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This research investigated the role of branding in the video game industry and how perceived brand differentiation influenced brand loyalty among members of ...
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Student name: Gosse de Reus
Student Number: 459767
Supervisor: Ms. Vasiliki Tsagkroni
Master Media and Business
Erasmus School of History, Culture and Communication Erasmus University Rotterdam
Master Thesis
June 2017
This research investigated the role of branding in the video game industry and how perceived brand differentiation influenced brand loyalty among members of Generation Y in the Netherlands. It aims to fill a gap in branding literature investigating the importance of brands in the video game industry. The video game industry is characterized by an oligopolistic structure with Nintendo, Sony and Microsoft remaining as the three main video game console manufacturers in the contemporary market. The present study investigated to what extent the target demographic perceives the three brands as differentiated and to what extent this influences their loyalty towards these brands. A quantitative method was used employing a questionnaire in order to assess participants’ opinions about the brands. Statistical analysis allowed for investigating the linear relationship between perceived brand differentiation and brand loyalty. Results show that there is a relationship between the two concepts, meaning that when a participant scores higher on the differentiation scale indicating more differentiation of the brand, it is likely that participants score higher on the loyalty scale. Multiple regression analyses indicated that the strength of the perceived brand differentiation score could account for nearly 50 percent of the score of brand loyalty for all three brands, indicating a high degree of relatedness between the two concepts. The results also stress that there is a certain causality among brand sources that compose brand equity, implying that marketers can focus their attention on multiple steps in gradually building brand equity. For firms operating in the video game industry, it turns out to be viable to focus on differentiating a brand from the competition in terms of software offered on the console and offering advantages that competing brands do not offer. This is likely to increase brand loyalty among Generation Y consumers in the Netherlands.
KEYWORDS: Brand, branding, perceived brand differentiation, brand loyalty, brand equity, video game industry
The video gaming industry in 2017 is bigger than the movie industry and music industry, with revenues of over 23 billion US dollar in 2015 (ESA, 2016). An evolution recognized by many scholars throughout the last two decades (Williams, 2002) and ascribed to technological progress and innovation throughout every new generation of hardware (Nieborg, 2014). The industry is deemed to be the “fastest growing and most exciting category of mass media for the coming decade” (Marchand & Hennig-Thurau, 2013, p. 141). A negative reputation has stuck to the industry for a long time, being regarded as a pastime for geeks and nerds (Alvisi et al., 2003; Egenfeldt-Nielsen, Smith & Tosca, 2013). However, this reputation has altered and the industry now has a large impact on contemporary popular culture (Aoyama & Izushi, 2003; Egenfeldt-Nielsen et al., 2013), also visible in the myriad ways that fans of videogames make use of them besides just playing, establishing an entire culture around videogames (Newman, 2008). The videogame industry is argued to have close links to other popular culture industries such as the film industry, but also cartoons (Aoyama & Izushi, 2003). A popular example of which is Pokémon, a video game franchise also exploited through a tv- series and films (Aoyama & Izushi, 2003). In academia, this practice is called transmedia storytelling, defined by Henry Jenkins as the flow of content across multiple media channels and argued to be almost inevitable in an era of media convergence (Jenkins, 2003). In essence, playing video games has become a more widely accepted hobby and an important part of popular culture, also due to the enlargement of its consumer base (Chung, 2005; Juul, 2010). So what are the consequences of the growth of the video game business and its impact on contemporary popular culture? The videogame industry has gained much scholarly attention, mostly focusing on the videogames themselves or the interaction between the games and its players (Crawford, 2011; Johns, 2006; Wesley & Barczak, 2010), while also receiving a lot of attention as a potential new way of educating (Egenfeldt-Nielsen et al., 2013). Aarseth (2001) stated that video games became a viable academic field in 2001, but the focus has since then largely remained on the analysis of the games and the players, a player-centric approach. Egenfeldt-Nielsen et al. (2013) define five major types of analysis concerning video games, namely game, player, culture, ontology and metrics. These also focus more on the player and video game itself than the economic impact of the industry and how it functions. The economic aspect of video games could be ascribed to the culture section, but this section mainly focusses on the impact of video games on popular culture. David Nieborg emphasizes the lack of attention for the role of marketing in his review of Digital Play (Kline, Dyer-Witheford & De Peuter, 2003),
academic literature that problematizes the role of marketing in the videogame industry (Nieborg, 2014). The significance of marketing in the video game industry has not received a lot of attention within the academic field of video game studies (Burgess & Spinks, 2014). The lack of attention for marketing practices in the video game industry is striking due to the popularity of the industry and the revenues that are available in the industry (Nieborg, 2014). What can be the significance of marketing in the video game industry and why? Given the highly competitive nature of the video game business, marketing can be of vital importance to firms operating in the industry. Brands are regarded as one of the most valuable intangible assets to any firm, granting firms competitive advantages (Keller, 2013; Kapferer, 2008). The video game industry is also known as a market characterized by an oligopolistic structure, which means that a small group of companies is in control of the market (Marchand & Hennig-Thurau, 2013; Kerr, 2006). Given the cyclical nature of the video game business, which provides a new ‘generation’ of home consoles, defined as “non- portable video game play devices that rely on a television screen” (Palomba, 2016, p. 64), every four to five years (Glas, 2016), it can be a competitive advantage for any major console manufacturer to establish a loyal consumer base. A loyal consumer base is a desirable asset to firms because the industry is also characterized by a network effect, meaning that consumers will be drawn to a platform that provides a lot of great content, but this content will only be present if the platform has a large installed base (Alvisi, Narduzzo & Zamarian, 2003; Alvisi, 2006; Steiner et al., 2016). Therefore, if consumers purchase a new platform based on pleasurable previous experiences with a brand and/or out of loyalty, this can create competitive advantages for firms aiming to become market leader in the industry. What are the power relations in the video game business and how have brands developed over time? Since the present study aims to investigate the role of branding strategies in the video game industry, it is not the intention of this paper to extensively discuss the history of the industry, but some insights are necessary in order to signify the importance of brands and branding in the video game market. In the contemporary market, three main competitors in the console industry remain: Nintendo, Sony and Microsoft, often termed as the industry’s incumbents. Their commercial success in the industry changes through the years and with every console generation. Nintendo was the market leader in the 1990’s, until Sony launched its first PlayStation (Glas, 2016). Sony then became leader until the release of the Nintendo Wii, which outperformed both Sony and Microsoft in terms of console sales. (Juul, 2010; O’Gorman, 2009) At the start of 2017, Microsoft and Sony seem to outperform Nintendo in terms of the number of consoles they sell to consumers, as was also the case with the sixth
successful video games can contribute to building a specific brand image for console manufacturers because consumers will relate pleasurable experiences to the brand that provided them with it (Velasquez et al., 2012). Based on findings from the previous two paragraphs, it can be concluded that it can be profitable for incumbents in the video game industry to clearly teach consumers what their console does and what kind of experiences it offers, in terms of hit video games, or previously successful franchises. Thus, differentiation of their consoles might evoke loyalty amongst consumers when their experiences keep meeting or exceeding expectations, while maintaining a brand image they are able to relate to. As mentioned before, in today’s video game industry, three main competitors remain. Nintendo, Sony and Microsoft all aim to win the minds and hearts of consumers and sell as many consoles and video games as possible. The strategy of establishing and fixing a set of meaning around a console and its users is still being applied. For example, Palomba (2016) sought to investigate how consumers perceive the three incumbent’s console’s personalities in the seventh generation. Nintendo’s Wii was seen as futuristic, sleek, cool and up-to-date. Microsoft’s Xbox 360 was assessed as confident, successful and a leader, whereas Sony’s PlayStation 3 was also perceived as a leader and up-to-date, but also as upper-class. Palomba (2016) argues that marketers can utilize insights from consumers’ perceptions of video game consoles to strategically position their successors in the market place and relate their personalities to the parent brands, which are Nintendo, Microsoft and Sony. The latest generation of consoles, the Nintendo Switch, PlayStation 4 and Xbox One all bear a slogan that aims to create meaning around the console in the minds of consumers. The Nintendo Switch is accompanied by the slogan ‘Play anytime, anywhere with anyone’ (Forde, 2017). This slogan emphasizes the dual nature of the Switch. It can be used at home on a big screen, but can also be played while travelling because it has a screen on the console. In video game literature, consoles are often defined as machines that require a television to play (Glas, 2016), thus the Nintendo Switch is not necessarily a console but more of a hybrid between handheld and console. The PlayStation 4 bears two slogans. The first is ‘Greatness Awaits’ (Gaston, 2013) and the second one is ‘This is for the players’ (Oster, 2013). These slogans seem to emphasize that the PlayStation 4 is supposed to be a console with great video games, focussing on the gaming aspect of the platform. This strategy bears great resemblance to the one used for the first PlayStation (Alvisi et al., 2003). The Xbox One has been released with the slogan ‘All in one. Input one.’, referring to the multi-media nature of the Xbox One Cook, 2013). These slogans can be regarded as examples of trying to establish a set of meaning around a console and its users. Consumer expectations have to be managed in order
consumers appear to be the prime target audience for video game console manufacturers, regardless of shifting perceptions of who plays games (Chess, Evans & Baines, 2017). Second, they are regarded as the future dominant segment of the market, making it potentially the most profitable target demographic (Lazarevic, 2012). This research aims to shine a light upon the role of branding in the videogame industry, without going to deep into specifics of the industry. Therefore, its history and contemporary status will be touched upon in order to allow for analysis of what role brands and branding fulfil in the industry. In light of the significant importance of brand differentiation and brand loyalty in the video game industry, the following research question is proposed: RQ: Does perceived brand differentiation predict brand loyalty among Dutch members from Generation Y? In the following second chapter, brands, branding and the significance of branding in the video game industry will be defined in the theoretical framework. In the third chapter, the methods will be outlined and the target demographic will be defined thoroughly. The fourth chapter will provide the empirical results, after which chapter five will draw conclusions from the research in light of the theoretical insights and outline the limitations of this research.
2.1 Brands, branding in a commercial industry Every commercial company aims to make profits and gain leadership in the market in which it is active. Accomplishing commercial success in an industry is dependent on multiple factors. First of all, a product or service needs to be of a certain standard quality in order for consumers to be satisfied with it and for them to continue purchasing it. However, when products or services in an industry become of a certain standard level of quality, other factors might influence a company’s success in the market. An important determinant of success in any market can be a brand and the process of branding. Keller (2013) states that branding means to create mental structures which help consumers organize their knowledge about products and services in a way that clarifies their decision making and, in the process, provides value to the firm. He argues that the key to branding is that consumers perceive differences among brands in a product category. These differences can be related to attributes or benefits of the product or service itself, or they may be related to more intangible image considerations. The role of branding in the videogame industry remains relatively untouched (Wesley & Barczak, 2010). Considering the fact that the video game industry now is the biggest entertainment industry, it deserves more attention in academic research concerning the role of brands and the act of branding in the video game industry. Most literature concerning the act of branding in the videogame industry has been done in retrospect and has not investigated the relationship between brand image and loyalty within consumer’s minds (e.g. Kline et al., 2003). In the following sections, a definition for the concept brand will be detailed and the components that construct a brand will be defined. After that, three different functions of brands will be discussed. Lastly, the significance of brands and branding in the videogame industry will be elaborated on.
2.2 Definition of a brand and its components The concept of a brand can be discussed in terms of multiple aspects. There is no unanimous definition of the concept of a brand, but several experts have formulated a definition, such as Keller (2013) and Aaker (2013), but also the American Marketing Association (AMA). The AMA definition is as follows: “A brand is a name, term, design, symbol, or any other feature that identifies one seller's good or service as distinct from those of other sellers." (http://www.ama.org). Keller (2013) takes this definition as a basis, but adds a note about it and suggests a distinction between ‘brand with a small b’ and ‘Brand with a capital B’. Keller
influence brand equity. Aaker (1991) considers brand loyalty, name awareness, perceived quality and other brand associations to be the four bases of brand equity, where ‘other brand associations’ can be regarded as the brand image that consumers have of a brand. The model designed by Aaker is shown in figure 1 below.
Figure 1. Aaker’s (1991) model of brand equity.
In his model, Aaker considers brand loyalty to be a source of brand equity, but it can also be seen as a result of strong brand equity. Sasmita and Mohd Suki (2015) argue that strong brand equity drives increased consumer confidence in a brand as opposed to the brands of the competition, resulting in increased consumer loyalty. Farquhar (1989) identifies positive brand evaluations, accessible brand attitudes and a consistent brand image to be the main sources of a strong brand. Accessible brand attitudes refer to how fast a consumer is able to retrieve brand evaluations stored in mind, which is similar to what Aaker calls name awareness. With the need for a consistent brand image, Farquhar (1989) refers to the process of shaping the brands personality and developing a relationship with the consumer. He argues for brands to create easily memorized characteristics for a brand, a strategy that can result in more name awareness. Keller (2013) defines two sources of brand equity, namely brand awareness and brand image. He argues that the first step in building brand equity is to create brand awareness. In order for consumers to consider a product, they have to be aware of its existence in the market. Brand awareness consists of brand recognition and brand recall. Brand recall of a brand is positive when consumers think of that brand when they are thinking of a certain
product category. Keller states that a sufficient level of brand awareness is needed in order for a company to establish a brand image in the minds of consumers. This is where Keller differs from Aaker, because he proposes brand awareness to be a step before establishing an image, whereas Aaker’s model stimulates the notion that the four sources of brand equity can be shaped simultaneously. This is recognized by Yoo and Donthu (2001), who empirically assessed the effectiveness of the brand equity dimensions proposed by Aaker (1991) and Keller (1993), with the intention to develop a psychologically sound and cross-culturally generalizable measure of brand equity. Their results propose that there may be a potential causal order among the dimensions of brand equity, meaning that brand awareness might precede perceived quality, and perceived quality precedes brand loyalty (Yoo & Donthu, 2001). Establishing a brand image in the minds of the consumer is the part where brands make an effort to differentiate their brand from the competition. The goal of establishing a brand image is to link strong, unique and favourable associations to the brand in the minds of consumers (Keller, 2013). Kapferer (2008) states that branding is meant to invoke beliefs of exclusivity and superiority of a brand and emotional bonding with consumers. Keller (2009) deems the ultimate goal of branding to ensure consumers to be ‘in-sync’ with the brand, which he calls brand resonance. It reflects the extent to which consumers form a psychological bond with a brand or the level of activity performed with a brand as a result of loyalty. Keller proposes a brand resonance pyramid, consisting of six brand building blocks that belong to four stages of brand development. The first is salience, which means consumers should bear deep brand awareness. This stage is meant to build the identity of the brand, who is the brand to the consumer? The second stage is meant to apply meaning to the brand, what is it? The brand building blocks that belong to this stage are performance and imagery. At this point, points of parity and points of difference are established, meant to signify to the target consumer group how the brand is the same as other competing brands as well as how it is different from those. The third stage is to evoke judgments among consumers, or create associations towards the brand. The building blocks are judgments and feelings, which aim to create positive, accessible reactions towards the brand. The final building block is resonance, the stage at which the consumer establishes a relationship with the brand. This stage is aimed at evoking intense active loyalty among consumers. This model recognizes the causal order among the multiple sources of brand equity. The brand resonance model is displayed in figure 2 below.
Figure 2.
1989). In order for the brand image to add towards positive brand equity, marketers need to ensure that these associations are strong, unique and positive (Keller, 2013; Kapferer, 2008). The brand image is influenced by advertising and consumer’s own experience, but also word of mouth (Keller, 2013). The concept of brand equity and how to measure it has been explained in different ways. Keller (2013) states that brand positioning is a defining component of marketing strategy, designing an image of the brand in the mind of consumers that takes a distinct and valued place. Brand positioning is able to tell consumers how the brand is unique, but also how it is similar to competing brands and why consumers should purchase the brand’s products. In addition, Farquhar (1989) argues that the brand’s image should be consistent throughout the course of its marketing campaigns, meaning that consumers should be able to recognize the brand and its values, based on previous experiences with the brand. The associations should be in line with previous associations and experiences with the brand in order for the image to reside in the minds of the consumers. In other words, a brand image should be logical in the minds of the consumer, meaning that it should rhyme with whatever associations consumers hold with a brand. Keller identifies four dimensions that marketers need to know in order to position their brand effectively, namely who the target consumer is, who its main competitors are, how the brand is similar to the competitors and how the brand is different from them. This research focuses on the consumer perception of brand differentiation, signifying how a brand is different from its competitors. Keller (2013) argues that points-of-difference (POD’s) are defined as attributes or benefits that consumers strongly associate with a brand, positively evaluate, and believe they cannot find with a competing brand. Keller defines POD’s in terms of uniqueness, performance or imagery associations, which can be, for example, either superior quality or being a low-cost provider of a product or service. Thus, for consumers to perceive a brand as differentiated, they need to hold associations towards the brand that signify the brand as unique, a good or excellent performer and a positive image. Thus, quality and reliability of a brand are important traits for any firm looking to develop competitive advantages. Delgado-Ballaster and Luis Munuera-Aléman (2001) found that trust can be regarded as a predicting factor for brand loyalty, meaning that when consumers trust a brand they feel the brand will meet the consumption expectations. The research in this thesis focuses on the relationship between perceived brand differentiation and brand loyalty. As can be derived from previous paragraphs, consumer’s perceptions of brands are influenced by multiple factors such as advertising, word of mouth and their own experiences with a brand (Keller, 2013; Kapferer, 2008). Whether or not
consumers are able to differentiate products within a specific product category is therefore dependent on the effectiveness of marketing strategies. Marketers have to assure that consumers bear positive, strong and unique associations towards a brand in order for it to have a strong brand equity. This in turn is supposed to establish a loyal consumer base that is willing to pay a price premium and stick to a brand that meets or exceeds their expectations (Keller, 2013; Kapferer, 2008; Brakus et al., 2009; Marchand et al., 2013; Thomson, MacInnis & Park, 2005). Brand loyalty is an outcome of an established relationship with a brand (Kapferer, 2008). This relationship can be maintained through respecting any associations consumers have towards a brand and keeping the right balance between staying true to that identity and innovating (Keller, 2000; Kapferer, 2008). Loyalty can also be established when consumers feel that a brand experience is a good fit with their lifestyle and social identity (Nam, Ekinci & Whyatt, 2011). For a company, a loyal consumer base has several advantages. The most important one is that it provides stability of future sales (Kapferer, 2008), also because it creates a barrier of entrance for possible new competitors (Keller, 2013). Rundle- Thiele and Maio Mackay (2001) argue that loyalty amongst consumers reduces the marketing costs of doing business. Amine (1998) argues that consumer brand loyalty should not be reduced to the single dimension of repeated purchases. He argues that the loyalty process is influenced by more factors, such as brand pricing, store loyalty and an absence of competitor’s promotions. However, loyalty can be argued to be feeble in case consumers are tempted towards other brands when the product is not available in a store or when competing products are cheaper, possibly because of price promotions. Generation Y consumers are known as a notoriously disloyal consumer group, making it difficult to secure repeat purchase amongst this group of consumers (Lazarevic, 2012). Fernandez (2009) does, however, argue that Generation Y consumers have belonging needs, meaning that they pick brands to influence their social identity and this way attempt to add to belonging to a certain social group. Thus, if brands are able to be perceived as socially acceptable, this might add to brand loyalty among Generation Y consumers. This, however, might be hard to achieve because this consumer demographic is argued to be media-wise and able to filter out marketing messages they do not want to receive (Fernandez, 2009). Previous paragraphs suggest brand loyalty to be the ultimate goal of branding strategies to create strong brand equity. Multiple sources are argued to build brand equity and it can be argued that there is a causal order in the process of building brand equity. After securing brand awareness, marketer should focus on instilling positive and strong associations towards their brand in the minds of consumers, while aiming to be in-sync with consumers in
probability that the company is able to gain a large market share (Rundle-Thiele & Maio Mackay, 2001) Finally, brands serve multiple purposes for consumers. In this section, two main purposes of brands will be identified for consumers. The first purpose of brands for consumers is to carry special meaning, often based on past experiences. The second purpose is to serve as an identifier to the source or maker of the brand and to be able to assign responsibility to it. As stated before, one of the purposes of branding is for brands to invoke special meaning in the minds of consumers. This can cause economic advantages for brands in multiple ways. If a company is able to provide consumers with pleasurable experiences, they are likely to assign these experiences to the brand that provided it. This way, consumers might develop a relationship with brands and stick to these brands for future purchases (Brakus et al, 2009; Kapferer, 2008; Keller, 2013). According to this knowledge, brand loyalty has to be established over time and over the course of multiple pleasurable experiences. Consumers will have to associate the brand with a good experience and the company has to keep meeting expectations in order for the consumer to remain loyal. Keller (2013) states that experience goods, such as films but also video games, benefit greatly from a strong brand because consumers are not able to judge the quality of a product based on superficial aspects like packaging. Instead, consumers in the videogame industry might rely on recommendations by friends and family (Mathews & Wearn, 2016; Alvisi et al., 2003). Therefore, previous pleasurable experiences might be of significant impact in future purchasing decisions. Purchasing an unknown brand can prove to be an economic risk for consumers, thus choosing a familiar brand can be a risk-reducing decision. In the case of video games and video game consoles, which are relatively expensive entertainment products compared to, for example, films and music, choosing a familiar brand can prove to be a risk- reducing decision (Marchand, 2016). Brands play an important role in the lives of consumers because they are omnipresent. They signify quality for consumers, allowing them to assign responsibility to the manufacturers. Besides functioning as a shorthand device, literature shows that brands also influence the construction of an individual’s identity (Tuškej, Golob & Podnar, 2013). Influencing a consumer-brand identification is argued to result in positive consequences for a brand, in the form of consumer commitment and willingness to provide positive WOM (Tuškej et al., 2013). They argue that this identification process is mostly influenced by brand values, these have to overlap with values of the desired and targeted consumer demographic.
Summarizing the previous paragraphs, consumers use brands as shorthand devices to predict experiences and distinguish similar products within a certain industry. If a certain brand offers pleasurable experiences, consumers might start relying on this reputation a brand has and express this through repeat purchases. Consumers utilize brands in their construction of the individual identity, emphasizing the importance of constructing a brand-consumer relationship. In the following section, the significance of these theories will be reflected on within the videogame industry.
2.4 Branding importance in the video game industry As stated in the introduction, there is a lack of scientific research in the videogame industry concerning the relevance of brands and branding. In the next section, a brief overview of branding in the videogame industry will be reported. After that, several purposes and functions of branding in the videogame industry will be detailed and connected to the purpose of this research. Kline and his colleagues (2003) are argued to be the first to extensively discuss the role of branding in the videogame industry (Nieborg, 2014). They state that Nintendo was the first company to brand the videogame industry, noting they got their main inspiration from the Disney company, known for its films focused on families. One of their prime strategies was to market their videogame characters as mascots. This strategy made Mario , Nintendo’s mascot, more recognized by children from America than Mickey Mouse , Disney’s mascot (Kline et al., 2003). Sheff (1993) states that Nintendo colonized the youth’s culture, which was showered with the culture of Nintendo in the form of cartoons, films and magazines. Nintendo had entered the collective consciousness according to Sheff, which in branding jargon means Nintendo had successfully applied a branding strategy to achieve brand awareness among consumers. Sony attempted to imitate this strategy by developing mascot games, but these failed to become associated with the console name (Alvisi et al., 2003). Nevertheless, the presence of strong franchises is regarded as a valuable asset for video game console manufacturers (e.g. Kline et al., 2003) Sony’s success with their first PlayStation console has firmly established video games and gaming in the social and cultural lives of a generation Newman (2002) calls Generation PSX. He argues that Sony’s marketing with the PlayStation has altered the visibility and status of video gaming, shifting it from geeky to even a chic way of spending one’s free time. Juul (2010) pleads that the video game industry’s connection to “awkward young males” (p. 152) has kept many players away from the industry for a long time. Glas (2016) argues that Sony
