101

#
"

!
%
!
#

Question 8:
Regarding consumer electronics, the brand is important to me, because I think that
other people judge me by the brands I use.

$
#

!

"

!

%
$

Question 9:
When I buy consumer electronics, I prefer certain brands, because I feel that I have a
lot in common with other buyers of these brands.

$

#
"
!

#

!
%
$

Appendix

Page 102

Question 10:
When I buy consumer electronics in an internet shop, I prefer brands over no-name
products or retail brands.

%
$
#
!
$
!

#
$

&
!

'
(

Question 11:
When I buy consumer electronics in a non-internet retail store, I prefer brands over
no-name products or retail brands.

%

!

$

!
#

&
!

'
(

Text 2:
Second, I will ask you some questions about flights.
Same procedure as before. Please indicate, which answer you most strongly agree
with.

Appendix

Page 103

Question 12:
On average, how often do you book flights in a period of one year?

$

Question 13:
When I book a flight, the airline brand is not as important to me as other things.

"

%
!

!

"

"

%

Question 14:
Searching for my favored brand facilitates the purchase/booking of flights for me.

#
!

"

!

$

Appendix

Page 104

Question 15:
When I book a flight, I pay attention to the brand logo or characteristic brand colors in
order to find or retrieve the airline brand that I am searching for.

$
#
"

!
#
!

$

Question 16:
When I book a flight, I prefer brands, because brands reduce the risk to be displeased afterwards.

"
$

!
%
!

%

Question 17:
When I book a flight, I prefer brands, because I know that I buy good quality when I
choose for a brand.

"

#
!

$

Appendix

!

Page 105

$
%

Question 18:
Regarding flights, I care about the brand, because it has to fit well with myself.

!

!

$

"

Question 19:
Regarding flights, the brand is important to me, because I think that other people
judge me by the brands I use (i.e. the airline I fly with).

%

!

!

#

#
%"

Question 20:
When I book a flight, I prefer certain brands, because I feel that I have a lot in common with other buyers of these brands.

$

Appendix

Page 106

%

!

$

!

%
"
%

Question 21:
When I book a flight in an internet shop, I prefer brands over no-name airlines or
rather unknown airlines.

%

$
%
!

!

&

"

' )
(

#

*
!

Question 22:
When I book a flight in a non-internet retail store, I prefer brands over no-name airlines or rather unknown airlines.

#

$
!
$

!
#

%
$
&

' )

*
!
(

$
%

Appendix

Page 107

Text 3:
Last, I will ask you some questions about clothes.
Once again, please indicate, which answer you most strongly agree with.
Question 23:
On average, how often do you buy clothes in a period of one month?

$

Question 24:
When I buy clothes, the brand is not as important to me as other things.

"

"
$
!

#

!
$

Question 25:
Searching for my favored brand facilitates the purchase of clothes for me.

#

!

!

"

%

%

Appendix

Page 108

Question 26:
When I buy clothes, I pay attention to the brand logo or characteristic brand colors in
order to find or retrieve the product that I am searching for.

"
#

!

!

$

Question 27:
When I buy clothes, I prefer brands, because brands reduce the risk to be displeased
afterwards.

"

!
%
!

$
%

$

Question 28:
When I buy clothes, I prefer brands, because I know that I buy good quality when I
choose for a brand.

"

$
!

"

Appendix

Page 109

"

!

$

Question 29:
Regarding clothes, I care about the brand, because it has to fit well with myself.

$

$

!

%
#

!

$

Question 30:
Regarding clothes, the brand is important to me, because I think that other people
judge me by the brands I use.

%

!

!
"
"

Question 31:
When I buy clothes, I prefer certain brands, because I feel that I have a lot in common with other buyers of these brands.

$
"

Appendix

Page 110

!
%
!

Question 32:
When I buy clothes in an internet shop, I prefer brands over no-name products or
retail brands.

$
"
$
#
!
"

!

%
#
"

&

'

!
(

"%
%

Question 33:
When I buy clothes in a non-internet retail store, I prefer brands over no-name products or retail brands.

$
!

!

&

'

!
(

Appendix

End:
Thanks a lot for your participation!! Have a nice day ;-)

Page 111

Appendix

Page 112

Appendix 4
Results of the exploratory (and confirmatory) factor analysis for the market of
consumer electronics regarding the questions concerning the three brand
functions:

Appendix

Page 113

Results of the exploratory (and confirmatory) factor analysis for the market of
flights regarding the questions concerning the three brand functions:

Appendix

Page 114

Results of the exploratory (and confirmatory) factor analysis for the market of
clothes regarding the questions concerning the three brand functions:

Appendix

Reliability analysis of the computed factors:
Cronbach’s Alpha for the first (rational) factor of consumer electronics:

Cronbach’s Alpha for the second (emotional) factor of consumer electronics:

Cronbach’s Alpha for the first (rational) factor of flights:

Cronbach’s Alpha for the second (emotional) factor of flights:

Page 115

Appendix

Cronbach’s Alpha for the first (rational) factor of clothes:

Cronbach’s Alpha for the second (emotional) factor of clothes:

Page 116

Appendix

Page 117

Appendix 5
Influencing factors of consumer information search and buying behavior
through the Internet:

Note. Adapted from: ‘Consumer adoption of the Internet as an information search and product purchase channel: some research hypotheses’ (p. 109) by Moon, Byeong-Joon (2004), in: Int. J. Internet Marketing and Advertising.

Informationen zum Autor

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