Understanding the Concept of Brand Equity

My palms were clammy and my throat was dry. “Just Do It” I kept telling myself. Come on, “It’s so easy a caveman can do it” I tried to convince myself. As I stood at the jewelry counter, it hit me, “Diamonds are forever.” I looked at the stone like I knew what I was doing and questioned the clarity. Don’t worry, “You’re in good hands” the sales clerk reassured me. To my surprise, my girlfriend was in the mall and saw me at the counter. She ran over, looked at the ring and asked, “It’s the real thing.” I was too stunned to utter a word as she grabbed the ring and said, “I’m loving it.” Seems like an opening monologue for an annual commercial program on cable television. OK, maybe not. But it does demonstrate the concept of brand equity as your mind reacts to the slogans associated to these popular company brands. (Nike, Geico, DeBeers, AllState, Coca-Cola, and McDonalds respectfully).

Developing a strong, successful brand image may be the best marketing investment a company can make. A company’s brand image is the total of all intangible and intangible characteristics such as history, values, ideas, beliefs, prejudices, interests and features that make it unique. The company’s brand image visually represents the internal and external characteristics of a company. “A brand is thus a product or service whose dimensions differentiate it in some way from other products or services designed to satisfy the same need. These differences may be functional, rational, or tangible – related to product performance of the brand. They may also be more symbolic, emotional, or intangible – related to what the brand represents.” (Kotler and Keller. 2009. pg. 239)

Ultimately, the brand is only as strong as it is in the mind of the consumer. In order for a brand to hold value, the consumer must believe that distinctive differences exist among other brands within a product category. This value can be a direct result of establishing brand equity. “Brand equity is the added value endowed on products and services. It may be reflected in the way consumers think, feel, and act with respect to the brand, as well as in the prices, market share, and profitability the brand commands for the firm.” (Kotler and Keller. 2009. pg. 239) Brand equity depends on related associations made by the consumer and is considered a very valuable intangible asset. Three recognized perspectives of brand equity are; financially based, brand extensions and consumer based.

Brand equity measured in financial terms can “determine the price premium that a brand commands over a generic product.” (NetMBA. Nd. para. 4) Measured in terms of brand extensions, a successful brand can be used to introduce new products. Consumer based brand equity can increase the consumers feelings toward the brand. “The premise of customer-based brand equity models is that the power of a brand lies in what customers have seen, read, heard, learned, thought, and felt about the brand over time.” (Kotler and Keller. 2009. pg. 240)

Customer based brand equity involves three unique attributes. First, brand equity is developed based upon unique customer responses to the brand. In addition, the unique responses are a direct result based upon the consumer’s knowledge regarding the brand. And finally, brand knowledge is a very important aspect of brand equity. “Brand knowledge consists of all the thoughts, feelings, images, experiences, beliefs, and so on that become associated with the brand.” (Kotler and Keller. 2009. pg. 241)

Different reactions and feelings to the brand are a result of the consumers familiarity and knowledge of the brand. And “the differential response by consumers that makes up brand equity is reflected in perceptions, preferences, and behavior related to all aspects of the marketing of a brand.” (Kotler and Keller. 2009. pg. 241) Strong brands lead to strong revenues. As a result, companies leverage strong brand equity for strong profit results. “Understanding consumer brand knowledge – all the different things that become linked to the brand in the minds of consumers – is thus of paramount importance because it is the foundation of brand equity.” (Kotler and Keller. 2009. pg. 242)

Building brand equity is developed with three main forces. First, brand elements have a very important influence on brand equity. Brand elements are used to identify and differentiate the brand. They include elements such as the brand name, logo, slogan and character. “A brand element that provides a positive contribution to brand equity, for example, conveys certain valued associations or responses.” (Kotler and Keller. 2009. pg. 246)

Selecting brand elements involves 2 themes: branding building and brand preservation. Within these two themes, marketers consider 6 criteria when selecting elements. The first three characteristics, regarding the brand as memorable, meaningful and likeable, are associated with building a strong brand. The last three characteristics, regarding the brand as transferable, adaptable and protectible, are associated with preserving and leveraging brand equity through elements. It focuses on how a brand is positioning to adapt opportunities and threats, for long term success.

The second force in building brand equity involves the relationship and combined effort to associate the product and service, along with all marketing efforts, activities and programs. All of the messages, images, perceptions and promotions of the brand must stay consistent when presented to the consumer. The consumer must be able to associate the marketing effort with the brand. This aspect is also very important when you consider internal branding as well. Internal and external branding must coincide so that employees of the company deliver on the promise and properly represent the brand.

An example of this consistency in brand delivery is when a consumer can recognize a brand within seconds of seeing the commercial, even without viewing the logo or hearing the brand name. Target does a great job in using consistent imagery, music and themes to develop commercials. In some of their commercials, the logo and brand name are not presented for ten seconds or more. However, due to the consistency of the branding elements, consumers are able to identify the brand of Target within seconds.

The third force in building brand equity involves, “other associations indirectly transferred to the brand by linking it to some other entity (a person, place, or thing.)” (Kotler and Keller. 2009. pg. 246) Associating a professional athlete or famous star with a brand has been used by many companies for years. Michael Jordan with Nike Shoes, Tiger Woods with American Express, Catherine Zeta-Jone for T-Mobil, and Charlton Heston with the National Rifle Association are just a few. Associations can help establish credibility, popularity and other positive characteristics associated with the brand, reflective of the associated party. An example of association by a place might be coffee to Seattle to Starbucks.

Creating or adjusting a positive brand image which results in strong brand equity is a basic but necessary goal of every company. “Most business people understand the power of a well-recognized and respected brand name. It can strengthen consumer preference for your product, raise customer loyalty, insulate you from competitive forces and cut your promotional costs.” (Carey. 2007. para. 4) It builds the foundation on which companies build their futures. “Marketers build brand equity by creating the right brand knowledge structures with the right consumers.” (Kotler and Keller. 2009. pg. 245) Strong brands are based on strong products, with a clear message, differentiated from the competition, with a believable and consistent message, that is relevant to the targeted audience. With these characteristics in place, companies will experience strong brand equity.


References

Kotler, P., Keller, K. L. (2009). Marketing Management. New Jersey: Pearson Prentice Hall.

Internet Center for Management and Business Administration, Inc. N.d. Brand Equity. Retrieved June 21, 2009 from NetMBA Business Knowledge Center. Website: http://www.netmba.com/marketing/brand/equity/

Carey, W.P. May 9, 2007. Brand Equity. It’s Worth More Than Companies Realize. Retrieved June 21, 2009 from Marketing and Services Leadership. Website: http://knowledge.wpcarey.asu.edu/article.cfm?articleid=1413