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Brand Equity And Luxury Brands

Paper Type: Free Essay Subject: Marketing
Wordcount: 5469 words Published: 19th May 2017

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Most of successful businesses hinge upon their great business strategies. The business strategy generally composes of four components: the product-market investment decision, the customer value proposition, the organization’s assets and competencies, and functional strategies and programs (Aaker and McLoughlin, 2007). In terms of organization’s assets and competencies, brand appears to be one of the most valuable intangible asset of the company (Keller and Lehmann, 2006). Therefore, concept and importance of brand has been widely discussed amongst both researchers and practitioners (Pitta and Katsanis, 1995).

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Brand is different from product (Capon, Mac Hulbert, and Capon, 2009) and more than service. A classic definition of brand by Kotler (1991, pp.442) brand is “a name, term, sign, symbol or design or combination of them which is intended to identify the goods of one seller or group of sellers and to differentiate them from those of competitors”. This definition has been discussed as being failed to capture the essence of what brand involves and achieves (Aaker and McLoughlin, 2007). Fifield (2008) thoroughly redefines brand as “a set of consistent meanings which exist in addition to the product or service offering”. In other words, brand is “a set of belief and feeling exist in customer minds […derive from what they have been promised]”. The promises of brand are conveyed through the value proposition the brand delivers through ranges of marketing mix (Fifield, 2008; Moutinho and Southern, 2010). Moutinho and Southern (2010) restate definition of brand as “an entity, which offers customers added value based on factors over and above its functional performance. These added values differentiate offer and provide basis for customer preference and loyalty. Marketers use the marketing mix to position the brand and to create brand value around a coherent set of each marketing mix […base on relevant stimuli].”

Brand draws a number of benefits to the business in terms of both recruit and retains customers. Aaker (cited in Fifield, 2008) highlights the benefit of the brands in terms of financial benefits namely “price premium”. This financial benefit leads to perceived higher quality and perceived higher value which provide point of differentiation in consumer mind. It therefore would increase consumer usage which results in increase in return on investment for company at last (Fifield 2008). In addition to that, brand creates customer value by managing two types of risk for them including “performance risk”; by providing promise of sameness and predictability, and “psychological risk” ; by providing image and social acceptability (Keller 2003 cited in Moutinho and Southern, 2010).

Branding is suggested to be expensive to the business. It is also difficult to identify its cost or investment (Fifield, 2008). However, the additional return from brand appears to be more worthwhile. Fifield (2008) suggests the commodity products without branding would end up with price war. This would not only produce small return to a single company, but also small value to the whole value-chain.

Brand Equity

Since brand appears to be a strategic intangible asset that could allow succeed to the company but costly to do so, the reflection of real value that the brand name hold is essential for further business direction. The reflection of value of the brand name is known as measuring brand equity. There are a number of researchers has investigated concept of brand equity since early 1990s (Pitta and Katsanis, 1995). In a general scope, according to Keller (1993), brand equity is defined in terms of “marketing effects uniquely attribute to the brand”. This means the certain outcome of marketing a product or service would not happen if that product or service does not hold that name (Keller, 1993). In other word, brand equity is the value that brand name gives to a product or service (Pitta and Katsanis, 1995). Brand with high brand equity provides their owners with competitive and financial benefits (Aaker and MacLoughlin, 2007). In terms of behavioral viewpoint, brand equity is essential to make point of differentiation which lead to competitive advantages based on non-price competition (Aaker, 1991).

Brand equity creates a number of values to the firm and customer. It affect merger and acquisition decision, stock market response, determinant of brand extension, increase probability of brand choice/willingness to pay premium price/ marketing communication effectiveness/ brand licensing, and decrease vulnerability to competitive marketing action/ elastic response to price increase (Yoo, Donthu, and Lee, 2000)

Brand equity has also been defined and motivated to be studied in two perspectives: financial and consumer perspective. In a financially base perspective, the motivation of studying brand equity is to determine the value of a brand for the purpose of accounting, investment, or divestment (Keller, 1993). Therefore, it has been defined as the incremental cash flow of products or service over the cash flow that comes from the sale of unbranded product or service (Simon and Sullivan, 1993). This incremental cash flow incorporates the value that is evaluated by consumers of branded products and the cost that are saved by brand equity with competitive advantages (Simon and Sullivan, 1993).

On the other hand, in the consumer-oriented perspective, the motivation to study brand equity comes from the need to improve marketing productivity (Keller, 1993). In regards to brand equity’s definition in this perspective, there are two researchers, Aaker in 1991 and Keller in 1993, conceptualizing brand equity concept that is widely accepted by researchers and practitioners.

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Figure 2.1: Aaker’s dimension of Brand Equity (Source: Aaker, 1992)

Aaker combines behavioral and perceptual approach to assess brand equity (Hsu, 2011). Aaker defines brand equity as “a set of brand assets and liabilities linked to a brand, its name and symbol that add to or subtract from the value provided by a product or service to a firm and/or to that firm’s customers” (Aaker and McLoughlin, 2007). In Aaker’s model, brand equity derives from five sources: brand awareness, brand associations, perceived quality, brand loyalty, and other propriety brand asset (Figure2.1).

Figure 2.2: Keller’s dimension of Brand Equity (Source: Keller, 1993)

Meanwhile, Keller focuses on consumer perception (Hsu, 2011). Keller (1993) refers the memory principle namely associative network memory model in defining brand equity. He suggested that an individual dimension of brand is a node in a memory that connects together with links that has various types and degrees of association. Therefore, it would leads to different knowledge of brand which means different level of brand equity (Janiszewski and van Osselelaer, 2000). Keller stated, “Brand equity is the differential effect of brand knowledge on consumer response to the marketing of the brand”. Keller suggested that brand equity comes from brand knowledge; whereby brand knowledge arises from two sources: brand awareness (derived from brand recall and brand recognition) and brand image (derived from brand association which influenced by type, favourability, strength, and uniqueness) (Figure 2.2).

According to both researchers, their concepts share some common major components namely brand awareness and brand association. In fact, dimension of brand equity in Keller’s model seems to have deeper investigation in the source of brand association dimension in perceptual perspective. The perceptual components of brand equity might be important sources of competitive advantage for suppliers that rely strongly on intangible value. Since luxury brands are more about aspiration and perception to the brand, Keller’s brand equity dimension could fits to the scope of the topic and worth to investigate in detail. Therefore, the following will discuss dimension of brand equity according to Keller’s brand equity model which composing of brand awareness and brand image.

Brand Awareness

Brand awareness refers to the strength of brands presence in the consumers’ memory (Aaker and McLoughlin, 2007). It is reflecting by the ability to identify the brand under different conditions by consumers (Keller, 1993). Brand awareness is important to the business because it yields to more tendency for the brand to be liked and frequently purchased (Aaker and McLoughlin, 2007). This is because brand awareness influences the information and strength of brand association in the brand image (Keller, 1993).

There are two main measures of brand awareness according to Aaker and McLoughlin (2007). The first measure is prompted awareness. This refers to “the consumers’ ability to recognize the brand from a list of brand name”. In fact, prompted awareness is known as brand recognition in Keller’s model. The second measure is unprompted awareness. It is “the consumers’ ability to recall the brand name when asked to identify brand in a category” (Aaker and McLoughlin, 2007). Brand recall is a synonym of unprompted awareness when looking at Keller’s model.

Practically, brand recall is more desirable in marketing perspective than brand recognition (Pitta and Katsanis, 1995). This is because it implies that the brand has achieved a dominant awareness level and becomes a member of the consideration set for that category in consumers’ mind (Aaker and McLoughlin, 2007). This means brand recall allows consumers to create choice themselves because they can generate picture of the brand in their minds without aiding. Therefore, brand recall could provide higher degree in likability and purchase than brand recognition.

Brand awareness is generally created through ranges of marketing tools, particularly marketing communication (Aaker and McLoughlin, 2007). This is because communication media provides brand visibility and keep the brand in consumers’ sights that allows consumer to repeatedly encrypt the brand name.

Brand Image and Brand Association

Brand image is a picture of the offering in consumer’s mind that includes symbolic meaning when consumer associate with the specific attribute of product or service (Cretu and Brodie, 2007). It is a set of perception about a brand, which consumers form in order to reflect their association to the brand (Keller, 1993). Keller (1993) defines Brand Image as “a perception about a brand as reflected by the brand associations held in a consumer memory”. Brand image play an important role in the business, especially where it is difficult to differentiate products or services based on tangible quality features (Cretu and Brodie, 2007). Brand image derives from various dimensions of brand association including type, favorability, strength, and uniqueness.

Brand association is anything in consumer’s memory (Aaker, 1991). It can be any aspects of brand that consumer relates with the brand (Aaker and McLoughlin, 2007). The aspects of brand come from the product itself as well as other entities that built around the brand. Brand association is important as it provides opportunity for consumer to develop positive relationship with the brand when consumers have ability to connect to the brand in certain circumstance (Aaker, 1991).

Types of Brand Association

To understand more on the process that consumers create brand association, Keller (1993) has categorize the aspects/attributes of brand into two types and identify the perceived benefits gain from each type of brand aspects/attributes. It therefore leads to certain attitude about brand in consumers’ minds and influence brand image.

Attributes can be categorized into two types according to Keller (1993): product-related attribute (intrinsic (Fill, 2009)) and non-product-related attributes (extrinsic (Fill, 2009)). The attributes that is product-relating arises from the physical composition of product itself and usually form the perceived functional benefits after consumers use certain product (Keller, 1993). This type of attribute also can build up the perceived experiential benefits when the product attributes satisfy consumers’ experiential needs such as sensory pleasure, cognition stimulation, and variety. (See example in Appendix A)

Meanwhile, the non-product-related attributes arise from price, packaging, type of person who use product (user imagery), and when the product is used (usage imagery). Non-product-related attributes usually profile certain personality to the brand (known as Brand personality) and generates symbolic benefits relating to the needs of social approval and personal expression to consumer (Keller, 1993). (See example in Appendix A)

When consumers evaluate all brand attribute and its benefits, they would profile a specific attitude towards brand; known as Brand attitude (Keller, 1993). Brand attitude is important because it influences motivation and evaluation on consumers’ choices of brand (Keller, 1993). The attitude would leads to specific perception towards brand; Brand Image.

Favorability, Strength, and Uniqueness of Brand Association

According to Keller (1993), apart from type of brand association explained above, image of the brand is also influenced by three dimensions of brand association namely favorability, strength, and uniqueness. Firstly, favorability of brand associations arises when consumers feel satisfied to the attributes (product-related and non-product-related attributes) and benefits (functional, experiential, and symbolic benefits) provided by brand. Therefore, they would create positive attitude towards brand. This would eventually leads to positive brand image.

Secondly, strength of brand associations depends on how consumers’ memories receive and maintain information about brand. It could be both quantity and quality wises of processing information that influence the strength. The strength of brand association could ease consumers in recalling the brand. Thus, consumers can portrait the picture of brand in their mind.

Lastly, uniqueness of brand association derives from all type of attribute (product-related and non-product-related attributes) and their benefit (functional, experiential, and symbolic benefits) that differ from that of competitors. This would too promote distinct picture of brand in consumers’ mind. Therefore, it could draw the competitive point of difference which would create unique selling proposition and strengthening brand position.

To sum up, different types of brand attribute create different perceived benefits; then lead to brand attitudes that forms brand image. These three dimensions of brand association assist in creation of positive/negative brand image. This is because consumers have positive/negative attitude toward brand, be able to recall the brand easily, and see the brand different from the other brands in the category.

Several researchers have proved Keller’s dimensions of brand equity. Danes et al (2011) reports that recent branding research measuring brand image via free association method has found that brand equity increase as the number of associations increase (Chen, 2001 cited in Danes et al, 2011). This is correspondent with traditional construct and scales brand equity measurement, which indicates that functional and non-functional brand associations influence brand perception, and can create differential advantage to the brand.

Luxury Brand

The word “luxury” generally connects with extravagance, prestige, elitism (Moore and Birtwistle, 2005) and higher price (Beverland, 2004). It is something nonessential, but provides pleasure and comfort, or some other things that is expensive and associates with an exclusive sumptuous lifestyle (American Heritage, 1993). There are the attempts from a number of researchers giving the definition and dimension of “luxury brand” (Figure 2.3). However, the definition of luxury brand has not been completely defined. Jackson and Haid (2002 cited in Moore and Birtwistle, 2005) purpose that luxury brand consists of high status that grants opportunity for brand owner to charge premium price. “These brands possess a desirability that extends beyond their function and which provide the user with a perceived status through ownership. Their appeal and desirability is a result of their constructed scarcity in availability (usually as a result of enforced restrictions on distribution) and because of their associations with particular consumer segments.” (Jackson and Haid, 2002). In fact, luxury brands are regards, as “image in mind of the consumers that comprise association about a high level of price, quality, aesthetics, rarity, extraordinariness, and a high degree of non-functional associations” (Heine, 2011).

Luxury framework.jpg

Figure2.3: Key Model Identifying Luxury Brand Dimensions (Source: Fionda and Moore, 2009)

Phau and Prendergast (2000, pp. 123-4 cited in Beverland, 2004) suggested that generally luxury brands have four fundamental characteristics: perceived exclusivity, well-recognized brand identity, high levels of brand awareness and strong sales, and customer patronage/loyalty. In order to do branding, Beverland (2004) provides a model of a “luxury branding” which identifies and unites six components that marketers should take into consideration when designing marketing activities. The six components are brand heritage (history and culture), product quality/credibility/excellence (product integrity), personality and consumer group support (endorsements), and brand image investments (marketing). These dimensions of luxury branding provide luxury positioning and association through brand marketing decisions (Moore and Birtwistle, 2005). Okonkwo (2009) said luxury branding is about an identity, a philosophy, and a culture.

Figure2.4: The Components of a Luxury Branding (Source: Beverland, 2004)

About Parameter for Luxury Branding

Product integrity: This component is dawn with respect to sub-components including product quality, attention to detail, credibility, and product/production integrity (Beverland, 2004)

Value-Driven Emergence: The reason that luxury brands could be sold in high price is their supplementary perceived value adding to their products (Beverland, 2004).

Culture/ History: Most luxury brands are linked to their history by a number of means which can be grouped as “stories” (Beverland, 2004). Each brand might use several important stories to define its image, such as stories of people, products, event, and association that retain the link to the past and develop present culture (Beverland, 2004). Heritage or long history of brand adds authenticity, and is considered one of the hallmarks of a luxury brand (Fionda and Moore, 2009). This is important for brand promotion campaign (Beverland, 2004) as luxury brand identity usually associate with the story that the brand owns (Kapferer and Bastien, 2008)

Marketing/ Endorsements: Marketing campaign and endorsement could create awareness and positioning of the brand (Beverland, 2004).

Understand Luxury Branding

In building luxury brand, Kapferer and Bastien (2008) suggest that brand identity is more likely to be a major focus for luxury than brand positioning. This is because luxury brands consumption is functioning as a stamp for consumers’ superiority (Okonkwo, 2009). Consumers differentiate themselves through possession of luxury brand in order to shows their distinction; to be admired, recognized, appreciated, and respected (Okonkwo, 2009). Therefore, consumers use luxury brands in expression of a taste, a creative identity, and an intrinsic passion of a creator. “Luxury makes the statement, “this is what I am”, not “that depends” which is what positioning implies” (Kapferer and Bastien, 2008).

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Brand identity is the unique set of brand associations implying a promise to customers and includes a core and extended (Appendix B) that the brand managers aspire to create or maintain (Ghodeswar, 2008; Srivastava, 2011). Brand identity appears to be similar to brand image in the sense that both are dealing with brand association, but in different perspective. Brand image comes from consumer perception toward the brand, while brand identity is the things that brand manager would like brand to be perceived. In other word, brand identity originates from the company’s need to differentiate itself in consumers’ minds with unique features (Srivastava, 2011). Therefore, brand owners are more likely to create and ensure that brand identity and brand image of their product are identical through communication process (Srivastava, 2011).


Brand image: How the brand is now perceived?

Brand identity: How brand managers want the brand to be perceived?

Brand position: The part of the brand identity and value proposition to be actively communicated to a target audience.

To sum up, in accordance to managing brand equity for luxury brand, creating brand association through brand communication with regards to luxury brand components is highly essential to strengthen luxury brand equity. Additionally, balancing brand image and brand identity is also completely necessary.

Luxury Brand 2.0- Role of New Media in Luxury Brand Communication

In an account to the research on antecedents of brand equity from Yoo, Donhu, and Lee (2000), brand equity could be created, maintained and expanded by strengthening dimensions of brand equity through marketing activities. One of crucial marketing activities that grow brand equity is marketing communication such as public relations (Aaker 1991) or promotional event (Keller 1993). Percy and Elliot, R. (2009) suggest that brand equity is a result of positive brand attitude that could influenced by effective marketing communication strategy. Main purpose of marketing communication in strengthening brand equity is to portray brand identity and create brand image (Winer, 2008).

About Marketing Communication

According to Fill (2009), since 1990s, the influence of relationship marketing concept and interactive approach embrace additional perspective to marketing communication. The purpose of marketing communication is not only creating awareness and persuasion, but also to develop understanding and preference, reminds, and reassure customers about the brand (Fill, 2009). Marketing Communication becomes a long-term strategic approach with integrative and interactive orientation instead of merely short-term one-way communication aiming at promoting product (Fill, 2009; Pickton and Broderick, 2005). With recent integrated one-to-one/ one-to-many two-way dialogue approach, marketing communications has been defined as a management process that organization seek to engage with audiences; by understanding their way of receiving message, then communicate message which audiences value, and aim at audience responses. The response from audiences includes attitudinal, emotional and behavioral responses (Fill, 2009). In short, marketing communication process concerns on three aspects: engagement, audience, and response.

Marketing communication mix consists of three elements: tools, media, and messages. Tools are methods/ disciplines to convey message through the mean (media) that could reach target audiences (Fill, 2009). There are five principles of marketing communication tools: advertising, sales promotion, public relations, direct marketing and personal selling (Fill, 2009). These five tools could be more effective with the support from word-of-mouth recommendation from consumers (Fill, 2009). In regards to media, traditionally, media in marketing communication includes broadcast (television and radio), print (newspapers and magazines), outdoor (billboards, street furniture, transit), In-store (point-of-purchase and packaging), and other (cinema, exhibitions, product placement, ambient, and guerrilla)

The selection of marketing communication mix includes the degree of control required over the delivery of the message; the financial resources available to pay a third party to transmit messages; the level of credibility that each tool bestows on the organisation; the size and geographic dispersion of the target audiences;

the communication tasks each tool is best at satisfying.

The key turning point of marketing communication was when the internet and digital technologies formed the new concept and channel of media. “Since mid 1990s, the internet and digital technologies have enabled new interactive forms of communication, where the receiver has greater responsibility for their part in the communication process” (Fill, 2009). In terms of new media usage with interaction to brand, consumers no longer merely seek for entertainment and information, but for discovering, participating, sharing, and expressing themselves (Moore, 2007 cited in Fill, 2009). Therefore, the measurement of success for the brand owner on new media is to measure consumer’s expectation on brand and their interaction (dwell time, dwell quality, and dwell insight (Appendix C)) rather than measuring the reach and frequency of message. Consumers currently consume a mixture of traditional and new media (Fill, 2009).

New media definition and characteristics

In terms of marketing communication, new media includes “websites and other digital communication and information channels in which active consumer engage in behaviors that can be consumed by others both in real time and in long forwards regardless of their spatial location” (Hennig-Thurau et al, 2010).

Characteristic of new media appears to build around the interactivity and digital (Winer, 2008). Recent research has conceptualizes new media characteristics as being digital, proactive, visible, real-time and memory, ubiquitous, and network (Hennig-Thurau et al, 2010). Each characteristic can be explained as following.

Digital means there are no marginal cost for producing additional copies of digital product and easily distribute.

Pro-active stands for the contribution of consumers in all part of the value chains e.g. review, co-creation, and develop the open source, etc.

Visible indicates that consumers’ activities on new media can be seen and tracked by others.

Real-time involves no time limit; meaning that consumers can access to new media at anytime, while Memory is crucial for personalization of future interaction.

Ubiquitous means consumers can reach and be reached by other whenever wherever through mobile device.

Networks represent that new media allows consumers to be part of network sharing, creating, communicating, and building relationship with other through social networks.

Shankar and Hillinger (2007 cited in Winer, 2008) have classified new media into three groups: intrusive where advertising plays role in interrupting consumers, non-intrusive where the consumers select the communication to receive, and user-generated where the consumers create communications. To name media in each group, firstly, intrusive new media includes internet advertising (i.e. buttons, banners, skyscrapers, rectangles, interstitials, pop-ups), advergames, and M-commerce. Secondly, non-intrusive ones include social networking site, podcasting, Buzz/viral marketing, and some types of internet advertising i.e. streaming audio/ video, destination site, sponsored search/ paid links. Lastly, user-generated type includes blogs, video sites, rating/ recommendations.

Affect of New media on Branding

New media change the structure of marketing communication with “Interactivity” that enables new way of engaging, communicating, and delivering benefit to target audiences that traditional media unable to (Winer, 2008). It also increases number of media with internet and digital technology-base. Generally, brand building via marketing communication involves two main constructions: identity that managers wish to portray, and image that constructed by audiences’ perception. Web2.0 and user-generated-content have added a new dimension to managerial-driven perspective of brands in two ways. Firstly, consumers seem to assume greater role in defining what brand means to them and share with their familiar stakeholders as much as with the organization who own the brand (Figure2.5). Secondly, apart from reducing brand managers’ role in influencing and controlling the way brands are perceived, Winer (2008) points out that the coordination of message across a number of new media is also burdensome with new media as the market is fragmented.

Figure2.5: Modified Mass Communications Model (Source: Hoffman and Novak, 1996)

New Media in Luxury Brand communication

Marketing Communication for Luxury brand

Luxury is not just a product, a service, an object, a concept, or lifestyle. “It is an identity, a philosophy, and a culture” (Okonkwo, 2009). The communication of luxury brand appears to be not only on the intrinsic, but also rely strongly on the extrinsic attributes (Fill, 2009). Luxury brand communication strategies usually associates brand name to consumers’ aspirational needs and social and psychological motivation (Fill, 2009). Kapferer and Bastien (2008) claim that, for luxury, the role of advertising is not for selling, but aiming at recreating the dream. For example, one executive of BMW stated, “My job is to make sure that the 18-year-olds in this [USA] country decide that, as soon as they have the money, they will be buying a BMW. I have to see to it that when they go to bed at night they are dreaming of BMW”.

Method of developing luxury brand includes the combination of advertising, public relations, direct marketing, event (e.g. fashion shows), word-of-mouth, celebrity endorsement, craftsmanship, and a touch of mythology (Fill, 2009; Pickton and Broderick, 2005; Fionda and Moore, 2009). The purpose of powerful marketing communications is to build brand image (Pickton and Broderick, 2005). Each communication tools convey distinct function in building luxury brand and strengthen elements of brand equity. For instance, advertising provides “support in establishing the brand image, which consequently assists in creating identity and attraction, and generates awareness” (Fionda and Moore, 2009). Direct communication with the customer on a personal level is an area of growing importance as managers ensure that a relationship with the customer was developed (Pickton and Broderick, 2005). The investment in PR made the brand interesting and attainable and raised awareness (Pickton and Broderick, 2005). A fashion shows increase fashion element of the brand and help maintaining fashionable positioning (Pickton and Broderick, 2005).

Communicating Luxury Brand 2.0- driver and barrier

Similar to other industries, new media change structure of communication, which create multiple challenge and opportunity for luxury brand. The major driver that pushes luxury brands to present and conduct business online is that consumer is there. In a meantime, communication of luxury brand through new media concerns the issue of incompatibility of media and industry characteristic, lack of industry reference, and lack of control in message delivery and interpretation.

Although luxury industry appears to be associating with innovation, avant-gardism, and creativity, which should compatible with channel of modern business like digital technology, characteristics of new media seems to against luxury core value (Okonkwo, 2009). New media in communication, especially Internet, are suggested to be available to the mass consumer base (Okonkwo, 2009). This is becau


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