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To cite this Article Kim, Woo Gon , Lee, Soojin and Lee, Hae Young(2007) 'Co-Branding and Brand Loyalty', Journal of
Quality Assurance in Hospitality & Tourism, 8: 2, 1 — 23
To link to this Article: DOI: 10.1300/J162v08n02_01
URL: http://dx.doi.org/10.1300/J162v08n02_01
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Co-Branding and Brand Loyalty
Woo Gon Kim
Soojin Lee
Hae Young Lee
Woo Gon Kim is Associate Professor, Florida State University, College of Busi-
ness, Dedman School of Hospitality, One Champions Way, Suite 4116, Tallahassee,
FL 32306 (E-mail: wkim@cob.fsu.edu).
Soojin Lee is Doctoral Student, Texas A&M University, Department of Recreation,
Park and Tourism Sciences College Station TX 77843-2261 (E-mail: sjlee73@tamu.edu).
Hae Young Lee is Assistant Professor, Kyungsung University, School of Hospital-
ity and Tourism Management, 314-79 Daeyeon-3dong, Nam-gu Busan, 608-736 South
Korea (E-mail: hylee1228@ks.ac.kr).
Journal of Quality Assurance in Hospitality & Tourism, Vol. 8(2) 2007
Available online at http://jqaht.haworthpress.com
Ó 2007 by The Haworth Press, Inc. All rights reserved.
doi:10.1300/J162v08n02_01 1
2 JOURNAL OF QUALITY ASSURANCE IN HOSPITALITY & TOURISM
INTRODUCTION
on-site survey was conducted to the customers who have visited chain
restaurants in Seoul, Korea in order to investigate the effects of co-
branding on customer satisfaction and brand loyalty. This study offers
useful information to both marketing managers in restaurant industry
and academics concerning the crucial determinants of customer satis-
faction and brand loyalty linked to co-branding.
LITERATURE REVIEW
Co-Branding
(Lee, Kim, & Kim, 2006). A larger number of chain restaurants, hotels,
and theme parks have together implemented co-branding strategies to
accomplish synergy (e.g., Country Inns with T.G.I. Friday’s, Ramada
with Bennigan’s, T.G.I. Friday’s with Holiday Inn, Starbucks with both
Marriott and Hyatt, Pizza Hut with Marriott, McDonald’s with Walt-
Disney, and Sofitel with Dorint) (Young, Hoggatt, & Paswan, 2001).
Paul Kirwin, President, Country Inns & Suites, stated that “co-
branding works especially well for limited-service hotels and mid-
priced hotels, and casual-dining restaurants because they serve a similar
customer” (Ryan, 1999). Country Inns’ co-branding partnering with a
T.G.I. Friday’s was a win-win strategy for both brands. TGIF generated
additional 15-20% revenue from hotel guests during their lunch and
dinner business. On the other hand, the benefits of hotel were derived
from (1) meeting hotel guests’ dining needs and (2) savings from the
construction costs of building and operating a decent restaurant in the
hotel (or on premise) (Ryan, 1999).
Yip (2005) summarizes the advantages of implementing a co-
branding strategy as follows: “From the viewpoint of both the operator
and the partner, the ability to access a broader customer base and form
new relationships with clients is one of the most important and benefi-
cial advantages. The revenue generated by the partnership can gener-
ally outweigh the expense of forming the alliance; as a result, budgeted
expenditures can be concentrated in other areas. In addition, co-brand-
ing enhances the credibility of the hotel’s brand by borrowing credibil-
ity from other brands.”
4 JOURNAL OF QUALITY ASSURANCE IN HOSPITALITY & TOURISM
Customer Satisfaction
visit. However, service quality issues have been stated about the exces-
sive emphasis on customer satisfaction and whether or not it connects to
their performance (Lam & Zhang, 1999; Su, 2004). Few researchers
have examined the linkage between co-branding and customer satisfac-
tion as one of the effective marketing strategies.
Brand Loyalty
Since people are inclined to behave in a way that maximize the ex-
pected utility value, customers who perceive that they can receive bene-
fits are likely to be attached to the brand offering psychological and
behavioral benefits (Woodside & Walser, 2007). It is, therefore, logical
to suggest that the perceived price benefits enable customers to develop
a degree of brand loyalty. The second hypothesis is:
synergic effects for both parties (restaurants and other industries). Par-
ticularly, such co-branding can provide customers with more diverse
choices of samples, catalogues, and gifts. The increased diversity of
promotional materials available to customers can enhance the perceived
value of services and products at the restaurants. The perceived value, in
turn, may significantly affect customer satisfaction (Cronin, Brady, &
Hult, 2000; Eggert & Ulaga, 2002; Parasuraman, 1997; Parasuraman &
Grewal,, 2000). It can be inferred that the perceived premium promo-
tion such as samples and gifts increases the level of customer satisfac-
tion and brand loyalty. These conjectures help generate two other
hypotheses that are related to the effects of premium promotion:
The conceptual model for this study is shown in Figure 1. Given that
the impact of three types of perceived benefits (i.e., price, premium pro-
motion, and post-purchase services) on brand loyalty can be mediated
by customer satisfaction, this study posits customer satisfaction par-
METHODS
RESULTS
Sample Characteristics
crease in the rate of credit card usage and card service charges prompts
the joint action between chain restaurants and credit card companies.
Since chain restaurants cannot explicitly force their customers to use
specific credit cards, they give a variety of benefits (e.g., discount bene-
fits and promotion gifts) to the customers through a co-branding with
credit-card companies that charge the lowest service fee. In Korea, LG
Card is considered as the most successful credit card company in estab-
lishing cooperation with chain restaurants. The collaborated chain res-
taurants offered a 5% discount to their customers who made their
payment by LG Card. As a result, several chain restaurants such as
T.G.I.F., Sizzler, Tony Roma’s, Marché, and Outback Steak House has
experienced a sharp growth, and the market share of LG card has
increased to nearly 13%.
A mobile communication company is another partner that has been
vigorously engaged in co-branding with chain restaurants over the last
several years. As the communication market reached its ceiling, the mo-
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when mileages of the card reached a certain point. Co-branding with ri-
val chain restaurants can help improve their reputation, cut marketing
costs, and increase sales. However, one can also expect some negative
consequences that may result from the excessive use of this co-branding
strategy. First of all, the co-branding strategy may keep one from devel-
oping an independent image. Also, there is a problem for the possible
down reputation of a restaurant if the co-branding fails.
Measurement Model
cates that the confirmatory factor model fits the data well, and all load-
ings of the items exceed .3 and each indicator t-value exceeds 3.45 (p <
.01) (see Table 4). The findings indicates that the Cronbach’s alpha ex-
ceed .6 for each scale. One item for post-purchase services and two
items for brand loyalty were dropped because of the weak contributions
to coefficient alpha and low item-to-total correlations (see Table 4). Ad-
ditionally, the composite reliability (C) for each construct is accept-
able, exceeding the minimum value of .6 (Diamantopoulos & Siguaw,
2000). The composite reliability indicates whether the individual indi-
cators of each construct provide reliable measurement of the construct.
testing the proposed structural model. The fit of structural model was
good (Ù2 [67] = 185.94, p < .05; CFI = .91, GFI = .89, AGFI = .83,
Downloaded At: 07:49 8 March 2011
RMSEA = .08) and support was found for four of the seven hypothe-
sized paths. Overall, the model accounted for 49% of the variance in
customer satisfaction (SMC = .49) and 38% of the variance in brand
loyalty (SMC = .38).
The first two hypotheses concerned the relationship the price benefits
and two outcomes of customer satisfaction and restaurant brand loyalty.
The relationship between price benefits and customer satisfaction (H1a)
is supported by the positive path coefficient (standardized ␥11 = .55, t =
5.26, p < .001), while the relationship between price benefits and brand
loyalty (H1b) is not supported (standardized ␥21 = -.06, t = -.46, n.s.).
The role of price benefits as a strong antecedent of customer satisfaction
has been confirmed in the previous literatures (Voss, Parasuraman, &
Grewal, 1998). However, the result was shown that price benefits were
not likely to develop brand loyalty to the chain restaurants. In compari-
son with consumer learning theory, consumer-behavior theorists who
argue that discount benefit may not effect on brand loyalty. Customers
who visit chain restaurants in response to price benefits (e.g., free bev-
erages, free entrées, and free desserts) would be less likely to visit the
chain restaurant in the post-promotion period without the benefits
(Bawa & Shoemaker, 1987; Taylor, 2001). The result of hypothesis
testing, therefore, corroborates the existing literature.
Hypothesis 2 postulated that premium promotion is positively related
to customer satisfaction and brand loyalty. As not expected, no relation-
ship between the premium promotion and customer satisfaction (stan-
dardized ␥12 = -.11, t = -1.16, n.s.) and brand loyalty (standardized ␥22
16 JOURNAL OF QUALITY ASSURANCE IN HOSPITALITY & TOURISM
= .00, t = .01, n.s.) were discovered, thus H2a and H2b are not sup-
ported.
Hypothesis 3 suggested that the post-purchase services positively re-
lated to customer satisfaction and brand loyalty. H3a and H3b are sup-
ported by significant and positive path coefficients (standardized ␥13 =
.38, t = 4.00, p < .001; standardized ␥23 = .36, t = 3.19, p < .001; respec-
tively).
Lastly, the path coefficients between satisfaction and loyalty were
examined for Hypothesis 4. As theorized, satisfaction was found to
have significantly, positively effect on brand loyalty (standardized ß21 =
.38, t = 2.81, p < .01). Thus H4 is supported. The role of customer satis-
faction as a strong antecedent of brand loyalty has been confirmed in the
previous literatures (Ellinger et al., 1999; Fornell, 1992; Kim et al.,
2004; Newman & Werbel, 1973; Yoon & Uysal, 2005). The results of
hypotheses testing are also shown in Figure 2.
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most chain restaurants have been struggling to work out brand differen-
tiation strategies for keeping the preceding level of market share to
continue to exist. For this reason, it has become an urgent issue for
them to implement successful marketing strategies. Nowadays, joint-
promotion has increasingly risen as one of the alternative methods
among restaurant marketers in Korea. However, the relationship be-
tween joint-promotion, consumer satisfaction, and brand loyalty remains
largely unexplored. Therefore, this study investigates the effects of
joint-promotion on customer satisfaction and brand loyalty.
In Korea, most chain restaurants do joint-promotion with uniform
benefits to the customers. Disregarding their customers’ perceptions/
preferences toward joint-promotion may result in a large waste of re-
sources by the companies. Among the three joint-promotional strategies
(i.e., price benefits, premium promotion, and post-purchase services)
shown previously, the price benefits related promotional strategy seems
to be the most effective method to attract customers to the chain restau-
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rants in Korea. Besides, it was shown that the customers who receive
the benefits of discount prices tend to be more satisfied with the restau-
rant than those who do not get the price benefits; the present study
showed that the attainment of price benefits (e.g., free meals, free bever-
ages, and free desserts) was positively associated with the customer sat-
isfaction. However, it was also shown that those who received the price
benefits did not tend to develop brand loyalty to the chain restaurants.
They seem to develop a loyalty to the price benefits but not to the chain
restaurants that provide such benefits. Thus, if other competing restau-
rants offer more competitive prices, then they are likely to visit the res-
taurants with a better price offer. This suggests that the joint-promotion
method that does not contribute to developing brand loyalty to the given
restaurant is not a desirable strategy. Plus, the price benefit strategy may
generate a bad margin for the restaurant, although it helps increase the
number of customers and the total revenue. That is, the increased num-
ber of customers, driven by the price joint-promotion, requires more op-
erating costs (labor cost, facility maintenance, and etc.), and the profit
for each customer is likely to decrease. For this reason, price benefits
seem to be a better promotional method for new opening restaurants to
attract new customers as a short term marketing strategy than for the
established restaurants.
Post-purchase services (e.g., mileages accumulation and electronic
newsletter), on the other hand, significantly affected the level of satis-
faction and brand loyalty to the chain restaurants, although it was a
much less powerful factor in restaurant selection processes than the
18 JOURNAL OF QUALITY ASSURANCE IN HOSPITALITY & TOURISM
price benefits. This result shows that the post-purchase services that
helps familiarize the customers to the restaurants in a long-term period
are effective ways of promotion.
Premium promotion (e.g. samples, catalogues, and gifts) did not sig-
nificantly affect the level of both customer satisfaction and brand loyalty
to the chain restaurants. This study may have produced somewhat differ-
ent results if the restaurants had provided the customers with more attrac-
tive gifts. However, since it appears to be virtually impossible to satisfy
all the customers’ tastes for gifts, marketers of the restaurants need to take
some effective measure to adopt a premium promotion strategy. It seems
to be appropriate that marketers recognize the characteristics of their res-
taurants and major target market and provide the gifts that could best
match the identified characteristics. A good combination between the
types of joint-promotion and the profiles of customers in chain restau-
rants can help enhance the level of both customer satisfaction and brand
loyalty, which finally leads to more numbers of visits.
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The limitations of this study and future research agenda are as fol-
lows. There are several limitations to this study. The first limitation
Kim, Lee, and Lee 19
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doi:10.1300/J162v08n02_01
Kim, Lee, and Lee 23
APPENDIX