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Management Decision

Brands and brand equity: definition and management

Lisa Wood

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Lisa Wood, (2000),"Brands and brand equity: definition and management", Management Decision, Vol. 38 Iss 9 pp. 662 669
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Brands and brand equity: definition and management

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Lisa Wood
Sheffield Hallam University, Sheffield, UK


Brands, Brand equity,

Brand loyalty, Brand valuation,
Value analysis


This article assumes that brands

should be managed as valuable,
long-term corporate assets. It is
proposed that for a true brand
asset mindset to be achieved, the
relationship between brand loyalty
and brand value needs to be
recognised within the
management accounting system.
It is also suggested that strategic
brand management is achieved by
having a multi-disciplinary focus,
which is facilitated by a common
vocabulary. This article seeks to
establish the relationships
between the constructs and
concepts of branding, and to
provide a framework and
vocabulary that aids effective
communication between the
functions of accounting and
marketing. Performance measures
for brand management are also
considered, and a model for the
management of brand equity is

Brand management
In consumer marketing, brands often provide
the primary points of differentiation between
competitive offerings, and as such they can
be critical to the success of companies.
Hence, it is important that the management
of brands is approached strategically.
However, the lack of an effective dialogue
between functions that are disparate in
philosophy and do not have a common and
compatible use of terminology may be a
barrier to strategic management within
organisations. No more is this evident than
between the functions of marketing and
accounting. This article seeks to establish the
relationships between the constructs and
concepts of branding, and to provide a
framework and vocabulary that aids effective
communication between the functions of
accounting and marketing. The assumption
in the article is that good communication
between functions within organisations aids
strategic management. A model for the
management of brand equity is also offered.
The following discussion focuses on the
concepts of brand equity and added value as
they relate to the brand construct itself.

Brand equity

Management Decision
38/9 [2000] 662669
# MCB University Press
[ISSN 0025-1747]

[ 662 ]

An attempt to define the relationship

between customers and brands produced the
term ``brand equity'' in the marketing
literature. The concept of brand equity has
been debated both in the accounting and
marketing literatures, and has highlighted
the importance of having a long-term focus
within brand management. Although there
have been significant moves by companies to
be strategic in the way that brands are
managed, a lack of common terminology and
philosophy within and between disciplines
persists and may hinder communication.
The current issue and full text archive of this journal is available at

Brand equity, like the concepts of brand and

added value (discussed in the section headed
``The brand construct'') has proliferated into
multiple meanings. Accountants tend to define
brand equity differently from marketers, with
the concept being defined both in terms of the
relationship between customer and brand
(consumer-oriented definitions), or as
something that accrues to the brand owner
(company-oriented definitions). Feldwick
(1996) simplifies the variety of approaches, by
providing a classification of the different
meanings of brand equity as:
the total value of a brand as a separable
asset when it is sold, or included on a
balance sheet;
a measure of the strength of consumers'
attachment to a brand;
a description of the associations and
beliefs the consumer has about the brand.
The first of these is often called brand
valuation or brand value, and is the meaning
generally adopted by financial accountants.
The concept of measuring the consumers'
level of attachment to a brand can be called
brand strength (synonymous with brand
loyalty). The third could be called brand
image, though Feldwick (1996) used the term
brand description. When marketers use the
term ``brand equity'' they tend to mean brand
description or brand strength. Brand
strength and brand description are
sometimes referred to as ``consumer brand
equity'' to distinguish them from the asset
valuation meaning.
Brand description is distinct because it
would not be expected to be quantified,
whereas brand strength and brand value are
considered quantifiable (though the methods
of quantification are not covered by this
article). Brand value may be thought to be
distinct as it refers to an actual, or notional
business transaction, while the other two
focus on the consumer.
There is an assumed relationship between
the interpretations of brand equity. This
relationship implies the causal chain shown
in Figure 1.

Lisa Wood
Brands and brand equity:
definition and management

Figure 1
The brand equity chain

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Management Decision
38/9 [2000] 662669

Very simply, brand description (or identity

or image) is tailored to the needs and wants
of a target market using the marketing mix of
product, price, place, and promotion. The
success or otherwise of this process
determines brand strength or the degree of
brand loyalty. A brand's value is determined
by the degree of brand loyalty, as this implies
a guarantee of future cash flows.
Feldwick considered that using the term
brand equity creates the illusion that an
operational relationship exists between brand
description, brand strength and brand value
that cannot be demonstrated to operate in
practice. This is not surprising, given that
brand description and brand strength are,
broadly speaking, within the remit of
marketers and brand value has been
considered largely an accounting issue.
However, for brands to be managed
strategically as long-term assets, the
relationship outlined in Figure 1 needs to be
operational within the management
accounting system. The efforts of managers of
brands could be reviewed and assessed by the
measurement of brand strength and brand
value, and brand strategy modified
accordingly. Whilst not a simple process, the
measurement of outcomes is useful as part of a
range of diagnostic tools for management. This
is further explored in the summary discussion.
Whilst there remains a diversity of opinion
on the definition and basis of brand equity,
most approaches consider brand equity to be
a strategic issue, albeit often implicitly. The
following discussion explores the range of
interpretations of brand equity, showing how
they relate to Feldwick's (1996) classification.
Ambler and Styles (1996) suggest that
managers of brands choose between taking
profits today or storing them for the future,
with brand equity being the ``. . . store of
profits to be realised at a later date.'' Their
definition follows Srivastava and Shocker
(1991) with brand equity suggested as;

. . . the aggregation of all accumulated attitudes

and behavior patterns in the extended minds
of consumers, distribution channels and
influence agents, which will enhance future
profits and long term cash flow.

This definition of brand equity distinguishes

the brand asset from its valuation, and falls
into Feldwick's (1996) brand strength category
of brand equity. This approach is intrinsically
strategic in nature, with the emphasis away
from short-term profits. Davis (1995) also

emphasises the strategic importance of brand

equity when he defines brand value (one form
of brand equity) as ``. . . the potential strategic
contributions and benefits that a brand can
make to a company.'' In this definition, brand
value is the resultant form of brand equity in
Figure 1, or the outcome of consumer-based
brand equity.
Keller (1993) also takes the consumer-based
brand strength approach to brand equity,
suggesting that brand equity represents a
condition in which the consumer is familiar
with the brand and recalls some favourable,
strong and unique brand associations. Hence,
there is a differential effect of brand knowledge
on consumer response to the marketing of a
brand. This approach is aligned to the
relationship described in Figure 1, where brand
strength is a function of brand description.
Winters (1991) relates brand equity to
added value by suggesting that brand equity
involves the value added to a product by
consumers' associations and perceptions of a
particular brand name. It is unclear in what
way added value is being used, but brand
equity fits the categories of brand description
and brand strength as outlined above.
Leuthesser (1988) offers a broad definition
of brand equity as:
the set of associations and behaviour on the
part of a brand's customers, channel
members and parent corporation that permits
the brand to earn greater volume or greater
margins than it could without the brand

This definition covers Feldwick's

classifications of brand description and brand
strength implying a similar relationship to
that outlined in Figure 1. The key difference to
Figure 1 is that the outcome of brand strength
is not specified as brand value, but implies
market share, and profit as outcomes.
Marketers tend to describe, rather than
ascribe a figure to, the outcomes of brand
strength. Pitta and Katsanis (1995) suggest
that brand equity increases the probability of
brand choice, leads to brand loyalty and
``insulates the brand from a measure of
competitive threats.'' Aaker (1991) suggests
that strong brands will usually provide
higher profit margins and better access to
distribution channels, as well as providing a
broad platform for product line extensions.
Brand extension[1] is a commonly cited
advantage of high brand equity, with Dacin
and Smith (1994) and Keller and Aaker (1992)
suggesting that successful brand extensions
can also build brand equity. Loken and John
(1993) and Aaker (1993) advise caution in that
poor brand extensions can erode brand

[ 663 ]

Lisa Wood
Brands and brand equity:
definition and management
Management Decision
38/9 [2000] 662669

Farquhar (1989) suggests a relationship

between high brand equity and market power
asserting that:

The competitive advantage of firms that have

brands with high equity includes the
opportunity for successful extensions,
resilience against competitors' promotional
pressures, and creation of barriers to
competitive entry.

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This relationship is summarised in Figure 2.

Figure 2 indicates that there can be more
than one outcome determined by brand
strength apart from brand value. It should be
noted that it is argued by Wood (1999) that
brand value measurements could be used as
an indicator of market power.
Achieving a high degree of brand strength
may be considered an important objective for
managers of brands. If we accept that the
relationships highlighted in Figures 1 and 2
are something that we should be aiming for,
then it is logical to focus our attention on
optimising brand description. This requires
a rich understanding of the brand construct
itself. Yet, despite an abundance of literature,
the definitive brand construct has yet to be
produced. Subsequent discussion explores
the brand construct itself, and highlights the
specific relationship between brands and
added value. This relationship is considered
to be key to the variety of approaches to
brand definition within marketing, and is
currently an area of incompatibility between
marketing and accounting.

The brand construct

The different approaches to defining the
brand construct partly stem from differing
philosophies (such as product-plus and
holistic branding outlined below) and
stakeholder perspective, i.e. a brand may be
defined from the consumers' perspective
and/or from the brand owner's perspective.
In addition, brands are sometimes defined in
terms of their purpose, and sometimes
described by their characteristics. The
following examines the diverse approaches to
brand definition. From this diversity an
integrated definition is drawn.
The American Marketing Association
(1960) proposed the following companyoriented definition of a brand as:

A name, term, sign, symbol, or design, or a

combination of them, intended to identify the

Figure 2
The relationship between brand equity and
market power

[ 664 ]

goods or services of one seller or group of

sellers and to differentiate them from those of

This definition has been criticised for being

too product-oriented, with emphasis on visual
features as differentiating mechanisms
(Arnold, 1992; Crainer, 1995). Despite these
criticisms, the definition has endured to
contemporary literature, albeit in modified
form. Watkins (1986), Aaker (1991), Stanton et
al. (1991), Doyle (1994) and Kotler et al. (1996)
adopt this definition. Dibb et al. (1997) use the
Bennett (1988) variant of the definition which
A brand is a name, term, design, symbol or
any other feature that identifies one seller's
good or service as distinct from those of other

The key change to the original definition are

the words ``any other feature'' as this allows
for intangibles, such as image, to be the point
of differentiation. The particular value of this
definition is that it focuses on a fundamental
brand purpose, which is differentiation. It
should not be forgotten that brands operate in
a market environment where differentiation
is crucially important. Even where
monopolies exist, companies may choose to
position their brand(s) with a view to future
competition. The other key feature of this
definition is that it takes the corporate
perspective rather than emphasising
consumer benefits.
Ambler (1992) takes a consumer-oriented
approach in defining a brand as:
the promise of the bundles of attributes that
someone buys and provide satisfaction . . . The
attributes that make up a brand may be real
or illusory, rational or emotional, tangible or

These attributes emanate from all elements

of the marketing mix and all the brand's
product lines. The attributes of a brand are
created using the marketing mix, and are
subject to interpretation by the consumer.
They are highly subjective. Brand attributes
are essentially what is created through brand
description (one interpretation of brand
equity) mentioned previously.
Many other brand definitions and
descriptions focus on the methods used to
achieve differentiation and/or emphasise the
benefits the consumer derives from
purchasing brands. These include (inter alia)
definitions and descriptions that emphasise
brands as an image in the consumers' minds
(Boulding, 1956; Martineau, 1959, Keller, 1993)
brand personality (Alt and Griggs, 1988;
Goodyear, 1993; Aaker, 1996), brands as value
systems (Sheth et al., 1991), and brands as
added value (Levitt, 1962, de Chernatony and

Lisa Wood
Brands and brand equity:
definition and management

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Management Decision
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McDonald, 1992; Murphy, 1992; Wolfe, 1993;

Doyle, 1994). Brown (1992) takes a broad
approach to these concepts in defining a
brand as:

. . . nothing more or less than the sum of all

the mental connections people have around it.

The boundaries between these definitions are

not distinct, with each merely focusing on
different aspects of what Ambler (1992) refers to
as ``bundles of attributes . . .'' A key
contribution of this approach is not one of
definition, but of understanding the
characteristics of brands. Unfortunately there
has been a proliferation of brand ``definitions'',
when perhaps subsets of brands or brand
characteristics are being described. It is
nonetheless important to be able to describe the
characteristics of brands, as this may provide a
level of understanding useful for strategic
decision making. Aaker (1996) highlights the
strategic importance of understanding brand
``personality'' which he suggests:

. . . can help brand strategists by enriching

their understanding of people's perceptions of
and attitude toward the brand, contributing
to a differentiating brand identity, guiding
the communication effort and creating brand

Styles and Ambler (1995) identified two broad

philosophical approaches to defining a brand.
The first is the product-plus approach which
views branding as an addition to the product.
The brand is essentially viewed as an
identifier. In this context, branding would be
one of the final processes in new product
development, i.e. it is additional to the product.
The second approach is the holistic perspective
in which the focus is the brand itself. Using the
marketing mix, the brand is tailored to the
needs and wants of a specified target group.
The elements of the marketing mix are unified
by the brand such that the individual elements
of the mix (for instance price), are managed in
a way which supports the brand message.
Holism is considered important for the
creation of high brand equity as it rejects
practices such as discounting a premium
brand for short-term gain.
It is down to interpretation as to which
brand definitions fit into which category,
with some seeming to fit both the productplus and holistic approaches. de Chernatony
and McDonald (1992) seem to take the
``product-plus'' approach when they say that:
The difference between a brand and a
commodity can be summed up in the phrase
``added values''.

That is, a brand is something additional to a

commodity product. More importantly, they
suggest that brands and added value are
synonymous. In marketing, the link between

brands and added value is common though

not consistent.
It is recognised that marketing, as a
discipline, sometimes uses and adapts
concepts derived from other disciplines. The
concept of added value most notably can be
found in economics, accounting and
marketing literature, and there is a distinct
integration of ideas among the three
disciplines. As far as marketing is concerned,
the greatest degree of alignment is with the
accounting literature. The concept of added
value has evolved over time in the marketing
literature such that there is much variation in
the interpretation of the term. This variation
in usage within marketing can be confusing,
and the way that added value is used in
marketing is incompatible with the accounting
vocabulary. Wood (1996) explores the various
approaches to the concept of added value and
examines the fundamental differences in the
accounting and marketing approaches. These
are very briefly outlined next.
In accounting, added value is quantifiable
and something that accrues to the
organisation. The accounting approach is
typified by Lucey (1985), who defines added
value as:
. . . the difference between sales income and
bought in goods and services . . . Value added
is the wealth that a firm creates by its own

In marketing, added value is not quantifiable

and is translated as a consumer benefit. The
marketing approach is indicated by Kinnear
and Bernhardt (1986) when they suggest that:
. . . many companies make their product more
convenient to use, thus adding value for the

Wood (1996) suggested that what marketers

call added value would better be termed
added value agents. Added value agents are
the factors that create and help realise added
value. Much marketing activity is based
around managing added value agents, the
outcomes of which are represented by added
value itself. Added value agents are many
and various, but branding is of major
importance, and gets significant coverage in
the marketing literature. Clearly there is a
relationship between what marketers and
accountants call added value. By managing
added value agents, marketers can
significantly increase added value that
accrues to the organisation. Compatibility
between accounting and marketing can be
achieved by a simple change in use of
terminology. If added value is not used as
synonymous with added value agents then
confusion is avoided, and consistency and
compatibility between disciplines is
achieved. Added value agents such as brands

[ 665 ]

Lisa Wood
Brands and brand equity:
definition and management

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Management Decision
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provide benefits for the consumers that are

sufficient to create purchases.
Having acknowledged that added value is
quantifiable, it is also acknowledged that
added value is difficult to quantify where a
sales transaction has not taken place. From a
marketing perspective, it is recognised that
products that have yet to be sold have
potential added value (Ecroyd and Lyons,
1979) which marketing activity can help to
realise. Although added value can be
attributed to products and services, both core
and surround[2], increasingly added value
agents, such as brand image, are derived
from the less tangible aspects. Added value
tends to be greater when emphasis is placed
on the less tangible, more subjective aspects
of products and services. This may be why
marketing authors such as de Chernatony
and McDonald (1992) suggest synonymy
between brands and added value.
Table I summarises the breadth of
definitions discussed above. A common feature
of the definitions summarised in Table I is that
they either address the role of brands for the
seller, or they focus on the role of brands for
the consumer. None of the authors in Table I
explicitly addresses in their definitions how
brands benefit both the buyer and seller,
though some (e.g. Doyle, 1994) discuss or
describe both buyer and seller benefits.
It is possible to draw together many of the
approaches to brand definition. An
integrated definition can be achieved that
highlights a brand's purpose to its owner,
and considers how this is achieved through
consumer benefits. Added value is implicit to
this definition. That is:
A brand is a mechanism for achieving
competitive advantage for firms, through
differentiation (purpose). The attributes that
differentiate a brand provide the customer
with satisfaction and benefits for which they
are willing to pay (mechanism).

Competitive advantage for firms may be

determined in terms of revenue, profit, added
value or market share. Benefits the consumer
purchases may be real or illusory, rational or
emotional, tangible or intangible. In
whatever way the benefits or attributes of
brands are described, it is important they are
distinguished from the added value (and
other advantages) the firm gains, as this has
been the source of much confusion.
The following summarises the
interrelationship of brand concepts and
provides a foundation upon which the
management of brands can be addressed.

Summary discussion and

It has been suggested that brand
management should be strategic and holistic,
as this is conducive to longevity. As
discussed earlier, the marketing mix should
function in a way that supports the brand
message. This approach rejects, for example,
discounting as a short-term sales promotion
for a premium brand. That is, the decision to
reposition a premium brand as a value brand
should be a strategic one, rather than as the
outcome of tactical marketing mix decisions.
The suggestion that brands should be
managed as long-term assets is not new (see
Dean, 1966), but getting stronger and more
widespread. Davis (1995) indicated that brand
management should take a long-term
perspective and suggested that:

. . . management wants to change its ways and

start managing its brands much more like
assets increasing their value over time.

Wood (1995) suggested that the management

of brands should be a higher level function
than currently exists in many companies.
This is an argument supported by Uncles et

Table I
Summary of brand definitions and descriptions

[ 666 ]

Emphasis on brand benefits to the company

Emphasis on brand benefits to the consumer

Aaker (1991)
American Marketing Association (1960)
Bennett (1988)
Dibb et al. (1997)
Doyle (1994)
Kotler et al. (1996)
Stanton et al. (1991)
Watkins (1986)

Aaker (1996)
Alt and Griggs (1998)
Ambler (1992)
Boulding (1956)
Brown (1992)
de Chernatony and McDonald (1992)
Doyle (1994)
Goodyear (1993)
Keller (1993)
Levitt (1962)
Martineau (1959)
Murphy (1992)
Sheth et al. (1991)
Wolfe (1993)

Lisa Wood
Brands and brand equity:
definition and management
Management Decision
38/9 [2000] 662669

al. (1995) who suggest that:

If brands do have value then the way a

company uses its portfolio of brands is a top
management decision.

The restructuring of brand management to

multi-discipline teams is also gaining
momentum. de Chernatony (1997) indicates
that brand management is:

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. . . becoming more of a team-based activity,

managed at more senior levels by people who
adopt a more strategic perspective.

Clearly, it is important that everyone

involved in brand management is working
towards a common goal. A starting point in
achieving goal congruence is a common
vocabulary, which this article has sought in
part to provide.
The integrated definition of a brand as:
. . . a mechanism for achieving competitive
advantage for firms, through differentiation

adopts the holistic approach to branding, and

assumes relationship R1 below:
R1: marketing mix ! brand
! competitive advantage
In relationship R1, brands are created using
the marketing mix in a way that is
synergistic. Brands are strategically
positioned in the market by offering benefits
that are distinct from competition and that
are desired by consumers. Hence,
competitive advantage is achieved.
The process of this relationship is outlined
in R2:
R2: marketing mix ! brand description
! brand strength
! competitive advantage
Managers of brands are essentially involved
in the creation of brand description and
therefore the degree of brand strength or
brand loyalty achieved. It is assumed that the
higher the degree of brand strength achieved,
the greater the competitive advantage.
Competitive advantage, and the outcome of
brand activity can be measured in a number
of ways. Some are suggested in Figure 3.
It should be noted that the bulleted (and
other) performance measures could replace

Figure 3
Measures of competitive advantage

the term ```competitive advantage'' as the

outcome in R2. The performance measures
adopted in brand management are crucially
important, as they can influence the
objectives and strategies chosen by
managers. Quantification itself is considered
to be important as it provides hard data that
can be compared year on year, as well as
providing marketers (or other functions)
with well-defined targets.
Brand value is suggested as one of the
performance measures that can replace the
term ``competitive advantage'' in R2. This is
in essence the relationship previously
outlined in Figure 1.
Figure 1 suggested a relationship between
the various concepts of brand equity (i.e.
brand value is a function of brand strength
which is, in turn, a function of brand
description) which Feldwick (1996) asserted
cannot be demonstrated to exist in an
operational context. It is suggested in this
paper that strategic management of brands
would be facilitated by making this
relationship explicit, monitored and
measured. However, the structure and
culture of organisations may not always
facilitate the strategic approach.
Multi-discipline teams and other emergent
characteristics of brand management,
together with the balance sheet capitalisation
of brand value may imply making
operational the relationship outlined in
Figure 1. However, this has yet to become
explicit, which it would need to be for
effective asset management. Figure 4
indicates the relationships that would exist if
brand equity were to be managed both
strategically and operationally.
Whereas Figure 1 suggested that brand
description determines brand strength,
which in turn determines brand value,
Figure 4 recognises that the measurement of
brand strength and brand value provides
information that may determine how brand
description is managed. In this model, the
measurement of brand value is of managerial
significance rather than purely a financial
accounting exercise.
Whereas added value, profit and revenue
are historically focused measures, brand
value looks to the future. Brand value is an
index-based measure that seeks to represent
the net present value of the future earnings
stream of a brand. The job of managers of

Figure 4
The management of brand equity

[ 667 ]

Lisa Wood
Brands and brand equity:
definition and management

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Management Decision
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brands therefore, is to maximise the

long-term value of that earnings stream. This
will require expenditure on the marketing
mix to support brands, and may lead to shortterm sub-optimisation (even to profit and loss
account losses) to ensure the long-term brand
building. Brand value has an additional
advantage over other measures, in that it
addresses the health of the market, as well as
the health of the brand within a market.
Performance measures that encourage
decisions that promote the long-term health
of the brand, are considered to be better than
measures that do not encourage strategic
decision making. A key benefit of adopting
brand value as a performance measure is that
it creates a long-term focus for management.
If brand strength is the degree of attachment
to a brand, and brand value is based on the
future earnings of a brand then the higher
the brand strength the higher the brand
value. Managers of brands (not necessarily
marketers alone) should therefore manage,
and seek to maximise, both brand strength
and brand value. The natural long-term
outcome of this should be increased


1 A brand extension means using a brand name

successfully established for one segment or
channel to enter another one in the same
broad market. Brand stretching means
transferring the successful brand name to
quite a different market..
2 Products are viewed as having a core and
surround. The core identifies the basic
features of the product such as functional
performance. This is said to be responsible for
about 20 percent of the impact of a product (in
consumer marketing). The surround focuses
those features/benefits that are less tangible,
and more subjective, such as image. These
features are said to be responsible for about 80
percent of the impact of the product.
3 Indicated by market concentration.


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Application questions

Should brands always be managed by


How is brand performance measured in

your organisation?

[ 669 ]

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