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Procedia - Social and Behavioral Sciences 81 (2013) 40 – 44
1st World Congress of Administrative & Political Sciences (ADPOL-2012)
How Word of Mouth Influence Brand Equity for Automotive
Products in Indonesia
Sri Murtiasih a *, Sucherly b, Hotniar Siringoringo a
a
Gunadarma University, Jalan Margonda Raya No. 100, Depok16424, Indonesia
b
Universitas Padjajaran, Address, Bandung, Indonesia
Abstract
The objective of the study is to evaluate the influence of WOM towards brand equity on automotive customer in Indonesia.
Brand equity in this case is measured using brand awareness, association, loyalty, and perceived quality. Data was collected by
deploying questionnaire and automotive customers were the respondents. Taking into account that research variables (WOM,
brand awareness, association, loyalty, perceived quality, and brand equity)are latent in nature, Structural Equation Modeling
(SEM) was used to perform data analysis. Result shows that WOM influence brand awareness, association, loyalty, and
perceived quality significantly in the positive direction. Subsequently brand awareness, association, loyalty, and perceived
quality influence brand equity significantly and positively.
2013 Published by Elsevier Ltd.
© 2013 The Authors. Published by Elsevier Ltd.
Selectionand
Selection andpeer
peerreview
reviewunder
under
thethe responsibility
responsibility of Prof.
of Prof. Dr. Andreea
Dr. Andreea IluziaIluzia
Iacob.Iacob.
Keywords:Brand Awareness, Brand Association, Perceived Quality, Loyalty, Indonesia, Automotive
1. Introduction
Word of Mouth (WOM) is known to every researcher as an important factor that has a role in consumer decision
making. WOM, in fact is an ultimate factor in consumer behavior. Several previous researches have shown that
WOM is some seven times more effective than newspaper and magazine advertising (Bickart & Schindler, 2001;
Smith, Menon, & Sivakumar, 2005; Trusov, Bucklin, & Pauwels, 2009), four times more effective than personal
selling, and twice as effective as radio advertising in influencing consumers to switch brands (Herr, Kardes, & Kim
1991). Even a research concluded that WOM was nine times as effective as advertising at converting unfavorable or
neutral predispositions into positive attitudes (Day, 1971).
In today's Internet era, consumers seek information through internet, gathering pre- purchase product information
(Adjei et al., 2009; Zhu and Zhang, 2010) that majorly influence their purchase intentions (Zhang and Tran, 2009)
and share the experience they had. This can be called as online WOM (Brown et al., 2007; Chatterjee, 2001; Davis
and Khazanchi, 2008; Godes and Mayzlin, 2004; Kiecker and Cowles, 2001; Xia and Bechwati, 2008). Online
WOM communication is a concern for marketers because it is a source of spreading consumer dissatisfaction
thorough the internet, which is referred to as negative WOM communication. Various studies on the role of WOM
*Corresponding author: Hotniar Siringoringo. Tel.: +62-812-961-7275
E-mail address:
[email protected]1877-0428 © 2013 The Authors. Published by Elsevier Ltd.
Selection and peer review under the responsibility of Prof. Dr. Andreea Iluzia Iacob.
doi:10.1016/j.sbspro.2013.06.384
Sri Murtiasih et al. / Procedia - Social and Behavioral Sciences 81 (2013) 40 – 44 41
on marketing has been done before like of example its influence on brand awareness (Hoyer, 1990; Macdonald and
Sharp, 2000);influence on(the condition of) consciousness, expectations, perceptions, attitudes, behavior and
behavioral intentions (Buttle, 1998); influence consumers to switch brands (Herr, et. al., 1991); influence
expectations and perceptions during the search phase of information and influence behavior during the evaluation of
the pre-selection of the various service providers (Lynn, 1987; Stock & Zinsner, 1987; Woodside &Milner, 1992).
Gil, Andres and Salinas (2007) suggested that the information provided by a family can affect the formation of
brand equity. A person can receive recommendations to buy certain brands from a family that influence his action
based on the facts how well the family establishes the contacts with a number of brands used by the family.
Consumers often think of the family as a reliable reference in relation to the purchase of certain products (Childers
&Rao, 1992; Moore, Wilkie &Lutz, 2002).
However, extensive research on the effects of WOM on the four dimensions of brand equity (viz. brand
awareness, brand associations, perceived quality, and brand loyalty) still remains unexplored to some extent.
Sources of WOM studied on previous researches also been limited to the family, while the WOM source can be
from family, relatives, friends, other people, and experts that are simply not advertising. In this study we extend the
influence of WOM to brand equity thorough four dimensions of brand equity and also by considering various WOM
sources. The purpose of this study therefore is to build a model of brand equity based on WOM to highlight how
WOM affects brand equity.
2. Researh methods
The object of the research is automotive products. Research variables are WOM, brand awareness, association,
loyalty, perceived quality, and brand equity. All the four variables are latent in nature which means manifest
variables should be deployed to define them for measurement purpose. Therefore, a questionnaire was deployed as
data collection instrument through which observation of latent variables could be done. Questionnaire was
developed based on methodology followed by Harrison-Walker (2001) for WOM variable, Yoo, Donthu, and Lee
(2000) and Yasin et al (2007) for brand awareness and association, Yoo et al. (2000), Yasin et al. (2007) and
Chaudhuri and Holbrook (2001) for brand loyalty and Yoo et al. (2000), Yasin et al. (2007) and Dodds, Monroe, and
Grewal (1991) for perceived quality.
Prior to questionnaire distribution, validation and reliability test was performed. Questionnaire was administered
to 214automotive customers both using email and direct distribution. Data was analyzed using Structural Equation
Modeling (SEM).
3. Results and discussion
3.1. Model Validation
As shown in Table 1, indexes of goodness of fit statistics verify that model is a very good fit to the data collected.
Chi-square (P-value), RMSEA (Browne & Cudeck, 1993; Steiger 1990; Hu & Bentler, 1999), GFI (Hu & Bentler,
1999), and NFI ( are the most important indexes on model validation.
It means model proposed is a very good model for WOM and brand equity relationship in Indonesian automotive
customers context.
Table 1. Goodness of fit statistics
Index Acceptance value Value
Chi-Square (P-value) > 0.01 441.63 (0.26763)
Root Mean Square Error (RMSEA) <0.08 0.011
Goodness of Fit Index (GFI) Close to 0.9 is a very 0.920
good fit
Normed Fit Index (NFI) Close to 0.9 is a very 0.857
good fit
42 Sri Murtiasih et al. / Procedia - Social and Behavioral Sciences 81 (2013) 40 – 44
3.2. Model Analysis
In this study we used six manifest variables to measure WOM, four manifest variables for brand awareness, six
manifest variables for brand associations, four manifest variables for perception of quality, six manifest variables for
brand loyalty and five manifest variables for brand equity. As aforementioned, all those indicators are valid
measurement for the corresponding variables. Relationship between variables is shown in Figure 1.
awarenes -0.11
0.12
1.05 associat -0.10
1.00 mouth 1.05 0.22
-0.07
1.04 quality
0.99
loyalty 0.01
0.07 0.65
equity -0.16
Chi-Square=441.63, df=424, P-value=0.26763, RMSEA=0.011
Figure 1. WOM-brand equity model
Based on Figure 1 it can be stated that the influence of WOM on brand equity dimensions are similar, ranging
from 0.99 to 1.05. WOM in this study come from family members, colleagues, experts or other sources (such as
other customers who have previous experiences). Prior to buying, automotive customers sought information from all
those WOM sources. WOM in this context is positive information. This analysis proves that positive information
obtained through family members, colleagues, experts or other sources increases the brand equity.
WOM influence brand association. Exposing information through the
WOM sources creates, modifies and strengthens the relationship between the consumer and the brand, to result in
WOM that impacts their brand association with it. The higher the consumer contact with the brand, the stronger and
more the association will be in the minds of consumers. This relationship is empirically verified by Villarejo-Ramos
and Sanchez-Franco (2005) and Yoo et al. (2000). However, the study by Yoo et al. (2000) combine brand
awareness and brand association into brand image.
For variable, perceived quality, study shows that positive WOM triggers customers toward assessing the brand,
in terms of the perception about the quality perceptions in his mind. The results showed that stronger the positive
WOM received by customer; higher is the perception of quality. Further it shows that positive WOM increases
brand loyalty. The rationale behind this fact could be that by receiving positive information from people you trust,
consumers confident is enhanced more towards the brand.
Overall, the study indicates that positive information through WOM increases brand awareness, brand
associations, perceived quality and brand loyalty. In automotive market, positive information is usually diffused
from one customer to another if they have had a good experience of purchasing a car. It is important so that
consumers feel satisfied and refer brand to others as well. These favorable experiences and buying recommendations
for the product are beneficial from the company perspective.
Investigating brand equity further provides evidence that WOM influence brand equity significantly and
indirectly thorough brand awareness, brand associations, perceived quality and brand loyalty. The effect is in
Sri Murtiasih et al. / Procedia - Social and Behavioral Sciences 81 (2013) 40 – 44 43
positive direction. It was evident that positive WOM helps companies to build strong brand equity. But management
should be aware of WOM diffusion as it could be in negative or positive, especially on internet. Satisfied customers
theoretically distribute positive WOM, but dissatisfy customer on the reverse will diffuse negative WOM
4. Conclusion
Our results have several important implications. WOM communication not just influence and shapes consumer
attitudes and behavioral intentions to purchase (Chatterjee, 2001; Chevalier &Mayzlin, 2006; Herr et al., 1991;
Kiecker & Cowles, 2001; Sen & Lerman, 2007; Smith & Vogt, 1995; Weinberger & Dillon, 1980; Xia & Bechwati,
2008) but more importantly it influences brand equity.WOM communication therefore should be taken into more
consideration by companies. Companies should be aware of the risks of negative WOM communication because
even high brand equity can be significantly diluted by negative online product reviews (Bambauer-Sachse &
Mangold, 2010).
Acknowledgements
This research is funded by Gunadarma University as part of doctoral scholarship. Hence, this research is part of
doctoral thesis work. The authors would like to thank Gunadarma University for supporting this research by
providing funding. We would like also to extend our thanks to Himanshu Dutt who has spent his hours to read and
make some improvement on the grammar.
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