International Management Review Vol. 3 No.

3 2007

Customer-based Brand Equity and Improvement Strategy for Mobile

Phone Brands: Foreign versus Local in the Chinese Market

Hao Liaogang1, Gao Chongyan2, Liu Zi’an3

1
Marketing Department, School of Economics and Management, Southwest Jiaotong University,
Chengdu, China;
Marketing Department, Business Administration Faculty, The Chinese University of Hong Kong,
Hong Kong
2,3
Marketing Department, School of Business, University of International Business and Economics,
Beijing, China

[Abstract] Brand equity practically boils down to the word of mouth and purchase behavior of
customers. Brand-knowledge structures in the minds of customers are the source or
foundation of brand equity. Customer-level brand equity can be captured by five aspects:
awareness, associations, attitude, attachment, and activity. In this article, we measure the
brand equity of six major mobile phone brands in the Chinese market，which include four
foreign and two local ones. A total of 174 respondents from one major university in Beijing
were surveyed for data collection. The survey was conducted to obtain insights on how
consumers form attitudes towards different mobile phone brands. In the study, we attempt to
understand the attributes to which customers give greater focus. Furthermore, we create the
brand perceptual map and the ideal line in order to understand the advantages and
disadvantages of different brands. The data analysis results show that international brands
outperform local brands in terms of customer-based brand equity in the Chinese market.
Based on the two studies, we further explore and discuss how local brands should improve
their brand equities to compete with international brands.
[Keywords] Brand equity; brand improvement; mobile phone; Chinese market

Introduction
Since China’s accession to the World Trade Organization (WTO) in 2001, many localbrands
have been facing mounting challenges from foreign competition. This is most obvious in the
industries that the government has entirely opened to foreign participation, such as the
mineral water industry and the mobile phone industry. In this research, we focus on the
mobile phone industry. In the Chinese mobile phone market, an interesting phenomenon is
worth examination: as a result of fierce competition, the landscape of market share ranking
has been dramatically changing amongst competitors. For a long period in the 1990s, three
foreign mobile phone brands, namely, Motorola, Nokia, and Ericsson, nearly dominated the
whole Chinese market. This situation changed soon after the local brands, including Bird and
TCL, started to size up. However, the situation has been undergoing another flip since 2005
when foreign brands have adjusted their competition strategies.

Both foreign and local brands take turns capitalizing their competitive position in the Chinese
mobile phone market. Essentially, this entails the need for both local and foreign brands to
gain a clear understanding of their customers’ preferences in terms of mobile phone features

76
International Management Review Vol. 3 No. 3 2007

and their competitive position in customers’ perceptions so that they can establish their own
brand improvement strategies and take full competitive advantage. The major purpose of this
research is twofold: (1) to compare local and foreign mobile phone brands in the Chinese
market with respect to customers’ perceptions, and (2) to formulate brand improvement
strategies for mobile phone brands, both foreign and local, that are in a disadvantageous
competitive positions in all aspects of customers’ perceptions.

Theoretical Background
Building and properly managing brand equity has become essential for most companies. More
and more companies have already realized that brand equity is one of their most valuable
intangible assets. Maintaining and enhancing the strength of company brands has therefore
become an important management imperative (Keller & Lehmann, 2006). In relation to this,
Keller (1993) defined the term customer-based brand equity (CBBE) as “the differential effect
of brand knowledge on customer response to the marketing of the brand.”

Brand equity is widely accepted as a multidimensional concept that consists of brand loyalty,
brand awareness, perceived quality, brand associations, and other proprietary assets (Aaker,
1996). The rewards for building strong brand equity are obvious. However, the problem lies
in the fact that only a few managers are able to objectively assess the strengths and
weaknesses of their brands.

How to measure brand equity is very important in assessing the value of brands. Rather than
taking the more traditional approach of measuring brand equity for accounting or strategic
reasons, the approach employed in this article focuses on optimizing brand equity through
parsimonious manipulation of the marketing mix. Yoo and Donthu (2001) adopted four
dimensions to measure brand equity, namely, brand loyalty, brand awareness, perceived
quality, and brand associations. Similar dimensions are observed by other researchers. For
instance, Shocker and Weitz (1998) proposed that brand loyalty and brand associations are
dimensions of brand equity. Meanwhile, Yoo, Donthu, and Lee (2000) proposed and tested a
model in which perceived quality, brand loyalty, and band associations all contribute to brand
equity. For the purpose of our study, we adopt four dimensions to measure brand equity:
brand loyalty, brand awareness, perceived quality, and brand image. Strong brand equity
means that customers have high brand awareness, maintain a favorable brand image, perceive
high quality, and are loyal towards the brand.

Methodology
Research Design
To understand what mobile phone attributes consumers give greater weight to and how they
perceive different mobile phone brands, we have conducted a survey among business students
at a major university in Beijing.

Sample
In order to compare brand perceptions between international brands and local brands in China,
we have selected the six most popular mobile phone brands in the Chinese market as our

77
International Management Review Vol. 3 No. 3 2007

research focus. Those mobile phone brands include Nokia, Samsung, Motorola, Sony, TCL,
and Bird. The first four brands are foreign brands, while the last two are local brands. Their
market shares in China in 2006 are listed in the following table.

Table 1. Market Shares of Mobile Phone Brands in 2006 (%)

Nokia Samsung Motorola SONY TCL Bird Others

10.21 10.17 10.25 9.89 9.89 10.05 39.56

Source: National Customer Satisfaction Survey in 2006, Tsinghua University

The subjects surveyed are 174 business students from one major university in Beijing. These
business students are an appropriate sample for the survey because they come from different
regions of China and have sufficient awareness and experiences in buying and using mobile
phones.

Measures
All measures in the questionnaire are adopted from previous work. A nine-point Likert scale
was employed in the questionnaire and no reverse scale was used. Specifically, to measure
overall satisfaction, we ask the subjects, “Overall (including product per se, service, price,
etc.), are you satisfied with the brand of your mobile phone (Strongly dissatisfied/Strongly
satisfied)?” To measure brand loyalty, we ask the subjects, “Assuming that you are now
planning to change your mobile phone, what are the odds that you would select the brand
(Very unlikely/Very likely)?” To measure customers’ word-of-mouth towards the mobile
phone brand, we ask the subjects to rate the statement, “I would recommend the product or
service to others (Strongly disagree/Strongly agree).” To measure perceived quality, we ask
the subjects, “Compared with other mobile phone brands, how do you think of the total
quality of the brand (Very poor/Very good)?” and “Do you think that the brand has consistent
quality (Very inconsistent/Very consistent)?” To measure brand leadership, we ask the
subjects, “Do you think that the brand is the leading one in the mobile phone industry
(Strongly disagree/Strongly agree)?” and “Do you think that the brand is trendy when it
comes to product design (Strongly disagree/Strongly agree)?” To measure perceived value, we
ask the participants, “Considering the overall quality of the mobile phone brand, do you think
the price is commensurate (Strongly incommensurate/Strongly commensurate)?” To measure
brand personality, we ask the participants, “Do you think that the brand image is vivid
(Strongly obscure/Strongly vivid)?” and “Do you know well which group of people prefer the
brand (Very badly/Very well)?” To measure brand differentiation, we ask the subjects, “Do
you think the brand is significantly different from other mobile phone brands (Strongly
indifferent/Strongly different)?” To measure brand awareness, we ask the subjects to rate the
statement, “The brand is the one that I first thought of among all mobile phone brands
(Strongly disagree/Strongly agree)” and “I know well about the background of this brand
(Strongly disagree/Strongly agree).”

Data Collection and Analysis

We surveyed 174 students in a business school of one major university in Beijing. In the

78
International Management Review Vol. 3 No. 3 2007

preliminary analysis, neither outliers nor missing values were found. Thus, all questionnaires
were valid for analysis. For a reliability check, the Cronbach's Alpha of all multi-item scales
are greater than .70, as shown in the following table. Then we take the average mean of all
items for each multi-item scale and use the average number in further analysis.

Table 2. Reliability Check of Multi-Item Scales

Measures Perceived quality Brand Leadership Brand Personality Brand Awareness

Cronbach's
.90 .80 .80 .77
Alpha

In the questionnaire, we asked the subjects to rank the importance of mobile phone attributes.
The results are listed in the following table:

Table 3. Ranking of Brand Attributes According to Consumers’ Mobile Phone Preference

Func-
Design
Brand Design tion Prom- Unique-
Service Durability Price Varia- Place Ads
Image Style Vari- tion ness
tion
tion

8.50 8.28 8.11 7.87 7.85 7.04 6.95 6.80 6.47 6.35 6.19

From Table 3, we can see that service is the attribute that subjects give the greatest weight to.
Durability is the second important attribute according to consumers’ mobile phone
preferences. Then brand image, design style, price, design variation, function variation, place,
promotion, advertisement, and uniqueness follow. Further, a one-way ANOVA test indicates
that the overall difference in importance among the attributes is significant (p<.01). We also
investigated consumers’ attitudes towards different brands of mobile phones in the
questionnaire. The following table lists customers’ attitudes towards different mobile phone
brands:

Table 4. Customers’ Attitudes towards Different Mobile Phone Brands

Brand Nokia Samsung Motorola SONY TCL Bird
Overall
7.17 6.13 5.46 5.45 3.96 4.64
Satisfaction
Brand Loyalty
6.62 4.80 4.57 3.93 2.45 2.41
Perceived quality
7.72 6.88 6.52 6.05 3.91 4.69
Brand Leadership
7.10 6.64 6.84 6.67 3.95 4.09
Brand Personality
5.74 5.53 5.80 6.09 3.90 4.00
Brand Awareness
5.67 4.60 4.21 4.34 2.97 2.67

79
International Management Review Vol. 3 No. 3 2007

Regarding the overall satisfaction ratings towards different mobile phone brands, further
statistical testing indicates that customer overall satisfaction ratings across different mobile
phone brands are significantly different in general (p=.000). Particularly, the customer overall
satisfaction ratings for foreign mobile phone brands are generally greater than those for local
mobile phone brands. Regarding customer brand loyalty ratings towards different mobile
phone brands, further statistical testing indicates that customer brand loyalty ratings are
significantly different across all brands (p=.000). Specifically, foreign mobile phone brands
received greater loyalty from their customers than local mobile phone brands.

Regarding customer perceived quality, brand leadership, brand personality, and brand
awareness, there are also significant differences among different mobile phone brands (for all
ANOVA tests, p<.01). The same patterns are observed for customer overall satisfaction rating
and brand loyalty rating. Compared with local mobile phone brands, foreign mobile phone
brands enjoy a higher perceived quality, higher brand leader power, more vivid personality,
and more awareness. Overall, with respect to customer attitudes towards mobile phone
brands, foreign brands outperform local brands in all aspects. Chinese local mobile phone
brands are therefore in a disadvantageous position with respect to competition with foreign
mobile phone brands.

From the previous discussion, we can see that it is obviously urgent for local mobile phone
brands to improve their customers’ attitudes towards their brands. Creating a consumers’
perceptual map for different mobile phone brands can be helpful for such an objective. We
put all the variables for customer attitudes together for factor analysis. We extract two factors
from the factor analysis, which account for 65.24% of the cumulative variances of all the
variables. The rotated factor loadings matrix is listed in Table 5.

Table 5. Factor loadings

Component
1 2
x6 .818
x8 .742
x9 .698 .516
x10 .734
x11 .794
x13 .631
x14 .744
x15 .695
x16 .601
x17 .533 .590
x18 .780

According to the factor loadings on the two factors, together with what the independent
variables (e.g. x1, x2, …, x18) measure, we can name factor1 as the quality/value dimension
because the variables measure perceived quality and perceived value mainly load on this

80
International Management Review Vol. 3 No. 3 2007

factor. Meanwhile, we can name factor2 as the personality/awareness dimension because the
variables measure brand personality and brand awareness mainly load on this factor. Then we
save the regression factor scores for all six brands and list them in Table 6. Further ANOVA
tests indicate that the factor scores for two factors are overall significantly different across all
brands (p<.001).

Table 6. Factor Scores for Different Brands

Factor score of the quality/value Factor score of the
Brand
dimension personality/awareness dimension
Sony -.229 .542
Samsung .249 .207
Motorola .396 .109
Nokia .831 .153
Bird -.481 -.603
TCL -.738 -.400

With the quality/value dimension in the y axis and the personality/awareness dimension in the
x axis, we put the six brands in the quadrant according to their factor scores. We can then
obtain the following consumers’ perceptual map towards mobile phone brands, as shown in
the following figure. The Ideal Line denotes the ideal positions for mobile phone brands. This
ideal line provides the directions for all mobile phone brands in improving their position in
consumers’ perceptions.

Quality/Value

Ideal Line
Sony Samsung

Motorola

Nokia

Personality/Awareness

TCL

Bird

Figure 1. Consumers’ Perceptual Map towards Mobile Phone Brands

81
International Management Review Vol. 3 No. 3 2007

From Figure 1, we find that compared with foreign brands, local ones such as TCL and Bird
are in a disadvantageous position with respect to both the quality/value and
personality/awareness dimensions in consumers’ minds. Among foreign mobile phone brands,
in comparison with the ideal line, Sony and Samsung are in a superior position with respect to
the quality/value dimension but are in an inferior position with respect to the
personality/awareness dimension in consumers’ minds. Lastly, Motorola and Nokia are in a
superior position with respect to the personality/awareness dimension but are in an inferior
position with respect to the quality/value dimension in consumers’ minds.

Conclusion and Discussion

In this paper, we find that when consumers purchase mobile phones, the relative importance
they give to product attributes can be ranked as follows: service, durability, brand image,
design style, price, design variation, place, promotion, advertisements, and unique features.
Thus, service, durability, and brand image are the most important three attributes by
consumers’ preference. Price, distinctiveness (including design and function), place,
promotion, and advertisements are the second tier attributes of consideration. Most surprising
is that brand feature uniqueness is the least important factor that affects consumers’ mobile
phone preference. Furthermore, we have analyzed and compared local mobile phone brands
with foreign ones in the Chinese market, described customers’ attitudes towards all mobile
phone brands, and created a perceptual map in this paper. We find that in the Chinese market,
local brands are in a disadvantageous position in consumers’ perceptual map with respect to
both the quality/value and personality/awareness dimensions. Specifically, Nokia ranks
number 1 in all aspects of customer attitudes towards mobile phone brands. All four foreign
mobile phone brands significantly outperform all two local mobile phone brands with regard
to customer attitudes in the Chinese market.

In addition, the current paper has researched both consumers’ preference for mobile phone
attributes and different perceptions towards mobile phone brands in consumer minds’ in the
Chinese market. The results are useful for mobile phone brands when they strive to improve
their brand equity in the Chinese market. First, for all mobile phone brands, they should pay
more attention to the improvement of their services and the enhancement of their products’
durability and brand image rather than focusing on intense price competition that has been
taking place in the Chinese market in recent years. Second, according to the current market
status, local mobile phone brands like TCL and Bird, which are in a disadvantageous position
compared with foreign mobile phone brands, should exert greater efforts towards both
enhancing their products’ quality and value and building up their brand personality and image.
Third, there is still room for foreign mobile phone brands to improve their brand equity; for
instance, Sony and Samsung should pay more attention to building up brand personality and
image (especially for Sony), while Motorola and Nokia should exert more efforts towards
enhancing their products’ perceived quality and value.

82
International Management Review Vol. 3 No. 3 2007

References
Aaker, D. A. (1996). Measuring brand equity across products and markets. California Management
Review, 38 (3): 102-120.
Keller, K. L. (1993). Conceptualizing, measuring, and managing customer-based brand equity. Journal
of Marketing, 57 (1): 1-22.
Keller, K. L., & Lehmann, D. R. (2006). Brands and branding: research findings and future priorities.
Marketing Science, 25 (6): 740-760.
Shocker, A. D., & Weitz, B. (1998). A perspective on brand equity principles and issues. Defining,
Measuring, and Managing Brand Equity (Conference Summary Report), Cambridge, MA: 88-
104.
Yoo, Boonghee, & Donthu, N. (2001). Developing and validating a multidimensional consumer-based
brand equity scale. Journal of Business Research, 52 (1): 1-14.
Yoo, Boonghee, Donthu, N., & Lee, S. (2000). An examination of selected marketing mix elements
and brand equity. Journal of Academy of Marketing Science, 28 (2): 195-211.

83