ONLINE VIDEO ADVERTISING IN BUILDING BRAND EQUITY Master’s Thesis Julianna Alanne Aalto University School of Business Marketing Spring 2017 Aalto University, P.O. BOX 11000, 00076 AALTO www.aalto.fi Abstract of master’s thesis Author Julianna Alanne Title of thesis Online video advertising in building brand equity Degree Master of Science in Economics and Business Administration Degree programme Marketing Thesis advisor(s) Lasse Mitronen, Olli Rusanen Year of approval 2017 Number of pages 103 Language English Abstract The objective of this study is to add understanding to the role of online video advertising (voluntarily consumed online video content produced for commercial purposes) in building brand equity (the additional value created by a brand). The focus is on answering the research question: What is the role of online video advertising in building brand equity? As earlier research acknowledges that brand equity can be increased through its dimensions, the present study will also utilize brand awareness, brand associations, perceived quality and brand loyalty in the examination. The study aims to expand the body of research on the crossroads of modern advertising and branding in the increasingly interactive communication environment. The managerial interest towards the topic arises mainly from the potential to reach consumers in the volunteer content consumption, as online video keeps on growing its share as the dominant content format of the internet. Simultaneously, the ability to build strong brands is recognized as one of the very few ways to build sustainable competitive advantage. The research problem was approached through qualitative multiple-case study of four prominent Finnish brand marketers: Valio, Fazer, Cloetta and Paulig. 12 semi-structured in-depth interviews were conducted among the company representatives, media partners and creative partners. The data analysis was executed as an abductive content analysis, guided by a conceptual framework created for the purposes of this study. The study resulted in identification of four versatile and inter-related roles of online video advertising in building brand equity: (1) Channel, as online video advertising can be seen as a tactical choice among other marketing efforts in brand building, however, benefitting from the ability to reach fragmented audiences; (2) Facilitator, as online video advertising can be seen as a strong enabler of more innovative and creative advertising concepts, building stronger activation and experiences to consumers; (3) Challenger, as online video advertising encourages the marketer to re-evaluate the old conventions and brand control; and (4) Participator, as online video advertising creates great potential in making the advertiser a true member of consumer’s everyday life through discussion and continuous content. The overall findings of the study imply that online video advertising has strong perceived potential in increasing brand equity across its dimensions Additionally, crucial barriers of online video advertising’s success were identified: relevance, technical & creative implementation and transparency. The concluding chapter presents a refined framework where the original conceptual framework is enriched with the new empirical findings. Keywords online video advertising, content marketing, brand equity, brand equity dimensions Aalto-yliopisto, PL 11000, 00076 AALTO www.aalto.fi Maisterintutkinnon tutkielman tiivistelmä Tekijä Julianna Alanne Työn nimi Online-videomainonta brändipääoman rakentajana Tutkinto Kauppatieteiden maisterin tutkinto Koulutusohjelma Markkinointi Työn ohjaaja(t) Lasse Mitronen, Olli Rusanen Hyväksymisvuosi 2017 Sivumäärä 103 Kieli Englanti Tiivistelmä Tämän Pro gradu-tutkielman tavoitteena on tarkastella online-videomainonnan roolia brändipääoman rakentajana. Tutkimuksen keskiössä onkin vastata tutkimuskysymykseen: Mikä on online-videomainonnan rooli brändipääoman rakentajana? Koska aiemmat tutkimukset toteavat, että brändipääomaa voi kasvattaa sen dimensioiden kautta, myös tämä tutkimus hyödyntää brändipääoman dimensioita tarkastelun tukena. Brändipääoman dimensioilla viitataan näin ollen bränditunnettuuteen, brändimielikuviin, laadukkuuteen ja brändilojaliteettiin. Viestintäympäristömme muuttuessa yhä interaktiivisemmaksi, tämä tutkielma pyrkii laajentamaan aiempaa tutkimusta modernin mainonnan ja brändinrakentamisen risteyskohdassa. Online-videon kasvattaessa dominanssiaan internetin suosituimpana sisältömuotona, tutkimusen liikkeenjohdollisena motivaattorina on pitkälti mahdollisuus olla läsnä kuluttajan vapaaehtoisessa sisällönkulutuksessa. Samanaikaisesti, tutkijat tunnistavat vahvan brändin yksiksi harvoista nykypäivän kestävistä kilpailueduista. Tutkimusongelmaa lähestyttiin kvalitatiivisen monitapaustutkimuksen menetelmin. Tutkimusotokseen valikoitui neljä merkittävää suomalaista brändimarkkinoijaa: Valio, Fazer, Cloetta ja Paulig. Tutkimusdata kerättiin puolistrukturoiduilla syvähaastatetteluilla, joita toteutettiin kokonaisuudessaan 12 kappaletta. Haastateltavien joukko koostui yritysten edustajista, sekä heidän media- ja luovista partnereistaan. Data-analyysi toteutettiin abduktiivisena sisältöanalyysinä, jota opasti tutkimusta varten rakennettu käsitteellinen viitekehys. Online-videomainonnalle identifioidaan lopulta neljä moninaista roolia brändipääoman rakentajana: (1) Kanava, sillä online-videomainonta voidaan nähdä taktisena kanavavalintana muiden vaihtoehtojen joukossa, minkä hyötynä on kuitenkin nähdä kyky tavoittaa pirstaloituneet kuluttajaryhmät; (2) Mahdollistaja, sillä online-videomainonta voidaan nähdä ainutlaatuisena luovien ja innovaativisten ratkaisujen mahdollistajana, samalla rakentaen vahvoja kokemuksia ja aktivointia kuluttajissa; (3) Haastaja, sillä online-videomainonta rohkaisee markkinoijia uudelleenarvioimaan vanhoja tapoja ja konventioita sekä haastamaan brändikontrollin; sekä (4) Osallistaja, sillä online-videomainonta luo mainostajalle merkittävän potentiaalin tulla todelliseksi jäseneksi kuluttajan jokapäiväisessä elämässä keskustelun ja jatkuvan sisällön kautta. Kaiken kaikkiaan tutkimuksen löydökset viittaavat siihen, että online-videomainonnalle voidaan nähdä potentiaalisena brändipääoman rakentajana halki brändipääoman dimensioiden. Lisäksi, tutkimustuloksista huomioitiin online-videomainonnan onnistumisen kriittiset esteet: relevanssi, tekninen ja luova implementaatio sekä läpinäkyvyys. Yhteenvetokappale esittelee myös jalostetun käsiteellisen viitekehyksen, jossa alkuperäistä viitekehystä on kehitetty uusien löydösten pohjalta. Avainsanat online-videomainonta, sisältömarkkinointi, brändipääoma TABLE OF CONTENTS 1 INTRODUCTION ......................................................................................................... 1 1.1 Online video is taking over ............................................................................................................... 1 1.2 Research gap ..................................................................................................................................... 2 1.3 Research problem and objectives ...................................................................................................... 4 1.4 Key concepts ..................................................................................................................................... 4 1.5 Research structure ............................................................................................................................. 5 2 ONLINE VIDEO IN ADVERTISING .......................................................................... 6 2.1 Online advertising ............................................................................................................................. 6 2.2 Video in advertising .......................................................................................................................... 8 2.3 Online video advertising ................................................................................................................... 9 2.4 Content marketing ........................................................................................................................... 12 2.5 Social media channels ..................................................................................................................... 15 2.6 Key enablers, opportunities & challenges ....................................................................................... 19 3 BUILDING BRAND EQUITY ................................................................................... 22 3.1 Brand building ................................................................................................................................. 22 3.2 Brand equity .................................................................................................................................... 23 3.3 Brand equity & marketing communications ................................................................................... 24 3.4 Brand equity dimensions ................................................................................................................. 29 3.4.1 Brand awareness .................................................................................................................. 29 3.4.2 Brand associations ................................................................................................................ 30 3.4.3 Perceived quality .................................................................................................................. 33 3.4.4 Brand loyalty ........................................................................................................................ 34 3.5 Synthesis & conceptual framework ................................................................................................. 37 4 METHODOLOGY ...................................................................................................... 40 4.1 Research strategy: Qualitative multiple-case study ........................................................................ 41 4.2 Case companies: Valio, Fazer, Cloetta & Paulig ............................................................................ 43 4.3 Data collection: Semi-structured interviews ................................................................................... 46 4.4 Data analysis: Abductive content analysis ...................................................................................... 48 4.5 Research quality: Reliability, validity & generalizability ............................................................... 49 5 FINDINGS ................................................................................................................... 51 5.1 Overview ......................................................................................................................................... 51 5.1.1 Important trend of our time .................................................................................................. 52 5.1.2 Change & constant development ......................................................................................... 53 5.2 Challenges ....................................................................................................................................... 54 5.2.1 Relevance ............................................................................................................................. 54 5.2.2 Control ................................................................................................................................. 56 5.2.3 Resource allocation .............................................................................................................. 59 5.3 Enablers ........................................................................................................................................... 61 5.3.1 Creative freedom .................................................................................................................. 62 5.3.2 Content acceptance .............................................................................................................. 63 5.3.3 Technical implementation .................................................................................................... 64 5.4 Opportunities ................................................................................................................................... 66 5.4.1 Hyper targeting & synergies ................................................................................................ 66 5.4.2 Discussion & activation ....................................................................................................... 69 5.4.3 Continuity ............................................................................................................................. 70 6 DISCUSSION .............................................................................................................. 72 6.1 Brand awareness .............................................................................................................................. 73 6.2 Brand associations ........................................................................................................................... 74 6.3 Perceived quality ............................................................................................................................. 75 6.4 Brand loyalty ................................................................................................................................... 77 6.5 Crucial barriers ................................................................................................................................ 78 6.6 Versatile roles of online video advertising ...................................................................................... 80 7 CONCLUSION ............................................................................................................ 84 7.1 Research summary .......................................................................................................................... 84 7.2 Managerial implications .................................................................................................................. 87 7.3 Limitations of the study ................................................................................................................... 88 7.4 Suggestions for further research ...................................................................................................... 88 REFERENCES .................................................................................................................... 90 APPENDICES ..................................................................................................................... 96 LIST OF FIGURES Figure 1 Contextual complexity of the research scope .......................................................... 9 Figure 2 Circular influence of MC and brand equity, adjusted from Keller (2001, 2009) .. 25 Figure 3 Yoo et al. (2000) .................................................................................................... 26 Figure 4 Synthesis of the theoretical context, adjusted from Yoo et. al (2000) .................. 39 Figure 5 Conceptual framework .......................................................................................... 40 Figure 6 Qualitative research process, adapted from Eriksson & Kovalainen, (2008) ........ 43 Figure 7 The identified roles of online video advertising in building brand equity ............ 80 Figure 8 Refined framework ................................................................................................ 86 LIST OF TABLES Table 1 Online video advertising definition, adjusted from Lee & Lee (2012) .................. 10 Table 2 Kietzmann et al. (2011) .......................................................................................... 16 Table 3 Classification summary of YouTube, Facebook, Instagram and Snapchat ............ 19 Table 4 Summary of studies linking brand equity & marketing communications .............. 28 Table 5 Brand awareness as classified by Keller (1993, 1998) ........................................... 30 Table 6 Brand associations as classified by Keller (1993, 1998) ........................................ 33 Table 7 Cues of perceived quality by Kirmani & Zeithaml (1993) ..................................... 34 Table 8 Brand loyalty as classified by Dickson (1994) and Aaker (1991) .......................... 37 Table 9 Overview of case companies .................................................................................. 46 Table 10 Summary of interviews ......................................................................................... 48 Table 11 Summary of research findings .............................................................................. 82 1 INTRODUCTION 82% of world’s internet traffic will be video-based in 2020. (Cisco, 2016) The rapid growth of online video as the dominant content format among consumers has created a need to explore its potential to marketers. In efforts to be relevant and visible to the consumer in the modern and constantly developing communications environment, researchers have started to explore new marketing techniques, which take advantage of online video (Lee & Lee, 2012; Chen & Lee, 2014). Simultaneously, several researchers (e.g. Yoo et. al, 2000; Keller, 2009; Buil et al, 2013; Busen & Mustaffa, 2014) have called for more research and conceptual development on how modern advertising activities may contribute to brand equity. The purpose of this study is to explore the role of online video advertising, meaning the voluntarily consumed online video content produced for commercial purposes, in building brand equity, the additional value created by a brand. The study aims to expand the body of research on the crossroads of modern advertising and branding by analyzing brand practitioners’ perceptions of the opportunities and challenges of online video advertising in brand building in the increasingly interactive communication environment. 1.1 Online video is taking over Consumers have more control over the media than ever before as the audiences can decide what messages they seek, skip and pass along (Sachs, 2012). In the modern communications environment, marketers are no longer only competing with other businesses, but also with the everyday life of consumers occupied by content from friends and family to the followed celebrities. Considering the massive expansion of online video traffic of the recent years, marketers need to be able to be present in the volunteer content consumption of consumers. These new forms of advertising have been termed as online video advertising (Lee & Lee, 2012), viral video advertising (Huang et al., 2013) and microfilm advertising (Chen & Lee, 2014). This study will focus on studying the content created to promotional purposes, 1 consumption of which is based on voluntarity (Lee & Lee, 2012), and thus utilize the term online video advertising. Even though modern technologies are fundamentally changing the way we interact and communicate, the importance of branding has not declined. Having a strong brand is one of the very few ways to build sustainable competitive advantage. (e.g. Aaker 1991, 1996: Dickson, 1994; Kapferer, 2004; Keller 1993, 1996, 2009; Yoo et al. 2000). Accordingly, brands are recognized to bring a vast yet intangible value to organizations. Brand building is a truly meaningful part of product management and thus a management priority (Aaker 1991, 1996; Kapferer, 2004, Keller, 2009). Traditionally, branding theories have emphasized the usage of mass media. The efficiency of these techniques can be questioned, as the modern and interactive marketplace has developed to be more information intensive and consumer- driven than ever before. New guidelines are needed to understand how marketers can leverage the modern marketing communication phenomena. There is increasing evidence that companies that utilize online video in their branding tend to be more successful in creating engagement with their customers (Southgate el al., 2010). It is argued that online video advertising can be an efficient way to reduce costs, impact positively to customer’s resistance to advertising, result in a bigger audience reach faster and earn media for the brand (Dobele et al. , 2007; Cruz & Fill, 2008; Eckler & Bolls, 2011; Southgate et al., 2010; Chen & Lee, 2014). The rapid growth of online video advertising spending (46% YoY, IAB 2016) in Europe also reflects the development of marketers aiming to utilize the potential in these new marketing forms. These developments have also raised a strategic need for more experiential marketing efforts (Topsümer & Yarkin, 2015). 1.2 Research gap As the rapidly developing technology keeps on revolutionizing the way the world interacts, the ability to build strong brands has become the prioritized marketing activity to most companies. (Aaker 1991, 1996; Kapferer 2004; Keller, 2009). Nevertheless, research is lacking consensus on how branding and brands should be effectively developed in the modern and interactive communication environment. A growing amount of brand information is available to customers daily, raising a need to build new understanding in the field of branding to stay relevant in the rapidly changing marketing context. (Keller, 2009). 2 Marketers face the difficulty of choice in the variety of marketing communication options available to build their brands (e.g. TV, print, promotions, sponsorships, interactive advertising, just to mention a few). Therefore, building understanding of what different marketing communication options have to offer, how should they be combined and what are their specific characteristics when optimizing marketing communications programs has become essential. (Keller, 2001). Simultaneously, consumers have more power than ever to choose whether to receive the marketing communications messages targeted to them. Marketers need to increasingly enter the volunteer content consumption of consumers to deliver their branding messages and build the superiority of a brand. While a multitude of studies have been conducted on the concept of brand equity (e.g. Aaker, 1991, 1992, 1996; Keller 1993, 1998; Kapferer 2004) only a little conceptual development or empirical research has been conducted on how different marketing activities build brand equity. The research focus has traditionally been on the exploration of the brand equity concept itself, not so much on its sources and development. Nevertheless, it is important to understand how marketing activities can contribute to brand equity and brand equity dimensions. (Yoo et al., 2000). It is reviewed that the link between advertising and brand equity is mainly justified. Nevertheless, examining the role of modern advertising in developing brand equity dimensions is not common in the literature. (Busen & Mustaffa, 2014). Considering the growth and benefits of online video advertising and the importance of branding to marketers, the potential in their combination is evident. Brand marketers are pushed towards publishing and to take a bigger stand in creating original and interesting content to engage with their customers. Yet, previous research has not examined the contribution of online video advertising in building brand equity. As noted, earlier research has shown that marketing efforts contribute in in building brand equity (Yoo et. al, 2000; Tong & Hawley, 2009; Buil et al., 2013), however, the effects of the new types of marketing efforts constantly growing in today’s world have not been examined. As advertising field is going through an evolution from involuntary to voluntary, it is crucial to understand how marketers should use online video in the delivery channels of social media, which are generally intense in user generated content and have a strong ability to build engagement (Keller 2009). 3 This study contributes in providing an analysis on how brand marketers perceive the usage of online video advertising to build their brands. Considering the rapid increase of online video consumption and the following potential of online video advertising, understanding its possibilities and challenges in the context of building brand equity can be seen essential. 1.3 Research problem and objectives The aim of this thesis is to add insight into understanding the phenomenon of online video advertising and its opportunities and challenges for marketers aiming to build additional value through branding. The purpose is to look at how brand marketers perceive online videos as part of their marketing efforts and thus conceptualize its role in building additional value with the brand, also known as brand equity. In order to achieve the objectives mentioned, the main research question of this thesis is stated as following: What is the role of online video advertising in building brand equity? Furthermore, the brand equity dimensions of brand awareness, brand associations, perceived quality and brand loyalty (Aaker, 1991) will be utilized in this study, as earlier research shows that brand equity can be maintained, created and expanded through its dimensions (Yoo et al., 2000). Thus, it is helpful to build understanding of the primary research question through adding a secondary research question: What is the role of online video advertising in building brand awareness, brand associations, perceived quality and brand loyalty? 1.4 Key concepts In this Section, the key concepts of this research are shortly represented. All of the concepts described can be regarded as fundamental ground concepts of this study, which should be thus outlined before moving forward with the study. Concept Description Defined to have a persuasive nature and consist promotional Online video advertising messages, yet, depending partially on the peer propagation by consumers (Eckler & Bolls, 2011). This study focuses on 4