9 2. CHAPTER 2 LITERATURE REVIEW 2.1. Brand Authenticity To create impactful branding strategies, marketers need to understand the concept of authenticity in their products and services, along with its influences and outcomes (Morhart et al., 2015). According to the Oxford English Dictionary, being authentic means being reliable, trustworthy, original, firsthand, and prototypical as opposed to copied. In the context of branding, authenticity signifies a brand's adherence to its core values and genuine identity (Beverland & Luxton, 2005; Beverland and Farrelly, 2010). Consumers perceive brand authenticity as a subjective evaluation of a brand's genuineness (Napoli et al., 2014). Fritz et al. (2017) describe it as the perceived consistency in a brand’s actions that reflects its core values, staying true to itself without compromising its essence. Authenticity is not just a desirable trait but a critical driver of consumer engagement and loyalty (Lu et al., 2015), making it essential for marketers to understand and leverage this attribute in their branding efforts. The research on brand authenticity has produced a wide variety of conceptualizations. Bruhn et al. (2012) developed comprehensive scales to measure brand authenticity, identifying attributes such as continuity, originality, reliability, and naturalness in their measurement scales. Napoli et al. (2014) highlighted quality commitment, heritage, and sincerity, while Morhart et al. (2015) proposed a four-dimensional scale including continuity, credibility, integrity, and symbolism. Despite differences, these frameworks agree on themes of consistency, honesty, and genuineness. Grayson and Martinec (2004) differentiate between indexical authenticity, which concerns whether the entity is genuine, and iconic authenticity, which can be conferred by an icon, representing something aspirational to customers. The more recent model by Lee and Chung (2020) focuses on product authenticity, communication authenticity, brand originality, price authenticity, and health self-efficacy as attributes of brand authenticity. Previous research has proved that the impact of brand authenticity on consumer behavior and psychological outcomes is significant. Authenticity perceptions positively influence brand attitude, credibility, and trust (Ewing et al., 2012; 10 Blackshaw, 2008; Napoli et al., 2014). In the hospitality industry, Lu et al. (2015) found that perceived authenticity enhances brand equity dimensions like awareness, image, and quality. Brand authenticity also fosters emotional brand attachment (Morhart et al., 2015) and strengthens brand relationship quality (Lee and Chung, 2020). Behavioral outcomes of brand authenticity include increased brand loyalty, purchase intention, and brand recommendation (Lu et al., 2015; Morhart et al., 2015). Overall, research demonstrates that authenticity positively affects both psychological and behavioral consumer responses, making it an important factor in successful branding strategies. 2.2. Product Authenticity Within the domain of product authenticity, researchers have examined a range of aspects and components contributing to the perception of authenticity. Liao and Ma (2009) identified six properties of product authenticity, including originality, quality commitment and credibility, heritage and style persistence, scarceness, sacredness, and purity. Gilmore and Pine (2007) categorized what a company sells to a customer into five economic offerings, presenting a framework to understand the progression of economic value and the possibilities of authenticity in different genres: 1. Commodities – Natural authenticity (i.e., something in its natural state and still untainted) 2. Goods – Original authenticity (i.e., originality in design, being the first of its kind; not a copy or imitation) 3. Services – Exceptional authenticity. (i.e., something executed exceptionally well, and with the utmost care) 4. Experiences – Referential authenticity. (i.e., refers to some inspiring context, human history, or shared memories) 5. Transformations – Influential authenticity. (i.e., something exerting influence on others and pointing to a higher goal or meaning). Consumers' expectations of authentic products extend to the product’s reflection of the brand's image, leading them to infer that the brand possesses desirable attributes consistent with its image (Cinelli and Lebeouf, 2019). The literature further explores various criteria for determining product authenticity. It suggests that product offerings may be considered authentic if they are produced using traditional or artisanal methods 11 (Beverland, 2005; Boyle, 2003; Groves, 2011; Munoz et al., 2006; Peterson, 2005), if they are perceived as unique (i.e., not “mainstream”; McLeod, 1999; Munoz et al., 2006), if they prioritize quality and use natural ingredients (Lee and Chung, 2020), or if they live up to marketers’ claims (Gilmore & Pine, 2007). The perception of product authenticity is influenced by both objective sources of information and consumers' reliance on different cues, highlighting the complex ways in which authenticity is assessed and valued in the consumer decision-making process. Building on this, Lee and Chung (2020) emphasize the significant influence of product authenticity on brand satisfaction, trust, and commitment. Liao and Ma (2009) further explained that authentic products are valued for their unique characteristics, and consumers with a need for authenticity are willing to invest time and money to obtain such products, contributing to brand loyalty. 2.3. Product Originality Gatignon and Xuereb (1997) outline originality as the degree of novelty perceived by either consumers or the firm, emphasizing distinctions from existing industry offerings. From a consumer-centric perspective, product originality is defined as a product's newness or uniqueness as perceived by the consumer relative to previous offerings (Moldovan et al., 2011). In dynamic markets, originality holds significance by not only increasing profitability through heightened value over competitors but also by playing a critical role in attracting consumer attention (Koo and Joo, 2014). This impact goes beyond consumer appeal, significantly affecting overall profitability and influencing a product's financial performance (Kumagai and Nagasawa, 2022). A higher level of originality in a new product is associated with increased interest and surprise, leading to greater word-of-mouth (WOM) potential (Derbaix and Vanhamme, 2003). Despite the positive effects on profitability and consumer attention, research shows an inconsistent effect of product originality on commercial success (Calantone et al., 2006; Kleinschmidt and Cooper, 1991). While some studies suggest a positive correlation between originality and new product profitability (Langerak et al., 2004), others argue that it may not directly impact a product’s financial performance (Calantone et al., 2006; Henard and Szymanski, 2001). Concerns are raised that high innovativeness might hinder new product success due to 12 consumer unfamiliarity (Calantone et al., 2006), with some studies indicating that originality may have no significant direct effect on a product’s financial performance. (Calantone et al., 2006; Szymanski et al., 2007) 2.4. Design Newness Product design, which refers to the observable exterior aspects of a product, serves as a crucial means of differentiation for consumer goods (Talke et al., 2017). Several companies, such as Alessi, Apple, or Kartell, have strategically focused on product design as a competitive tool (Verganti, 2006). In the context of product design newness, various concepts are used to characterize design newness, such as originality, novelty, uniqueness, or atypicality, all capturing the deviation specifically in a product's design from the current state (Runco and Charles, 1993; Hekkert et al., 2003; Bloch, 1995; Loken and Ward, 1990). Novel designs often have a positive impact on market share, sales over the whole product life cycle, and sales growth (Korenok et al., 2010; Landwehr et al., 2013; Millner & Hoffer, 1993; Talke et al., 2009) The degree of design newness often depends on the visual attributes shared with other products in the same category, suggesting that a newer design shares fewer attributes with its category counterparts (Whitfield and Slatter, 1979). From a competitive perspective, the degree of design newness can be evaluated by comparing the design of products that offer similar benefits to customers and target the same market segments (Kotler & Armstrong, 2012). Assessments of design newness involve comparing the product's outlines, proportions, dimensions, structures, colors, or materials against existing products (Bloch, 1995; Ranscombe et al., 2012; Warell, 2001). However, the literature has presented mixed evidence regarding the impact of design novelty on consumer preferences. While some research suggests that higher design novelty attracts attention and arouses consumer interest, positively influencing consumer preference (Garber, 1995; Crilly et al., 2004; Krippendorff, 2005), others argue that it may lead to psychological discomfort, perceived risks, high learning cost, and negative implications for brand identity and reliability (Castano et al., 2008; Kreuzbauer and Malter, 2005; Schnurr, 2017). 13 2.5. Communication Authenticity In response to the perceived inauthenticity and lack of credibility in mass marketing, consumers are increasingly urging companies to adopt greater transparency, openness, and responsibility in their communication practices (Molleda, 2010). The study also stresses that building authenticity through communication is essential for the sustainability of corporate identities and the relationships they develop over time, necessitating an alignment between communication efforts and the reality and core values of the organization (Molleda, 2010). Communication authenticity, comprising both company authenticity and advertising authenticity (Lee and Chung, 2020), emerges as a critical strategy for companies to foster positive relationships with consumers. Yoo's (2013) emphasis on the consistent impact of communication authenticity on brand trust, attachment, and loyalty across various studies reinforces its significant role. Additionally, Lee and Chung (2020) further highlighted that the influence of communication authenticity extends to brand satisfaction, trust, and commitment. Moreover, Molleda (2010) suggests that a brand's marketing communications play a significant role in shaping consumer perceptions of authenticity. Supporting this, Jin and Ava (2020) stated that consumers' attitudes toward a brand and their subsequent behavioral intentions are often influenced by a brand's communication efforts. Specifically, their study highlighted the impact of transparent brand communication on consumers' perception of a brand's transparency and authenticity, with significant effects on attitudes, trust, and behavioral intentions toward the brand. The consistent findings across these studies highlight the connections and importance of communication authenticity in shaping consumer perceptions and fostering positive brand-consumer relationships. 2.6. Company Authenticity Although the concept of authenticity has been studied across disciplines from diverse perspectives, this study focuses on how it has been understood in the business context. Gilmore and Pine (2007) argued that authenticity has become a focal point in the modern business world, identified as a new quality and business norm. They asserted that, “authenticity has overtaken quality as the prevailing purchasing criterion, just as 14 quality overtook cost, and as cost overtook availability.” Crofts (2005) supports this view, emphasizing the significance of authenticity in corporations, defining authentic businesses as those which generate their profits through the pursuit of a profound and positive purpose. Unlike businesses that compete primarily on price, authentic companies attract customers through the resonance of their purpose. Lee and Chung (2020) defined company authenticity as having honest communication with consumers and responsible management activities. Furthermore, company authenticity is also recognized as one of the seven attributes of brand authenticity (Lee and Chung, 2020). Building on this foundation, Morhart et al. (2014) stated that authentic companies, offering meaningful and identity-relevant benefits, exhibit increased levels of credibility, integrity, and continuity. These attributes foster perceptions of a company being faithful and true towards itself and its customers. Consequently, this perceived dedication translates into positive consumer responses. Arnould and Price (2000) further affirm that consumer perceptions of a company's authenticity are linked to beliefs that a company is trustworthy and honest. 2.7. Advertising Authenticity The advertising industry has made the word “authenticity” as one of its most popular keywords, with marketing managers and creatives agreeing that executing an authentic advertisement is essential to effective and successful advertising (Beverland, Lindgreen, and Vink 2008; Morhart et al. 2014; Poetzsch 2014). Beverland (2005) provides a comprehensive definition of authenticity in the context of advertising, in which he defined it as a story that balances industrial and rhetorical attributes to project sincerity through the avowal of commitments to traditions, passion for craft and production excellence, and the public disavowal of the role of modern industrial attributes and commercial motivations. According to Becker et al. (2019), an authentic ad is characterized by the genuineness, realness, and truthfulness evident in its executional elements, such as the plot. Becker et al. (2019) has identified four relevant dimensions crucial to authentic advertising, namely preserving the brand essence, honoring brand heritage, showing a realistic plot, and presenting a credible message. This aligns with the criteria proposed by Park and Kim (2014), who emphasize that advertising communications must embody sincerity, 15 reliability, not exaggerated, straightforwardness, and sympathy to be considered authentic. Advertisers specifically hold the belief that genuine advertising fosters consumer connection with the brand (Grayson and Martinec 2004; Holmes 2015), builds brand trust (Anderberg and Morris 2006), elicits feelings of empathy or sympathy (Stern 1994), and helps overcome consumer skepticism toward ads (Darke and Ritchie 2007; Poetzsch 2014). Notably, the concept of advertising authenticity has been recognized as one of the dimensions contributing to communication sincerity, as proposed by Lee and Chung (2020). This connection reinforces the idea that authentic advertising aligns with sincere communication strategies. 2.8. Brand Originality Bruhn et al. (2012) introduce a comprehensive concept of brand authenticity, where originality stands as one of four fundamental dimensions, accompanied by continuity, reliability, and naturalness. The significance of originality within this framework is then reinforced by the findings of Rodrigues et al. (2022).