Effects of mergers and acquisitions on brand loyalty in luxury Brands: The moderating roles of luxury tier difference and social media

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Effects of mergers and acquisitions on brand loyalty in luxury Brands: The moderating roles of luxury tier difference and social media Yerim Chunga, Alex Jiyoung Kimb, a b

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Management Science at Yonsei Business School, Yonsei University, Seoul, South Korea Marketing at SKK Business School, Sungkyunkwan University, Seoul, South Korea

A R T I C LE I N FO

A B S T R A C T

Keywords: Luxury brand Mergers and acquisitions Luxury tier difference Social media Brand loyalty Brand communication

This study examines the effects of the perceived evaluation of mergers and acquisitions (M&As) on the brand loyalty of consumers toward the acquired brand, the moderating effects of luxury tier differences, and the media used for delivering the M&A news. Our results reveal that the evaluation of M&As has a positive relationship with perceived brand beliefs and luxury values, and consequently on brand loyalty. The moderating effect of luxury tier differences on the relationship between M&A evaluation and perceived values is stronger when the acquiring brand is from a lower luxury tier. However, the moderating effect on the relationship between perceived values and brand loyalty is stronger when the acquiring brand is from a higher luxury tier. Social media has different moderating effects than traditional media. Our study provides useful insights into luxury brand M& As for both academics and practitioners.

1. Introduction Mergers and acquisitions (M&As) is an important strategic decision of companies to gain both tangible and intangible benefits (Lee, Lee, & Wu, 2011). According to Thomson Reuters (2017), > 50,000 M&A agreements were signed in 2017, accounting for more than US$ 3.5 trillion. M&As has also been a popular growth strategy in the luxury market, recently becoming more widespread (Solca, 2015; Felsted & Halzack, 2017). Despite the increasing interest in luxury market M&As, there are few existing studies on the subject. Previous marketing literature about M&As mainly focused on brands’ effects on M&As (e.g., the effects of brands on the likelihood of M&A success), not vice versa. However, a merger usually influences the image of both brands, which may be a critical factor in the context of luxury brands, as brand image has significant effects on the unique values customers expect from their consumption (Kim & Ko, 2012). The conventional benefits of M&As—such as increased market shares—may not apply in the context of luxury brands. When market share expands owing to M&As, perceived symbolic and hedonic values may be diluted (Hagtvedt & Patrick, 2009). To the best of our knowledge, no existing studies have examined the effects of M&As on luxury brands and their value to consumers from this perspective. This study aims to provide insights on M&As between luxury brand firms and the effects of an M&A announcement on consumers’ brand

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loyalty to the target (i.e., acquired) brand. We investigate the effect of an M&A announcement on consumers’ beliefs and their perceived luxury values of the target brand, which in turn influence their brand loyalty. This study considers horizontal M&As between luxury brands at different luxury tiers where the brand name and identity of the acquired brand remain the same. According to industry practice, this is the most prevalent type of M&A in the luxury market (Chung, Youn, & Lee, 2014; Homburg & Bucerius, 2005); moreover, horizontal M&As would have much stronger effects on how customers perceive and value brands (Wiles et al., 2012). We examine the differential effects of using traditional media versus social media to communicate M&A news to customers. Previous studies have examined the distinctive characteristics of traditional media and social media. Consumers’ perceptions of M&A news may differ, depending on the type of media used (Coulter, Bruhn, Schoenmueller, & Schäfer, 2012). Luxury brands actively utilize both social and traditional media in their promotion strategies. The type of media used for communication may therefore have important moderating effects on how consumers perceive M&As. 2. Literature review and hypotheses 2.1. Luxury brand M&As Prior studies focused mainly on the financial implications of M&As,

Corresponding author. E-mail addresses: [email protected] (Y. Chung), [email protected] (A.J. Kim).

https://doi.org/10.1016/j.jbusres.2019.11.030 Received 10 January 2019; Received in revised form 8 November 2019; Accepted 9 November 2019 0148-2963/ © 2019 Elsevier Inc. All rights reserved.

Please cite this article as: Yerim Chung and Alex Jiyoung Kim, Journal of Business Research, https://doi.org/10.1016/j.jbusres.2019.11.030

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such as the pre- and post-merger financial performances of the acquiring and acquired firms (King, Dalton, Daily, & Covin, 2004). Marketing scholars have recently started investigating the effects of the product-related capabilities and brands of the merging firms on their financial performance. There is a consensus that brands and marketing capabilities have a strong positive impact on M&As’ success, increasing post-M&A performance (Bahadir, Bharadwaj, & Srivastava, 2008; Liu, Öberg, Tarba, & Xing, 2018; Yang, Davis, & Robertson, 2012). While more studies are investigating the relationship between marketing variables and M&As, few studies have investigated consumers’ perception of M&As and how it changes their perception of the brands involved. Consumers’ perceptions of M&As are particularly important for luxury brands, owing to the importance of brands’ reputations (Kim & Lavack, 1996). Furthermore, consumers’ brand perception is a key factor of consumer loyalty, and therefore purchases (Laroche, Habibi, & Richard, 2013). Brand-related factors—such as brand reputation and equity—are crucial for enhancing the customer equity of luxury brands (Kim & Ko, 2012).

perception of the target brand with that of the acquiring brand (Voss & Mohan, 2016). Similarly, when a trustworthy brand merges with another brand, the trustworthiness transfers to the target brand, causing consumers to perceive it as more trustworthy and responsible (Aaker & Keller, 1990). It is also suggested that consumers’ perceived brand trust is associated with their acceptance of brand extension (Reast, 2005). Moreover, consumers usually believe that successful M&As enhance the long-term sustainability of the merged brands (Capron, 1999; Sorescu et al., 2007). We hypothesize that when consumers evaluate an M&A between two brands positively, their brand beliefs on brand quality, trust, and sustainability will be enhanced. H1: Consumers’ positive evaluation of an M&A will improve their perceived brand beliefs of the target brand. 2.3. Perceived luxury values Consumers perceive luxury brands as superior, rare, authentic, and of higher quality than other brands (Chandon et al., 2016). The concept of a luxury brand is multidimensional and includes personal and social meanings and functional and non-functional (e.g., emotional) values (Ko & Megehee, 2012; Wilcox, Kim, & Sen, 2009). Accordingly, the consumption of luxury brands derives both cognitive and emotional consumer values (Vigneron & Johnson, 2004). While cognitive values—such as economic and quality values—emphasize the rational aspects of consumer evaluation, emotional values—such as social and experiential values—rely on the affective benefits of the consumption experience, including both personal and interpersonal (or social) values (Lee et al., 2015; Wiedmann et al., 2009; Wilcox et al., 2009). We therefore focus on three consumption values derived from luxury brands that are likely to be affected by M&As: economic, symbolic, and experimental value. Economic value is the economic utility of the brand. Firms usually go through a transformative stage after M&As, such as the repositioning of brands (Liu et al., 2018). As horizontal M&As occur between brands with different luxury tiers, brand transformation may have significant effects on consumers’ perceived economic value. Consumers may expect a change in the price of the target brand or that the perceived economic value of the brand would change, even at the same price. Thus, consumers’ perceptions of M&As can affect the economic value of the target brand. Successful M&As encompass the transfer of knowledge and capabilities, such as product improvement that could improve their economic value (Lee et al., 2011). Symbolic value is defined by psychological and interpersonal aspects like social identity and self-expression (Smith & Colgate, 2007). Therefore, symbolic value is a means of demonstrating one’s social status and this value is increased when luxury brands enhances one’s self-confidence (Vigneron & Johnson, 2004). Experiential value refers to the enjoyment consumers derive from their brand experience, which is more personal than symbolic value. Thus, consumers evaluate experiential value by focusing on themselves, rather than on how others perceive them. As both symbolic and experiential values reflect consumers’ psychological states during their consumption experience, luxury brand M&As may influence the degree of symbolic and experiential values consumers derive from the brands involved in an M&A. If consumers encounter a favorable M&A and believe that it is beneficial to the target brand, both the symbolic and experiential values of the brand would increase (Smith & Colgate, 2007; Vigneron & Johnson, 2004).

2.2. Perceived brand beliefs This study focuses on three types of consumer brand beliefs, which are susceptible to change following an M&A announcement: perceived brand quality, brand trust, and brand sustainability. These beliefs are important consumption values (Chaudhuri & Holbrook, 2001; Schultz & Block, 2015; Yoo & Donthu, 2001). We define brand beliefs as the customers’ beliefs concerning the brand at the time of the M&A announcement and not necessarily as related to the luxury consumption values of the brands (Chaudhuri & Holbrook, 2001). Perceived brand quality is consumers’ subjective judgment towards a brand that is based on their beliefs on whether the brand delivers reliable and consistent quality (Aaker, 1991; Yoo, Donthu, & Lee, 2000). Brand quality is one of the key values of brand loyalty (Yoo et al., 2000; Yoo & Donthu, 2001) and a fundamental attribute of luxury brands, as consumers expect superior quality, compared with nonluxury brands. (Vigneron & Johnson, 2004; Wiedmann, Hennigs, & Siebels, 2009). Brand trust is customers’ belief that they are safe while interacting with the brand and that the brand has specific traits that are competent and credible (Chaudhuri & Holbrook, 2001; Doney & Cannon, 1997). Brand trust is a key mediator for long term customer–brand relationships. (Laroche et al., 2013; Martin-Consuegra, Faraoni, Díaz, & Ranfagni, 2018). Lastly, brand sustainability is defined by consumers’ opinions of the long-term prospects of a brand (Schultz & Block, 2015). According to M&A literature, M&As should create synergy that enhances their long-term sustainability (Larsson & Finkelstein, 1999). Consumers also recognize that brands engage in M&As to fortify their financial performance (i.e., sustainability) (Königs & Schiereck, 2006). Previous M&A studies show that successful M&As improve target brands’ performance because of the synergy generated through knowledge and capabilities transfer (Capron & Hulland, 1999; Sorescu, Chandy, & Prabhu, 2007). Moreover, the images of the brands that participate in M&As can influence consumers’ brand perceptions. Lee et al. (2011) showed that a brand’s pre-M&A image affects customers’ brand perception after the M&A, as consumers associate the brands involved in the M&A with each other, transferring and exchanging their brand images. Similarly, M&As can influence consumers’ brand perceptions. For example,Thorbjørnsen and Dahlén (2011) showed that when consumers are informed about an M&A by the dominant acquirer, they develop a more positive attitude towards the target brand, as they expect the target brand to benefit from the acquiring brand’s competence. Therefore, consumers’ positive brand beliefs of a target brand would increase if they evaluate the M&A favorably. Prior studies on cobranding show similar results, confirming that co-branding can strengthen the brand equities of the firms engaged in the process (Liu et al., 2018). Specifically, consumers tend to associate the quality

H2: Consumers’ positive evaluation of an M&A would improve their perceived luxury consumption values of the acquired brand. 2.4. Brand loyalty Brand loyalty, a critical factor of a brand’s performance, is defined 2

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also to obtain brand information (Morra et al., 2018). Moreover, luxury brands actively utilize social media to foster a brand relationship with customers, owing to its wide audience base and highly interactive nature (Chu & Kim, 2011; De Vries et al., 2012; Kim & Ko, 2012). Consumers learn about M&As through both social and traditional media platforms. Previous studies suggest that social media could have different moderating effects on how consumers perceive M&As because of its unique characteristics. Specifically, the impacts of social media on consumers’ perceived values and brand equity differ from those of traditional media (Coulter et al., 2012; Dahlén, Granlund, & Grenros, 2009). User-generated social media communication has a stronger effect on brand equity and attitude—which affects the purchase intentions of consumers—compared with firm-generated contents (Goh, Heng, & Lin, 2013; Schivinski & Dabrowski, 2016). Consumers tend to perceive messages on social media as being more trustworthy and valuable, because they are received from those whom they feel close with (Barasch & Berger, 2014). We therefore expect that announcing M&As on social media platforms will have a stronger effect on consumers’ perceived brand beliefs and luxury values. Likewise, the effects of perceived brand beliefs and luxury values on brand loyalty will also be stronger, as discussed in Section 2.5 (Coulter et al., 2012; Schivinski & Dabrowski, 2016).

as consumers’ attachment to a brand and their commitment to repurchase (Aaker, 1991; Colicev, O'Connor, & Vinzi, 2016). Higher brand loyalty implies higher consumer satisfaction, increased brand choice, and higher consumer spending (Kim, Ko, Lee, Mattila, & Kim, 2014). Investigating how M&As influence brand loyalty is therefore important. Previous studies show that brand loyalty is closely related to consumers’ perception of brand quality, trust, and sustainability, as explained in Section 2.2 (Capron, 1999; Chen-Yu, Cho, & Kincade, 2016; Laroche et al., 2013). Likewise, previous research on luxury brands suggests that the unique consumer values associated with luxury brands—such as their economic, symbolic, and experiential values—enhance brand loyalty (Choo, Moon, Kim, & Yoon, 2012). H3: Consumers’ perceived brand beliefs and luxury values have positive effects on brand loyalty. 2.5. Moderating role of luxury tier difference Previous M&A studies suggest that the brand tier difference between brands in an M&A, such as the luxury image difference between the acquiring and target brands, can moderate the effects of M&As. For example, Lee et al. (2009) show that the impact of M&As on consumers’ brand equity depends on the brand image of the target brand. When an acquiring brand has a brand image similar to the target brand, the impact on brand equity is less significant, compared with a case in which the target brand has a better brand image. This is consistent with previous studies on brand extensions that show that consumers exhibit different behavior when facing upscale versus downscale extensions (Chung et al., 2014; Kim & Lavack, 1996; Riley, Pina, & Bravo, 2013). Previous research also suggests that M&As have a stronger impact on consumers when the acquiring brand has a lower luxury image than the target brand. Königs and Schiereck (2006) show that an M&A initiated by a less prominent firm results in higher returns. According to Wiles et al. (2012), the acquiring firm’s returns from an M&A are greater when they buy a firm with a higher quality positioning. Kirmani, Sood, and Bridges (1999) also find that luxury brand consumers tend to have a more favorable perception of upscale extensions than downscale extensions. We therefore expect that consumers would consider M&As initiated by a luxury brand on a lower luxury tier to be more surprising and that the effects of such M&As would therefore be stronger.

H5-(a): Using social media to announce M&As will enhance the relationship between M&A evaluation and consumers’ perception. H5-(b): Using social media to announce M&As will enhance the relationship between consumers’ perception and brand loyalty. 3. Methodology This study investigates how M&As affect consumers’ perceptions of brand beliefs and luxury values, and subsequently brand loyalty. We also examine two moderating effects: the effect of luxury tier difference between the acquiring and target brands, and the effect of social media M&A announcements. Our research model is presented in Fig. 1. 3.1. Procedure To examine our research questions, we designed three (based on luxury tier difference) by two (based on the media type used to announce the M&A) between-subjects experiments. We developed three scenarios based on the different luxury tier levels of the acquiring brand: the acquiring brand is at a lower tier, at the same tier, or at a higher tier than the acquired brand. For each of these three scenarios, we further developed two scenarios based on whether consumers learn about the M&A through social media or traditional media. Based on desk research and focus group interviews prior to the main experiments, we conducted surveys on consumers of luxury cosmetic brands in Korea. We use luxury cosmetic brands in our experiments because consumers are most familiar with luxury cosmetics owing to their relatively affordable price and short purchase cycle. The luxury cosmetic sector also has a wide range of consumers with sufficient experience of different brands. We selected four luxury cosmetic brands: Lancôme, Dior, Chanel, and Biotherm. All of these brands originated from France, which allows us to control for any possible country of origin effect. We set Lancôme as the acquired brand for our scenarios, while Biotherm, Dior, and Chanel were set as the acquiring brands at comparatively inferior, similar, or superior luxury tiers. The focus group interviews confirmed that these brands are perceived as luxury brands and that the different level of luxury tiers that we used in our experiments were accurate. In the main experiments, each of the six scenarios was distributed to our respondents (n = 689), who were randomly chosen and nearly evenly distributed among the scenarios1. In each scenario, an announcement of an M&A between the luxury brands were shown to our respondents using social or traditional media (Facebook and a well-

H4-(a): The effects of M&As on customers’ perceived brand beliefs and luxury values will be stronger when the acquiring brand is at lower luxury tier than the target brand. Conversely, the effects of consumers’ perceived brand beliefs and luxury values on brand loyalty to the target brand would be stronger when the acquiring brand has a higher luxury image. Consumers believe that brands with stronger brand equity—such as those with higher brand quality, trust, and luxury values—would offer higher consumption values, which influences their brand loyalty (Aaker, 1992). Consumers’ brand loyalty is likely to be higher when they perceive higher values and their consumption experiences are more enjoyable (Chaudhuri & Holbrook, 2001; Chen-Yu et al., 2016). Similarly, the images of brands participating in M&As are transferable; an acquiring brand’s luxury image may influence consumers’ perceived brand beliefs and luxury values, thus having a stronger effect on brand loyalty. H4-(b): The effects of consumers’ brand beliefs and luxury values on brand loyalty will be stronger when a target brand is acquired by a brand from a higher luxury tier. 2.6. Moderating role of social media Consumers use social media to not only connect with each other, but 3

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Fig. 1. Conceptual research model.

items. The measurements for brand loyalty and behavioral intentions were adapted from Wernerfelt (1991), Gaby, Kristof, and Patrick (2003), and Gounaris, Tzempelikos, and Chatzipanagiotou (2007). All of the constructs in this study were measured using a seven-point Likert scale from 1, “strongly disagree,” to 7, “strongly agree.”

Table 1 Consumers’ perception of luxury tiers of the acquirer brand with respect to Lancôme. Group

N

Mean

SD

SE

Mean differences

Biotherm

226

4.8319 (a)

1.36563

0.09084

Dior

227

3.4405 (b)

1.55710

0.10335

Chanel

236

3.0763 (c)

1.53072

0.09964

(a)–(b) (a)–(c) (b)–(a) (b)–(c) (c)–(a) (c)–(b)

F

88.799

1.39133*** 1.75559*** −1.39133*** 0.36426*** −1.75559*** −0.36426***

3.3. Preliminary analyses To test the validity and reliability of our results, we first conducted exploratory factor analyses with principal component factor analyses and a varimax rotation. We then used Cronbach’s alpha to test for internal consistency. The results of the exploratory factor analysis and reliability tests provided good support for the entire measurement model. The standardized factor loadings, Cronbach’s alpha coefficients, and average variance extracted (AVE) values were all well above adequate limits, supporting the convergent validity of our approach. Table 2 shows both the constructs and the measurement items and Table 3 shows the factor loadings, Cronbach’s alpha values, AVE scores, and reliability estimates for each of our constructs. We also conducted a confirmatory factor analysis to investigate the structural equation model, allowing us to determine whether the correlations were statistically significant. The standardized correlation coefficients of each construct were smaller than the square roots of the AVE for the main constructs of the model, supporting discriminant validity (Table 4). The results of the confirmatory factor analysis showed that the overall model fit was satisfactory: χ2 = 1052.975, df = 361, p = 0.000, CFI = 0.967, RMSEA = 0.53, NFI = 0.951, TLI = 0.961, IFI = 0.966. To test the proposed hypotheses, we used structural equation modeling with a maximum likelihood estimation. The fit indices were: χ2 = 1319.432 (df = 428, p = 0.000), CFI = 0.958, NFI = 0.940, IFI = 0.959, and RMSEA = 0.55. These indices are within acceptable ranges, indicating a good fit between the hypothesized model and the data. All analyses included controls for the respondents’ preferences for the acquiring and acquired brands and their previous purchases of the acquired brand to control for possible brand effects. Table 5 summarizes the results.

***

*** p < 0.001, Duncan Test a > b > c. The higher the mean, the more inferior the luxury tier.

known traditional online newspaper in Korea). Participants were asked to read the scenario carefully before answering a list of questions regarding their perception of the M&A, their perception on brand beliefs, luxury values, brand loyalty, and purchase/recommendation intentions of the acquired brand. All participants—females ranging from their 20 s to their 50 s—were aware of the luxury cosmetic brands and all had used them in the past. We verified that the participants perceived the differences between the luxury tiers of the four brands through means tests, as shown in Table 1.2 Lastly, we confirmed that all participants recognized that the M&A was announced through social media, rather than traditional media. 3.2. Measures The measures used in this study were adapted from previous studies and modified to fit our research context. Consumers’ perceptions on brand quality were based on Yoo et al. (2000) and Ko, Costello, and Taylor (2019). The measurement items for brand trust were based on Chaudhuri and Holbrook (2001) and Sweeney and Swait (2008) and those for brand sustainability were based on Schultz and Block (2015). Consumers’ perceptions of luxury brand values were adapted from Lee et al. (2015) and Smith and Colgate (2007). Lee et al. (2015) was also used to determine the economic, symbolic, and experiential value

4. Results 1

Note that the sample selection and data collection were performed by one of the largest marketing research firms in Korea: Embrain Korea. 2 Specifically, we asked if they perceived the brands to be of a lower luxury tier than Lancôme.

4.1. The effects of M&As on consumer perception and attitudes As shown in Table 5, when consumers perceive M&As between two 4

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Table 2 Measurement items.

Table 3 Reliability and validity estimates.

Construct

Items

M&A

This merger is good for Lancôme. I am glad to hear about this merger. This merger will be helpful for Lancôme. Lancôme products are of high quality. Lancôme will maintain a high quality. Lancôme products are high-end. Although acquired by XXX, I trust this brand. I believe that Lancôme is still a trustworthy cosmetics brand. I believe that Lancôme is still reliable. Although acquired by XXX, Lancôme is still a competent brand. Lancôme will retain its brand power in the future. Lancôme will contribute to the beauty industry as a leader in the cosmetics market. I expect to be satisfied with the price of Lancôme. It is worth buying Lancôme. The price I pay for Lancôme is reasonable. Lancôme symbolizes my economic status very well. Lancôme symbolizes my social status very well. Lancôme is a symbol of success. When I shop for Lancôme, I can concentrate only on shopping. Using Lancôme gives me a lot of pleasure. I am so intent on shopping for Lancôme that I forget any other things. I will be committed to Lancôme. I will continue to use Lancôme I will remain loyal to Lancôme. I intend to keep purchasing Lancôme. My choice will be Lancôme if I need to buy cosmetic products. I am willing to buy Lancôme again. I would recommend Lancôme to my friends. I am willing to promote Lancôme on SNS. I am willing to post and share the information about Lancôme.

Brand Quality (BQ)

Brand Trust (BT)

Brand Sustainability (BS)

Economic Value (EV)

Symbolic Value (SV)

Experiential Value (EXV)

Brand Loyalty (BL)

Purchase Intention (PI)

Recommendation Intention (RI)

Construct

Factor loading

Cronbach’s alpha (> 0.7)

Average variance extracted (> 0.5)

Composite reliability (> 0.7)

M&A

0.898** 0.845** 0.922** 0.899** 0.776** 0.901** 0.729** 0.874** 0.932** 0.890** 0.853** 0.800** 0.887** 0.901** 0.834** 0.692** 0.872** 0.931** 0.913** 0.936** 0.823** 0.866** 0.925** 0.924** 0.891** 0.931** 0.912** 0.909** 0.925** 0.841**

0.917

0.790

0.947

0.893

0.741

0.916

0.874

0.721

0.901

0.880

0.720

0.902

0.899

0.765

0.932

0.866

0.702

0.886

0.918

0.796

0.950

0.932

0.820

0.962

0.935

0.831

0.967

0.919

0.796

0.950

BQ

BT

BS

EV

SV

EXV

Loyal

PI

RI

Model fit: χ2 = 1052.975 df = 361 CFI = 0.967 RMSEA = 0.053 NFI = 0.951 TLI = 0.961 IFI = 0.966. ** p < 0.01.

chi-squared tests to determine whether there are significant differences between the brands owing to the luxury tier difference. The path coefficients are significantly different among the three scenarios, supporting H4. Considering H4-(a), the effects of an M&A on perceived brand beliefs and luxury values are greater when the acquiring brand has a lower luxury image. However, no significant result was found for brand sustainability. Regarding H4-(b), brand quality and experiential value have greater effects on brand loyalty when the acquiring brand has a more luxurious image. Contrary to expectations, brand sustainability has a greater effect on brand loyalty when the acquiring brand has a lower luxury image. This may be because of the negative impact of brand sustainability on loyalty, such as decreasing exclusivity.

luxury brands positively, their brand beliefs and perceived luxury values tend to be higher, thus supporting H1 and H2. When consumers evaluate M&As between two luxury brands favorably, they expect the target brand’s brand quality to be enhanced, that the target brand will become more trustworthy, and that its market performance will improve. Considering luxury values, when consumers evaluate M&As favorably, their expected economic value of the target brand will be higher and consumers will perceive the target brand to be more prestigious, offering higher symbolic value. Similarly, they will perceive that the target brands will provide them with a higher experiential value, such as better experiences when shopping for and consuming the brand. Regarding H3, while consumers’ perceived luxury values had positive effects on brand loyalty, only brand sustainability (of the three brand beliefs) had a positive effect on brand loyalty. Our results also show that this increased brand loyalty will have positive effects on consumers’ purchase and recommendation intentions, which are consistent with the findings of existing marketing studies (Chaudhuri & Holbrook, 2001).

4.3. The moderating effects of social media We used a multi-group analysis to examine the moderating effects of social media being used for announcing M&As. The results reported in Table 7 are consistent with the results for H1, H2, and H3. In examining the moderating effects of social media, we conducted chi-squared tests, confirming that the path coefficients between the social media and traditional media scenarios are significantly different. While the path coefficients for social media are generally greater than those for traditional media, the only significant effects are those of the symbolic and experiential values on brand loyalty. Symbolic value has a significant effect on brand loyalty only when the M&A was announced on Facebook. Furthermore, the effect of the experiential value is stronger when the M&A was communicated via traditional media, contrary to H5.

4.2. The moderating effects of brand tier difference To test the moderating effects of brand tier difference, we conducted multi-group analysis; the results are reported in Table 6. The fit indices (χ2 = 2451.218 [df = 1284, p = 0.000], CFI = 0.945, NFI = 0.892, IFI = 0.946, RMSEA = 0.036) are within acceptable ranges and the scenario results are consistent with those of the overall model. We used

5. Discussion This study examined how consumers’ M&A evaluation would affect 5

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Table 4 Correlation matrix.

MA BQ BT BS EV SV EXV BL PI RI

Mean

SD

MA

BQ

BT

BS

EV

SV

EXV

BL

PI

RI

4.2148 4.9149 4.7794 4.7547 4.2709 4.8220 4.4804 4.4509 4.7054 4.4615

1.17452 0.98643 1.01222 1.00209 1.03483 1.03830 1.06597 1.08604 1.11765 1.09166

0.884* 0.430** 0.433** 0.452** 0.423** 0.327** 0.418** 0.292** 0.317** 0.379**

0.828* 0.746** 0.697** 0.528** 0.641** 0.634** 0.583** 0.574** 0.590**

0.825* 0.759** 0.590** 0.675** 0.640** 0.654** 0.627** 0.677**

0.834* 0.594** 0.673** 0.688** 0.634** 0.635** 0.651**

0.854* 0.532** 0.615** 0.609** 0.590** 0.612**

0.814* 0.692** 0.658** 0.635** 0.664**

0.870* 0.736** 0.691** 0.730**

0.894* 0.817** 0.809**

0.906* 0.810*

. 0.870*

** p < 0.01; The square root of the AVE is given along the diagonal. SD = standard deviation.

brands, and the use of social media in communicating about the M&A, would moderate these effects. The moderating effects we consider are important to luxury brands, because most M&As in luxury markets are horizontal, which usually has significant influences on consumer values considering brands with different luxury images (Chung et al., 2014; Homburg & Bucerius, 2005). In addition, luxury brands are now actively utilizing both social and traditional media in their marketing communications (Godey et al., 2016; Kim & Ko, 2012). Our findings suggest that when consumers evaluate M&As between luxury brands positively, their perceptions on the brand beliefs and luxury values of the target brand would be higher. Furthermore, consumers’ perceived brand sustainability and luxury values derived from consuming the target brand (economic, symbolic, and experiential values) would have significant impacts on brand loyalty. An increase in consumers’ brand loyalty when they perceive the target brand to be more sustainable because of the M&A is consistent with previous literature (Sorescu et al., 2007). It has been widely demonstrated that a major objective of M&As is to strengthen a brands’ competitive advantages and enhance long term sustainability (Capron, 1999). Similarly, the positive impacts of luxury values on brand loyalty concur with the previous findings regarding luxury brands. This demonstrates that luxury values are the primary driving force behind luxury brand consumption (Tynan et al., 2010; Wiedmann et al., 2009). Our findings suggest that brand sustainability and luxury values are important in enhancing brand loyalty and encouraging repurchase. However, we did not find significant effects of brand quality and trust on brand loyalty.

Table 5 Path estimates for the proposed model. Relationship Evaluation of M&A → Brand Quality Evaluation of M&A → Brand Trust Evaluation of M&A → Brand Sustainability Evaluation of M&A → Economic Value Evaluation of M&A → Symbolic Value Evaluation of M&A → Experiential Value Brand Quality → Brand Loyalty Brand Trust → Brand Loyalty Brand Sustainability → Brand Loyalty Economic Value → Brand Loyalty Symbolic Value → Brand Loyalty Experiential Value → Brand Loyalty Brand Loyalty → Purchase Intention Brand Loyalty → Recommendation Intention Purchase Intention → Recommendation Intention Proposed model fit χ2 = 1319.432, df = 428, p = 0.000, CFI = 0.958, IFI = 0.959, RMSEA = 0.055

Coefficient **

0.887 0.822** 0.891** 0.683** 0.814** 0.788** −0.068 −0.088 0.311** 0.124** 0.195** 0.443** 0.930** 0.688** 0.293**

t-value 14.433 12.802 14.415 12.772 12.288 13.864 −1.032 −1.829 4.351 3.997 4.638 10.512 29.445 10.512 4.816

NFI = 0.940, TLI = 0.952,

** p < 0.01.

consumers’ perceived brand beliefs and consumption values regarding the acquired brand and subsequently the brand loyalty. We also examined how luxury tier differences between the acquiring and target

Table 6 Results of the multi-group analysis with respect to luxury tiers. Path

Coefficient Biotherm (A)

Evaluation of M&A → Brand Quality 0.883** Evaluation of M&A → Brand Trust 0.820** Evaluation of M&A → Brand Sustainability 0.891** Evaluation of M&A → Economic Value 0.797** Evaluation of M&A → Symbolic Value 0.847** Evaluation of M&A → Experiential Value 0.809** Brand Quality → Brand Loyalty 0.076 Brand Trust → Brand Loyalty 0.047 Brand Sustainability → Brand Loyalty 0.034 Economic Value → Brand Loyalty 0.211** Symbolic Value → Brand Loyalty 0.219** Experiential Value → Brand Loyalty 0.386** Brand Loyalty → Purchase Intention 0.936** Brand Loyalty → Recommendation Intention 0.706** Purchase Intention → Recommendation Intention 0.300** Model fit summary Unconstrained model: χ2 = 2451.218, df = 1284 Structural weights (e.g., constrained model): χ2 = 2560.833, df = 1388 Model comparison: Δχ2(71) = 109.615, p < 0.05

Critical Ratios for Differences in absolute value Dior (B)

Chanel (C)

A vs B

A vs C

B vs C

0.907** 0.860** 0.919** 0.707** 0.771** 0.787** -0.359* -0.008 0.542** 0.132* 0.155* 0.407** 0.872** 0.679** 0.307**

0.816** 0.738** 0.964** 0.545** 0.714** 0.731** 0.357* 0.079 -0.567* 0.194** 0.278** 0.667** 0.503** 0.620** 0.319**

1.357 0.854 0.298 1.443 2.595 1.633 2.232 0.465 2.171 0.874 0.126 0.617 0.932 0.384 0.015

2.565 2.155 1.569 3.212 2.616 2.015 1.630 0.321 1.906 0.114 0.910 2.644 0.384 0.735 0.096

1.197 3.012 1.317 1.768 0.080 0.334 3.015 0.672 2.939 0.815 0.895 1.846 0.597 0.443 0.121

* p < 0.05. ** p < 0.01. 6

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about M&As on social media, where consumers usually interact with each other, their symbolic value may become relevant, affecting brand loyalty. Conversely, experiential value may be more important in the case of traditional media, because consumers may focus on the content of the news, rather than interacting with others. Overall, our findings on the moderating role of the media used suggest that different types of media can be used to effectively communicate with consumers, enhancing the effects of M&As on consumers’ brand perceptions and brand loyalty.

Table 7 Results of the multi-group analysis considering social media. Path

Coefficient Traditional media

Social Media

Critical Ratios for Differences

Evaluation of M&A → Brand Quality 0.879** 0.934** 0.398 Evaluation of M&A → Brand Trust 0.808** 0.819** 0.033 Evaluation of M&A → Brand 0.904** 0.909** 0.396 Sustainability ** ** 0.683 1.075 Evaluation of M&A → Economic Value 0.721 Evaluation of M&A → Symbolic Value 0.849** 0.771** 1.561 ** ** Evaluation of M&A → Experiential 0.791 0.851 0.989 Value Brand Quality → Brand Loyalty 0.420 -0.059 0.769 Brand Trust → Brand Loyalty -0.035 -0.103 0.680 1.619 Brand Sustainability → Brand Loyalty 0.106 0.346** ** Economic Value → Brand Loyalty 0.182 0.089 1.113 Symbolic Value → Brand Loyalty 0.144 0.302** 1.960 ** ** Experiential Value → Brand Loyalty 0.501 0.340 2.091 Brand Loyalty → Purchase Intention 0.932** 0.903** 0.059 Brand Loyalty → Recommendation 0.225** 0.276** 0.676 Intention 0.739** 0.670** 1.599 Purchase Intention → Recommendation Intention Model fit Summary Unconstrained model: χ2 = 2688.321, df = 864 Structural weight (e.g., constrained model): χ2 = 2761.866, df = 914 Model comparison: Δχ2(50) = 73.545, p < 0.05

6. Conclusion 6.1. Theoretical and practical contributions This study offers several academic and managerial implications. The main contribution is the investigation of M&As between luxury brands, which has previously been largely ignored in marketing literature. Previous literature on M&As focused mainly on the effects of M&As on firms’ pre- and post-M&A financial performance and the effects of product and marketing characteristics in successful M&As. Although M &As often change consumers’ perceptions of the brands involved significantly, few insights are available from the consumers’ standpoint. Previous studies on luxury brands have paid little attention to M&As with a few exceptions, which have focused on the acquiring brand in M &As (e.g., Lee et al., 2011). This study focuses on the target brand, which is the main driver for M&As. We are therefore able to offer new insights on M&As between luxury brands from consumers’ point of view. Our findings that consumers’ favorable evaluations of M&As can generate positive consumer perceptions towards the target brand provide a possible explanation for target brands in M&As benefiting from the agreement. When consumers encounter the M&A news and evaluate it favorably, their beliefs and values concerning the target brand can increase. This holds true regardless of the luxury tier difference between the acquiring and target brands, implying that consumers’ positive evaluations of M&As are critical to improving brand performance and ensuring post-M&A success. While prior studies suggest that the perceived brand image difference between brands can have important effects on their performance (Aaker & Keller, 1990; Palmeira, Lei, & Valenzuela, 2019), it is not clear whether and how consumers’ perceived brand image differences considering brands engaging in M&As would affect their brand perceptions. Our findings show that consumers exhibit different brand perceptions after M&As that depend on the luxury image difference between the brands involved. We also examine the role of media in communicating M&A news to consumers. Literature concerning social media has examined the effects of social media on luxury brand communication. Our findings add new insights, showing that social media may be effective in communicating with consumers in a different way than through traditional media. Specifically, our results suggest that social media is more effective in enhancing consumers’ brand loyalty through their perceived symbolic value, owing to the interactive nature of social media (Choo et al., 2012; Lee et al., 2015). Overall, our findings suggest that practitioners in the luxury brands industry need to consider the roles of luxury tier differences and communication media in managing their brands, both before and after engaging in M&As.

** p < 0.01.

One possible explanation is that for luxury brands, consumers might perceive the brand quality and trust as being less prone to change after the M&A. Consumers may perceive the brand quality of luxury brands to be sufficiently high and sufficiently trustworthy, even prior to M&As (Wilcox et al., 2009). However, brand sustainability may more likely be affected by M&As, as it is one of the primary reasons behind M&As (Gaughan, 2010). Our findings on the moderating effects of luxury tier differences provide several interesting implications. As expected, the impacts of M &As on the perceived brand beliefs and luxury values seem to be greater when the acquiring brand is on a lower luxury tier than the acquired brand. According to Königs and Schiereck (2006), M&As initiated by smaller and less prominent firms result in abnormally high returns. Our findings therefore provide support for higher returns in M&As initiated by less prominent brands, based on the positive impacts of M&As on consumers’ perceived beliefs and values. Our results also suggest that consumers’ perceived brand quality and experiential values could impose stronger impacts on the brand loyalty of the acquired brand when the acquiring brand is at a higher luxury tier. This means that the higher the brand quality image and luxury consumption value of the acquiring brand, the greater the brand loyalty of the acquired brand will be. Moreover, the higher quality image and higher level of experiential value of the acquiring brand could spread to the acquired brand owing to the synergy expected to flow from the acquiring brand to the acquired brand (Capron & Hulland, 1999; Weber & Dholakia, 2000). Our results regarding the moderating effects of social media suggest that while the type of media may not be as important as expected in affecting consumers’ perceptions of the acquired brand, it could make a significant impact on the relationships between luxury values and brand loyalty. The effect of symbolic value on brand loyalty is significant only when the M&A news is delivered via social media. The effect of experiential value on brand loyalty is significant for both social and traditional media. Interestingly, it is stronger when the M&A is announced via traditional media. Symbolic value, which is a means of expressing one’s social status, is obtained through interacting with others (Choo et al., 2012; Lee et al., 2015). When consumers learn

6.2. Limitations This study has several limitations. First, we used surveys based on different M&A scenarios between brands at different luxury tiers, communicated via both social and traditional media platforms. While we measured consumers’ perceptions and intentions using surveys, we were unable to observe their actual behaviors. Future research should address this issue, for example, the impacts of M&As could be more accurately measured using consumers’ actual purchasing data following 7

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M&As. Second, we were not able to measure the research constructs both before and after exposing the stimuli. Future research should measure the constructs both before and after exposure to the stimuli. This would improve understanding of the causal effects of M&As. Third, future research could use alternative product categories and different participant groups to generalize our study’s results. Forth, we used visual stimuli to determine the moderating effects of social media, which may not fully represent the differences between social media and traditional media platforms. Future research should develop more realistic instruments or use more sophisticated experiments to address this issue.

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