The Role of Price and Promotion in Creating Brand Equity

Abstract

The purpose of this study is to ascertain the influence of price and promotion on brand equity, which eventually leads to the determination of consumer’s preference for a particular brand. This research aims to add value to the current field by testing this relationship under the influence of three other mediating dimensions including the brand image, brand loyalty and quality of the product. In order to test the proposed model, the Structural Equation Modeling technique was used in this study. Within this realm, the CFA and path analysis were used to assess the validity and reliability of the latent constructs. The results of the research revealed that the price and promotion of a particular product have a statistically significant relationship with its brand equity. The results also seem to reject the mediating effect of brand image, perceived quality and brand loyalty between price and brand equity. The relationship of promotion, however, does allow for mediation by the perceived quality of a brand, but rejects the other two hypotheses. A number of researchers in Pakistan have previously conducted research on brand equity, albeit using different predictors in different industries. It must be noted that this proposed model of price and promotion, and its effects on the brand equity has not been thoroughly tested in the Pakistani context. Hence, this study proves to be a preliminary basis for further research on the linkages between price, promotion actions and brand equity.