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IJBM
32,4
300
Received 15 November 2013
Revised 20 February 2014
Accepted 25 March 2014
International Journal of Bank
Marketing
Vol. 32 No. 4, 2014
pp. 300-320
r Emerald Group Publishing Limited
0265-2323
DOI 10.1108/IJBM-11-2013-0136
Building brand equity in retail
banks: the case of Trinidad
and Tobago
Meena Rambocas and Vishnu M. Kirpalani
Department of Management Studies, The University of the West Indies,
St Augustine, Trinidad and Tobago, and
Errol Simms
Faculty of Social Sciences, The University of the West Indies,
St Augustine, Trinidad and Tobago
Abstract
Purpose – The purpose of this paper is to investigate an integrated model mapping the influence
of brand affinity, customer experience, and customer satisfaction on brand equity in retail banking.
Design/methodology/approach – Data were collected from 315 banking customers in Trinidad and
Tobago through personally administered structured questionnaires and analyzed with Structural
Equation Modelling.
Findings – The findings showed the mediating role of customer satisfaction in brand equity
relationships. The results also showed the pivotal role of brand affinity, customer satisfaction, and
service experience in explaining brand equity.
Practical implications – The study provides an integrated approach to brand building. It also offers
an objective framework brand owners can use to evaluate marketing investments. It also provides a
clear brand differentiation strategy for bank brands. Finally, it introduces cross-cultural research in
brand equity which can be a useful competitive tool for indigenous banks and foreign banks seeking
market expansion strategies.
Originality/value – This research is one of the few studies that analyzed brand equity in retail
banking. It advanced a brand equity framework that explores the mediating role of customer
satisfaction and provides a guide to uplift perceptions and stimulate customer confidence in the
banking sector.
Keywords Brand equity, Customer satisfaction, Bank marketing, Brand affinity, Service experience,
Trinidad and Tobago
Paper type Research paper
1. Introduction
Retail banking is changing rapidly as customers and government agencies become
more demanding, and markets more competitive. In response to these changes, banks
are adopting integrated branding strategies (Cohen and Mazzeo, 2010; Tallon, 2010;
Bravo et al., 2010). Through effective branding, banks cultivate unique identities and
relationships, simplify product choice, reduce search activities, and reduce purchase
risks. The value of successful brands encapsulates the essence of brand equity (Keller,
1993). Specifically, brand equity is the value of a brand name to all stakeholders
including producers, retailers, and consumers (Tuominen, 1999). It exists when
customers select a specific brand or express a willingness to pay more for the same
level of quality just because of the product’s name. Brand equity has a direct and
positive link with profitable performances and competitive advantages (Bello
and Holbrook, 1995; Kim et al., 2003) and remains as one of the few areas banks can
maintain a trustworthy relationship with customers (Ohnemus, 2009). Banks with
strong brand equity also reap financial incentives through cobranding advantages Brand equity in
and product line extensions (Ohnemus, 2009). retail banks
There is an abundance of research conceptualizing and measuring brand equity, but
to date most are focussed on product-based brand equity, with only a handful of studies
focussing on service-based brand equity ( Jahanzeb et al., 2013; Krishnan and Hartline,
2001). This sparse contribution to the service literature is surprising given the
increasing role of services in modern economies (Wilson et al., 2012) and in particular 301
to employment in developing nations (Cali et al., 2008). In addition, the inherent
differences between service and product-related marketing make a case for expanding
brand equity literature into the service domain (Krishnan and Hartline, 2001). Some
academics argue that brand equity is cognitively constructed through awareness,
association, loyalty, and perceived quality (Aaker, 1991; Keller, 1993; Yoo and Donthu,
2001). Others argue that brand equity is a personal and social phenomenon created
through social appeal and personal attachment (Belen del Rı́o et al., 2001). This study
builds on the academic contribution and examines brand equity through the lens
of consumer behavior and psychology theories, focussing specifically in the domain of
retail banking. An examination of the literature suggests that the use of service
experience in marketing is growing as more managers are realizing the benefits on
fundamental marketing goal such as customer satisfaction, loyalty, and positive word
of mouth (Camarero, 2007; Verhoef et al., 2009). But, despite this increased interest, the
use of service experience as a marketing strategy is often isolated from other
marketing initiatives (Berry et al., 2006). In this regard, a strong call for integrating
service experience as a strategic tool in marketing (Aaker, 1991, 1996; Keller, 2001;
Klaus and Maklan, 2007; Klaus et al., 2013). This paper responds to this call by
investigating the effect of service experience on brand equity (Aaker, 1991, 1996; Keller,
2001). The role of brand attachment is also receiving a considerable interest in research
given the proven correlation with long-term customer relationships (Park et al., 2010).
Attachment reflects the degree of affinity or bond that emotionally connects a brand
with a customer on a personal level. Berry (2000) also make a case for strong emotional
connections in branding. According to Berry (2000) emotionally attached customers
hold favorable attitudes toward brands which positively affect a wide range of
marketing outcomes. In addition to service experience and affinity, studies support for
the role of customer satisfaction in bank management (Moutinho and Smith, 2000).
More recent contributions have explored customer satisfaction as a mediator between
form activities and marketing outcomes like perceived quality and customer loyalty
(Caruana, 2002; Al-Hawari and Ward, 2006), customer retention, and economic
performance (Cronin and Taylor, 1992). This study extends these contributions and
investigates the mediating role of customer satisfaction on brand equity relationships.
This study is unique given that it is one of the first to investigate the impact of service
experience and brand affinity on brand equity, an area identified as underexplored in
the branding literature (Christodoulides and De Chernatony, 2010). It is also one of the
first studies to investigate the mediating role of customer satisfaction on brand equity
relationships and addressed a recent call by leading researchers ( Jahanzeb et al., 2013)
to examine causal relationships in marketing concepts (service experience, brand
affinity, customer satisfaction, and brand equity). Additionally, this study is one of a
few that examined brand equity from a banking perspective, an industry classified as
complex with high consumer involvement (Aldlaigan and Buttle, 2001). In addition
to these theoretical gaps, no study has undertaken brand equity investigations in
small island states, with Trinidad and Tobago (TT) as no exception. This study has
IJBM implications for retail bankers in TT and the wider Caribbean. Specifically, the study
32,4 empirically demonstrated the importance of customer satisfaction in brand value
and proposed an integrated model for predicting and explaining brand equity in retail
baking. Customer satisfaction is an important managerial and theoretical concept
given the strategic importance ( Jamal and Naser, 2002; Torres and Tribo, 2011). This
study demonstrated the mediating role of customer satisfaction in brand equity
302 relationships.
The retail banking sector of TT, a small twin island state located in the southern
Caribbean, is a distinctive service category, facing unprecedented challenges. It is
the largest service sector in the country comprising nearly 40 percent of total
financial assets (Trinidad and Tobago Central Statistical CSO (TT CSO), 2010).
It contributes 14 percent to the country’s gross domestic product and employs
approximately 8 percent of the labor force. Historically, retail banking in TT has
been relatively stable. Most operations center on providing conventional services
(such as loans, deposits, and short-term credit facilities) through traditional
distribution channels (the majority of transactions are done through personal
interface and automated banking machines), with limited use of internet banking
(Rambocas and Arjoon, 2012). However, the market is transforming both
structurally and operationally, which, when coupled with the aftermath of the
2008 financial crisis, have challenge customer confidence and trust in the banking
system. In addition, the emergence of other financing options such as peer to peer
lending and micro financing options are challenging the financial supremacy banks
once enjoyed. These alternatives are now presenting opaque distinctions between
banks and non-banks and are driving banks to find innovative market distinctions.
Despite these challenges, retail bank remains the largest sector in the TT financial
market, with eight commercial banks and 123 branches. Although, the financial
crisis of 2008 challenged the economic sustainability of many Caribbean countries,
its impact on the TT’s retail banking institutions has been mild when compared to
Caribbean neighbors (Trinidad and Tobago Central Bank, 2011). This makes TT an
ideal for further investigations. Industry experts are also having trouble explaining
the sector’s stability. Some arguments draw on the industry’s oligopolistic structure,
others look at a bank’s management practice and/or government regulations (PECU
Credit Union, 2009; Bankers Association of Trinidad and Tobago, 2008). But, these
arguments have failed to consider the role of market forces that include brand
stability and customer value. This study will address this issue.
The remainder of the paper is structured in four main sections. First, we examined
the theoretical relationships between consumer brand knowledge and brand equity.
Second, we presented the conceptual model that guided our research design and
hypotheses. Third, we presented the methodology and data analysis techniques and
finally a discussion on the implications of our findings and recommendations for future
research initiatives.

2. Theoretical background and research hypotheses

Brand equity is the value a brand name brings to all stakeholders including producers,
retailers, and consumers (Tuominen, 1999). It exists when stakeholders gravitate
toward a specific brand, or willing to pay more for the same level of quality because of
a name. This study defines brand equity from a customer perspective. Despite the
recent prominence in marketing, there is little consensus on how brand equity is
created (Pappu et al., 2005; Kayaman and Arasli, 2007). Early contributions promote
brand equity as company asset with consumer and firm appeals (Aaker, 1991; Brand equity in
Keller, 1993, 2001) but to date, antecedents of brand equity remain disjointed and retail banks
unclear (Christodoulides and De Chernatony, 2010). The authors attributed this
academic uncertainty to the different methodologies used to quantify the intangible
construct. Arguably, brand equity is an outcome from consumers’ rational evaluation
of environmental stimuli (Aaker, 1991; Keller, 1993). Alternatively, others argue that
the construct is more of a subjective response to social and personal elements 303
(Belen del Rı́o et al., 2001; Kim and Kim, 2005). Lassar et al. (1995) suggested that
consumers create brand equity through intangible and perceptual dimensions like
perceived performance, perceived value, image, trustworthiness, and commitment. Yoo
and Donthu (2001), mapped behavioral determinants that included loyalty, perceived
quality, and brand awareness/association. Other studies (Netemeyer et al., 2004; Taylor
et al., 2007) suggested that brand equity is created by consumer willingness to pay
extra for a specific brand and other brand related responses such as perceived service
quality, brand value, and brand uniqueness.
Additionally, previous contributions are criticized for their simple first order approach
(Yoo and Donthu, 2001; Low and Lamb, 2000; Kim and Kim, 2005; Christodoulides and
De Chernatony, 2010), that map relationships among antecedents in isolation (Kim et al.,
2001). In this regards, researchers are increasingly employing higher order analyses to
explicitly represent causal constructs through modeling mediating effects (Kim et al.,
2001; Hair et al., 2010; Jahanzeb et al., 2013). Models with mediating variables offer
explanations for the causal relationships between independent and dependent variables
(Baron and Kenny, 1986). This study is a step in this direction and examine the influence
of service experience, brand affinity, and mediating role of customer satisfaction on
brand equity.

2.1 Service experience

Experiences are “processes of sensory perception, brand affect, and the participatory
experiences consumers seek from a brand” (Schmitt, 2012, p. 10). Epstein (1998)
summarized the experiential system as “a cognitive system driven by emotions” (p. 125).
He argued that although the rational and experiential systems of cognitive processing
are independent, they influence each other. Emotional experiences feed into intellectual
knowledge and influence behavior. Emotional experiences depend on service encounters
(Berry, 2000). Service experiences invoke emotional connections, harness trust, and
fulfillment. The evaluation of service experience affects the emotional and psychological
response toward the brand, which in turn influence attitudes and behaviors. This
conclusion was supported by Grace and O’Cass (2004) who examined the impact of
service experiences on customer evaluation and concluded that during a service
experience, both behavioral and emotional elements are evoked which ultimately affect
the way consumers rate the overall service encounter. The authors concluded that
emotional enticement created through positive service experiences lead to favorable
dispositions toward a service brand and higher equity.
Given the nature of services, several factors contribute to the level of experience
during and after the service consumption including continual interactions with
employees, physical environment, and delivery method. However, unlike goods,
service attributes are not determined before consumption but only realized during
and after consumption. In addition, the intricate nature of services extends to
the difficulties customers endure in judging the service provider especially when
the provider offers specialized technical expertise. The literature in consumer
IJBM research have already shown a significant influence of service experiences on post
32,4 consumption evaluations (Grace and O’Cass, 2004; Biedenbach and Marell, 2009).
Service experience affect customers’ feelings, beliefs, and behavior. Berry et al.
(2006, p. 43) suggested that service cues have a “disproportionately larger effect on
how customers evaluate service experiences and whether they chose to utilize
the service again.” These cues include functional (technical quality of offerings),
304 mechanic (object’s environment which appeals to the senses of sight, smell,
sound, taste, and texture), and humanic (which emerge from the behavior and
appearance of service providers). Motivated by the contributions made in the
service literature, we expect that the type of experience customers have with their
service provider will influence brand judgment. This expectation is reflected in the
hypothesis below:

H1. Service experience positively relates to brand equity, better service experiences
will increase the brand equity customers assign to retail banks.

2.2 Brand affinity

Drawing from the literature in sociology, the term affinity refers to “forces that cause
one person to be drawn to, and seek a relationship with another” (Oberecker et al.,
2008). In marketing, affinity is used to describe the emotional connection between
customers and brands (De Chernatony and Dall’Olmo Riley, 1999). Berry (2000) argued
that brand perception can be dominated by both impressions and beliefs on what
the brand stands for. Successful brands make strong emotional connections with
customers (De Chernatony and Dall’Olmo Riley, 1999; Berry, 2000). Such appeals are
either directed toward both functional service attributes, and perceived service benefits
(Berry, 2000). Brand affinity goes beyond rational economic value and reflects the
emotional affection consumers express for their preferred brands. Consumers interact
with hundreds of brands but consciously develop emotional connections with only a
few through feelings of love, affection, or belonging (Berry, 2000). Early contributions
to emotional research (Bowlby, 2005) indicated that the degree of emotional affection
directed to any object is predicted by the nature of an individual’s interaction with that
object. In his analogy of personal and brand relationships, the author suggested
that individuals who are strongly attached to a person are more likely to be committed
to, invest in, and make sacrifices for that person, and likewise customers will depict
similar behavioral traits in their brand relationships. Emotional attachment to a brand
often reflects the consumer willingness to make financial and personal sacrifices to
maintain relationships with the brand. In this regard, emotionally attached customers
are more likely to hold favorable attitudes toward a brand. Thomson et al. (2005)
argued that attachment and affection are developed over time. Through continual
interaction, meanings are developed and strong emotional bonds are created. Emotional
attachment is therefore a reflection of the customer mental state, embedded in
mental psyche.
Brand affinity taps into dimensions of differentiation and brand positioning
(Aaker and Biel, 1993) and supports a price premium by converting other brands
into imperfect substitutes, and mitigate the threat of competition through loyalty
(Romaniuk et al., 2007). Perceived differentiation and by extension brand
association, are important in consumer choices. The favorability, strength, and
uniqueness of brand affinity also influence customer differential responses through
information recall, product differentiation and purchase decision (Keller, 1993).
In this regard, we suspect that the brand affinity is positively related to the Brand equity in
additional value customers assign to brands. This expectation is reflected in the retail banks
hypothesis below:

H2. Brand affinity positively relates to brand equity, higher brand affinity will
increase the brand equity customers assign to retail banks.
305
2.3 Customer satisfaction
Satisfaction is a mental state of pleasurable fulfillment derived from consumption
(Oliver, 1999). Satisfaction reflects an overall judgment on one product’s superiority
that occurs after consumption, guided by reference points set before consumption.
Although satisfaction is related to perceived quality, it is considered as a distinctive
long-term mental state (Sureshchander et al., 2002; Gustafsson et al., 2005). Satisfied
customers create and sustain deep psychological bonds with preferred brands.
Customer satisfaction is linked to economic performance given the relationship
with profitability, market share and return on investments (Bitner, 1990; Oliver,
1999). Additionally, satisfaction is linked to non-economic performance given the
relationship with behavioral and attitudinal loyalty (Bloemer and Kasper, 1995).
Also, satisfaction influence other aspects of consumer behavior such as buying
more products, buying other products from the same supplier, increasing the
tolerance for higher prices and positive word of mouth. More recently, Anderson
et al. (2004) developed a framework that specified how customer satisfaction affects
current and future consumer behavior, and in turn how behavior affect future cash
flow risk and shareholder value. Satisfied customers are able to identify preferred
brands very easily and impact on market penetration and expansion strategies.
Therefore, customer satisfaction reduces demand volatility and improves
cash flow. Customer satisfaction is also linked to long-term financial performance
(Bolton et al., 2000; Zeithaml, 2000; Anderson et al., 2004) and shareholder value
(Hogan et al., 2002). Satisfied customers increase a firm bargaining power with
stakeholders and facilitate stable demand patterns, increase investment and reduce
overall cost.
Given the strong and positive relationships between both firm performance and
customer behavior, we expect satisfaction to have a similar influence on other
marketing phenomena like brand equity. This provided the motivation for our third
research hypothesis:

H3. Customer satisfaction directly relates to brand equity in retail banks, higher
customer satisfaction will increase the brand equity customers assign to retail
banks.

The mediating role of customer satisfaction in our brand equity model is based on the
recent arguments promoted by Caruana et al. (2000) suggesting that customer
satisfaction is a dynamic concept that varies with intensity, time, and circumstance.
The author found that customer satisfaction serves a mediating role in several
customer relationships. Positive thoughts and feelings toward a brand are likely to
have a positive influence on the brand evaluation (Yuksel et al., 2010) and increase
the level of satisfaction toward the brand and influence preferential responses.
Furthermore favorable experiences with the services core, functional and technical
areas and emotional affinity should reinforce the preferential value customers assign to
IJBM the brand and increase the level of brand equity. In line with this argument we
32,4 expect that:

H4. Customer satisfaction mediates the relationship between service experience

and brand equity.

306 H5. Customer satisfaction mediates the relationship between brand affinity and
brand equity.

The proposed research model is presented in Figure 1.

3. Methodology
The study examined the relative effect of three predictor variables (customer
experience, brand affinity, and customer satisfaction on brand equity. The study also
investigated the mediating role of customer satisfaction in explaining brand equity.
The population of interest was defined as citizens of TT, 18 years and over with an
expressed preference toward a specific bank for service encounters. Service encounter
is defined in this study as depositing, borrowing or purchasing of financial products.
According to the TT National Census Report, the number of citizens above 18 years is
just over 980,000 people. The authors could not verify the number of eligible banking
customers in TT and estimated this number to be within the vicinity of 900,000.
In terms of sampling, the research employed a multi-stage approach. This approach
involved two stages: area sampling and systematic sampling. According to Davis
(2000), when area sampling is conducted, the study’s population is first separated into
two distinct non-overlapping geographic areas (here after referred to as clusters), and
then a sample is selected from each cluster. This approach guarantees a wide
geographical reach and more representativeness. The study divided the first cluster
(Tobago) into two regions (north and south) and the second cluster (Trinidad, the larger
island) into four regions: eastern, western, central, and southern. The researchers
identified major banks in each region through bank web sites. Each bank’s corporate
division was contacted to seek consent for data collection on bank premises. In order to
overcome the sample bias associated with the research design, the data collection
extended to intercepting bank customers at leading shopping malls. The shopping
malls selected for data collection housed retail banks and therefore represented the
sample of interest. Data were collected by a final year PhD student trained in research
methodology. To collect the data, the researcher was stationed at the exit/entrance
closest to the resident bank and approached every third person entering was

SERVICE EXPERIENCE

CUSTOMER SATISFACTION Brand Equity

Figure 1.
Proposed research model
BRAND AFFINITY
approached for participation (a convenience sample). We recognize the statistical Brand equity in
dilemmas associated with convenience samples in quantitative research, but justify retail banks
its use, given the absence of a sampling frame and inability to identify members of
the population. In light of the obvious limitations of our sampling strategy, steps were
taken to minimize the uncertainties and bias by ensuring participants met two
specified criteria before participation (citizens of TT over the age of 18 years and had
an expressed preference toward a particular bank for service encounters). We also 307
employed the advice form Skowronek and Duerr (2009) to design diversity in survey
administration to strengthen the weaknesses of the sampling approach. Diversity was
added by distributing questionnaires at different times of the day on different days of
the week during a three-month period. This strategy allowed access to a cross-section
of retail banking clients and control (although not eliminate) the statistical dilemmas
associated with convenience sampling.
Approximately 450 participants were approached and 360 agreed to participate in
the study, but only 315 met specified sampling criteria with respect to age and banking
preference. This generated a 70 percent response rate. Participation was voluntary
without incentives. Data collection extended for three months July 2011 to September
2011. Data were collected through structured questionnaires divided into two sections.
The first section solicited responses on brand affinity, service experience, customer
satisfaction, and overall brand equity (previously discussed in the literature
review). The study utilized scales developed and tested by previous studies (brand
affinity – Aziz and Yasin, 2010; service experience – Grace and O’Cass, 2004; customer
satisfaction – Taylor et al., 2004; and brand equity – Lassar et al., 1995). Each construct
was measured on five-point Likert Scale that ranged from 1 – strongly disagree to
5 – strongly agree. Table I presents sample items used in the survey. Section 2, asked
for data on age, gender, income, education, and ethnicity. The items in the final survey
were refined with a pilot study using personal intercepts on a convenient sample of
50 full time university students. The pilot study employed a similar approach for data
collection as the main study and was designed to obtain feedback on the structure and
wording of the survey instrument and get an opportunity to observe non-verbal cues of
respondents. The pilot study helped with phrasing the questions for the main study.
Overall, the pilot study showed no major problems with the structure and design of
the instrument and paved the way for the main study. In total, 315 questionnaires
were completed in the main study, with 32 cases with missing data (10.1 percent).
The percentage is relatively high to warrant diagnosis of randomness through Little’s
Missing Completely at Random test (w2 ¼ 808.04, df ¼ 919, p ¼ 0.996). This suggested
that the data is missing completely at random and replacing missing values with
predicted values provides a powerful alternative to analyzing data. Although there are
several methods to replace missing data (Hair et al., 2010) the Expectation Maximum
(EM) algorithm was chosen as the preferred method because of the technique’s power
in imputing data to create complete data sets. Based on probabilistic models, the EM
imputes missing data in all cases regardless of the number of missing cases or sample
size and is a powerful alternative to other imputation algorithms such as WOMAC
(Ghomrawi et al., 2011).

4. Results
In terms of profile, 51 percent of the participants were male. Relative to age, the
majority of participants were between 25 and 44 years old (45.1 percent). This profile
closely resembles the national distribution according to the recently conducted national
IJBM Brand affinity 1. I feel emotionally connected to my bank
32,4 2. I like my bank
3. To me, my bank is unique
4. My bank suits my personality
5. I am proud to tell my colleagues about my bank
6. I am happy with my bank
Customer 1. The services I get from my bank exceeds my expectations
308 satisfaction 2. I am a satisfied customer of my bank
3. My bank provides me with all the services I need from a bank
4. I consider my choice to continue transacting with my bank a wise one
5. My bank comes close to what I would describe as a perfect bank
6. I am contented with my bank
7. I am delighted with my bank
8. I am sure that my bank is the right bank to do business with
Service 1. My bank has a modern layout
experience 2. Employees at my bank provide prompt service
3. Employees of my bank are always willing to help
4. Employees at my bank are never too busy to give me assistance
5. The service offered by my bank is superior compared to alternative banks
6. My bank has never broken my trust
Brand equity 1. I find my bank more attractive compared to other banks
2. I have great respect for my bank
Table I. 3. I have positive feelings towards my preferred bank
Sample items 4. Even though the other banks offer similar services I transact with my bank
used in survey because it is a logical choice for me

survey (TT CSO, 2010). The income distribution showed the majority of participants
(88.6 percent) earned less than US$30,000 (US$1 ¼ TT $6.00), which reflects the
average income distribution of the country. Table II presents the mean, standard
deviation, and correlations for all the variables used in the study.
Data analysis began with factor analysis on predictor items using principal
component approach with varimax rotation. As expected, three groups emerged which
provided the empirical support for discrimination among the three theoretical
constructs proposed in the brand equity model (service experience, brand affinity, and
customer satisfaction). Next, confirmatory factor analysis (CFA) was used to test the
theoretical pattern of factor loadings on each of the pre-specified constructs. CFA
establishes uni-dimensional constructs through varimax rotation and ensures that the
combination of measured indicators measure one and only one construct, an important
test in multi-item measurement scales. Before CFA was applied, the items were tested
for sufficient level of correlations. This relationship was verified through the factor’s
MSA coefficient and Bartlette test of Sphericity, to measure the degree of inter-item
correlation among measured indicators. The results of the CFA show that each construct
was uni-dimensional and had acceptable reliability coefficients. The measurement scale
for service experience consisted of six items. The MSA (0.803) and Bartlett test of
Sphericity ( po0.05) were acceptable, but two items were deleted from further analysis
because of low factor communalities. The retained items explained 66.1 percent of
variance with a strong reliability statistic (Cronbach’s a ¼ 0.826). The second construct
“brand affinity” comprised six indicators. The MSA (0.842) and Bartlett test of Sphericity
( po0.05) were also acceptable but two items were deleted from this scale because of low
factor communalities. The retained indicators explained 68 percent of total variance and
 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Prompt 1 0.607** 0.555** 0.526** 0.495** 0.466** 0.491** 0.459** 0.458** 0.432** 0.298** 0.442** 0.507** 0.492** 0.532** 0.486** 0.321** 0.307** 0.385** 0.276**
Helpful 0.607** 1 0.775** 0.396** 0.459** 0.376** 0.333** 0.457** 0.470** 0.514** 0.312** 0.296** 0.463** 0.523** 0.487** 0.374** 0.223** 0.141* 0.318** 0.208**
Busy 0.555** 0.775** 1 0.396** 0.447** 0.439** 0.345** 0.455** 0.507** 0.577** 0.341** 0.352** 0.501** 0.572** 0.523** 0.427** 0.294** 0.179** 0.343** 0.293**
Trust 0.526** 0.396** 0.396** 1 0.521** 0.522** 0.540** 0.450** 0.525** 0.509** 0.328** 0.529** 0.548** 0.473** 0.498** 0.538** 0.472** 0.303** 0.404** 0.395**
Like 0.495** 0.459** 0.447** 0.521** 1 0.568** 0.627** 0.553** 0.500** 0.554** 0.445** 0.494** 0.605** 0.517** 0.580** 0.535** 0.388** 0.322** 0.444** 0.426**
Unique 0.466** 0.376** 0.439** 0.522** 0.568** 1 0.649** 0.470** 0.451** 0.496** 0.372** 0.521** 0.570** 0.526** 0.609** 0.533** 0.366** 0.360** 0.384** 0.429**
Personality 0.491** 0.333** 0.345** 0.540** 0.627** 0.649** 1 0.562** 0.446** 0.500** 0.448** 0.552** 0.588** 0.485** 0.574** 0.568** 0.383** 0.454** 0.430** 0.479**
Social acceptance 0.459** 0.457** 0.455** 0.450** 0.553** 0.470** 0.562** 1 0.424** 0.633** 0.396** 0.529** 0.498** 0.516** 0.553** 0.493** 0.426** 0.368** 0.453** 0.429**
Expectations 0.458** 0.470** 0.507** 0.525** 0.500** 0.451** 0.446** 0.424** 1 0.633** 0.449** 0.439** 0.644** 0.529** 0.556** 0.443** 0.356** 0.250** 0.403** 0.387**
Overall
satisfaction 0.432** 0.514** 0.577** 0.509** 0.554** 0.496** 0.500** 0.633** 0.633** 1 0.626** 0.611** 0.581** 0.624** 0.649** 0.572** 0.400** 0.345** 0.519** 0.469**
Only choice 0.298** 0.312** 0.341** 0.328** 0.445** 0.372** 0.448** 0.396** 0.449** 0.626** 1 0.517** 0.513** 0.500** 0.521** 0.472** 0.295** 0.302** 0.422** 0.377**
Wise choice 0.442** 0.296** 0.352** 0.529** 0.494** 0.521** 0.552** 0.529** 0.439** 0.611** 0.517** 1 0.588** 0.518** 0.546** 0.606** 0.409** 0.452** 0.609** 0.607**
Perfect 0.507** 0.463** 0.501** 0.548** 0.605** 0.570** 0.588** 0.498** 0.644** 0.581** 0.513** 0.588** 1 0.585** 0.698** 0.594** 0.485** 0.313** 0.497** 0.521**
Experiences 0.492** 0.523** 0.572** 0.473** 0.517** 0.526** 0.485** 0.516** 0.529** 0.624** 0.500** 0.518** 0.585** 1 0.671** 0.592** 0.398** 0.341** 0.512** 0.458**
Delight 0.532** 0.487** 0.523** 0.498** 0.580** 0.609** 0.574** 0.553** 0.556** 0.649** 0.521** 0.546** 0.698** 0.671** 1 0.608** 0.400** 0.392** 0.486** 0.474**
Right choice 0.486** 0.374** 0.427** 0.538** 0.535** 0.533** 0.568** 0.493** 0.443** 0.572** 0.472** 0.606** 0.594** 0.592** 0.608** 1 0.441** 0.351** 0.511** 0.557**
Attractive 0.321** 0.223** 0.294** 0.472** 0.388** 0.366** 0.383** 0.426** 0.356** 0.400** 0.295** 0.409** 0.485** 0.398** 0.400** 0.441** 1 0.326** 0.554** 0.567**
Respect 0.307** 0.141* 0.179** 0.303** 0.322** 0.360** 0.454** 0.368** 0.250** 0.345** 0.302** 0.452** 0.313** 0.341** 0.392** 0.351** 0.326** 1 0.507** 0.457**
Affection 0.385** 0.318** 0.343** 0.404** 0.444** 0.384** 0.430** 0.453** 0.403** 0.519** 0.422** 0.609** 0.497** 0.512** 0.486** 0.511** 0.554** 0.507** 1 0.607**
Logical 0.276** 0.208** 0.293** 0.395** 0.426** 0.429** 0.479** 0.429** 0.387** 0.469** 0.377** 0.607** 0.521** 0.458** 0.474** 0.557** 0.567** 0.457** 0.607** 1
Mean 3.60 4.02 3.82 3.51 3.73 3.37 3.70 3.97 3.36 4.00 3.84 3.92 3.24 3.73 3.58 3.75 3.71 3.74 3.95 3.89
Standard
deviation 1.123 0.962 0.995 0.904 0.894 0.989 0.983 0.930 1.056 0.885 0.976 0.762 1.074 0.968 1.007 0.891 0.894 1.072 0.753 0.838
N 315 315 315 315 315 315 315 315 315 315 315 315 315 315 315 315 315 315 315 315

Notes: *,**Correlation is significant at 0.05 and 0.01 level (two-tailed), respectively

Mean, std deviation

and correlations of
retail banks

309

Table II.
Brand equity in

variables in study
IJBM had strong reliability coefficient (Cronbach’s a ¼ 0.842). The third construct labeled
32,4 “customer satisfaction” was measured using an eight-item scale. The MSA (0.908) and
Bartlett test of Sphericity ( po0.05) were also acceptable. All eight items were retained
which explained 62 percent of total variance, which is above the minimum requirement
(50 percent) in social science research. These eight items had strong reliability coefficient
(Cronbach’s a ¼ 0.911). The final construct (the dependent construct in this model) was
310 “brand equity” was measured with a four item scale. The MSA (0.771) and Bartlett test of
Sphericity ( po0.05) were acceptable and items explained 63 percent of total variance
with strong reliability coefficient (Cronbach’s a ¼ 0.786). The factor loadings are shown
in Table III.
The factor loadings were used as composite variables for all four constructs.
Using factor scores as the basis for calculating composite variables has the advantage
is purported as the best method for complete data reduction as it represents all
variables loading on the factor (Hair et al., 2010). It is also a method commonly used in
past literature when multi-item scales are used. We tested the convergent validity of the
model by using the average variance extracted (AVE) criteria. According to Hair et al.
(2010, p. 687) the average variance of 0.5 is a good rule of thumb for adequate
convergence. All four constructs meet the convergence requirement (brand affinity
0.680, service experience 0.661, customer satisfaction 0.623, and brand equity 0.631).
Discriminant validity was accessed by estimating the correlation coefficient among
factors in the model with correlations o0.85 indicative of discriminant validity
(Rambocas and Arjoon, 2012). The correlation matrix is shown in Table IV. All factors
were significantly correlated, however the greatest correlation exist between brand

Factor loading Variance extracted Reliability

Brand affinity (BAFF)

Like 0.836 67.962 0.842
Unique 0.816
Personality 0.867
Social acceptance 0.776
Service experience (SE)
Prompt 0.829 66.101 0.826
Helpful 0.873
Busy 0.855
Trust 0.681
Customer satisfaction (CS)
Expectations 0.742 62.309 0.911
Overall satisfaction 0.842
Only choice 0.723
Wise choice 0.763
Perfect 0.827
Experiences 0.798
Delight 0.837
Right choice 0.774
Brand equity (BE)
Attractive 0.774 63.002 0.786
Table III. Respect 0.702
Factor loading and Affection 0.851
reliability test Logical 0.839
 Correlations
Brand equity in
Brand equity Brand affinity Customer satisfaction Service experience retail banks
Brand equity (BE)
Pearson correlation 1 0.625** 0.692** 0.464**
Sig. (two-tailed) 0.000 0.000 0.000
Brand affinity (BAFF) 311
Pearson correlation 0.625** 1 0.795** 0.667**
Sig. (two-tailed) 0.000 0.000 0.000
Customer satisfaction (CS)
Pearson correlation 0.692** 0.795** 1 0.720**
Sig. (two-tailed) 0.000 0.000 0.000
Service experience (SE)
Pearson correlation 0.464** 0.667** 0.720** 1
Sig. (two-tailed) 0.000 0.000 0.000 Table IV.
Discriminant validity from
Note: **Correlation is significant at 0.01 level (two-tailed) factor correlation matrix

affinity and customer satisfaction (b ¼ 0.795) and service experience and customer
satisfaction (b ¼ 0.720).
The second stage in the analysis utilized Structural Equation Modelling (SEM) to
estimate the brand equity model through AMOS 18. The justification for using SEM rests
on the technique’s ability to uniquely estimate a series of separate, but interdependent
regression equations simultaneously which allow the strength and significance of
relationships to be assessed within the context of the entire model. Additionally, SEM
enables complex and multiple relationships to be modelled simultaneously so that an
independent variable in one relationship can also be modelled as a dependent variable
in another relationship, and is an instrumental tool for testing mediating effects.
The hypothesized model depicted in Figure 1 was ascertained using multiple fit indices
(w2 to degree of freedom w2/df, significance p, GFI, AGFI; Hair et al., 2010). The measures
of good fit (w2/df ¼ 185.132; p ¼ 0.000; GFI ¼ 0.818; AGFI ¼ 0.822; NFI ¼ 0.762) were
less than an acceptable level. This suggested that the data collected did not fit the
theoretical model tested and the theoretical model should be re-specified. This is shown in
the correlation matrix in Table V.
In order to improve the model, we re-specified the model through a series of iterative
adjustments according to the steps set by Hair et al. (2010). These included first
deleting standardized path coefficients that were not statistically significant ( p40.01),
and second inspecting the modification indices for possible relationships not estimated
in the model. Generally, modification indices 44 suggest that the model can be improved

Standardized estimate p CR

CS ’ SE 0.396 *** 10.967

CS ’ BAFF 0.659 *** 18.277
BE ’ CS 0.524 *** 8.126
BE ’ BAFF 0.243 *** 4.107
BEa ’ SE 0.121 0.012 2.50 Table V.
Standardized estimate
Notes: aNon-significant relationship p40.01; *** p ¼ 0.000 in original model
IJBM significantly by estimating the specified path. One path was estimated (BA to SE) and
32,4 one path was deleted (SE to BE). The re-specified model is shown in Figure 2.
The w2 (w2/df ¼ 3.929; p ¼ 0.047; GFI ¼ 0.994; AGFI ¼ 0.938; NFI ¼ 0.995) were close
to the cut off criteria (Hair et al., 2010) and allowed us to test the individual hypotheses
using the standardized path coefficients and their respective critical t-values. The
critical t-value for each path coefficients is greater than 2.58 and all standardized path
312 coefficients in the re-specified model were statistically significant ( po0.01). This is
shown in Table VI.
The findings supported the relationship between BAFF and BE (b ¼ 0.21, p ¼ 0.002)
and suggest that emotional connections between customer and brand increase brand
value. However, contrary to expectations expressed in H1 the results showed service
experience had an indirect effect on brand equity, mediated through customer
satisfaction. Specifically, the nature and magnitude of the standardized path coefficient
(b ¼ 0.341, p ¼ 0.000) showed a direct and positive impact of actual service experience
on customer satisfaction and support the conclusion that customer satisfaction is
dependent on consumption circumstance (Giese and Cote, 2000).
The model showed CS explained for more than 28 percent of BE variance (b ¼ 0.529,
p ¼ 0.000) and supported H3. According to Baron and Kenny (1986), a variable is
considered a mediator when three conditions are filled, namely,: (a) variations in the
presumed independent variables (in this case service experience and brand affinity)
significantly accounts for variation in the mediator (customer satisfaction); (b) variations

e1
0.45
SERVICE EXPERIENCE

0.34

e3 e4
0.67
0.70 0.49
CUSTOMER SATISFACTION 0.53
Brand Equity

0.57 0.21

0.00
BRAND AFFINITY
Figure 2.
Re-specified brand e2
equity model
Notes: χ2 = 3.929, df = 1, Prob=0.047, GFI=0.994, AGFI=0.938, NFI=0.995

Estimate p CR

SEa ’ BAFF 0.667 *** 15.881

CS ’ SE 0.341 *** 8.167
CS ’ BAFF 0.568 *** 13.611
BE ’ CS 0.529 *** 7.981
Table VI. BE ’ BAFF 0.205 0.002 3.097
Standardize estimate
in re-specified model Notes: aRe-specified relationship modification index 44; *** p ¼ 0.000
in the mediator (customer satisfaction) significantly accounts for variations in the Brand equity in
dependent variable (brand equity); (c) when points a and b are controlled, a previously retail banks
significant relationship is no longer significant (perfect mediation) or is reduced (partial
mediation). Relative to SE, the direct relationship between CS and BE (b ¼ 0.121
p ¼ 0.012) was insignificant, and SE explained 12 percent variation in CS (b ¼ 0.341,
p ¼ 0.000), suggesting that customer satisfaction mediate the relationship between
service experience and brand equity. Relative to BAFF, the direct relationship with BE 313
(b ¼ 0.243, p ¼ 0.000) is statistically significant. Relative to the impact of CS, the results
show that BAFF explained 32 percent of variances in CS (b ¼ 0.568, p ¼ 0.000),
suggesting that CS partially mediate the relationship between BAFF and brand equity,
fully supporting H4 and partially H5. This finding is in line with recent empirical
evidence for customer satisfaction serves a mediating role in marketing relationships
(Garbarino and Johnson, 1999; Caruana, 2002; Moutinho and Smith, 2000).
Finally, our re-specified model mapped a positive and direct relationship between
brand affinity and service experience. The findings show that BAFF has a strong and
positive impact on SE (0.667, p ¼ 0.000). Previous research efforts explained the impact
of SE on the emotional bond between consumers and brands with only a handful of
research efforts focussed on the reversed relationship. One exception is Schmitt et al.
(2009) who suggested that experiences are sensations derived partially from feelings
evoked by exposure to brand related stimuli and forms part of a brand’s identity.
This suggests that experiences are more than responses during consumption, but
judged from indirect interactions with the brand, particularly from subjective
convictions formed prior to consumption. This study supports this view, and offers
an opportunity to extend brand related research. Table VII presents a summary of
our findings.

5. Discussion and conclusions

Our study builds on the premise that the power of a brand lies in what customers
learn, feel, see, and hear about brands overtime. Our interest in brand equity from a
customer perspective is twofold. First, motivated by the perspectives of Lassar et al.
(1995) and Keller (2001) customer brand equity can be considered a driving force
behind economic and financial prosperity. Second, given escalating costs, stagnated
demand and increasing competition, financial institutions in TT are seeking innovative
ways to maximize returns from marketing expenditure. Understanding branding
from a psychological perspective will allow banks to develop impactful strategies.

Hypothesis Conclusion

H1 Service experience positively relates to brand equity, better service Not supported
experiences will increase the brand equity customers assign to retail banks
H2 Brand affinity positively relates to brand equity, higher brand affinity Supported
will increase the brand equity customers assign to retail banks
H3 Customer satisfaction directly relates to brand equity in retail banks, Supported
higher customer satisfaction will increase the brand equity customers
assign to retail banks
H4 Customer satisfaction mediates the relationship between service Supported
experience and brand equity Table VII.
H5 Customer satisfaction mediates the relationship between brand affinity Partially Summary of research
and brand equity supported hypotheses
IJBM This study empirically examined the causal impact of service experience and brand
32,4 affinity on brand equity as well as mediating role of customer satisfaction on
brand equity relationships. Our study is one of the few studies that empirically
examined brand equity relationships in a specific service sector, and as far as we know,
the only study that presents a brand equity model in retail banking. The results of our
study suggest that customer satisfaction fully mediates the relationship between
314 service experience and brand equity, but only partially mediates the relationship
between brand affinity and brand equity.
The results showed that customer experience had a strong and positive effect on
customer satisfaction. This relationship revealed the perceptual consequences of
service experience, which in turn influence brand equity. Similarly, our findings
mapped a positive and direct relationship between service experience and brand
affinity, where higher brand affinity is linked to better service experience. This finding
suggests that customers evaluate their actual experiences during consumption by
subjective beliefs and connotations formed prior to consumption.
Similarly, the result showed that brand affinity had a significant and positive
impact on brand equity, but this relationship can be improved through customer
satisfaction. The mediating role of customer satisfaction in our brand equity model
suggests that service experience and affinity toward a bank increase customer
satisfaction and in turn increase the attractiveness of banks. Customer satisfaction is
considered a principal component of customer loyalty, word of mouth (Molina et al.,
2007), brand extension and willingness to pay price premiums (Cronin et al., 2000;
Anderson et al., 1994). The more satisfied customers are the less vulnerable the banks
are to competitive threats from other financing options ( Jamal and Naser, 2002).
Customer satisfaction is normally described as a multi-faceted marketing concept
created through the interaction of different service quality dimensions (McDougall and
Levesque, 1999). Our findings show that importance of service experiences during
service consumption, and support the contributions made in prior research (Cronin and
Taylor, 1992; Jamal and Naser, 2002). However, this study extends the literature by
showing the effect of subjective beliefs formed prior to consumption on satisfaction
and ultimately brand equity. The findings suggest that consumers who are emotionally
tied to a brand are likely to hold favorable attitudes toward the brand and is in line with
contribution in the attachment literature (Thomson et al., 2005). This is an interesting
point in the context of retail banking given its credence and complex nature.

6. Managerial implications and limitations

Brand equity is an important managerial concept, because strong brands are associated
with strong companies and strong companies generally benefit from efficient marketing
activities (Raggio and Leone, 2007). Recently banks have increased emphasis on uplifting
credibility and confidence through improving the service experience, with very little
recognition of performance outcomes. The brand equity framework in this study
identifies and explains the positive effect of customer experiences in creating valuable
brands and is a valuable tool to reasonably and objectively track customers’ perceptions
overtime. This benefit is especially helpful given the harsh economic uncertainties of
today’s business environment and supports consistent calls by senior management
to report on the benefits of marketing investments. Additionally, the increasing threat of
international banks moving into TT and the wider Caribbean has raised questions about
the strength of local sector’s ability to successfully compete. The brand equity model
provides a guide for managers to build customer satisfaction and strengthen the value of
indigenous brands. It presents a unique perspective in cross-cultural research which will Brand equity in
also be useful to foreign banks seeking expansion strategies into developing countries retail banks
within the Caribbean, particularly in TT.
The model shows that although service experience is an essential antecedent to
creating strong brands, the impact is dependent on other influences (brand affinity and
customer satisfaction), both of which are perceptual in nature and independent of
marketing investment. The findings show the customer perception of their service 315
experience is based on the level of affinity assign to bank brands, which in turn
increases satisfaction and preference toward the bank brand. Building strong bank
brands calls for an extension of branding strategies beyond improved service
experiences (such as providing a comfortable pleasant service environment and trained
friendly staff) to include a more holistic approach that integrates other elements
of marketing. This means that marketers should focus on building affinities by
extending marketing investment beyond the service environment. This should
include strengthening the presence of the brand in consumers’ minds and promoting
a distinctive identity that gives direction and meaning. The pivotal role of brand
affinity to the brand equity model further supports the argument for engagement in
retail banking going beyond tactical and functional levels. This study only provided
the empirical support for the role of brand affinity without specifying the exact
activities banks should engage in and the costs involved in these efforts but bank
managers should understand that that delivering superior customer service and
satisfaction depends on the influence of appeals through multiple mechanisms.
One example is through customer relationship management strategies focussed on
creating lifetime-valued customer and increasing the share of business through
multiple products. These appeals provide useful guidelines for strategic branding
initiatives in the largely saturated banking sector with primarily standardized
product offerings.
This study provides a useful framework that explains the influence of brand
affinity, service experience, and customer satisfaction on brand equity. However, our
findings are limited to a convenience sample of retail banking customers from one
country (TT). Future research can consider extending this study to other countries for
cross-cultural comparisons as well as other service sectors such as tourism and health.
Our study also focussed on key antecedents to strong bank brands, without examining
effects of this preferential value on consumer behavioral responses and long-term
profitability. As pointed out by one reviewer, private banks are profit maximizers,
who are constantly searching for ways to improve their rate of return. Future studies
can explore the empirical link between the bank’s brand building efforts and
key performance indicators, in order to quantify the financial returns on the brand
building efforts.

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Corresponding author
Dr Meena Rambocas can be contacted at: Meena.Rambocas@sta.uwi.edu

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