Brand Equity
Contents :
  • Meaning and Definition of Brand Equity.
  • Sources of Brand Equity.
  • Keller's Model of Brand Equity.
  • Drivers of Brand Equity.
  • Significance of Brand Equity.
  • Brand Knowledge.

What is Brand Equity ?

Meaning and Definition of Brand Equity :

Period of 1980s witnessed the extensive use of brand equity concept by the advertising professionals. Different valuable academic contributions concerning the brand equity were offered by scholars like Srivastava and Shocker, Kapferer, Keller and Aaker throughout the 1990s. There was, however, no universal definition and explanation of the concept of brand equity. Today, a common description of the brand equity is possible and it says that brand equity is the value assigned to a particular brand by customers as per their perception about it.
The idea behind the concept of brand equity is the value attached to the brand, which is more than value attached to its tangible attributes. Therefore, brand equity comes under the category of intangible assets of an organisation. Additional revenues or cash flows brought by a particular brand to the firm describe the brand equity of that brand. Products with higher brand equity are generally priced higher.

According to Biel :
"Brand equity can be thought of as the additional cash flow achieved by associating a brand with the underlying product or service".

According to Aaker : 
"Brand equity is a set of brand assets and liabilities linked to a brand, its name and symbol add to or subtract from the value provided by a product or service to a firm and/or to that firm's customers".

According to Keller :
"Brand equity is defined in terms of marketing effects uniquely attributable to the brands. For example, certain outcomes result from the marketing of a product or service because of its brand name, which would not have been occurred if the same product or service did not have the brand name".

Value stored within a brand which offers competitive advantage to it, is called brand equity. Equity denotes the worth of brand. It is a universally accepted notion that brands offer value, But, in adverse conditions, they might diminish the value.
Variety of literature is available on the topic of brand equity, which assists in exploring and explaining the concept of brand equity. It is the benefits of the brand equity which attract the managers and academicians towards it.

Brand Equity

Sources of Brand Equity :

Brand equity has following sources :

1) Market Research: 
Market research is one of the important sources of brand equity. Prior to launching a new product in the market, a quantitative as well as qualitative investigation is important so as to get acquainted with the ongoing market trends and other aspects. It helps in determining the desired products and services of the target market. Therefore, ultimately it leads to development of appropriate products, which facilitate brand equity of the firm.

2) Quality: 
Quality of the brand is also a source of brand equity. The quality of the new product should be excellent in order to establish an everlasting impact on the minds of its customers. Quality leads to satisfaction among the consumers and they promote the brand to other users also. Thus, ultimately it improves the brand equity of the product.

3) Marketing Mix : 
Another source of brand equity is marketing mix strategies implied for the brand or/ product. The appropriate utilization of the marketing mix _promotes efficient marketing of the brand. As marketing of the brand is effective, it leads to improved brand equity.

4) Brand Extension: 
Brand equity can also be achieved by undergoing brand expansion. It refers to addition of new products under the same brand name. As different new and improved products with unique features are introduced by the parent brand, it leads to improved brand equity. For example, LG smartphones, Lux shampoos, Dettol shaving cream, etc.

5) Customer Opinion: 
Views of customers are also one of the major sources of brand equity. Most of the companies welcome the valuable suggestions and responses from their customers because this helps them to evaluate the shortcomings as well as strong points associated with their product/brand.

6) Customer Satisfaction : 
Satisfied customers are also the sources of brand equity as they explore the value of the brand in the target market. More the products and services offered as per the requirements of the customers, more they become satisfied. Thus, it is clear that satisfied customers lead to improved brand equity.

Keller's Model of Brand Equity :

Customer perspective was used by Keller to describe the concept of brand equity. Customer-Based Brand Equity Model or CBBE Model answers two questions, i.e., 'What makes a brand strong?' and ‘How to build a strong brand?' Generally, customers through their brand experiences develop certain feeling, belief or attitude about the given brand, it is called power of the brand. Therefore, the perception of customers about a particular brand describes the power of the brand.

“Customer-based brand equity is defined as the differential effect that brand knowledge has on consumer response to the marketing of that brand."

Three major components of this definition are as follows :

1) Differential Effect : 
Brand equity ascends from varying responses from the customers. Non-occurrence of variations in customer responses clearly means that the brand name is actually a commodity or a generic product. Here, the prices are used as competition basis. For example, customers interested in buying air tickets are not so influenced by the brand of the airlines, instead they use pricing as a basis of purchasing air tickets.

2) Brand Knowledge: 
Brand knowledge is the main reason behind differences in customer responses. All the feelings, emotions, beliefs, attitudes, thoughts, etc.,
thoughts, etc., which customers associate with the brand are collectively called brand knowledge. Generally, brands focus to develop unique, favorable and strong customer associations. For example, Le Meridian (luxury), Cafe Coffee Day (relaxed enjoyment), Pizza Hut (fast, worth and hygienic), etc.

3) Consumer Responses to Marketing : 
The varying responses from the customers that establish brand equity are revealed through opinions, inclinations and actions associated with the various facets of brand marketing. Powerful brands which have good market image bring in more earnings.
When, in comparison to brand being unidentified, customers respond more positively towards an identified brand and its marketing, it is called positive customer-based brand equity. Here, taking out advertising support or any price increase has minor impact on the customers. Moreover, new distribution channels as well as brand extensions are welcomed by customers.
On the contrary, negative customer-based brand equity of the brand means customers' response is less favorable towards the marketing actions of the brand in comparison to an unknown or fake product.
In presence of high brand awareness and familiarity as well as the favorable and strong brand perceptions among the customers, the concept of customer-based brand equity originates. Adding unique and differential features to the brand so as to highlight the reason of buying the brand and develop its competitive advantage, results in differential responses from the customers that ultimately develop customer-based brand equity.

Drivers of Brand Equity :

The different drivers of brand equity are as follows :

1) Perceived Quality: 
The quality perceived by the customer related to a brand is the first driving force of brand equity. Here, the mode of rating the perceived quality is not relevant.

2) Name Awareness: 
Brand name awareness is another driver of brand equity. The brand name should be such that customers can recall or remember it. Differentiation along with brand name awareness is the key driver of brand equity. In absence of differentiation, many commodity brand names developed, which characterized by poor loyalty, marginal profitability or extinction susceptibility.

3) Brand Associations: 
Brand association is also a driving force of brand equity and various firms are learning the advantages of getting their brand associated with different personalities, icons, events and even with other brands in the market.
These brand associations facilitate the information processing of the customers so as to influence their perception about the brand. For example, Hema Malini associated with Kent RO and Virat Kohli associated with Adidas are the brand associations that influence the customers' perceptions.

4) Brand Loyalty: 
Although brand loyalty gets less attention while counting for the drivers of brand equity yet it plays an important role in it. Only a satisfied consumer can narrate the story of the brand in the best possible manner which influences other people's perception.

5) Other Proprietary Assets: 
Brand equity can also be derived from trademarks, patents and other uniqueness associated with a brand but all this will only be helpful when the customers will be able to distinguish the brand from the list of other brands available in the market.

Significance of Brand Equity :

Significance of brand equity can be understood with the help of following points :

1) Significance to 'Customers: 
Following are the ways in which brand equity is significant for the customers :

  • Products and brands related information can be easily stored, processed or interpreted by the customers with the help of brand equity. Thus, it facilitates information processing.
  • Brand equity fills the customers with confidence while making a purchase decision. Buying a branded product gives more confidence to the buyer as compared to buying a non-branded or unknown brand product. This may be because of past experience with the brand.
  • The ultimate importance of the brand equity to the consumer is the satisfaction drawn while using the brand/product. For example, people tend to draw more satisfaction in drinking Tajmahal Tea in comparison to an unknown tea. Brand name truly alters the experiences of the consumers.

2) Significance to Marketer: 
Brand equity is also significant to the marketers as it increases their value in the market. Different points describing the significance of brand equity to the marketers are as follows :

  • Brand equity facilitates marketing activities. It helps in implementing more efficient marketing programs. Positive brand equity helps in reducing the overall expenses required for advertising and promotion activities.
  • Improved customer loyalty is the result of positive brand equity. Customers remain committed towards a brand with positive brand equity. This automatically reduces the marketers' expenditure customer acquisition and retention activities.
  • Marketers can charge high prices for their products in case of positive brand equity. This high pricing is supported by the loyal customers of the brand. Therefore, brands with strong brand equity only implement high pricing for their products.
  • Brand equity facilitates the growth of the firms as it adds value to the brand. Different growth opportunities are provided by the brand equity. Therefore, for growth, firms prefer the extension of the brand rather than introducing new brands.
  • Brand equity enables the company to more readily access the distribution chain for their products. The distribution channels readily welcome the branded products for distribution as it becomes easy for them to place such products in market, whereas products without brand equity bring lot of uncertainties with them.
  • Last but not the least importance of brand equity for marketer is that brand equity gives a competitive edge. It restricts the accessibility of the rivals. Brands can construct equity which would help them to acquire a position in the market and quality relationships in a defensive style. Once a brand gains equity in market, it becomes the threat for growth of other brands by giving them tough competition.

Brand Knowledge :

From the perspective of the CBBE model, brand knowledge is the key to creating brand equity, because it creates the differential effect that drives brand equity. What marketers need, then, is an insightful way to represent how brand knowledge exists in consumer memory. Brand knowledge can be characterized in terms of two components - brand awareness and brand image.