INFLUENCE OF UNETHICAL MARKETING BEHAVIOR ON CUSTOMER-BASED BRAND EQUITY A Thesis Presented to the Faculty of ISM University of Management and Economics in Partial Fulfillment of the Requirements for the Degree of Master of International Marketing By Oleksii Novosad May 2016 INFLUENCE OF UNETHICAL MARKETING BEHAVIOR ON CUSTOMER-BASED BRAND EQUITY 2 Abstract Nowadays the topic of ethics in business receives decent amount of attention. Current studies discovered that business ethics have significant impact on the way consumers evaluate companies and the way they react on unethical behavior in a short-term. This research empirically discovers the impact of unethical marketing on customer-based brand equity as a whole and on all its elements separately. This study surveyed brand attitudes of two groups of respondents which were exposed to two unethical brand scenarios – unfair pricing and dishonest advertising. These two groups were compared to the third control group. The results demonstrated that both unfair pricing and dishonest advertising have a significant impact on the way consumers perceive brand. Unfair pricing turned out to be more harmful for the brand attitude, as it lowered the brand equity to bigger extend. Dishonest advertising, despite having impact on most of the customer-based brand equity, did not impact brand feelings. These findings discover an opportunity for further research on the reasons why some brand equity elements are impacted differently than the others. Moreover, this work opens a request for researching the reasons why ethics impact such a concept as brand equity. INFLUENCE OF UNETHICAL MARKETING BEHAVIOR ON CUSTOMER-BASED BRAND EQUITY 3 Contents Introduction ......................................................................................................................... 5 Background & Relevance................................................................................................ 5 Research Question, Goal, Objectives and Sequence ....................................................... 6 Research design ............................................................................................................... 7 Literature Review................................................................................................................ 8 Introduction ..................................................................................................................... 8 Definitions of Ethics........................................................................................................ 8 Ethics in Business.......................................................................................................... 11 Defining Brand Equity .................................................................................................. 15 Brand Equity and Ethics ................................................................................................ 20 Role of Ethics in Consumer’s Attitudes ........................................................................ 21 Impact of Unethical Pricing on Brand Perception ........................................................ 25 Impact of Dishonest Advertising on Brand Perception ................................................. 31 Conclusion..................................................................................................................... 37 Research methodology ...................................................................................................... 39 Research Design ............................................................................................................ 39 Theoretical Framework.............................................................................................. 39 Conceptual model: ..................................................................................................... 39 Methods and Alternatives.............................................................................................. 41 Setting and Participants ................................................................................................. 47 Scenarios .................................................................................................................... 47 Samples ...................................................................................................................... 49 Instrumentation and Scales............................................................................................ 52 Brand Equity Questionnaire ...................................................................................... 52 Manipulation check & Demographics........................................................................... 56 Hypotheses .................................................................................................................... 57 Variables........................................................................................................................ 58 Internal Validity ............................................................................................................ 59 External Validity ........................................................................................................... 61 Empirical Results .............................................................................................................. 61 Manipulation check ....................................................................................................... 61 Univariate Analysis of Variances .................................................................................. 64 INFLUENCE OF UNETHICAL MARKETING BEHAVIOR ON CUSTOMER-BASED BRAND EQUITY 4 Multivariate Analysis of Variance ................................................................................ 68 Causal Effect ................................................................................................................. 75 Hypotheses Revised ...................................................................................................... 76 Discussion and Conclusions ............................................................................................. 77 Discussion ..................................................................................................................... 77 Conclusions ................................................................................................................... 81 References ......................................................................................................................... 82 INFLUENCE OF UNETHICAL MARKETING BEHAVIOR ON CUSTOMER-BASED BRAND EQUITY 5 Introduction Background & Relevance The issue of ethics in business has significant importance and relevance. Despite the lack of consensus in defining ethics as a concept, many researchers are addressing it in psychological, philosophical and managerial literature (Richardson, 2003; Narvaez, 2008; Van Slyke et.al, 2012; Bruni & Sugden, 2013; Timpe & Boyd, 2014, as cited in Alzola, 2015). This study in particular regards to business and it's rather controversial side – marketing. The research of business ethics was enriched with various studies. Part of them has been dedicated to marketing ethics in particular. As a result, marketing ethics in recent 50 year drew dramatically attention of ethics publishers (Schlegelmilch and Oberseder, 2010, as cited in McClaren, 2015) As an attempt to study ethical concerns in business empirically, a research by Chonko and Hunt was made. One of its purposes was to figure out what ethical problems in business are most common and relevant for managers. Findings pointed at 8 ethics issues businessess face the most. Some of them are related to human resource management approach (e.g. prejudice in hiring), others are expressed in contract violations, and some are triggered by direct marketing actions (1985). This study focuses on studying marketing ethics in particular. Therefore, only two relevant problems will be tested. They are: unfair pricing policies and dishonest advertising techniques. Reflecting on the concept of honesty, researchers made some important notices about the role of advertisement in the overall morality of marketing. “In order for companies to engage INFLUENCE OF UNETHICAL MARKETING BEHAVIOR ON CUSTOMER-BASED BRAND EQUITY 6 in the marketing of good corporate conduct in a morally acceptable fashion, companies must not produce a barrage of ads that encourage faulty reasoning” (Stoll 2002) Research Question, Goal, Objectives and Sequence A number of studies proved that firm's unethical behavior has an impact on the way consumer evaluates the company as a brand. Especially, controversial business techniques negatively impact consumer trust. (Leonidau, et.al. 2013). Some other studies demonstrated how buyers' moral evaluation of a company can affect their brand commitment. Ingram, Skinner and Taylor discovered that "If corporate actions are perceived, as unethical, the company stands to lose favor with their most committed customers" (Ingram, et.al. 2005). Organizational commitment and loyalty (resonance), according to Keller are at the top of consumer-based brand equity pyramid (2003). This thesis aims to answer the question how in particular unfair pricing and dishonest advertising influence each of the customer based brand equity (CBBE) elements. The goal of this work is to find out precise consequences of previously mentioned unethical behaviors to the elements of brand equity. This will allow making empirical conclusions regarding actual consumer response to marketing ethics. In order to achieve this goal, a number of objectives should be completed along the way. First of all, as the study relates to such a concept as ethics, it is important to find out how the term can be defined and what the definition depends upon. Secondly, despite the gap in research of consumer-based brand equity relation to ethics, this study discovers what is already known about business ethics' influence on specific separate elements related to CBBE. Thus, INFLUENCE OF UNETHICAL MARKETING BEHAVIOR ON CUSTOMER-BASED BRAND EQUITY 7 literature review chapter will be divided into three main parts. First one will focus on defining ethics and discovering their effect on consumer perception of a firm in general. Second part will be focused on the concept of customer-based brand equity. The third part will provide an overview of unfair pricing and dishonest advertising consequences in businesses. Reviewing the relevant literature will provide an opportunity to informatively formulate a theoretical framework for the empirical study to follow. After the model is formulated, next objective is to find out an optimal methodology for measuring the impact of unfair pricing and dishonest advertising on brand equity. Research design As the research goal focuses on finding precise consequence of brand's unethical behavior, methodological design should make sure to provide a research design, where participants could be exposed to an unethical behavior of a brand. In this case, the respondents will be asked to fill in a scenario based questionnaire about their judgement on the brand. Completion of the empirical study will allow drawing conclusions about actual consumer response to marketing ethics. This study has both theoretical and practical values. As it was mentioned earlier, drawing the empirical conclusions allows formulating a data-supported theory regarding the effects of ethics on brand equity. More precisely, these effects will be discovered separately for each element of brand equity, and consequently, the theory will be able to describe the impact of ethics on different levels of involvement with the brand. Same theory can influence practical managerial decisions regarding ethics. Businesses will be able to evaluate the impact unethical INFLUENCE OF UNETHICAL MARKETING BEHAVIOR ON CUSTOMER-BASED BRAND EQUITY 8 marketing has on brand perception. However, the reaction on this impact will not be suggested and will remain up to businesses to decide. Literature Review Introduction This thesis seeks to synthesize understanding of marketing ethics and consumer-based brand equity. Consequently, the following chapter will review the literature on both concepts separately, as well as on possible correlation between them. For this, the sections of Literature Review chapter will consist of defining the key concepts and combining them together. For the moment being ethics are widely researched (Schlegelmilch and Oberseder, 2010, as cited in McClaren, 2015), include much controversy (Mohammed, et.al, 1999), and in terms of their effect, lack of ethics can negatively impact company’s sales (Shehryar and Hunt, 2005). More precise impact on company and brand is the target of this chapter. Definitions of Ethics One of the cross-cultural studies of consumer perceptions about marketing ethics states: "of all the business functions, marketing probably receives the most scrutiny, generates the most controversy, and faces the most criticism about ethics" (Mohammed, et.al, 1999). Ethics in general have a tight connection with values. Payne and Pressley note: "Any discussion of ethics, whether general or business, must begin with the concept of values, which can be defined in different ways" (2013). Even though these values may vary in definition for different companies, violating them can be fairly called unethical behavior. Moreover, the INFLUENCE OF UNETHICAL MARKETING BEHAVIOR ON CUSTOMER-BASED BRAND EQUITY 9 authors highlight that "Making moral or ethical judgments implies that the decision-maker is concerned with the moral rightness or wrongness of the decision, rather than the legality of the decision" (Payne and Pressley 2013). This means that looking at unethical marketing behavior, it should keep in mind that for instance even though certain techniques may not necessarily be illegal per se, nevertheless, they can be considered unethical. For example, many pricing policies may often be legally justified; however some of them can explicitly violate unwritten rules of honesty and transparency. In such a case, if fairness values (even though they are subjective) are compromised, they will nevertheless be considered unethical. Proceeding with the topic of ethics’ nature, nowadays research introduces us such a concept as moral law in contrast to a legal law. The main concerns of the study – is the issue or right decision being or not being in line with the letter of the law. In fact abiding to the law is not something a person can do or not do by own choice (Preston, 2010). Some authors claim that marketing ethics come from business ethics as an extension. Researchers point out that "Brinkman (2002) provided both a broader definition of ethics, as well as a more narrowly focused definition of marketing ethics" (Brinkman, 2002, as cited in Payne and Pressley, 2013). The authors mention that according to Brinkman: "marketing ethics is an extension of the basic definition of ethics.” Later they explain that Brinkman’s “categorization of marketing ethics supports the proposal that general business ethics are a suitable base for constructing a single marketing ethics code that everyone in the fields of marketing could utilize" (2002, as cited in Payne and Pressley, 2013). Others say “Unethical activities not only create a negative view of business but also affect corporate profitability, co-worker relationships, job INFLUENCE OF UNETHICAL MARKETING BEHAVIOR ON CUSTOMER-BASED BRAND EQUITY 10 performance, and job satisfaction.” (Keith, et.al., 2008) Although, despite possible argument of being more experiences, “large firms are more likely than medium sized firms to have experienced detection of transgressions”. (Gazley et al., 2015) Following this logic, Payne and Pressley (2013) conclude that among businesses, such a term as ethics can have a universal formulation. They state that "a single code of ethics for all business professionals, including marketing professionals, is reasonable and may be a good solution for those professionals confronted with ethical dilemmas." (Payne and Pressley 2013). There is also a different opinion on possibility of a single code of ethics in an organization. Some authors point out that “While our results confirm the importance of these codes of ethics and the need to have them in the company, they also reveal that codes of ethics in themselves are insufficient to create a strong ethical” (Lavorata, 2007) On the other hand, the opposing point of view remains at hand. Discussing the issue from the standpoint fairness it has been noted that “Ethical principles prohibit deceptiveness, too, and also other unfair acts. Unfairness is a difficult concept” (Preston, 2010). Continuing the topic, Preston describes ethics as “not rules in the same sense that legal restraints are. They are neither uniformly nor formally agreed upon by all members of society, nor can the offenders of ethical rules be sanctioned or punished as by law.”(2010) Nevertheless for this thesis in particular, the discussion means that exposing the participants to an unethical behavior scenario can have credibility if all the participants of a sample are exposed to the same ethics controversy scenario. Besides, the conclusion about universalizability of business ethics' definition imply that disregarding various factors (e.g. such INFLUENCE OF UNETHICAL MARKETING BEHAVIOR ON CUSTOMER-BASED BRAND EQUITY 11 as culture, sensitivity towards ethics etc.), all the participants of a sample who qualify presented behavior as unethical, can be tested for their reaction towards the brand. In other words, possibility to generalize business ethics addresses the issue of subjectivity of ethics definition. Researchers however, also introduce such concepts as moral myopia. According to the definition it is: “a distortion of moral vision, ranging from shortsightedness to near blindness, which affects an individual's perception of an ethical dilemma” (Drumwright and Murphy, 2004). They proceed with saying that this myopia makes the issues of morality become more vague and undefinable. Especially in some cases it can make consumer start ignoring and not seeing the issue problems at all. (2004) Therefore, exposing consumers to moral dilemma in the thesis should account for subjectivity of this concept. Yet, “as future business executives and employees, the ethical views held by college students will impact corporate culture.” (Keith, et.al., 2008) Ethics in Business Some publishers describing the relevance and applicability of ethics in business setting mention: “Writing and discussing an ethics statement emphasizes the importance of ethics to internal constituents, and perhaps even has self-fulfilling dimensions.” (Drumwright and Murphy, 2009) If ethics indeed come onto the level of self-fulfillment, the sphere where they don’t want to be ignored for sure – is business. Therefore, in this section, let us take a deeper look at the research which has been done regarding more specifically in the field of marketing ethics. First of all, the issue of ethics in marketing is often described as having significant importance. It was claimed that ethics in advertising is a constantly developing narrative, which INFLUENCE OF UNETHICAL MARKETING BEHAVIOR ON CUSTOMER-BASED BRAND EQUITY 12 changes as dynamically as the advertising industry does. And in recent times, it probably has being among the most revolutionary topics for this industry. (Drumwright and Murphy, 2009) Research shows that as the time passes by, working for an advertising agency people become more and more conservative towards viewing ethics within the realm of their profession. (Keith, et.al. 2008) One of the reasons for this – is the recent trend of consumer request for corporately social behavior on the side of the supplier alone with legislative requirements for it. Marylyn Carrigan and Ahmad Attalla in their study explain: "legislation has played a part in raising consumer expectations of marketing behavior, and regulation has also helped move us from the "caveat emptor" position of the 1960s to more socially responsible era in marketing” (2001). Moreover, studies proved that there is a demand for mentoring design which would train people to be socially responsible advertising people this can have implication for future as well as for the present time. Such programs and the system which can be created alone with them must be designed so that employees could build up their own standards of ethics (Keith, et.al., 2008) The authors proceed admitting that similar steps to these have already been taken. One of them was the introduction of ethics programs in universities. They point out that in fact universities’ textbooks are also concerned with ethical issues in marketing nowadays, and therefore they include these topics into their chapters. (2008) An interesting point about contrasting ethics and morality was brought up by Brennan et al. The authors argue that: INFLUENCE OF UNETHICAL MARKETING BEHAVIOR ON CUSTOMER-BASED BRAND EQUITY 13 “Intensifying efforts to instill ethics may result in more ethics but less morality… we may wish to reconsider the certainty with which we are presenting ethics in the teaching of marketing. Instead, we propose that educators must examine how individuals seek to maintain manageable impressions of ‘the other’.” (2010) This statement provides additional and rather unusual view on definition of such a concept as ethics. Answering the question of why at all consumers are concerned with ethics when it’s about big brands, authors interestingly point out that the consumers “have little choice. The only way out of the ethics/capitalism dilemma is to exit the market altogether and to accept a different logic of production, distribution and consumption.” (Egan-Wyer et al., 2014) As for ethics in advertising for instance, some suggest that the question is usually a controversial topic. There always will be a sense of significance and disagreement regarding this topic. The authors point out that this topic is discussed also in the governmental sphere. Namely, some legal activity is noticed on this regard. (Drumwright and Murphy, 2009) Speaking of a selfregulation in ethics, author note that: “Self-regulating codes of conduct are needed to establish the personal responsibility of senior management when non-compliance occurs. However, senior management and corporate credos can be a major stumbling block for establishing sound ethical norms tor intra-firm trade and pricing.” (Mehafdi, 2000) Other authors add up that it is crucial for entities to get involved in advertising techniques which contain a certain good level of corporate responsibility. One of the ways how this responsibility can be expressed – is through the consumers get all relevant and truthful information about the product. (Stoll, 2002) The researcher argues that although it can be INFLUENCE OF UNETHICAL MARKETING BEHAVIOR ON CUSTOMER-BASED BRAND EQUITY 14 considered not correct for marketers to benefit from consciously deceitful information is that it is even more so not correct to act unethically due to the mere aim of gaining profits (2002). Some authors however, take a less conservative position on this topic. They argue that in case a consumer accepts the way how he or she was treated after reflecting on it, this treatment is not considered as such, which uses the consumer as a mean. This is based upon the conclusion that a person becomes rational after reflection. The approach is called reflective rational person approach (Wible 2011). There are several applications of such an approach. In terms of marketing ethics it means if the consumers accept the marketers’ actions, there should be no concern regarding the ethics of the activity the marketers exposed their potential buyers to. Although it also may be true that “If moral issues are not seen at all or are somehow distorted, it is highly unlikely that sound ethical decision making will occur.” (Drumwright and Murphy, 2004) In response to the trend, many multinational firms create their codes of conduct "to demonstrate their commitment to better business behavior (e.g. Levi Strauss, The Body Shop)...marketing ethics/societal marketing are key tracks at marketing conferences, as well as being priority topics for research (Carrigan and Attalla, 2001)". In other words, the topic of ethics in business and marketing nowadays becomes prerequisite for building a brand image. Others adhere to an adaptive marketing philosophy, which implies marketers’ responsibility both to the stockholders of the firm and to the society overall. (Chitakornskijsil, 2012) Authors also point out that “Ethical considerations in a marketing course cannot be bolted-on or perceived as ‘extras’. Indeed, the very notion that ethics can be dealt with in a special session suggests a reliance on technologies of ethics such as teleological or deontological approaches.” (Brennan et INFLUENCE OF UNETHICAL MARKETING BEHAVIOR ON CUSTOMER-BASED BRAND EQUITY 15 al., 2010) The author also admits that “just as marketing strategies are subjected to the regimes of economic measurement, so ethics is reduced to a calculation of moral potential.“ (2010) This brings up a conclusion that measuring ethics in business setting should account for the potential of such a concept as morality. Defining Brand Equity Brand equity – is the term which nowadays gets quite much of attention. Researchers, even though referring to the similar thing have quite many different definitions of it. There has been mentioned two most influential models of brand equity. One of the perspectives to look at brand equity – is as a consumer-based perspective. This perspective focuses on the analysis of influence made by consumer perception and behavior models on final buying decision (Keller, 2003; Kotler & Keller, 2007, as cited in Ruzeviciute and Ruzevicius, 2010). Looking at the models in particular though, there are several possible approaches to consumer-based brand equity. One model was designed by Aaker (1996). It included ten measures and was divided into five categories. Four elements were related to consumer-based brand equity and fifth category was measuring performance in particular (1996, as cited in Oliveira-Castro, et.al.,2008). Keller argued though that brand equity is predominantly based on consumer knowledge about the brand. In his model he introduced also such elements as brand awareness and brand image. Brand awareness relates to customers’ recognition of the brand and brand recall. Brand image, in its term clues in the associations the customers have with the brand (1993 as cited in OliveiraCastro, et.al.,2008). Regarding the brand equity possession, it is worth noticing that naturally, the brand equities of firms oftentimes can be very different (Wang and Fin, 2014) Therefore, in INFLUENCE OF UNETHICAL MARKETING BEHAVIOR ON CUSTOMER-BASED BRAND EQUITY 16 order to research consumer-based brand equity both models and the process of acquiring brand equity should be studied. Seeking to come up with a comprehensive definition of brand equity bring up a series of analysis: "Brand equity, as defined by Keller, occurs when a brand is known and has some strong, favorable and unique associations in a consumer’s memory” (1993, as cited in Pope et. al, 2008) Later the researchers highlight that the model developed by Keller view building a strong brand as four separate steps (Pope, et.al. 2008) They proceed paying readers’ attention at the fact that "These steps in turn consist of six brand building blocks – salience, performance, imagery, judgments, feelings and resonance." (Pope, et.al. 2008) Therefore, in this particular research namely Keller’s model will be used, thanks to its clarity and division into precise elements of brand equity and separate levels for them (Figure 1,). Figure 1 – Keller's Brand Equity Model “From "Strategic Brand Management: Building, Measuring, and Managing Brand Equity" by Kevin Lane Keller. © Pearson Education Limited 2013.” (as cited in Mind Tools Ltd, 1996-2016) INFLUENCE OF UNETHICAL MARKETING BEHAVIOR ON CUSTOMER-BASED BRAND EQUITY 17 Proceeding with analysis of Keller’s model itself Pope et. al. notice that the model ignores those elements which relate to supporting services (2008). However, Keller himself, describing the model in 2001 mentioned supporting services being part of the brand equity elements depicted in the pyramid. Namely, it was mentioned in contest of such an element as judgment (2001). Besides, Pope et. al. refer to present research which attempts identifying brand equity and brings up similar explanation as Keller brought. In particular Pope et.al. say: “Similarly, Thompson et al. (1998) identify other brand attributes associated with the industrial purchasing process. Again, many of these are consistent with Keller’s brand meaning construct, but attributes such as technical capability, delivery reliability and responsiveness are not included." (Pope, 2008) Overall though, branding is not a simple process and it requires much time and organizational efforts. (Ruzeviciute and Ruzevicius, 2010) As a demonstration of this complexity, research involves findings of the impact of brand equity elements on financial performance of an organization. These findings indicated that brand loyalty has one of the least effects on financial performance of organization and it is an exponential factor of brand quality and brand awareness. Thus, in order to improve loyalty, a company must get to a certain level of awareness and quality. (Aydin and Ulengin, 2015) Talking about accommodation of brand equity it was pointed out that “In trying to create strong brand equity, company should be interested in assessing the degree of customer brand dependence. The brand strength depends on the perception of customers. Satisfied and loyal customers indicate positive perceptions of brand”. (Ari and Natarajan, 2011) INFLUENCE OF UNETHICAL MARKETING BEHAVIOR ON CUSTOMER-BASED BRAND EQUITY 18 It is suggested that marketing professional should realize how different customers can be and how it influences their evaluation of the brand. Especially if the managers work in an international context, they must be able to identify the appropriate source of where the brand equity comes from and realize how different the levels of brand equity may help to expend the measurement of brand equity (Adil, 2014). Researchers found out that “Consumers with a high cognitive need may evaluate more brands than other consumers who may tire easily and thus evaluate fewer brands.” (Wang and Fin, 2014). It was also found out that consumer based brand equity is tightly connected with and affects entity’s unsystematic equity risk. According to the study, this consumer-based brand equity’s effected greater than it would have been on the systematic risk. (Rego, 2009) Brand awareness in its turn has been perceived as important dimension of CBBE. Therefore, academia and professionals can use the research of consumer based brand equity in order to understand how brand elements may impact consumer satisfaction. Also they can come up with a necessary strategy. (Adil1 2014) Besides the need to measure own firm’s brand equity, managers also feel the need to measure brand equity of their competitors (Wang and Finn, 2014). Unlike it was in the past, nowadays brands contain much of different information, and which does not serve as a mere mean of identification. Rather it relates to intangible attributes (Ruzeviciute and Ruzevicius, 2010). Although, some minor studies in the field of durable goods suggest that within the indicated industry, certain elements of brand equity are mutually exclusive and that predominantly significant components are performance, attachment and trustworthiness. (Nalina, 2008) INFLUENCE OF UNETHICAL MARKETING BEHAVIOR ON CUSTOMER-BASED BRAND EQUITY 19 Looking at the topic of branding power in food related industries, publishers point out consumer dilemma about commitment to certain brands when these brands do not make healthy food, yet give it some other positive qualities: “The risk is that existing consumers may feel alienated - potato chips with reduced potato will be less filling than the originals, and possibly taste sufficiently different to make consumers change brands.” (Market Watch: Global Round-up, 2004) As a solution the authors consult: “to reposition carbohydrate based snack and drinks as indulgent foods. This would avoid the problem of adding a healthy positioning to products that the public has always known were unhealthy and allow the product to trade on its strengths”. (2004) Some argue that the basis for customer-based brand equity defined from the perspective of consumer lays in customer knowledge, familiarity and associations (Washburn and Plank, 2002, as cited in Hawley, 2009) However, researchers claim that without having a reliable research which would evaluate their company’s performance and the performance of relevant brand, there are not many chances to find appropriate strategies for have a realistic realization of their brand situation (Wang and Finn, 2014). Despite certain ambiguity of the term brand equity, it is believed that it is very important to purposefully build brand equity for those product categories which are heavily branded (Hawley, 2009). Another important study proved that determinants of brand, which relate to image, such as symbolic, service and finance attributes can be counted as major drivers of brand equity in such services industry. In particular, the study was conducted with intention to discover brand equity dynamics and impacts in consumer choice of university (Vukasovic, 2015). Besides, the study demonstrated that consumer attributes in this context did not have any significant impact on the way consumers rated the brand equity. From INFLUENCE OF UNETHICAL MARKETING BEHAVIOR ON CUSTOMER-BASED BRAND EQUITY 20 this, it can be concluded that focusing on maintaining and developing the determining factors of consumer-based brand equity, can assist managers and marketers in positioning of their service on the marketplace and this was influence the choice of consumer (Vukasovic, 2015). Some authors also introduce such a term as brandability. According to the definition it means the way how excessive branding impacts the behavior of consumers and as a consequence – how it impacts brand performance in respective product category (Oliviera-Castro, et al. 2008) Even though this very term will not be used in this particular research, the term’s meaning is very tightly connected to current study, however it unveils the impact flow in an opposite direction – discovering how branding impacts consumer attitudes instead of visa versa. Brand Equity and Ethics The significance of studying namely brand equity elements can be noticed in the study of Carrigan and Attalla, which describes the following pattern among the respondents: "Within the past year, over half had bought a product or recommended a company on the basis of its ethical reputation" (Carrigan and Attalla, 2001). Thus, ethics may not only influence consumer attitudes to a brand, but also significantly impact the resonance about it. Continuing this idea, other researchers point out “Because environment issues have become a main- stream in the world, the environmentalism of consumers had increased in the early 1990s such that consumers are willing to purchase products which are more environmental friendly”. (Chen, 2010) Similarly, some significant negative impact can be noticed being connected to the ethical activity of an entity. "A recent survey by brand marketer Corporate Edge (Rogers, 1998) found that 57% of their sample said they would stop buying a brand if they knew child labor had been INFLUENCE OF UNETHICAL MARKETING BEHAVIOR ON CUSTOMER-BASED BRAND EQUITY 21 employed, and 21 percent supported action against companies they perceived unethical." (Carrigan and Attalla, 2001) Despite some exploration in the area, as it was mentioned earlier, the existing research does not cover the topic enough to understand the situation form a broader perspective. Namely, the area, which was understudied, is the consumer side. Researchers quote Hunt and Vitell, mentioning that "despite the amount of attention given to marketing ethics in recent years, the buyer side of the exchange process remains under-researched.” (1992, as cited in Carrigan and Attalla, 2001). Researcher Abela well formulates a definition of brand integrity in the following way: “By brand integrity, what is meant is the idea that a brand’s values are: clearly conveyed in all its communications; realized consistently through its products and services; congruent with the values espoused by the corporation that owns the brand; accepted and adhered to by all members of the corporation; and found to be agreeable and attractive by its customers and the communities within which it operates” (2002) Such a definition comprehensively describes which attributes may be acquired to such a possibly indefinite term as brand ethics. Role of Ethics in Consumer’s Attitudes An important question to ask – is what influence the lack of ethics in marketing has on the supplier from the demand side. In particular, what impact does unethical behavior have on the buying behavior or brand overall? It may seem natural to claim that all ethical practices will INFLUENCE OF UNETHICAL MARKETING BEHAVIOR ON CUSTOMER-BASED BRAND EQUITY 22 be rewarded with a positive attitude from consumers, whereas unethical activities will be punished by consumers in bad attitude towards the brand. However, the authors of previously mentioned study, talking about consumer brand perception, indicate that "efficient decision making requires consumers to be fully informed, yet information does not guarantee reaction to unethical behavior in return" (Carrigan and Attalla, 2001). Moreover, according to Folkes and Kamins, the relation between positivity of consumer attitude and ethics of a company can be in fact complex, and depend on various factors (Folkes and Kamins, 1999). For example, it was discovered that "Vices detract from attitudes more than virtues enhance them (Reeder and Brewer, 1979; Skowronski and Carlston, 1987, as cited in Carrigan and Attalla, 2001), and for this reason, those consumers to who ethics is important, do not always buy ethically consistently” (Carrigan and Attalla, 2001). According to the previous research, unfair pricing and dishonest advertising are among the most frequent issues of marketing ethics consumers claim that they encounter. This highlights consumers' attitude towards certain unethical behaviors. The degree of fairness converts into an emotion of satisfaction or dissatisfaction (Shehryar and Hunt, 2005). Besides, unfair pricing also can make consumer trust disappear and this way, to cause a negative resonance (Hess, 1995, as cited in Story and Hess, 2010). However, the intensity of consumer's response to unfair pricing is dependent on the harm they receive, and if the consumer commitment is high, relatively harmless unfairness can be forgiven (Ingram, Skinner and Taylor, 2005). INFLUENCE OF UNETHICAL MARKETING BEHAVIOR ON CUSTOMER-BASED BRAND EQUITY 23 Studying the effect of customer-based brand equity’s effect on firm’s financial performance, several important researches should be mentioned. One of them found out that associations and awareness combined together is the most important factors which impacts the size of operations. The higher the awareness of general publics about the brand, the more potential the firm has on in terms of the potential market. On the other hand though, in terms of purely financial indicators, the knowledge factor did not have any impact on the current ratio of the firm. This brings us to the conclusion that population’s awareness about a brand does not necessary turns out into an advantage for a firm in terms of ability to pay a debt or to carry it (Aydin and Ulengin, 2015). Studies demonstrated that brand has also a significant impact on the way how consumers chose services. Namely, one of the studies which proved it was conducted in the sphere of education and examined the impact of brand on the way potential students chose university. The findings demonstrated that brand played an important role in the criteria against which the consumers were choosing their university. (Vukasovic, 2015) Studying consumer response to unethical activities, some other interesting phenomena have been discovered and need a careful consideration. Some study mentioned that "Consumers would still buy products from unethical firms, but only at a lower price - the cost of poor ethics” (Creyer and Ross, n.d., as cited in Carrigan and Attalla, 2001). This means, that while studying the attitude of consumers towards firm's ethical performance, one should mind other possible incentives which shape buying behavior after an unethical activity has been performed. However, in order to truly understand the effect of unethical behavior of businesses should rather take a INFLUENCE OF UNETHICAL MARKETING BEHAVIOR ON CUSTOMER-BASED BRAND EQUITY 24 deeper look at what impact a certain activity has on brand equity elements, such as brand image, brand feelings and resonance. On the other hand, sometimes consumers are not as sensitive to an unethical behavior of a firm. The degree of sensitivity and its criteria is not yet researched enough to make a definite conclusion. According to a study, the degree to which they are concerned may strongly depend on their personal attachment to the ethics issue the company is violating. The scholars say "It may be that ethics only matter to consumers if they have a vested personal interest in them, and they would be personally positively or negatively affected by the behavior" (Carrigan and Attalla, 2001). Whereas the other research concluded that "Consumers are interested in ethical behavior beyond those issues that directly impact on them, and would be more discriminating in their purchases if they were given more information about ethically and socially responsible activities" (Dragon International, 1991 and Simon, 1995). One of the explanations for this is that "consumers have little specific knowledge about individual firms, but rather view ethics on a macro basis in terms of "general" business misdemeanors " (Carrigan and Attalla, 2001) and subsequently "poor ethical record has no effect on purchase intention" (Carrigan and Attalla, 2001). If this explanation is true, finding an impact of ethics on brand equity may be a challenge. Yet looking for this impact will automatically question the statement about lack of personal attitude towards an individual firm in regards with ethics. Hence, studying impact of ethical violations on brand equity may have rather unexpected findings. INFLUENCE OF UNETHICAL MARKETING BEHAVIOR ON CUSTOMER-BASED BRAND EQUITY 25 Impact of Unethical Pricing on Brand Perception As a basis for unfair pricing claim serves an example from Marketing News magazine: “Supermarkets are moving to distance themselves from the Office of Fair Trading's (OFT) report into misleading price advertising by distinguishing the "legitimate" deals offered in the sector from the questionable practices outlined in the report” p.8 (Baker, as cited in Marketing News, 2010) Going deeper into the most troublesome scenarios of ethics violation by marketers, let us analyze the essence of these problems. First of all, it was mentioned that unfair pricing is a common problem of marketing ethics. Interestingly, it is in fact suggested that one of the reasons for such a problem to exist - lays in the customer perception of price fairness concept. "Buyers compare their outcomes with other buyers and fairness judgments are a result of such comparisons (Xiaet al., 2004). Fairness judgments give rise to emotions that manifest themselves as consumer satisfaction or dissatisfaction with the seller and/or the product" (Shehryar and Hunt, 2005). Hence, it is important to realize that defining pricing as unethical, a special attention should be given to possibilities the consumers could have had regarding comparing their price to others. The scholars continue stating that "Consumer fairness perceptions are composed of both distributive and procedural components", concluding that customer "who finds that others paid less money for the same service should feel upset and angry over the perceived inequality. In this case, anger is an emotion that arises from a judgment of distributive fairness pertaining to the final price.” (Shehryar and Hunt, 2005) The authors continue with an example: “consider that an INFLUENCE OF UNETHICAL MARKETING BEHAVIOR ON CUSTOMER-BASED BRAND EQUITY 26 airline representative charged two passengers different prices because of differences in their weights. The fairness judgment of the passenger charged a higher price includes an assessment of the seller’s principle that led to the unequal outcome" (2005) Regarding pricing techniques and sales overall, some important insights from the side of literature and publishers has been made. Even though some of statements about this topic seem rather controversial, nevertheless they may bring some valuable understanding of the issue. One of the authors pointed out that “Sales and free items stupefy the mind. Yet, the exposing of our weakness and marketer’s deception does not mean we should prohibit such techniques. Rather we should allow deception within limits.” (Wible, 2011) The author bases this conclusion upon his claim that marketers have a right to exercise misleading activities in case the consumers are rational and can make sense of the situation. (2011) In regards with price itself there even are some state laws which target the unfair claims about the pricing of a company. These laws do not exist in every country though. Still in some they do. For instant the law of Arkansas has a regulation towards the wholesale price claims. The law states that in order for a company to be able to claim that the price is wholesale, it should either be selling only to the retailers or if it is a retailer it can claim that the price is wholesale only if it sells the product for the same price as bought from its suppliers. The technique to sell for the wholesale price and thus making no profit – is sometimes used among mall retailers (Gardner, 2007) Looking at the role of law in general though, researchers point out that “relationship does exist between the interaction and a firm's previous transgression. The reason there is an INFLUENCE OF UNETHICAL MARKETING BEHAVIOR ON CUSTOMER-BASED BRAND EQUITY 27 interaction relationship but not a direction may be because detection is a necessary precondition to fully comprehend the risk associated with illegal activity”. (Gazley et al., 2015) The author continues that “It is, therefore, important for regulatory agencies to maintain a visible presence in the market-place. This can come about through more convictions and ensuring that such cases receive a high media profile”. (2015) Thus, a conclusion can be made that legal laws can forcefully regulate business’s ethics through being mandatory. However, some point out that even violation of legal laws can be triggered by ethical misbehavior. It is more important that the parties who do so can be the law enforcers themselves. The authors admit: “Some legally incorrect decisions may be reached as a result of negligence or incompetence. In other cases, judges may fail to recuse themselves from conflict of interest. For instance, they may deliberately make incorrect decisions for self-serving reasons”. (BrandBallard, 2011) This confirms the theory that unwritten rules sometimes may be even more strict and more important than legal laws. Some of the studies demonstrated an occurrence when retailers hold more responsible for increased prices in demand increase conditions as well as control increase conditions, whereas the manufacturers were more responsible for price increase in the supply decrease condition. Yet as a result, both the retailers and the manufacturers faced the same request from consumers – to take responsibility for the prices increase. (Ratchford, 2014) With this been said, it can be concluded that ethical responsibility for price manipulation lays on those who a price technique may be associated with. INFLUENCE OF UNETHICAL MARKETING BEHAVIOR ON CUSTOMER-BASED BRAND EQUITY 28 Some studies indicated that when price is increased due to the fact that manufacturing costs were increased, this price increase is considered rather fair. However, when the same logic is exercised by a retailer, the consumers are much less forgiving and they tend to believe that the price increase was not justified. The conclusion of this study indicates that there is evidence that consumer perception of price being unfair may skew to the direction of downstream entity if there is an absence of qualifying information that shifts the blame upwards. (Ratchford, 2014) Interpreting the findings in the context of this work, an important takeaway is that consumers are sensitive towards the reasons for price changes. If the reason is does not sound convincing enough, this price change is likely to be perceived as unfair. One of the possible explanations for such phenomenon can be one of the previously mentioned studies, which related to consumer’s personal interest and interest in financial benefits while evaluating price ethics. (Carrigan and Attalla, 2001) Reasonable change in price in such a case may be considered if not an issue of pure ethics, then the issue of fairness. In own turn, authors point out, the concept of ethics and fairness can be inserted into one paradigm world, as they exist in different ones in terms of how they are found in products. It is stated that “Fair Trade does not simply launch one ethical world into a product, but instead we find multiple ethical worlds. Each of these is based on distinct standards, certification processes, notions of ethics and Fairness.” (Neyland and Simakova 2009) This way, using concept of fairness may be very close or even interlinked with such a construct as ethics. Another reason for perceiving price as unfair may be consumer’s perception of price discrimination. According to research, for instance such a social group as students and such a group as elderly people are not likely to be charged higher prices than are considered to be fair. INFLUENCE OF UNETHICAL MARKETING BEHAVIOR ON CUSTOMER-BASED BRAND EQUITY 29 On the contrary these groups of people oftentimes face discount opportunities. Therefore, overall social perception of price fairness for students and elderly is usually within limits of being fair. However for example price discrimination based on gender is considered to be unfair. (Okada, 2014) Possibly, this suggests that besides intentional price ethics violations, there are some possible negative ethical evaluations, which were neither intended nor expected by the firm to be as unfair. As it was indicated in the gender case, price difference for genders may fall into the category of gender price discrimination and as a result become considered as unfair. Nevertheless, there can be multiple effects of perceived unfair pricing on the business. One of them relates directly to sales results. The authors point out that "lack of fairness on the part of sellers leads to lost sales." (Shehryar and Hunt, 2005). Besides, brand as a whole can make cash flow of the company more vulnerable in terms of ability to repay debt (Rego et al., 2009).Yet along with the effect on sales, it is logical to conclude that unfair pricing, being part of unethical marketing behavior also has an impact on brand elements. One of the reasons to believe so – is the study about trust to a brand. The study discovers that part of trust towards the brand is clued in its trustworthy pricing. The authors discuss: "When customers disdain other brands, they implicitly trust their chosen brand to charge a fair price, which violates the assumptions of more liberal ethical frameworks. When trust and loyalty increase, brands then become responsible for a higher level of care and, inevitably, these ethical burdens translate into financial costs." (Story and Hess, 2010) Interestingly enough, in regards with firm’s financial performance, some studies mention loyalty as a factor of consumer-based brand equity has the least weight in terms of potential INFLUENCE OF UNETHICAL MARKETING BEHAVIOR ON CUSTOMER-BASED BRAND EQUITY 30 improvers of financial performance. (Aydin and Ulengin, 2015) The most impactful factor the authors pointed out was perceived quality. The second place in the ranking was taken by brand awareness and brand associations. (2015) From this, it can be concluded that in order to improve immediate financial performance per se, a company should pay attention towards perceived quality rather than the loyalty of its customers. Other studies on loyalty found out that brand affect and brand trust are significantly related with purchase loyalty as well as attitudinal loyalty. According to the study, attitudinal loyalty demonstrated more powerful impact than the purchase loyalty did. This study was made on the globally known brand LG’s brand trust and brand affect. It was concluded that in order to implement a marketing program, which would create a strong and favorable brand, it takes many years of consistent endeavors. (Kakati and Choundhury, 2013) The study continues, with pointing out a possible consequence of violating this trust "significant impact of higher ethical burdens, however, may be the cost of violating customer trust. Brands may not seek customer commitment, but when commitment is given, customers care about the brand and trust in the fidelity of the brand.” (Hess, 1995, as cited in Story and Hess, 2010) The authors claim that the customers “trust that the brand is concerned for their satisfaction and welfare. Violating this trust may carry far greater consequences than simple dissatisfaction. The fury of a committed customer scorned may be disastrous for profits.” (2010) Concluding that “customer trust is a precious commodity, not easily won, not easily lost, but once gone, is likely gone forever along with the commitment it inspires." (Hess, 1995, as cited in Story and Hess, 2010) Therefore, unfair pricing should be considered as a significantly INFLUENCE OF UNETHICAL MARKETING BEHAVIOR ON CUSTOMER-BASED BRAND EQUITY 31 influential factor on brand equity. Despite the issues with pricing, there is a rising issue of dishonest advertising. Impact of Dishonest Advertising on Brand Perception In terms of dishonest advertising, some authors point out a specific sphere where ethics play a big role. They say it is believed that advertisements in pharmaceutical industry can become a good example of an advertising, which makes unproven claims, which sometimes are in fact misleading. Pointing out the seriousness of the issue, the authors highlight that if journals can publish the adverts about medical research, the editors of the periodical might want to check the credibility of claims before publishing the article. (Ryan, et.al. 2010) The authors proceed admitting that “given our ongoing concerns about the possible inappropriate influence of advertising on prescribing and clinical decision making more generally, it would seem wise for editors and Congress organizers to actively encourage publications, presentations and debate on the topic.” (Ryan, et.al. 2010) Moreover, obviously “in an interconnected world of data and data sharing, advertising cannot see itself in a vacuum.” (Drumwright and Murphy, 2009) Some researchers claim that if a consumer is not aware that he is being exposed to advertising, his adequate evaluation of the situation does not function exactly properly. And his intelligence is at compromise. (Drumwright and Murphy, 2009) Others point out that “most retailers have generous return policies that give buyers 30 days to return the product. These return policies may be what make the consumer and perhaps the FTC more willing to allow INFLUENCE OF UNETHICAL MARKETING BEHAVIOR ON CUSTOMER-BASED BRAND EQUITY 32 deceptive practices” Wible (2011). Such deception vulnerability opens the door for marketers to act out of understanding of personal benefit rather than ethics boundaries. It is argued that one of the recent trends in discussing ethics relates to social media. Especially it touches upon the issue of transparency. The authors clarify by bringing up the question “do consumers have a right to know when a commercial pitch is being made through the likes of paid viral marketing, product placement, or the Internet?” (Drumwright and Murphy, 2009) The authors proceed with raising also such important questions as: “What are the acceptable limits for firms in leveraging word-of-mouth among consumers? Issues of deception are raised, but concerns run deeper.” (Drumwright and Murphy, 2009) Going deeper into the topic of transparency, the Drumwright and Murphy point out that this issue must be under close attention within the industry and some initiative towards consensus and optimal ground should be looked for. (2009) “Whether the norms involve ensuring transparency and protecting privacy in new and nontraditional media or creating ethical organizational cultures and encouraging ethical behavior by individuals, the advertising industry must embrace its responsibilities and take more of a leadership role.” (Drumwright and Murphy, 2009) Another important point the authors mention is that “the size and power of advertising organizations has undoubtedly increased tremendously; their obligations to provide responsible and ethical leadership within their organizations, the industry, and society more generally have increased as well.” (Drumwright and Murphy, 2009) INFLUENCE OF UNETHICAL MARKETING BEHAVIOR ON CUSTOMER-BASED BRAND EQUITY 33 In recent years, food ads directed at children became another topic, which got its publicity and intensity in various spheres. These include not only marketers but also academia. (Bakir and Vitell, 2010) The main reason for this is that children are often exposed to the advertising containing information about the product, which they are often unable to entirely process. On the other hand, if the control over the information is missing or lacking due to the fact that the subjects of the research are children, then the implications of ethics of such a marketing behavior changes. And in such a case, the adults are same vulnerable to the cognitive manipulation as the kids are. (Nairn and Fine, 2008) In addition, as for the advertising in food industry there is quite a bit of controversy going on. One of the widely discussed and serious issues – is ethics in advertisements directed at children overall. This topic has raised a decent amount of negative reaction as from the side of parents, as from the public policy makers. (Bakir and Vitell, 2010). Besides the age concerns, publications noticed a raised interest of consumers towards health in food overall. One of magazines note that “The new consumer interest in health has driven manufacturers to make some fairly drastic changes to their products. This shift is problematic for many sections of the food and drinks industry, notably snacks and alcoholic drinks manufacturers”. (Market Watch: Global Round-up, 2004) The magazine proceeds stating that: “manufacturers feel bound to alter their products to suit the tastes of consumers in the wake of this low-carb diet phenomenon”. (2004) Some publishers claim that in the process of a study, parents were exposed to a scenario, which would focus their attention on the implication that the food they are suggested to buy is having some potentially unhealthy nutrition ingredients for their kids. Parents’ reaction on the INFLUENCE OF UNETHICAL MARKETING BEHAVIOR ON CUSTOMER-BASED BRAND EQUITY 34 information provided would have a relation with their behavioral intentions. (Bakir and Vitell, 2010) Based on the results of a study it can be concluded that parents “did consider what others might think about a specific situation when forming their ethical judgments and intentions.” (Bakir and Vitell, 2010) However, surprisingly the Bakir and Vitell point out that “parents’ attitude toward food advertising did not affect their ethical judgments and behavioral intentions concerning specific food advertising directed at their children.” (2010) The other side of the coin in food advertisement for children is pointed out by publishers: “By taking food choices away from the child and giving them back to parents, many companies hope to avoid the wrath of anti-obesity campaigners while removing themselves from the obesity attorneys' spotlight.” (Market Watch: Global Round-up, 2004) The authors continue: “Whether these companies will be able to maintain sales despite a potential loss of share of children's spend remains to be seen” (2004) In this case, similarly as in many others, we can observe that unethical practices may not only bring positive dividends to brands, which make them happen, but also on the other hand, they can harm the brands including – in brand sales. Researchers as well say “advertising techniques that use evaluative conditioning formats manipulate consumer behavior via implicit attitude change.” (Nairn and Fine, 2008) Some researchers claim though that if a consumer is not aware that he is being exposed to advertising, his adequate evaluation of the situation does not function exactly properly. And his intelligence is at compromise. (Drumwright and Murphy, 2009) The rationality of consumers can be one of the prerequisites to defining which marketing behavior can be considered as unethical. Looking from standpoint of an assumption that people are rational, only those marketing techniques which in deed deceit the consumer should be regarded as immoral. (Wible, 2010) INFLUENCE OF UNETHICAL MARKETING BEHAVIOR ON CUSTOMER-BASED BRAND EQUITY 35 On the other hand, there is also a standpoint that people are in fact irrational in some sense. As proof for this, Wible states that people are falling for tricks of marketers again and again. As a matter of fact he points out that people still have certain degree of trust to the free “giveaways” and trust the companies that the products are on sale even though the announcement of the sales can be non-stop (2010). The author mentions that “The ignorant consumer standard says that event marketing practices that deceive the naive and ill-informed consumers should be banned.” Wible (2010) However, honesty in advertising and marketing claims has been also viewed from a rather unusual standpoint. It was interestingly pointed out that sometimes advertisers make obviously unserious claims, which are apparently made with an intention of a joke. For example, such claims as cars, which call fly in the air can be considered that type of claim, which are obviously intended to be perceived as not true. Sometimes, the author continues, these claims are nevertheless perceived with certain degree of trust and as a result some consumers expect the product to be superior. (Preston, 2010). This insight raises a question of the criteria of judgment in deciding when it is an obvious joke and when the information is purposefully deceitful. The researcher proceed point out that pure law cannot count on such claims to be unserious. Thus purely lawful judgment cannot account for the obvious playfulness of the claim and assume there was no buying decision impacted by the claim. (Preston, 2010) Proceeding with this logic, Preston comes to the conclusion that the ethics take on the role of judgment in such a situation and can in essence play INFLUENCE OF UNETHICAL MARKETING BEHAVIOR ON CUSTOMER-BASED BRAND EQUITY 36 a big role in the issue. (2010). Looking at law-related institutions, authors claim that schools of law should be as well involved in marketing practices for their product. However, apparently as there is an ethical concern to how to do this, such institutions as law schools should pay special attention to providing accurate information in their advertisement. Such a decision can have exceptionally positive outcomes on all parties (Ludlum and Johnson, 2015) Adding up to the discussion of consumers’ rationale and ability to identify certain behaviors as ethical or not, some say that people are not reflecting much after they made a purchase. And when they actually do reflect, they cannot asses if the way they were treated was fair or not. (Wible 2011) This brings up an important realization – it is not worth to take people’s negativity for dishonest behaviors for granted. Sometimes people may simply see information as a trustworthy despite the obviousness of its fallacy. Therefore, in the research of consumer attitudes towards brand based on ethical judgment, the study must make a “reality check” to see whether consumer evaluates the behavior as unethical. The way marketers sometimes react in terms of social responsibility does not always call for a positive feedback. According to maladaptive marketing philosophy, it becomes clear that organizations oftentimes are unable to respond to the needs of society, which do not relate to them and their circle of responsibility. As an immediate proof for this phenomenon, one can notice the fact that many marketing executives find their main responsibility only before the INFLUENCE OF UNETHICAL MARKETING BEHAVIOR ON CUSTOMER-BASED BRAND EQUITY 37 stockholders rather than the society. (Chitakornskijsil, 2012) This phenomenon partially explains the fact that marketers oftentimes are not afraid to expose their consumers to unethical marketing practices. With what has been said about people’s rationale, it can be concluded that businesses do not necessarily have feel the pressure from customers on their behavior to be ethical in case they act “smart”, and avoid people’s rationale. However, it applies predominantly to the consumers’ decision making, which as was mentioned earlier, not always impacted by the ethical aspect of the advertising they were exposed to before they were buying. As for the long-term perceptional aspect though, the claim of marketers’ irresponsibility towards consumers proves the research of brand equity in detail to be crucial. It can demonstrate the effect on long-term perception of the brand, rather than merely the impact on an immediate purchase. Conclusion From the reviewed literature several implications can be made. First of all, ethics as a concept despite being subjective can exist and possess generalizable features. If a certain social group believes that certain behavior is not ethical, this belief may be generalized even without having a written rule or law banning this behavior. Secondly, advertising and pricing are indeed the spheres which involve much controversy in regards with ethics unethical practices in business can harm not only firm’s reputation or customer’ commitment, but also can result in immediate losses of sales and short-term decision making of customers. Despite intangibility of such a concept as brand, ethics may have impact on its important elements as perceived quality and loyalty. In order to discover the effect precisely, a reliable research should be made – the INFLUENCE OF UNETHICAL MARKETING BEHAVIOR ON CUSTOMER-BASED BRAND EQUITY 38 literature suggests. Therefore, it is crucial for managers to see the reasons to maintain ethical responsibility. This research discovers presents and extend of effect of unfair pricing and dishonest advertising on consumer-based brand equity as a whole and on its elements separately. From the literature reviewed, it can be concluded that unfair pricing and dishonest advertising are the concepts, which mean unethical marketing behaviors (when identified by consumer as unethical) within pricing techniques and advertising tricks a company might execute. As mentioned earlier, consumer-based brand equity concept is used as defined by Keller (2001). The literature indicates the effect of unethical behavior on precise short-term measures as sales, amount of committed customers etc. However, the literature does not give a definite answer, on how unfair pricing and dishonest advertising influence consumer-based brand equity and its elements as a long run phenomenon. Another question the reviewed literature does not answer is whether there is a difference in effect of various unethical behaviors. Despite numerous studies on ethics in pricing and ethics in advertising, none of the previously mentioned sources answer attempt to combine various fields of ethics in one study. Therefore, this research work serves as a fulfillment for this gap. INFLUENCE OF UNETHICAL MARKETING BEHAVIOR ON CUSTOMER-BASED BRAND EQUITY 39 Research methodology Research Design Theoretical Framework In this section, the theoretical framework will be constructed based on the literature review. This construction will be done through establishing connections and missing links in connections between the main concepts (dependent and independent variables). So, we will look at what impact pricing and advertising have on consumer perception of each of the brand equity's element. Conceptual model: Unfair Pricing Dishonest Advertising C BBE Resonance Feelings Judgment Imagery Performance INFLUENCE OF UNETHICAL MARKETING BEHAVIOR ON CUSTOMER-BASED BRAND EQUITY 40 According to Dubinsky and Loken, many of marketing research studies focuses on developing models and framework for analyzing ethics in decision making of marketing. However, most of these studies have not been tested empirically (1989). Therefore, this study's attempt to discover implications about marketing ethics empirically, can contribute to better understanding of consumer perception of ethics and consequently, influence the morality of business decision-making. As a fundamental definition of customer-based brand equity, this research uses Keller's model. This model mentions 6 components of customer-based brand equity. They are salience (brand awareness), imagery (brand associations), performance, feelings, judgements and resonance. Let us take a look what each element means, and under which influences it is shaped. (Kerri-Ann L. Kuhn Frank Alpert Nigel K. Ll. Pope, 2008). According to Keller's model, brand equity appears when a brand has some strong, favorable and unique associations in the head of consumer (Keller 2003). Almost all customer-based brand equity components are related to consumer's evaluations. Brand associations for instance are argued to have "a level of strength, and that the link to a brand (from the association) will be stronger when it is based on many experiences or exposures to communications, and when a network of other links supports it." (Ravi Pappu Pascale G. Quester Ray W. Cooksey, 2005) Thus, brand associations are tightly connected with customer experience with the brand and communications with the brand. In the given case, Another expression of consumer evaluation is judgements and feelings about the brand. Judgements refer to overall quality and credibility evaluation of the brand (Kerri-Ann L. Kuhn INFLUENCE OF UNETHICAL MARKETING BEHAVIOR ON CUSTOMER-BASED BRAND EQUITY 41 Frank Alpert Nigel K. Ll. Pope, 2008). Feelings though are more of an emotional response to the brand. Keller (2003) distinguishes six main types of them: "warmth, fun, excitement, security, social approval and self-respect" (Kerri-Ann L. Kuhn Frank Alpert Nigel K. Ll. Pope, 2008). Finally, resonance, as being mentioned in the literature, is built upon consumer's trust to the brand to meet the expectations. (Story and Hess, 2010) Interestingly, the same study states that trust is neither easy gain, nor is easy to lose. However, when it is lost, it probably is lost forever. Yet, the longer it is kept, the more costs it accommodates, because customers' request for ethical concerns increases. (Story and Hess, 2010) In the given scenario, the salience will be defined the same for all the respondents, because the brand is made-up. As a conclusion from the literature review, it becomes obvious that unethical marketing has certain impact on brand equity. However, it is not clear enough, which brand equity elements are influenced the most; as well as it is not fully understandable, which unethical marketing behavior has more impact to particular elements of customer-based brand equity. Hence, testing the impacts of unethical marketing on brand equity elements will address the research problem. Methods and Alternatives Despite CBBE concept’s complexity of definition, it also has certain challenges in precision of measurement. Some say, there is neither implicit nor explicit measure exists, which could perfectly measure the concept. Yet, at the same time the researchers admit, various types of measures can help understanding consumer-based brand equity concepts. (Priluck and Till, 2010) Thus, there are several possible designs for this type study in particular. In ideal case, in INFLUENCE OF UNETHICAL MARKETING BEHAVIOR ON CUSTOMER-BASED BRAND EQUITY 42 order to discover a causal effect, an experimental study should be made. In a classic experiment the researcher manipulates independent variable to check its impact on the dependent variable (Proctor 2005). In this particular research, various unethical marketing behavior simulations would be performed and the change in dependent variable (perceived CBBE) would be measured. However, experimentation design is very complicated to deliver in this particular study. The main reason for this is the topic of the study. First of all, ethics is quite a sensitive topic to experiment on. On the other hand, in order to experiment on brand equity, there should be a brand, which would agree to perform unethical marketing behaviors to purposely provoke a negative reaction. The outcome of such experimentation could turn into real brand equity devaluation. For this reason, it is very costly and complicated to find such a brand to perform an experiment on in this case. As an alternative method for pure experiment design, there is a scenario design. There are several types of scenarios, which are possible to use. First - is a real case scenario (case study). One of its strong sides is that it presents real-live examples or experiences, thus eliminating much of assumptions and at the same time, giving an opportunity to test consumer reaction without ethical concerns of harm to a brand. However, case study as a method, involves also a threat to often fall into one of the two categories - either entirely replicate the theory or to provide the results completely opposite to the theory (Yin 1994, as cited in Lloyd-Jones, G. 2003). Therefore, despite its flexibility in regard with manipulation on variables, it has disadvantage in its response patterns. INFLUENCE OF UNETHICAL MARKETING BEHAVIOR ON CUSTOMER-BASED BRAND EQUITY 43 In this research though, the main objection toward case study design relates to the nature of the dependent variable - the brand equity. In order to evaluate the change in customer based brand equity, the same brand should be studied. Even if finding the same real brand case for both unfair pricing and dishonest advertising turns out successful, respondents' personal experience with a real brand can influence their CBBE evaluations. Some researches though, use made-up scenarios instead of previously mentioned case studies. Respectively, this research uses a made-up scenario. This research method has been used a number of studies of ethics. Some researches point out: "Accessing individual judgments via descriptive scenarios is an established means in ethics research" (Liu, Wang, & Wu, 2010, as cited in Schmalz and Orth, 2012). Especially, made up scenarios can be often noticed among researches of ethics in medical sphere (Lohfeld, et.al. 2012). Similarly as in the given case, experimenting on ethics in medical sphere can be very costly. Despite the fact that purely experimental design cannot be applied in this case, the research aim remains the same. Similarly as if it would be an experiment, the final goal is to find out whether there is a causal relationship. Thus the study consists of three scenario-based questionnaires, distributed to three random samples of respondents. As a guideline for formulating scenario stimuli (unethical behaviors) correctly, an experience of study by Carrol & Ahuvia was taken: "Considerations for selecting appropriate stimuli included identifying firm behaviors that could plausibly generate varying levels of ethical judgments, and relate to brands with varying levels of consumer attachment" (2006, as cited in Schmalz and Orth, 2012). INFLUENCE OF UNETHICAL MARKETING BEHAVIOR ON CUSTOMER-BASED BRAND EQUITY 44 Major weakness of scenario in the given case is lack of real experience of respondents with the brand. However, according to authors studying consumer based brand equity measurement, in essence one of the most difficulties in measuring this concept is its intangibility and subjectivity of judgment about it. Besides, it can require much time and financial resources. In the end, there is also a shortage of methodology in studying it (Ruzeviciute and Ruzevicius, 2010). Nevertheless, scenario is one of the optimal methodologies for the design of a study like this. As for the suggestion of who can make research and measure them, some argue that “place for voluntary ethics measurement systems would be better informed by institutional economic analysis. Specifically, we maintain that efforts to measure ethics and CSR must begin by recognizing the institutions that potentially constrain such efforts.” (Stoval et al., 2006) This may partially resound with earlier mentioned notice that full scale experiment could be the best option in this design, however the complexity of institutional analysis was addressed in the earlier chapters. In terms of relation to this particular study, one additional factor, which can have impact on this research work – is demographics. Some researchers argue that “Unlike some previous studies, gender and work experience were significantly related to ethical views. For students, females appear to have higher ethical standards than males.” (Keith, et.al., 2008) Also Keith claims that “the higher ethical standards of females carry over into the workplace and remain stable over time. However, male students appear to have a more relaxed view of ethical standards and to be willing to take more risks” (at.al. 2008) INFLUENCE OF UNETHICAL MARKETING BEHAVIOR ON CUSTOMER-BASED BRAND EQUITY 45 With that being said about genders, there are some specifies in how age can influence marketing ethics issues. Researchers claim that “The moral intensity measure of proximity was not significantly related to the ethical judgments and behavioral intentions of parents.” (Bakir and Vitell, 2010) It has also been pointed out that the law being an external force is universal and the same for all in commerce differs in its nature from ethics. The reason for that is that ethics is perceived and reflected differently in every person’s mind. Therefore it reflects personal decisions of people and makes those decisions as well as the criteria for them to be unique (Preston, 2010) If this is in fact true, this may have certain impact on researching ethics in this thesis. Namely, if the respondents are predominantly of one gender, the results on ethics sensitivity and impact to brand may lack objectivity. (Keith, et.al., 2008) Among other possible alternative methods of studying such issues as ethics and fairness, authors mention more focused ones, which are sometimes qualitative and not very easily generalizable. One of rather unusual methods of studying fairness is known as “reflexive skepticism”. The authors, who introduced the concept, present it as quite an ordinary and not significantly different from other methods of studying fairness. They say “Reflexive skepticism can be applied symmetrically to any number of different focal points and that Fair Trade is neither more nor less a suitable subject of interrogation than anything else” (Neyland and Simakova 2009), continuing that “the notions of what is “ethical” and from whose perspective turned out to be a highly disputable matter for those building the multiple Fair Trade worlds.” (2009) INFLUENCE OF UNETHICAL MARKETING BEHAVIOR ON CUSTOMER-BASED BRAND EQUITY 46 Certain measurement techniques are mentioned as being more effective to be used in another model of brand equity – where brand equity consists of four factors. The researchers point out: “the analyses revealed that four main dimensions, namely mall awareness, mall association, mall perceived service quality and mall loyalty were measured better as a second factor model for mall equity”. (Altintas et al., 2011) Some alternatives in terms of ethical frameworks have also been developed. The authors state that “An alternative ethical framework, capabilities theory, has been developed which aims to place equal weighting on ends and means, and seeks to outline a more holistic representation of the character of inequality.” (Cornelius and Gagnon, 2004) proceeding that “Capability assessment requires an appraisal of the degree to which individuals and groups are able to function and the degree to which the environment that they operate in enables or inhibits this”. (2004) Adding to the topic of approach to studying ethics, the authors emphasize on the importance of clarity in framework for the research. They state that “imperative for coherent equality management policy and practice – that the philosophical and ethical framework should be explicit and clear – requires a ‘translation’ of the ethically explicit capabilities approach into everyday thinking and practice”. (Cornelius and Gagnon, 2004) And in relation to measuring brand equity, researchers point out that “Although there is some agreement with regard to the definition of brand equity as the added value endowed by the brand to the product, additive approaches to measuring brand equity have recently given way to more holistic metrics”. (Christodoulides and Chernatony, 2010) INFLUENCE OF UNETHICAL MARKETING BEHAVIOR ON CUSTOMER-BASED BRAND EQUITY 47 Setting and Participants Scenarios Despite the down side of applying a scenario method in studying brand equity (the lack of experience with the brand), it is still possible to create a necessary appeal toward the made up brand. According to Washburn and Plank, CBBE occurs based upon consumer knowledge, familiarity and associations about the brand (2002, as cited in Jana, and Hawley, 2009). A madeup scenario can provide knowledge about any brand by describing brand's important factors. However, providing familiarity and associations for a made-up trademark - is a challenge. In order to create instant familiarity, the study came up with a brand in industry with much homogeneity in core value propositions of different players and comparably little brand attachment. In such a case, it is easier to get acquainted with the brand from the description. Thus, supermarket industry has been chosen, as it usually provides customers with enough similar choice, and low costs of switching (Allaway et al., 2011). In order to assure the quality of description, the research uses direct and indirect citation of the descriptions written on official web-sites of four known supermarket brands in Lithuania: Rimi (n.d.), Maxima (2016), IKI (2016) and Norfa (n.d.). In order to appeal to respondents' senses, visuals were also used in the description. The images were taken from real supermarkets, as well as from supermarket design images (included in appendixes and cited in the reference list). As an intention to contribute to an impression of the made-up brand being real, the brand name and its location was created. One of the key aims of the description was to create brand with equity, yet without link to a specific real brand, so that the answers would have as little INFLUENCE OF UNETHICAL MARKETING BEHAVIOR ON CUSTOMER-BASED BRAND EQUITY 48 prejudice as possible. Therefore, the brand name was created by reversing the word "Random", resulting in the word - Modnar. According to research, when brand utilities are being used in a study, separating product utilities from the actual brand name does not violate reliability and validity of the study. (Vazquez et al., 2002) Each of the three scenarios begins with the same description of the brand, and follows by exposition of a certain behavior, connected with the sample's purpose. The description, which was used for all three samples, was formulated as following: “The Modnar Store is one of the most dynamically expanding supermarket chains, which operates in big cities, small towns and district centers of southern Europe. Neat and clean environment inside the store create a unique atmosphere. The Modnar is a community store close to one’s home, where people go every day to buy the necessity goods. A part of the retail space of Modnar Store is leased to specialized shops, to make sure that the customers can find all the goods and services in one place. The Modnar Store suggests a range of saving opportunities. Its discount cards are used by almost 800 thousand customers. Sales with the loyalty cards make up more than three quarters of the company's total turnover.” (Maxima, Iki, Rimi, Norfa, n.d.) After reading the description inserted among the images of supermarket, the participants were asked to fill in the questionnaire. As a result, the survey is a scenario-based questionnaire type. (Lohfeld et al. 2012) The next section describes each of the survey samples in more detail. INFLUENCE OF UNETHICAL MARKETING BEHAVIOR ON CUSTOMER-BASED BRAND EQUITY 49 Samples Sample 1 was exposed to a brand description, where an unfair pricing technique is used by the brand. One of the unfair techniques used by the brand was claiming 50% discount of all product category prices while in reality the price was not predominantly a discount. The basis for this technique was the case study by Gardner (2007), which presented an ethical controversy, happened to jeweler retailers in the United States. As a part of his advertisement the jeweler retailer used claims that his prices of jewelry are wholesale prices. Later he was requested to submit necessary documentation, which would prove that he indeed was selling for exactly the same price as he paid for the items to his supplier. The author concludes that in certain areas of retail such technique as false claim of lower (in his case – wholesale) price happens on a regular basis. (Gardner, 2007) Therefore, one of the techniques the sample 1 uses – is retailer’s false claims on lowered prices. As a basis for coming up with hidden additional costs in the scenario, the case from FMCG magazine has been used as an example. It stated that “fine print regarding additional costs or disclosure of the "true costs" is unlikely to cure a breach of the Act. It is often the initial representation which is the deciding factor in whether a consumer make a purchase or not.” (FMCG, 2013) As well, the other case was used as an example. It was directly related to retail: “In a well-known example, a dealer offered a free bike with every new bike purchase. However, where a customer took up this deal, the purchase price increased”. (FMCG, 2013) Thus similar technique has been incorporated in the scenario. The whole unethical pricing exposure is formulated in the following way: INFLUENCE OF UNETHICAL MARKETING BEHAVIOR ON CUSTOMER-BASED BRAND EQUITY 50 “The supermarket practices certain pricing techniques, which some consumers complained about. As you can see on the picture below, the Modnar introduces "buy one, get one for free" technique. Many consumers do not pay careful attention to the small latter on the bottom of the sale promotion, which explain that only the consumers who bought more than 10 identical items per check-out get every second one for free starting from the 11th item. The wine section has a sale promotion on 50% discount for all wines. According to the supermarket policy, written in their pricing code, drinks which contain more than 9% of alcohol are not included into per-shelf discounts. Thus, up to 95% of all wines are sold at regular price. Overall the prices in the store look lower than in other stores. Yet, as it is indicated in the note near the entrance - the prices are indicated without tax deduction, and in fact are 21% larger than on the price tags.” After the description, the respondents are asked to fill in the quantitative questionnaire, indicating their attitudes towards the brand. Second part of the questionnaire asks to evaluate how unethical they evaluate the pricing technique to appear. Sample 2 has identical general brand description and questions about brand equity and ethics. However, the respondents of sample 2 see the description, where instead of unfair pricing the dishonest advertising techniques are introduced. As a basis for advertising scenario serves an example from The Week magazine: INFLUENCE OF UNETHICAL MARKETING BEHAVIOR ON CUSTOMER-BASED BRAND EQUITY 51 “A television advertisement for a DFS half-price sale has been banned by the Advertising Standards Authority (ASA) for being misleading. In the advert-which was promoting the half-priced Zeta collection-five sofas were shown with their normal selling price crossed out to show the sale price.” (The Week, 2009) The unfair advertising techniques in the scenario were indicated as following: “The supermarket practices certain advertising techniques, which some customers complained about. As you can see on the picture below, the Modnar presents the shelf as having only sugar free products. Many consumers do not pay careful attention to the small latter on the bottom of the advertising, which explain that only the products which have red circle sign on them are sugar free. In fact, 85% of products on this shelf contain sugar. In the wine section, there is an advertising stating that there are only Quality of Ages Award winning wines. In fact the supermarket participated in the Quality of Ages Award with its wine products; however, it never won the award in reality. Supermarket has much advertisement for kids. These ads are usually not true in content. As the supermarket mentions in its guidebooks near the entrance into the store, these advertisings serve more entertainment purposes.” Sample 3 is a control group variable. All the rest having identical to previous two samples, it does not have any information about neither the advertising nor the pricing INFLUENCE OF UNETHICAL MARKETING BEHAVIOR ON CUSTOMER-BASED BRAND EQUITY 52 techniques at all. This way, the results of the first two samples will be compared to the results of the control group in order to see the correlation of exposures to brand attitudes. Instrumentation and Scales Brand Equity Questionnaire The questionnaire is divided into three blocks of questions. The first block examins 5 elements of Consumer-Based Brand Equity. In order to measure CBBE, different scales have been used. These scale were modified to fit this particular research. All the questions were adapted to 7 points measurement scale to make the analysis process easier and more precise. The elements of CBBE were represented in the questionnaire in the order as they are listed in Keller's pyramid (2001). Thus, the first set of questions was discovering respondent's evaluation of brand performance. It included the following scales: - The Index of Consumer Sentiment Toward Marketing (Gaski and Etzel, 1986, as cited in Bearden et. al., 2011) - Consumer Attitudes Toward Marketing and Consumerism (Barksdale and Darden, 1972, as cited in Bearden et. al., 2011) - Price Perception Scale (Lichtenstein, et. al. 1993, as cited in Bearden et. al., 2011) - Meaning of Branded Product Scale (Strizhakova, et. al., 2008, as cited in Bearden et. al., 2011). INFLUENCE OF UNETHICAL MARKETING BEHAVIOR ON CUSTOMER-BASED BRAND EQUITY 53 The existant measurement scales were modified based upon earlier mentioned definitions of consumer-based brand equity. Namely, the questions on performance included such expressions as: brand's usage of additional services, trustworthiness o the return policy and brand's consistency with quality over time. Brand performance was measured by 7 Likert-type questions. Among them were: the brand provides sufficient amount of products to its customers the brand suggests enough of additional services (those other than buying goods) the brand is consistent with its performance quality over time the brand completely satisfies its customer requirements of quality the brand's customers believe its a trustworthy brand it will not be a problem to return a products when its a subject to return policy of the store this brand has fair pricing policies Next element in the questionnaire is imagery. As the basis for measuring imagery, Brand Personality scale (Aaker, 1997, as cited in Bearden et. al., 2011), Brand Experience scale (Brakus et.al., 2009, as cited in Bearden et. al., 2011) and Consumer Evaluation of Brand Extensions scale (Aaker and Keller, 1990, as cited in Bearden et. al., 2011) were used. The set of imagery questions involves a matrix of seven-item, seven-point semantic scale about the brand image (figure 2). This type of scale has been used for testing the participants of experiments (Levy et. al., 1995, as cited in Bruner II et.al.,n.d.). Please describe your impression of the brand based on characteristics below: INFLUENCE OF UNETHICAL MARKETING BEHAVIOR ON CUSTOMER-BASED BRAND EQUITY 54 indifferent caring low quality high quality service limited variety choice unfair inconvenient honest convenient insencere sincere ordinary unique Figure 2: Imagery Scale The respondents were suggested to indicate how much they lean towards one image characteristic or another. The characteristics of image were taken from previously mentioned scales, and aligned against the definition of imagery as an element of brand equity, which indicates the element to be related to intangible characteristics of the brand (Keller, 2001). Therefore, the questions include measurement of brand's care, fairness, sincerity etc. The third element of the study is judgements. They were measure by 7-item, 7-point Likert type questions. Two main scales of measurement were used for this section: Price Perception Scale (Lichtenstein, et. al. 1993, as cited in Bearden et. al., 2011) and Meaning of INFLUENCE OF UNETHICAL MARKETING BEHAVIOR ON CUSTOMER-BASED BRAND EQUITY 55 Branded Product Scale (Strizhakova, et. al., 2008, as cited in Bearden et. al., 2011). The questions on judgement were adjusted in accordance with the Keller's definition of this brand element (2001). The next set of questions was dedicated to studying respondent's feelings towards the brand. As the basis for his definition of customer-based brand equity, Keller mentions six feelings: warmth, fun, excitement, security, social approval and self-respect. These characteristics were used to determine respondent's feelings about the brand. 6-items, 7-points rating scale was used (figure 3). Please evaluate how much the given characteristic describes your feelings about the brand: Figure 3: Feelings Scale INFLUENCE OF UNETHICAL MARKETING BEHAVIOR ON CUSTOMER-BASED BRAND EQUITY 56 Finally, the last element tested - was resonance. Questions about resonance were based upon two main scales by Bettencourt et.al. They are Commitment scale and Loyalty (Organizational) scale (1997, as cited in Gordon C. Bruner II, n.d.). These were 7-item, 7-point Likert type questions. Resonance measurement involved the following statement-questions: I would pay extra for this brand I would say positive things about this store to others I would encourage my friends and relatives to shop at this store I would not buy from other brands if this brand is available in accessible distance to where I live I intend to shop at this store for the next year I would pay effort to help this store succeed Manipulation check & Demographics The second part of the questionnaire is manipulation check. It identifies how participants evaluate ethics of the behavior they were exposed to at the beginning of the questionnaire. This section helps to check the correlation between sensitivity towards ethics and evaluation of brand equity elements. In order to compose the questions for the manipulation check, elements from Marketing Norm Ethics scale have been used (Vitell, et.al., 1993, as cited in Bearden et. al., 2011). As the basis for the question wording though, the scale by Reidenbach and Robin (1990, as cited in Bearden et. al., 2011) was applied. The manipulation check was made on a sevenpoint, five-item rating scale (figure 4: Ethics Scale). INFLUENCE OF UNETHICAL MARKETING BEHAVIOR ON CUSTOMER-BASED BRAND EQUITY 57 Looking from your ethical perspective, please grade (0-lowest; 7=highest) to which extend the pricing techniques written in the brand description you read at the beginning are: Figure 4: Ethics Scale The third part includes demographic questions, such as age and level of income. With help of the last section, each of the three studies will indicate the degree to which the consumer perceives an unethical behavior to be harmful. As it was noted earlier, sensitivity to ethics can be affected by the degree of perceived harm (Ingram, et.al, 2005). Therefore, including the harm degree measurement will allow determining ethics impact on brand more accurately. Hypotheses H1: Unfair pricing decreases customer-based brand equity INFLUENCE OF UNETHICAL MARKETING BEHAVIOR ON CUSTOMER-BASED BRAND EQUITY 58 H1.1: Unfair pricing decreases performance element H1.2: Unfair pricing decreases imagery element H1.3: Unfair pricing decreases judgment element H1.4: Unfair pricing decreases feelings element H1.5: Unfair pricing decreases resonance element H2: Dishonest advertising decreases consumer based brand equity H2.1: Dishonest advertising decreases performance element H2.2: Dishonest advertising decreases imagery element H2.3: Dishonest advertising decreases judgment element H2.4: Dishonest advertising decreases feelings element H2.5: Dishonest advertising decreases resonance element H3: Unfair pricing influences consumer-based brand equity to the same degree of significance as dishonest advertising does. Variables In this study there are two independent variables and one dependent variable, which consist of five elements. The independent variables are: unfair pricing and dishonest advertising. The dependent variable is consumer-based brand equity, which is divided into the following elements: brand imagery, performance, judgements, feelings and resonance. The study tracks INFLUENCE OF UNETHICAL MARKETING BEHAVIOR ON CUSTOMER-BASED BRAND EQUITY 59 changes in the dependent variables depending on what independent variable they are compared against and to which extent the consumer thinks the given behavior is unethical. As the study compares different sample against each other, ANOVA test was done. Identical way of analysis was done in other similar studies. One of such studies discovered business ethics' impact on brand attachment. Likewise, this study used made-up scenarios for the experimental manipulation, and ANOVA testing for discovering the causal effect (Schmalz and Orth, 2012). The main weakness of this research design - is the difficulty to create a scenario, which would reflect all necessary brand equity features and sufficiently appeal to the respondent to be able to answer about their attitudes towards the brand. Internal Validity Defining internal validity, researchers point out that "In experimental research, internal validity refers to what extent researchers can conclude that changes in dependent variable (i.e. outcome) are caused by manipulations in independent variable" (Cahit, Kaya, 2015). Causal relationship is demonstrated through three types of evidence: Concomitant variation, time order of occurrence of the causal factor and absence of other causal factors (Proctor, 2005). Concomitant variation refers to predictability and ability to make patterns out of cause and effect relationship (Proctor, 2005). In this study, concomitant variation is expected from the sample size. Because this research contains quantitative questionnaire, rather than pure experimental design, the amount of respondents allows maximizing the ability to extract patterns. As for predicting the nature of causal relationships, research design of having two samples with manipulations and a control group will enable to predict where cause and effect can occur. Time INFLUENCE OF UNETHICAL MARKETING BEHAVIOR ON CUSTOMER-BASED BRAND EQUITY 60 order of occurrence of the causal factor precedes the effect due to the survey's function of pagebrakes. Respondents are at first asked to familiarize themselves with the brand through description, and only after that - to turn to the next page and fill in the questionnaire. As for the absence of other causal factors, this thesis' design eliminate outside factors due to the fact that scenarios involve a made up brand. This way, the participants do not have any other information than the researcher provides about the brand. As soon as the manipulation upon the change of unethical behaviors is presented in the scenario, the participants have to evaluate the brand. Therefore, the attitudes towards the brand are affected only by the primary definition of the brand and the last paragraph of the scenario, where unethical behavior is exposed. Consequently, the study measures the change to know the correlation effect. No other significant factors are influencing the change in attitudes, and thus the relationship can be considered as causal. As Slack puts it - "Establishing the internal validity of a study is based on a logical process. For a research report, the logical framework is provided by the report's structure" (2001). Hence, this particular study's structure grants the internal validity for the research design. The biggest threat to internal validity of this survey though - is possible lack of in formativeness of the scenarios. The questionnaire addresses such a rather complicated term as consumer-based brand equity; however, the brand description is relatively low. Therefore, respondents may give different responses about the brand due to the lack of information for formulating a solid opinion about the brand. INFLUENCE OF UNETHICAL MARKETING BEHAVIOR ON CUSTOMER-BASED BRAND EQUITY 61 External Validity In his research Myers summarizes the definition of external validity based on studies by Campbell and Stanley: "the concept of external validity refers to the question of generalizability" (1966, as cited in Mayers, 2014), following with a clarification that "specifically it refers to the degree to which observed causal relationships can be generalized across different participant groups, time periods, measures, and settings (Calder et al., 1982, as cited in Mayers, 2014). In the context of this study, external validity is supported by the sample randomization as well as its general criteria. One of the objections for this research's external validity though - is lack of demographic variety among the respondents. Namely, respondents' age is predominantly up to 30 years old. In case age influences ethics sensitivity or consumer brand response, the study's result may be limited to a conclusion about a certain age group. Empirical Results Manipulation check Before analyzing the data of the hypotheses, the normality of distribution check has been done. Because the survey’s answers’ possibility varied on a relatively small scale (1-7), ShapiroWilk test was avoided. According to Lund Research Ltd., ANOVA tolerates violation of assumption normality quite well (2013). That is why the normality of distribution was concluded visually from the Q-Q plot (Appendix 3) both for the brand equity responses and ethics manipulation check responses. INFLUENCE OF UNETHICAL MARKETING BEHAVIOR ON CUSTOMER-BASED BRAND EQUITY 62 The total amount of items was 38. In regards with credibility, the survey was considered credible at Cronbach's Alpha = 0.97 (see in the tables below). Cronbach's Alpha N of Items .970 38 Table 1: Reliability Statistics Case Processing Summary N % Cases Valid 120 100 Excluded 0 0 Total 120 100 Table 2: Summary Next, the manipulation check on scenarios’ ethics indications was done. In order to see if unethical behavior exposures were designed with proper validity, a separate ANOVA with Tukey HSD Post Hoc test was run on EthicsM variable. The purpose of the check was to see whether there is a significant difference in how respondents evaluated the described behavior on ethics scales. The results of Tukey’s test in the table below indicated that the respondents who were exposed to an unethical behavior evaluated brand ethics as significantly lower than those who did not have the unethical description. As for the sample 1 and sample 2 compared against each other, no significant difference was identified (p=0.185). Therefore, despite the differences in actual means of each of the three samples, it can be concluded that the manipulation on ethics in the scenarios was successful and did not violate the survey’s validity. INFLUENCE OF UNETHICAL MARKETING BEHAVIOR ON CUSTOMER-BASED BRAND EQUITY 63 Mean Difference Std. (I-J) Error Sig. 2 -.6750 .38168 .185 3 -1.8050* .38168 .000 1 .6750 .38168 .185 3 -1.1300* .38168 .010 1 1.8050* .38168 .000 2 1.1300* .38168 .010 (I) IndVar 1 2 3 Table 3: Means significance comparison for EthicsM In order to check the hypotheses, a series of tests has been done with the gathered data. First of all the outlier standards were identified. According to the formula of identifying outliers at g=1.5, the upper bound was identified = 7.85, and the lower bound = 0.25 (see the table “Outliers” in the appendixes). Among the responses on Brand Equity, the minimum value was = 1.83 and the maximum value was = 6.57 (see the table “Extreme Values” in appendixes). Therefore, no outliers were identified in the brand evaluation. INFLUENCE OF UNETHICAL MARKETING BEHAVIOR ON CUSTOMER-BASED BRAND EQUITY 64 Univariate Analysis of Variances Hypotheses 1 and 2 state that the independent variables - Unfair Pricing (in the analysis called IndVar 1) and Dishonest Advertising (in the analysis called IndVar 2) cause Brand Equity (in analysis BrandM) to decrease. In order to test these hypotheses, a Univariate Analysis of Variances (one-way ANOVA) test was run. The ANOVA’s main purpose was to see if the means of Independent variables are different from the mean of the control group (in the analysis called IndVar 3). If there is difference between the variables, the next assignment is to see whether the difference is significant and both of the variables are significantly different from the control group. In case the analysis showed that the mean of an independent variable is not significantly different from the mean of the control group, then the hypothesis would be rejected. The table below demonstrates that the means of all three groups are different. IndVar Mean Std. Std. 95% Confidence Deviation Error Interval for Mean 95% Interval for Mean Lower Bound Total Confidence Upper Bound 1 3.4643 1.14775 .18148 3.0972 3.8314 2 4.0010 1.01468 .16043 3.6764 4.3255 3 4.8212 .78954 .12484 4.5687 5.0737 4.0955 1.13464 .10358 3.8904 4.3006 Table 4: Descriptive for BrandM INFLUENCE OF UNETHICAL MARKETING BEHAVIOR ON CUSTOMER-BASED BRAND EQUITY 65 Looking at the confidence intervals at the lower bound and at the upper bound, no overlap was noticed. The upper bound of sample 1 and of sample 2 were smaller than the lower bound of the sample 3. Seeing that the samples do not overlap, we can conclude that there are no other samples that could have given a different result on the study. This omits type 1 error (incorrect rejection of true null hypothesis). In order to check the significance level of the means' differences, the level of p value for the independent variable should be less than or equal to 0.05. In this case, looking at the table below, the p value is 0.000. Therefore we can make a conclusion that there is a significant difference between the means of independent variables (1 and 2) as compared to the mean of the control group (3). Source Type III Sum of Squares f IndVar 37.360 Error 115.841 17 Total 2165.952 20 Corrected Total 153.201 19 Mean Square F Sig. 18.680 2 000 8.867 .990 Table 5: Tests of Between-Subjects Effects for BrandM In order to see which independent variables' means are different from the control group in particular, a Post Hoc test was run. This time, Tukey HSD test was run, because there was no significant heterogeneity of variance within the samples noticed. INFLUENCE OF UNETHICAL MARKETING BEHAVIOR ON CUSTOMER-BASED BRAND EQUITY 66 Looking at the table below, we can observe that comparing the control group against each of the independent variables results in the p value being less than 0.05. Thus, the conclusion to make is that both variable 1 and variable 2 are significantly different from the control group 3. An important point to notice – is that even though the variance between the means of group 1 and 2 is statistically very close to being insignificant (p = 0.46), the significant mean variance is present. In this case, in terms of interpretation it means that statistically, there is slightly more probability that the respondents who were exposed to dishonest advertising evaluated the brand equity better than those who were exposed to unfair pricing. Looking at the difference in means column, we can observe confirmation of this pattern. The participants of sample 1 (unfair pricing) evaluated the brand equity to be lower than the participants of sample 2. Precise cause of this difference can be seen in the Multivariate Analysis of Variance (MANOVA) with Post Hoc test (described in the Multivariate Analysis of Variance section). (I) (J) Mean Std. IndVar IndVar Difference Error Sig. (I-J) Tukey HSD 1 2 95% 95% Confidence Confidence Interval Interval Lower Bound Upper Bound 2 -.5367* .22250 .046 -1.0649 -.0085* 3 -1.3569* .22250 .000 -1.8851 -.8287* 1 .5367* .22250 .046 .0085 1.0649* 3 -.8202* .22250 .001 -1.3484 -.2921* INFLUENCE OF UNETHICAL MARKETING BEHAVIOR ON CUSTOMER-BASED BRAND EQUITY 67 3 1 1.3569* .22250 .000 .8287 1.8851* 2 .8202* .22250 .001 .2921 1.3484* Table 6: Multiple Comparisons for BrandM As the study demonstrated statistical significance of the means' difference, the clinical significance has been checked. There were two measures of clinical significance applied: Partial Eta Squared indicating strength of effect, and Observed Power indicating survey's power (indicated in the table below). Because this study uses equal sample sizes, Partial Eta Squared was used for the analysis. Source df Mean F Sig. Square IndVar 18.680 2 Error 117 Total 120 Corrected Total 119 Partial Eta Observed Power Squared 18.867 .000 .244 1 .990 Table 7: Clinical significance The table above demonstrates that the Partial Eta Squared is 0.244. It is considered that less than 0.02 is a weak effect, 0.13 is a medium effect and 0.26 is a large effect size. In this study, the effect size is 0.24, which is upper medium, and close to large size of affect. This means that the effect of different responses between the participants of three samples was predominantly due to the manipulation, rather than error. The observed power = 1. In case the observed power is less than .80, then the survey is considered underpowered. Therefore, this INFLUENCE OF UNETHICAL MARKETING BEHAVIOR ON CUSTOMER-BASED BRAND EQUITY 68 survey's power is high, and thus, it can be concluded that there were no significant error due to the sample size or other similar, power factors. Concluding from both statistical and clinical significance analysis, the research proved that there is a significant difference in the means of two independent variables and the control group. Therefore, the attitude towards brand of those who were exposed to unfair pricing or dishonest advertising is significantly worse than of those who were not acquainted with any unethical behaviors of the brand. Hence, the Hypothesis 1 and 2 have failed to be rejected. Multivariate Analysis of Variance Exploring the differences of the means between each of the brand equity elements separately, a MANOVA has been made. The table below presents descriptive statistics on each element of brand equity. Variable PerformM Std. Deviation N 1 4.0464 1.03441 40 2 4.4107 .96630 40 3 5.2321 .77080 40 4.5631 1.04852 120 1 4.0143 1.10410 40 2 4.4286 1.09516 40 3 5.2893 .78412 40 Total ImageM Mean INFLUENCE OF UNETHICAL MARKETING BEHAVIOR ON CUSTOMER-BASED BRAND EQUITY 69 Total JudgeM 4.5774 1.13070 120 1 3.2607 1.35907 40 2 3.9321 1.27282 40 3 4.7429 .91055 40 3.9786 1.33353 120 1 3.1833 1.63072 40 2 3.9792 1.33183 40 3 4.7500 1.05409 40 3.9708 1.49316 120 1 2.8167 1.42515 40 2 3.2542 1.29814 40 3 4.0917 1.21713 40 Total 3.3875 1.40911 120 Total FeelM Total ResonM Table 8: Descriptive Statistics From the descriptive statistics we can see that the difference between the evaluations of Performance (PerformM) and Image (ImageM) variables is smaller as comparing to the differences in evaluations of Judgment (JudgeM) and Feelings (FeelM) variables. The biggest difference was in the means of Resonance variable (ResonM). Going into more detailed look of analyzing the significance of difference in means for each level of brand equity, an analysis of equality of covariance across groups should be made. INFLUENCE OF UNETHICAL MARKETING BEHAVIOR ON CUSTOMER-BASED BRAND EQUITY 70 Box's M 33.883 F 1.060 df1 30 df2 43376.391 Sig. .377 Table 9: Box's Test of Equality of Covariance Matrices The Box tests the null hypothesis that the observed covariance matrices of the dependent variables are equal across groups. In this case thought, p=0.377 and therefore the null hypothesis is rejected. It means the variances across the groups are not equal (which satisfies the MANOVA assumption). Effect IndVar Value F Hypothesis df Error df Sig. Pillai's Trace .301 4.032 10.000 228.000 .000 Wilks' Lambda .708 4.250b 10.000 226.000 .000 Hotelling's Trace .399 4.467 10.000 224.000 .000 Roy's Largest Root .364 8.300c 5.000 114.000 .000 Table 10: Multivariate tests The multivariate tests indicate the significance of means' difference. In this study, all four tests of means' difference indicated same p-value. However, in terms of full analysis, the Wilks' Lambda was taken as the main one and resulted in: L=0.708; F(10, 226) p=0.000. Because pvalue is smaller than 0.05, it can be concluded that the means are significantly different for each of the dependent variables. INFLUENCE OF UNETHICAL MARKETING BEHAVIOR ON CUSTOMER-BASED BRAND EQUITY 71 Running the Leven’s test for homogeneity of variances for each variable, p=0.01 level was used. The test resulted in confirming the homoscedasticity of variances for each dependent variable in the following way: F df1 df2 Sig. PerformM 2.335 2 117 .101 ImageM 2.741 2 117 .069 JudgeM 3.778 2 117 .026 FeelM 5.965 2 117 .003 ResonM .409 2 117 .665 Table 11: Levene's Test of Equality of Error Variances Source Dependent Type Variable Sum III df of Mean F Square Squares IndVar PerformM Error Sig. Part. Observed Eta Power Squared 29.512 2 14.756 17.040 .000 .226 1.000 ImageM 33.841 2 16.921 16.735 .000 .222 1.000 JudgeM 44.064 2 22.032 15.385 .000 .208 .999 FeelM 49.093 2 24.547 13.282 .000 .185 .997 ResonM 33.579 2 16.790 9.691 .000 .142 .980 PerformM 101.317 117 .866 .000 .961 INFLUENCE OF UNETHICAL MARKETING BEHAVIOR ON CUSTOMER-BASED BRAND EQUITY 72 ImageM 118.297 117 1.011 .000 .955 JudgeM 167.554 117 1.432 .000 .919 FeelM 216.222 117 1.848 .000 .897 ResonM 202.708 117 1.733 .000 .872 Table 12: Test between subjects effect for MANOVA From the table above it can be inferred that the difference of means between all the dependent variables is significant (p=0.000). Partial Eta Squared indicated that the effect size was upper-medium for Performance, Image and Judgment, and it was medium for Feelings and Resonance. In terms of observed power, the survey for all the elements was sufficiently powered (at minimum level of 0.98). Similarly as in previous section on Hypotheses 1 and 2, a series of ANOVAs with Post Hoc tests has been run to see which elements had more significant levels of difference. In this case LSD test was chosen for the analysis, because the assumption of homogeneity of variances was confirmed. Dependent (I) Variable (J) Mean Std. Sig. Variable Variable Difference (I- Error Confidence J) PerformM 1 2 -.3643 95% Interval .20808 .083 Lower Upper Bound Bound -.7764 .0478 INFLUENCE OF UNETHICAL MARKETING BEHAVIOR ON CUSTOMER-BASED BRAND EQUITY 73 2 3 ImageM 1 2 3 JudgeM 1 2 3 FeelM 1 2 3 -1.1857* .20808 .000 -1.5978 -.7736 1 .3643 .20808 .083 -.0478 .7764 3 -.8214* .20808 .000 -1.2335 -.4093 1 1.1857* .20808 .000 .7736 1.5978 2 .8214* .20808 .000 .4093 1.2335 2 -.4143 .22484 .068 -.8596 .0310 3 -1.2750* .22484 .000 -1.7203 -.8297 1 .4143 .22484 .068 -.0310 .8596 3 -.8607* .22484 .000 -1.3060 -.4154 1 1.2750* .22484 .000 .8297 1.7203 2 .8607* .22484 .000 .4154 1.3060 2 -.6714* .26759 .013 -1.2014 -.1415 3 -1.4821* .26759 .000 -2.0121 -.9522 1 .6714* .26759 .013 .1415 1.2014 3 -.8107* .26759 .003 -1.3407 -.2808 1 1.4821* .26759 .000 .9522 2.0121 2 .8107* .26759 .003 .2808 1.3407 2 -.7958* .30398 .010 -1.3978 -.1938 3 -1.5667* .30398 .000 -2.1687 -.9647 1 .7958* .30398 .010 .1938 1.3978 3 -.7708* .30398 .013 -1.3728 -.1688 INFLUENCE OF UNETHICAL MARKETING BEHAVIOR ON CUSTOMER-BASED BRAND EQUITY 74 3 ResonM 1 2 3 1 1.5667* .30398 .000 .9647 2.1687 2 .7708* .30398 .013 .1688 1.3728 2 -.4375 .29432 .140 -1.0204 .1454 3 -1.2750* .29432 .000 -1.8579 -.6921 1 .4375 .29432 .140 -.1454 1.0204 3 -.8375* .29432 .005 -1.4204 -.2546 1 1.2750* .29432 .000 .6921 1.8579 2 .8375* .29432 .005 .2546 1.4204 Table 13: LSD test LSD test demonstrated that respondents evaluated brand performance and brand image significantly lower (p=0.000) (both in unfair pricing sample and dishonest advertising sample) as compared to ethical brand behavior. The evaluation of unfair pricing and dishonest advertising samples’ respondents for PerformM and ImageM can be considered statistically equal (p=0.083; p=0.068 respectively). Respondents’ evaluation of judgement and resonance demonstrated similar results, with slightly bigger probability of better attitude from respondents of dishonest advertising in regards with judgment (p=0.003) and resonance (p=0.005). As for the FeelM sample though, it demonstrated much less significance in differences of the means in regards with dishonest advertising (p=0.013). Even though the respondents of dishonest advertising sample evaluated the feelings towards the brand significantly lower than the control group, still their evaluation was not as low as the unfair pricing sample’s was. INFLUENCE OF UNETHICAL MARKETING BEHAVIOR ON CUSTOMER-BASED BRAND EQUITY 75 Because the MANOVA included 5 dependent variables, a Bonferroni correction has been made (Armstrong, 2014), and thus p-value to for comparison became 0.001 (instead of earlier 0.05). This way, the means of evaluation of feelings from sample 2 after the correction can be perceived as insignificantly different (smaller) as compared to the mean of the control group. However, H1.1-5 and H2.1-H2.3; H2.5 were not rejected, because this research is predominantly concerned with determining not only presence of impact, but also the comparison of the effects among each other. Therefore, despite the Bonferroni correction, the p-values were still too small to claim rejection of the hypotheses. As for H2.4, it was rejected, as its p-value stood out on Bonferroni scale as closer to p=0.05 than p=0.001. Causal Effect One of the impactful obstacles in proving causal nature of the correlational effect in ANOVA is the probability that the variance in the means difference was caused other factors than the manipulations. In pure experimental designs it is eliminated by the experiment’s conditions. Doing the experiment, researcher eliminates the participants from possible factors which could have impacted the results. This particular study, avoids the disturbance of external factors due to the quantitative design of having 120 participants in total. As for the internal factors, the only significant threat comes from perceptional quality of ethics. Every participant views ethics in own way and could have not passed the manipulation check. However, as it was indicated in the Results section, the manipulation check was passed and therefore, this internal distracting factor was alienated. Hence, because no significant factors were identified as influencers on the results, except for the INFLUENCE OF UNETHICAL MARKETING BEHAVIOR ON CUSTOMER-BASED BRAND EQUITY 76 manipulation check, it was concluded that the correlational effect was causation, where dependent variable (Brand Equity) changes were influenced by the independent variable (Unethical Behavior). Hypotheses Revised Summing up the results of Univariate Analysis of Variances and Multivariate Analysis of Variances sections, the conclusion is as following: - H1 and H2 were not rejected. Both unfair pricing and dishonest advertising decrease customer-based brand equity. - H3 was rejected. The impact of unfair pricing and dishonest advertising happens on slightly different scale. Unfair pricing turned out to be more impactful in decreasing customer based brand equity. - H1.1-5; H2.1-H2.3 and H2.5 were not rejected. Unfair pricing techniques make all the elements of brand equity go down. Dishonest advertising makes equally significant negative impact on all (customer-based brand equity) elements except for feelings (and slightly smaller ethics sensitivity of resonance and judgment elements). - H2.4 was rejected. Brand feelings are not likely to be significantly impacted by dishonest advertising. INFLUENCE OF UNETHICAL MARKETING BEHAVIOR ON CUSTOMER-BASED BRAND EQUITY 77 Discussion and Conclusions Discussion Global research of ethics in business has made an immense impact on the way businesses function nowadays. Much of this research played its role in ethics policy making both in legal spheres in the form of laws and in the area of unspoken rules of the codes of ethics. These codes exist inside of any person, being either consumer or producer of a product or service. Numerous qualitative studies have demonstrated how ethics violation is perceived within an organization and what implications it may have in the realm of managerial politics. A relatively new chapter in ethics research, as mentioned earlier in the review of literature, uncovers the impact of ethics on such an agent as consumer. Despite the lack of empirically evidenced studies in general, modern day authors like Vukasovic (2015), Ratchford (2014), Story and Hess (2010), Drumwright and Murphy (2009), et al. made an important step in unveiling the effect of unethical business practices on immediate consumer reaction and decision making in regards with business proposition. This research is making an advancement move towards understanding the effect of ethics on consumer reflected in such a long-term possession as brand equity. In spite of its complexity and ambiguity, a number of businesses function, striving to accommodate this rather intangible acquirement. Paradoxically, one of unfortunately common ways to do it – is using practices which compromise generally accepted ethical standards. Misleading pricing techniques or running unfair marketing campaigns indeed are able to generate excessive amount of immediate cash. INFLUENCE OF UNETHICAL MARKETING BEHAVIOR ON CUSTOMER-BASED BRAND EQUITY 78 Yet, in this study it was found out that both unfair pricing and dishonest advertising have a significant negative effect on the way consumers perceive brand. This negativity was reflected in customers evaluating consumer-based brand equity much lower in case of unethical behavior rather than without it. One of rather unusual findings was the degree of harms each of the two unethical behaviors caused. Negative consumer evaluation of brand equity was much more triggered by unfair pricing techniques than it was by dishonest advertising. The reason for this difference cannot be simply explained by any of previously mentioned studies. In fact it opens up a request for new studies to be made to uncover the criteria (or their absence), which influence consumers to see certain behaviors as more or less harmful. Having in mind researchers’ earlier mentioned claim that sensitivity to ethics depends on the degree of harm perceived (Ingram, et.al, 2005), it can be concluded that the ways of allocating and charging prices is much more sensitive to ethics than credibility of advertisement claims is. Thus, contributing to understanding the severity of ethics effect on brand equity, this research creates an opportunity for further studies of the reasons why certain unethical behavior influence brand to a different extend than others. This research work proved that all elements of brand equity are negatively impacted by the brand’s behavioral ethics. Interestingly enough, even the elements which involve evaluation of product quality (performance and judgement) were significantly affected by firm’s ethics. This brings up a conclusion that unethical activity not only appeals to consumer evaluation of image but also influences consumer expectations towards actual product features and qualities. Also, this research’s findings resound with numerous studies on brand loyalty, trust and commitment. Once again it was proved that resonance is negatively impacted by unethical INFLUENCE OF UNETHICAL MARKETING BEHAVIOR ON CUSTOMER-BASED BRAND EQUITY 79 behaviors a firm performs. This goes in line with studies by Ingram et al. (2005), Leonidau et al. (2013) and others. This conclusion creates an important implication for marketers and managers who are responsible for organizational strategy and culture. Applying ethically controversial pricing techniques or misleading advertisements despite possible dividends in immediate cash, can translate into long term costs. These costs can reflect not only in losing customer trust and loyalty, but also in wasting the effort of making and communicating a high quality of firm’s product as such. At some point these effects can end up the so hardly acquired consumer-based brand equity of a firm overall. Among rather unexpected outcomes of this research such an element of brand equity as brand feelings was noticed. It turns out to be impacted by advertising ethics not significantly. One of possible explanations for this phenomenon could clue in generally low evaluation of brand feelings among the respondents of the control group. However, the unfair price does have a significant impact on brand feelings, being compared to the same control group. Consequently, this disapproves the explanation of low control group evaluation. Besides, such an explanation does not have enough empirical support. What remains as a fact – is that for some reason emotional response to the brand is impacted by some unethical behaviors, whereas being not affected by others. The answer to why brand feelings were not impacted by dishonest advertising remains undiscovered and requires further research in this area. INFLUENCE OF UNETHICAL MARKETING BEHAVIOR ON CUSTOMER-BASED BRAND EQUITY 80 Looking at all the research findings, it can be concluded that this research helped understanding the effect of ethics on such a long-term intangible evaluation criteria as consumerbased brand equity. It empirically demonstrated the significance of the influence of unfair pricing and dishonest advertising on CBBE and enhanced managerial implications. Also, it expended the opportunity for further research of reasons for this influence to happen. This research work has several limitations. First one of them is related to the study design. As it was mentioned in methodology chapter, an ideal study of the effect ethics have on brand equity should expose participant to a manipulation in pure experimental design with brand experience. This study though was limited to exposing its participants to a brand equity description instead. Thus, the lack of brand experience could have an impact on the way the brand was evaluated. Second limitation derives from the first one and it relates to the brand Modnar being fictional. Possibility to claim strong consumer-based brand equity for an unreal brand is questionable. IF the brand was real, its customer-based brand equity could have been more solidly defined. Finally, the third limitation is connected to statistics. The samples for the study had more females than males and the age range was predominantly varying between 20 and 30 years old. Even though the probability of demographics having effect on findings remains undefined, more statistically correct study with even demographics could grant more confident empirical evidence. INFLUENCE OF UNETHICAL MARKETING BEHAVIOR ON CUSTOMER-BASED BRAND EQUITY 81 Conclusions Ethics acquire crucial importance in nowadays life both of society and of business. Corporate world starts facing ethics as a prerequisite rather than a luxury. Nevertheless, running after financial success, many businesses neglect certain aspects of ethics, and performing explicitly controversial techniques for gaining profit. At the same time, businesses strive to build solid brand equities with strong attachment and committed customers, sometimes hoping to have the unethical behavior to slip unnoticed. This research demonstrated that despite different extend of effect, unethical behavior, once noticed, diminishes perception of the brand significantly. 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Journal of Business Ethics. 93:307–319;DOI 10.1007/s10551-009-0223-9. p.316 INFLUENCE OF UNETHICAL MARKETING BEHAVIOR ON CUSTOMER-BASED BRAND EQUITY 90 Appendix 1 INFLUENCE OF UNETHICAL MARKETING BEHAVIOR ON CUSTOMER-BASED BRAND EQUITY 91 Appendix 3 Outliers Q3 7 Q1 0 Q3-Q1 7 g' = (Q3-Q1)*g upper bound outlier 10.5 17.5 (g'+Q3) lower bound outlier -10.5 (g'-Q1) g 1.5 Levene's Test of Equality of Error Variancesa F df1 df2 Sig. PerformM 2.335 2 117 .101 ImageM 2.741 2 117 .069 JudgeM 3.778 2 117 .026 FeelM 5.965 2 117 .003 .409 2 117 .665 ResonM Tests the null hypothesis that the error variance of the dependent variable is equal across groups. a. Design: Intercept + IndVar Case Processing Summary N % Cases Valid 120 100 Excludeda 0 0 Total 120 100 Extreme Values Case Number BrandM Highest Lowest Value 1 3 6.57 2 114 6.28 3 116 6.25 4 103 5.96 5 29 5.85 1 11 1.83 2 15 1.89 3 14 1.95 4 16 2.04 5 9 2.17 INFLUENCE OF UNETHICAL MARKETING BEHAVIOR ON CUSTOMER-BASED BRAND EQUITY 92 Appendix 2 Questionnaire Statistics Mean Please indicate in your opinion - how likely the following statements describe your attitudes as...-the brand provides sufficient amount of products to its customers Std. Deviation N 5.4667 1.15906 120 4.3333 1.36790 120 4.5250 1.39002 120 4.5333 1.58742 120 4.6417 1.40704 120 Please indicate in your opinion - how likely the following statements describe your attitudes as...-the brand's customers believe its a trustworthy brand 4.4917 1.77752 120 Please indicate in your opinion - how likely the following statements describe your attitudes as...-this brand has fair pricing policies 3.9500 1.81890 120 Please indicate how much you agree with the statements below:-I would chose this brand because of the quality that it represents 4.5583 1.43659 120 Please indicate how much you agree with the statements below:-I would chose the brand, because I support the values it stands for 3.8333 1.62612 120 Please indicate how much you agree with the statements below:-Buying from this supermarket makes me feel like I am getting a good deal 3.9417 1.59461 120 Please indicate how much you agree with the statements below:-I would chose the brand, because I like buying products on sale . 4.3250 1.70596 120 3.8750 1.66306 120 3.5833 1.67825 120 3.7333 1.69890 120 2.8417 1.59830 120 3.9833 1.69519 120 Please indicate how likely for the following statements to be true:-I would encourage my friends and relatives to shop at this store 3.8750 1.68813 120 Please indicate how likely for the following statements to be true:-I would not buy from other brands if this brand is available in accessible distance to where I live 3.3583 1.71888 120 Please indicate how likely for the following statements to be true:-I intend to shop at this store for the next year 3.3333 1.78384 120 Please indicate how likely for the following statements to be true:-I would pay effort to help this store succeed 2.9333 1.73318 120 4.4167 1.74213 120 3.6083 1.57339 120 Please indicate in your opinion - how likely the following statements describe your attitudes as...-the brand suggests enough of additional services (those other than buying goods) Please indicate in your opinion - how likely the following statements describe your attitudes as...-the brand is consistent with its performance quality over time Please indicate in your opinion - how likely the following statements describe your attitudes as...-it will not be a problem to return a products when its a subject to return policy of the store Please indicate in your opinion - how likely the following statements describe your attitudes as...-the brand completely satisfies its customer requirements of quality Please indicate how much you agree with the statements below:-I can count on this brand Please indicate how much you agree with the statements below:-This brand shares my values Please indicate how much you agree with the statements below:-This brand has earned my confidence Please indicate how likely for the following statements to be true:-I would pay extra for this brand Please indicate how likely for the following statements to be true:-I would say positive things about this store to others Please evaluate how much the given characteristic describes your feelings about the brand:-Warmth Please evaluate how much the given characteristic describes your feelings about the brand:-Fun INFLUENCE OF UNETHICAL MARKETING BEHAVIOR ON CUSTOMER-BASED BRAND EQUITY 93 Please evaluate how much the given characteristic describes your feelings about the brand:-Excitement 3.6500 1.68358 120 4.1917 2.03456 120 3.9250 1.90162 120 4.0333 1.96153 120 4.5167 1.52284 120 4.9167 1.48144 120 5.2667 1.35803 120 3.8917 1.87328 120 5.1333 1.34060 120 3.8500 1.80406 120 4.4667 1.35308 120 3.3583 1.87776 120 Looking from your ethical perspective, please grade (0-lowest; 7=highest) to which extend the pri...-ethical 3.2167 1.95402 120 Looking from your ethical perspective, please grade (0-lowest; 7=highest) to which extend the pri...-morally right 3.3000 2.09682 120 Looking from your ethical perspective, please grade (0-lowest; 7=highest) to which extend the pri...-do not violate unspoken promise 3.3583 2.08957 120 Looking from your ethical perspective, please grade (0-lowest; 7=highest) to which extend the pri...-do not violate unwritten rules 3.4500 2.14535 120 Please evaluate how much the given characteristic describes your feelings about the brand:-Security Please evaluate how much the given characteristic describes your feelings about the brand:-Social approval Please evaluate how much the given characteristic describes your feelings about the brand:-Self-respect Please describe your impression of the brand based on characteristics below.indifferent:caring Please describe your impression of the brand based on characteristics below.-low quality:high quality service Please describe your impression of the brand based on characteristics below.-limited choice:variety Please describe your impression of the brand based on characteristics below.unfair:honest Please describe your impression of the brand based on characteristics below.inconvenient:convenient Please describe your impression of the brand based on characteristics below.insencere:sincere Please describe your impression of the brand based on characteristics below.ordinary:unique Looking from your ethical perspective, please grade (0-lowest; 7=highest) to which extend the pri...-fair
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