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BRAND-NAMING LESSONS FOR DOMESTIC BUSINESSES

IN INDONESIA:

Choosing between local- and foreign-based brand names

SHINTA YANIRMA

An excerpt of a Master of Business Administration dissertation

Adam Smith Business School

University of Glasgow

September 2016

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ACKNOWLEDGEMENTS

I would like to thank the Indonesia Endowment Fund for Education (LPDP) and the

Indonesia government for their very generous sponsorship of the master’s degree; my

supervisor, Dr. Cleopatra Veloutsou, for her insightful comments, guidance, support

and patience during the dissertation project; my MBA classmates for going through this

intense yet incredible journey together–for those 9-to-5 days in the 305, late hours in the

library, trips around Scotland and pints at the bars; and the staff–especially Bob,

Victoria and David–for their wonderful work during the course.

I dedicate this degree to my parents, Agus and Lily, whom trust me with what I want to

achieve in life. I know it is not always easy in such a traditional collectivistic society

that we live in.

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ABSTRACT

BRAND-NAMING LESSONS FOR DOMESTIC BUSINESSES IN INDONESIA:

CHOOSING BETWEEN LOCAL- AND FOREIGN-BASED BRAND NAMES

Firms intentionally create foreign brand names to invite beneficial associations of some

foreign countries through languages implied by the brand names. However, the

consumers’ ability to comprehend the meaning of foreign brand names may partly

depend on their familiarity and attitude toward the associated foreign language, which is

out of the firms’ control. This research compares consumers’ perceptions about a local

language (LL), close foreign languages (CFL) and distant foreign languages (DFL), and

their associated brand names in order to gain a better understanding of brand-naming in

different language contexts. Data were analysed using multiple regression and paired-

samples t-tests. In a survey participated in by 350 Indonesian consumers, (1) there was a

clear distinction between perceived meaningfulness and likeability of brand names in

LL-CFL-DFL, and (2) selecting brand names in LL or CFL was more beneficial than

DFL. However, language familiarity and attitude were not enough to predict brand

name meaningfulness and likeability for LL-CFL-DFL. The applicability of this

research is limited by sample size, cultural context, and product category, particularly

since the demography of survey participants is skewed toward urban, middle-class

consumers.

KEYWORDS. Foreign branding, brand naming, country of origin, likeability,

meaningfulness, language attitude, language familiarity

Contact the Author: www.linkedin.com/in/theyanirma

How to cite this dissertation:

Yanirma, S. (2016). Brand-naming lessons for domestic businesses in Indonesia: choosing between local- and foreign-based brand names (Unpublished master dissertation). University of Glasgow, Glasgow.

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TABLE OF CONTENTS ABSTRACT.........................................................................................................................5

CHAPTER 01. INTRODUCTION.......................................................................................81.1. RESEARCH BACKGROUND.................................................................................................81.2. GAP IN THE LITERATURE.................................................................................................101.3. RESEARCH QUESTIONS....................................................................................................111.4. RESEARCH AIM AND OBJECTIVES....................................................................................111.5. RESEARCH CONTRIBUTION..............................................................................................111.6. DISSERTATION STRUCTURE.............................................................................................12

CHAPTER 02. BRAND NAMES FROM CONSUMERS’ POINT OF VIEW..................132.1. INTRODUCTION................................................................................................................132.2. DEFINITIONS AND FUNCTIONS OF BRAND NAMES............................................................132.3. ASSESSMENTS OF STRONG BRAND NAMES......................................................................13

2.3.1. Meaningfulness ........................................................................................................ 132.3.2. Likeability ................................................................................................................. 13

2.4. CONCLUSION...................................................................................................................13CHAPTER 03. THE ROLE OF BRAND NAMES IN CLASSIFYING COUNTRY-OF-ORIGIN.............................................................................................................................13

3.1. INTRODUCTION................................................................................................................133.2. THE CONSTRUCT OF “ORIGIN”.........................................................................................133.3. FOREIGN BRANDING........................................................................................................133.4. THE MISCLASSIFICATION OF COO...................................................................................133.5. CONCLUSION...................................................................................................................13

CHAPTER 04. RESEARCH FOCUS................................................................................14

CHAPTER 05. METHODOLOGY....................................................................................145.1. METHODOLOGICAL APPROACH.......................................................................................145.2. STUDY 1: PRELIMINARY RESEARCH................................................................................14

5.2.1. Product categories .................................................................................................... 145.3. THE CONTEXT OF INDONESIAN LANGUAGE.....................................................................14

5.3.1. The language classification ..................................................................................... 145.3.2. Indonesian-Arabic context ....................................................................................... 145.3.3. Indonesian-Chinese context .................................................................................... 145.3.4. Indonesian-Dutch context ........................................................................................ 145.3.5. Indonesian-Russian context .................................................................................... 14

5.4. STUDY 2: QUESTIONNAIRE DEVELOPMENT.....................................................................145.4.1. Stimuli design ........................................................................................................... 14

5.8. STUDY 2: DATA ANALYSIS..............................................................................................145.9. CONCLUSION...................................................................................................................14

CHAPTER 06. FINDINGS FROM STUDY 2....................................................................156.1. SCALE RELIABILITY, MEANS AND STANDARD DEVIATIONS.............................................15

6.1.1. Scale reliability ......................................................................................................... 156.1.2. Means of variables ................................................................................................... 15

6.2. COMPARISON OF STUDY 1 AND STUDY 2 RESULTS.........................................................156.3. OVERVIEW OF RESPONSES FOR LL, CFL AND DFL.........................................................15

6.3.1. Frequencies of answers ............................................................................................ 156.3.2. Language recognition accuracy .............................................................................. 15

6.4. HYPOTHESIS TESTING WITH REGRESSION ANALYSIS.......................................................156.4.1. Assumptions .............................................................................................................. 156.4.2. Meaningfulness of brand names in CFL as a dependent variable ........................ 156.4.3. Meaningfulness of brand names in DFL as a dependent variable ........................ 15

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6.4.4. Likeability of brand names in CFL as a dependent variable .................................. 156.4.5. Likeability of brand names in DFL as a dependent variable ................................. 156.4.6. General interpretation of the regression tests ......................................................... 15

6.5. HYPOTHESIS TESTING WITH PAIRED-SAMPLES T-TEST....................................................156.5.1. Brand name meaningfulness ................................................................................... 156.5.2. Brand name likeability ............................................................................................. 15

6.6. SUMMARY OF FINDINGS..................................................................................................15

CHAPTER 07. DISCUSSION............................................................................................167.1. INTERPRETATIONS OF FINDINGS......................................................................................16

7.1.1. Expected results: brand name meaningfulness and likeability .............................. 167.1.2. Unexpected result: brand name likeability .............................................................. 167.1.3. Novel findings: language familiarity and attitude .................................................. 16

7.2. IMPLICATIONS TO THEORIES............................................................................................167.2.1. The local-foreign dichotomy .................................................................................... 167.2.2. Brand name meaningfulness and likeability ........................................................... 167.2.3. COO cues and recognition accuracy ....................................................................... 16

CHAPTER 08. CONCLUSION.........................................................................................168.1. MANAGERIAL IMPLICATIONS: WHICH LANGUAGE IS THE BEST FOR A BRAND NAME?....168.2. RESEARCH LIMITATIONS.................................................................................................168.3. DIRECTION FOR FUTURE RESEARCHES............................................................................16

REFERENCES..................................................................................................................17

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CHAPTER 01. INTRODUCTION

1.1. Research background

The development of a new brand name requires a large investment in resources, and it

involves many internal and external parties (Schmitt and Zhang, 2012). The process

starts by specifying what the new brand name should accomplish, such as how it can

help the product positioning (Opatow, 1985). Brand names can comprise syllables with

no origin in the dictionary (e.g. Kodak) or word-based ones (e.g. Apple) (Lerman and

Garbarino, 2002). Although this research focuses on word-based brand names, all brand

names are created intending to communicate ideas (Heding et al., 2009).

As in any form of communication, languages are the medium. Even when firms do not

advertise the link between brand names and languages, consumers hold their own

perception regarding local-sounding or foreign-sounding brand names (Opatow, 1985).

Yet, more often than not, firms intentionally develop brand names that sound foreign to

invite beneficial associations (Thakor, 1996).

In Indonesia, Astor, Chitato, Marie Regal, Nu Green Tea, Okky Jelly Drink, Richeese,

Roma Marie, Silverqueen, Tango, and Ultra Milk are some of the most sought-after

snack products (www.topbrand-award.com, 2016). These brand names are recognised

by the majority of Indonesian consumers, as they are easy to find in school cafeterias or

minimarkets. However, these brand names are often mistaken as having foreign origin,

despite being developed by local firms. Such misperception is owing to creating brand

names from foreign words (Tjiptono et al., 2015). This misperception is usually

intentional (Melnyk et al., 2012; Son et al., 2013; Zhang, 2015). BrandZ’s (2015) list of

the top 50 most valuable brands in Indonesia contains 22 brand names in the Indonesian

language and 20 in foreign languages. It is difficult to determine which practice is more

common between brand names that sound local and foreign based on the above

examples, but both practices are seemingly prevalent in comparison.

Experimenting with foreign brand names has been trending since the rise of

globalisation (Xie et al., 2015). Nonetheless, when the meaning of brand names in a

local language must be relatively easy to understand by local consumers, foreign brand

names are less so by default. The consumers’ ability to comprehend the meaning of

foreign brand names would partly depend on their past exposure to the associated

foreign languages, which is out of the firms’ control (Schmitt and Zhang, 2012). There

is also an indication that consumers hold an attitude toward certain foreign languages,

which may cause bias in perceiving foreign brand names as more or less likeable than

usual (Leclerc et al., 1994; Alden et al., 1999; Giraldi et al., 2011; Melnyk et al., 2012).

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The branding literature suggests meaningfulness and likeability as the successful criteria

of brand naming (Keller, 2013). Since there is a doubt that consumers always apprehend

the meaning of foreign brand names, using foreign phrases in the brand may impact

upon perceived brand name meaningfulness and likeability.

Some reasons for firms to choose foreign brand names are to emulate the image of

prestigious foreign brands and to evoke foreign associations (Melnyk et al., 2012). It is

observed that the increasing use of foreign brand names is somewhat in line with the

increasing popularity of related foreign languages, such as the trend for English shop

signs in Tehran (Khosravizadeh and Sanjareh, 2011) or using French-sounding names

for South Korean cosmetic brands, e.g. Laneige and Mamonde (Melnyk et al., 2012). A

firm’s decision on foreign branding may also signal a herding behaviour in the

marketplace. In developing countries, many successful brands belong to multinational

companies. Not only are they successful, but these brands often become market leaders

in their category, such as Unilever’s or Procter & Gambler’s products in many countries

in which they operate (Keller, 2013). In a sense, it provides an incentive for local firms

to craft foreign brand names.

The motivation to pursue foreign branding is sometimes vague, but the effectiveness of

foreign branding is known to an even lesser extent. However, questionable effectiveness

is not an exclusive issue of foreign branding. Broadly speaking, it applies to the general

brand naming practice, as there is no formal, one-size-fits-all approach to brand naming.

Managers often follow their intuition, rather than following certain guidelines (Schmitt

and Zhang, 2012). Besides, existing guidelines on brand naming are not failure-proof.

So, the easiest route is to follow the pattern of successful brand names–usually, those of

competitors.

Another motivation for foreign branding is to mask the product’s country of

manufacture (COM), for instance, where targeted consumers may hold a stereotype

toward the COM (Magnusson et al., 2008; Zhang, 2015). It has led many foreign

branding studies to seek the opinions of consumers living in a country that is different

from the implied origin of the brand names, such as Krupka et al. (2014) who asked for

Croatian consumers’ reactions toward various COM (e.g. Bulgaria, China, Indonesia,

Mexico), to discern that Italian-sounding brand names were preferred among other

options. Yet, it is hard to find studies examining local consumers’ reactions toward

local firms that use foreign brand names. While Zhang (2015) observed that domestic

brands often pretend to be foreign, it is uncertain whether local consumers accept local

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firms’ efforts to appear foreign, when the products are made in a domestic

establishment.

1.2. Gap in the literature

The focus of this research combines several areas of knowledge: brand naming, foreign

branding, the country of origin, and the linguistics of the foreign language. The ideas of

brand naming research usually centre on consumers’ perceptions toward the varying

compositions of brand names. The notion of foreign branding research is mostly about

documenting and contrasting consumers’ reactions toward brand elements in

local/foreign identities (Apaolaza et al., 2014; De Meulenaer et al., 2015). This research

relies on the contexts of country-of-origin (COO) and country stereotype, because in

foreign branding, a product’s implied origin differs from its actual origin. This situation

gives rise to derivative theories, such as “COO congruence versus COO incongruence”

(Melnyk et al., 2012), “perceived brand localness versus perceived brand global-ness”

(Xie et al., 2015), and “COO cues versus COO information” (De Meulenaer et al.,

2015).

Consumers seem to prefer a specific COO for certain product categories, and firms

configure their branding elements to trigger associations with certain countries

(Magnusson et al., 2008). Consequently, it is suggested that country stereotype plays a

role in branding (Zhang, 2015), as hinted by COO literature that is over fifty years old

(Bowe et al., 2013).

Brand names are linguistic products by themselves. As mentioned, brand names are

often evaluated based on consumers’ perception of their meaningfulness and likeability.

Surprisingly, there are only a few foreign branding studies that examine meaningfulness

and likeability to the researcher’s knowledge. Even in studies documenting consumers’

attitude toward foreign brand names, the attitude is often anchored by purchase

intention (for example, see Pan et al., 2015) or willingness to pay (for example, see

Koschate-Fischer et al., 2012), without a separate measurement for brand name

evaluation, suggesting meaningfulness and likeability are skipped, because these are

implied in the purchase likelihood. Thus, further studies are needed to achieve balance

in the perspective.

Moreover, foreign branding studies are bound by cultural context, since what is

considered “foreign” largely varies from one region to another. The researcher believes

that the missing links, as laid out in section 1.1. and 1.2., are worth investigating.

Therefore, this research will help to bridge the gap between the aforementioned fields.

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1.3. Research questions

The research questions for this study are formulated as follows,

1. Which brand names generate a greater liking from Indonesian consumers, brand

names associated with a local language, close foreign languages, or distant

foreign languages?

2. Does familiarity toward a language increase perceived meaningfulness and

likeability of brand names associated with that language?

3. Does attitude toward a language increase perceived meaningfulness and

likeability of brand names associated with that language?

4. Regarding the perceived distance between a consumers’ native language and the

languages of the brand names, are brand names from languages with closer

distance being evaluated more favourably than brand names from languages

with further distance?

1.4. Research aim and objectives

This paper aims to assess consumers’ perceptions toward local and foreign languages to

seek possible links with consumers’ evaluations of brand names in local and foreign

languages.

The objectives of this paper are as follows,

• To assess the degree of consumers’ familiarity and attitude toward a local

language, close foreign languages, and distant foreign languages.

• To assess the magnitude of differences between perceived meaningfulness and

likeability of brand names in a local language, close foreign languages, and

distant foreign languages from a consumers’ point of view.

• To seek links between consumers’ perceptions toward local and foreign

languages and their evaluation of brand names in associated languages.

1.5. Research contribution

While many foreign branding research has been conducted in developed countries

(since the original intention was to reduce negative stereotypes held against products

associated with developing countries), only a few were carried out in the interest of the

emerging economies. It does not go unnoticed that researchers have been encouraging

future studies to pursue more understanding by further exploring “[…]the linguistic

nature of a brand name which presently receives little academic attention” (Harun et al.,

2011, p.286), notably, the acceptance toward foreign brand names by connecting them

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to “[…]language fluency in a different linguistic context” (Lee and Baack, 2014, p.533).

Lee and Baack (2014) advised that future studies look beyond the English language

context in order to expand the branding literature, particularly toward a deeper

understanding related to foreign brand names. This research is intended to find the

evidence in Indonesia, an emerging economy whose growing middle class holds

substantial purchasing power (KPMG, 2013; Pwc, 2015), but lacks research related to

branding. Previously, McDonald and Roberts (1990, p.7) warned marketers of the risk

of inappropriate brand-naming in the Asia Pacific region, because there is “a cultural

context where diversity creates inconsistencies of interpretation, association, and

perception.”

Last, this research is hoped to contribute in the following ways:

• For academic scholars: to enrich the variety of empirical findings in the foreign

branding literature.

• For researchers: to provide information on measuring the performance of foreign

branding as evaluated by consumers.

• For professionals: to serve as a reference during the brand naming and foreign

branding decision making process.

1.6. Dissertation structure

This dissertation consists of eight chapters as follows:

• Chapter 1 introduces the background of the dissertation by highlighting related

phenomenon and facts and setting the research direction.

• Chapters 2 and 3 lay the foundation of the research by reviewing literature.

Chapter 2 focuses on brand name literature, while Chapter 3 focuses on the

construct of origin.

• Chapter 4 lists the research variables, hypotheses, and comparison to their

counterparts in previous research.

• Chapter 5 describes the selection of research design and method.

• Chapter 6 discusses the empirical findings of the research.

• Chapter 7 interprets the implication of the findings to existing theories and

practices.

• Chapter 8 concludes the research and suggests improvements for future research.

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CHAPTER 02. BRAND NAMES FROM CONSUMERS’ POINT OF VIEW

2.1. Introduction

2.2. Definitions and functions of brand names

2.3. Assessments of strong brand names

2.3.1. Meaningfulness

2.3.2. Likeability

2.4. Conclusion

CHAPTER 03. THE ROLE OF BRAND NAMES IN CLASSIFYING COUNTRY-

OF-ORIGIN

3.1. Introduction

3.2. The construct of “origin”

3.3. Foreign branding

3.4. The misclassification of COO

3.5. Conclusion

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CHAPTER 04. RESEARCH FOCUS

CHAPTER 05. METHODOLOGY

5.1. Methodological approach

5.2. Study 1: Preliminary research 5.2.1. Product categories

5.3. The context of Indonesian language 5.3.1. The language classification 5.3.2. Indonesian-Arabic context 5.3.3. Indonesian-Chinese context 5.3.4. Indonesian-Dutch context 5.3.5. Indonesian-Russian context

5.4. Study 2: Questionnaire development 5.4.1. Stimuli design

5.8. Study 2: Data analysis

5.9. Conclusion

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CHAPTER 06. FINDINGS FROM STUDY 2

6.1. Scale reliability, means and standard deviations 6.1.1. Scale reliability 6.1.2. Means of variables

6.2. Comparison of Study 1 and Study 2 results

6.3. Overview of responses for LL, CFL and DFL 6.3.1. Frequencies of answers 6.3.2. Language recognition accuracy

6.4. Hypothesis testing with regression analysis 6.4.1. Assumptions 6.4.2. Meaningfulness of brand names in CFL as a dependent variable 6.4.3. Meaningfulness of brand names in DFL as a dependent variable 6.4.4. Likeability of brand names in CFL as a dependent variable 6.4.5. Likeability of brand names in DFL as a dependent variable 6.4.6. General interpretation of the regression tests

6.5. Hypothesis testing with paired-samples t-test 6.5.1. Brand name meaningfulness

6.5.1.1. LL and CFL

6.5.1.2. CFL and DFL

6.5.1.3. LL and DFL 6.5.2. Brand name likeability

6.5.2.1. LL and CFL

6.5.2.2. CFL and DFL

6.5.2.3. LL and DFL

6.6. Summary of findings

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CHAPTER 07. DISCUSSION

7.1. Interpretations of findings 7.1.1. Expected results: brand name meaningfulness and likeability 7.1.2. Unexpected result: brand name likeability 7.1.3. Novel findings: language familiarity and attitude

7.2. Implications to theories 7.2.1. The local-foreign dichotomy 7.2.2. Brand name meaningfulness and likeability 7.2.3. COO cues and recognition accuracy

CHAPTER 08. CONCLUSION

8.1. Managerial implications: Which language is the best for a brand name?

8.2. Research limitations

8.3. Direction for future researches

*** FULL WORD COUNT

Around 17,500 words (excluding abstract, list of contents, tables, references, appendices)

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