Brand EquityG
Helen Strong
Brand Equity (BE): Purpose
The concept of BE has grown from the observation that the presence of a brand name and related image can have a measurable effect on consumer preference and even the additional money they are prepared to spend to purchase a product. This type of information is useful when a company is considering selling the brand, offering franchises, or perhaps even setting the value of a product when merging with another company.
This model is useful at several points along the life of a brand. When introducing a new product, it helps the marketing team choose the most appropriate branding to apply to that product. For established products, calculation of the value or equity of the brand assists strategic decisions such as allocation of marketing resources, franchising opportunities, perhaps introduction of new products, or even discontinuance of a brand.
BE: Structure and Description
A glance at the literature will show that there is considerable diversity in what is covered by the term brand equity. And no one method has been accepted as the ultimate way of describing or calculating the contribution of the brand to the bottom line. Some try to quantify BE in a single financial measure, and others say that consideration has to be given to individual indicators that together make up BE.
BE results from a combination of awareness, perceived quality, the emotions, images, and feelings associated with the brand, together with the level of brand loyalty enjoyed from consumers of the brand. In some instances, patent protection creates a barrier for pretenders to the product area (Figure 5.1).
Figure 5.1 Brand equity
BE: Strategic Considerations
There are two major areas where strategic considerations apply. In the financial arena the value of a brand is important when it (the brand) is being sold, or when calculating the brand’s contribution to the value of an organization during mergers and acquisitions.
From a marketing perspective, the elements that contribute to BE all influence the popularity and sales emanating from that brand. The current or ongoing value or contribution of a brand ensures the profitability, survival, or both of the company.
BE: Implementation
The Management Study Guide BE website (MSG n.d.) reduces the BE concept to six measurements. These include:
- Returns to the Share-Holders.
- Evaluating the Brand Image for various parameters that are considered significant.
- Evaluating the Brand’s earning potential in long run.
- By evaluating the increased volume of sales created by the brand compared to other brands in the same class.
- The price premium charged by the brand over non-branded products.
- From the prices of the shares that an organization commands in the market (specifically if the brand name is identical to the corporate name or the consumers can easily co-relate the performance of all the individual brands of the organization with the organizational financial performance).
- OR, An amalgamation of all the above methods.
A similar definition is provided by Susan Gunelius (2011) on the AYTM blog site:
The tangible and intangible value that a brand provides positively or negatively to an organization, its products, its services, and its bottom-line derived from consumer knowledge, perceptions, and experiences with the brand.
As we can see, the measurement of BE has implications for sale of the brand in mergers and acquisitions and for determining what price premium can be commanded by the brand. What is important, is communicating to each and every employee in the organization that their actions and treatment of the consumer contribute to the brand image and the related brand value.
Kevin Keller (2010) emphasizes how knowledge of BE can assist in determining the strategic pathway for a brand. There are three areas of interest:
- What is the potential footprint for the brand?
- How can it be extended, if at all?
- What are the identifying elements of the brand and its positioning in different markets?
There are several methods of calculating BE in the literature. Whichever one is going to be used, the researcher needs to:
• Conduct consumer researchG to fully understand the target market’s needs
• For competing products and brands, establish:
○ Differentiators between the brands The research involves:
The research involves:
■ Measuring which factors or variables are used by consumers in deciding which brand to choose
■ Establishing the relative importance of the variables in the decision
■ Finding the strength of association of the variables with the different brands. (Perceptual mapping highlights relationships between brands, positioning of the brands, and it can also help find gaps in the market where consumer needs are not fulfilled.)
○ Relationship between price, preference levels, and sales volumes:
■ Internal management reports coupled with regular consumer usage and attitude (U&A) tracking studies would provide an indication of these relationships for a company’s own products.
■ Tracking price changes and sales volumes of competitors would be achieved through the auspices of services such as Nielsen Audits.
• Finally, summarize the results in:
○ An estimate of long-term contribution to sales
○ Perhaps, develop a BE index for all brands in the market
Wikipedia’s BE site (2012a) offers information on many BE calculation techniques. It first points to the work of Prof. David Aaker where individual metrics are tracked without combination into a single index. To have a finger on the pulse of BE, you would instigate a regular (tracking) quantitative survey in which questions that measure the factors would be asked (Table 5.1).
Table 5.1 Questions relating to brand equity
BE: Conclusions
Measurement of the value of the brand is a complex, focussed, and ongoing process. As we have seen above, there are many aspects to building a brand and one needs to have information about:
- Signals or indicators that the target market uses to form opinions about people, companies, and their products
- How to build these signals into the brand presentation and communication
- How to ensure that the target consumer becomes aware of the brand, aspires to, and actually uses it, and wants to be associated with what it stands for.
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