Brand equity

Brand equity

Brand equity refers to the marketing effects or outcomes that accrue to a product with its brand name compared with those that would accrue if the same product did not have the brand name [Aaker, David A. (1991), Managing Brand Equity. New York: The Free Press] Keller, Kevin Lane (2003). “Brand Synthesis: The Multidimensionality of Brand Knowledge,” Journal of Consumer Research, 29 (4), 595-600] [Leuthesser, L., C.S. Kohli and K.R. Harich (1995). “Brand Equity: The Halo Effect Measure,” European Journal of Marketing, 29 (4), 57-66.] Ailawadi, Kusum L., Donald R. Lehmann, and Scott A Neslin (2003). “Revenue Premium as an Outcome Measure of Brand Equity,” Journal of Marketing, 67 (October), 1-17] . And, at the root of these marketing effects is consumers' knowledge. In other words, consumers' knowledge about a brand makes consumers respond differently to the marketing of the brand Keller, Kevin Lane (1993). “Conceptualizing, Measuring, and Managing Customer-Based Brand Equity,” Journal of Marketing, 57 (January) 1-22] [Lassar, W., B. Mittal and A. Sharma (1995). “Measuring Customer-Based Brand Equity,” Journal of Consumer Marketing, 12 (4), 11-19] . The study of brand equity is increasingly popular as some marketing researchers have concluded that brands are one of the most valuable assets that a company hasNeumeier, Marty (2006). The Brand G
] .


There are many ways to measure a brand. Some measurements approaches are at the firm level, some at the product level, and still others are at the consumer level.

"Firm Level": Firm level approaches measure the brand as a financial asset. In short, a calculation is made regarding how much the brand is worth as an intangible asset. For example, if you were to take the value of the firm, as derived by its market capitalization - and then subtract tangible assets and "measurable" intangible assets- the residual would be the brand equity. One high profile firm level approach is by the consulting firm Interbrand. To do its calculation, Interbrand estimates brand value on the basis of projected profits discounted to a present value. The discount rate is a subjective rate determined by Interbrand and Wall Street equity specialists and reflects the risk profile, market leadership, stability and global reach of the brand [Chu, Singfat and Hean Tat Keh (2006). “Brand Value Creation: Analysis of the Interbrand-Business Week Brand Value Rankings,” Marketing Letters, 17, 323-331] .

"Product Level:" The classic product level brand measurement example is to compare the price of a no-name or private label product to an "equivalent" branded product. The difference in price, assuming all things equal, is due to the brand [Aaker, David A. (1996), “Measuring Brand Equity Across Products and Markets,” California Management Review, 38 (Spring), 102-120.] . More recently a revenue premium approach has been advocated .

"Consumer Level:" This approach seeks to map the mind of the consumer to find out what associations with the brand that the consumer has. This approach seeks to measure the awareness (recall and recognition) and brand image (the overall associations that the brand has). Free association tests and projective techniques are commonly used to uncover the tangible and intangible attributes, attitudes, and intentions about a brand. Brands with high levels of awareness and strong, favorable and unique associations are high equity brands.

Any of these calculation are at best approximations. A more complete understanding of the brand can occur if multiple measures are used.

Positive Equity Only?

An interesting question is raised- can brands have negative brand equity? From one perspective, brand equity cannot be negative. Positive brand equity is created by effective marketing including via advertising, PR and promotion. A second perspective is that negative equity can exist. Looking at a political "brand" example, the "Democrat" brand may be negative to a Republican, and vice versa.

The greater a company's brand equity, the greater the probability that the company will use a family branding strategy rather than an individual branding strategy. This is because family branding allows them to leverage the equity accumulated in the core brand. Aspects of brand equity includes: brand loyalty, awareness, association, and perception of quality.


In the early 2000s in North America, the Ford Motor Company made a strategic decision to brand all new or redesigned cars with names starting with "F". This aligned with the previous tradition of naming all sport utility vehicles since the Ford Explorer with the letter "E". The Toronto Star quoted an analyst who warned that changing the name of the well known Windstar to the Freestar would cause confusion and discard brand equity built up, while a marketing manager believed that a name change would highlight the new redesign. The aging Taurus, which became one of the most significant cars in American auto history would be abandoned in favor of three entirely new names, all starting with "F", the Five Hundred, Freestar and Fusion. By 2007, the Freestar was discontinued without a replacement. The Five Hundred name was thrown out and Taurus was brought back for the next generation of that car in a surprise move by Alan Mulally. "Five Hundred" was recognized by less than half of most people, but an overwhelming majority was familiar with the "Ford Taurus".

The Cadillac Cimarron is frequently cited as an example of a product causing the erosion of brand equity. Although the intention was to create a car to compete in the growing compact luxury segment, many believed the impression of it being a gussied up version of the Chevrolet Cavalier with which it shared its underpinnings severely undermined Cadillac's image. The consequent failure of the Cimarron in the marketplace coincided with numerous widely publicized troubles affecting engines installed in Cadillac's traditional full-size lines, in what is considered to be the least distinguished period in the marque's history.


See also

* Brand management
* Brand
* Customer engagement
* Equity (disambiguation)
* Marketing
* Product management
* Brand Architecture
* Brand extension
* Threaded Marketing

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