Brand Equity

Brand Equity

Introduction

Brief historical perspective of brands/ branding

The concept of brand name was first developed when owners of the cattle used their
animals skin to mark stamp in order to show that they were their property. This is what

contemporary businesses do nowadays for their brands. They have a mark on their products to
give life and personality to them so that consumers can recognize, relate and purchase those
products (Reid, 2008).

The evolution of marketing and branding in the 21st century

Marketing has changed overtime and in 21st century, the brand management became one
of the core branches of marketing. Previously it was product orientation. Now it has become an
outward looking approach. It has taken globalization fully into consideration. Similarly in the
21st century, it has integrated with the concept of brand management which is now a core tool of
marketing strategies.
What is a brand?
Brand is the identification of a product by a company. The company communicates
through brands by telling consumers that the products belong to them. Brand name in the 21 st
century attracts consumers by creating a personality statement and above all, by defining the
lifestyle of a person. Such is the power of the brand. It is an association of the consumers that
attracts them through modern marketing tactics and strategies. When a brand is translated into its
financial value, it becomes brand equity (Aaker & Biel, 1993). This equity leads businesses
towards the mission and vision of the company (Vision statement, 1989).
From marketing perspective, brand is the intangible essence that your customers can feel.
Their perception of the brands start with how you market your brand and that is where marketing
comes. Every communication of what you are serving to your customers start with the brand
(Brodie, 2009).

What do brands do?

Brands create the name and personality of a product(Cartwright, n.d.). It is the most
important element that distinguishes your product from that of your competitors. Brands create
the personality in a sense that you talk about it and think about throughout the day and in your
unconscious mind, you think of it a humanly figure. For example, Pepsi looks good after meal or
bring Lux soap from the market.

Brands in the marketing Process

Marketing requires a solid basis on which products are differentiated and have a standing.
Brands create that standing. Brands are the starting point of any marketing strategies required to
achieve an effective campaign. For example, for Lux which signifies beauty, their marketing will
revolve around sophistication. The process starts from research of the brand, giving the product a
brand name and then marketing using the brand name.

What is brand equity?

Brand is a phrase used in the context of marketing which describes the value of the brand name
itself. It basically describes for how much the brand can be sold as compared to a product with no name
but similar features (Kapferer, 1994).

Brand Equity: Financial term for the brand

Imagine you are seeing two similar products. One is without a brand name and the other
one is a branded product. Marketing try to change the perception of two similar products
therefore, those two products even though homogenous will have differentiated characteristics
3

and that is because of brand name. The one with the brand name will be considered a good
quality product as compared to the unbranded product.
Brand equity is the power of the name of a brand and recognition it has gained over time
leading to higher sales. It is the trust that is built in the mind of consumers. It is also known as
value premium that a company generates in terms of higher margin due to the name the brand
possesses as compared to the product or services core functions. In other words, it compares the
branded value of the product with what the company had earned without its recognition.
An individual buys Starbucks because it is operating since a long period of time and one
has a factor of trust in the name of the brand itself (Knipp, 2009). If the same coffee is sold by
street shops, one may not prefer it. Therefore, in reality, it is the value of the brand name minus
the core product.

Elements of Brand Equity:

There are elements of brand equity that are an integral part of Corporate Brand Equity. Some of
these components are:
1.
2.
3.
4.

Brand Awareness
Brand Association
Perceived Quality
Brand Loyalty

Brand Awareness
This is the first step created towards brand equity. It is the knowledge about the brand
that consumers retain in their memories (Esure Case Study: Increasing Brand Awareness
Through Targeted Marketing, 2005). In simpler terms, they know about the brand and the
4

category it is in. This is the highest level of recall where one does not need to remind consumers
about a product and where they even remember the logo of the brand. On the other hand, the
equity of the brand is low when consumers need an aided recall and will not purchase it until and
unless they are not reminded of it through regular marketing strategies.
Building awareness means that the involvement of consumers in the brand has to be
visible enough so that they are pulled towards it. To create awareness, marketers conduct
promotional activities that include Brand Activation, publicity, word of mouth, digital marketing
or a combination of Integrated Marketing Communication (IMC) platforms. When the
involvement is high, it leads to higher awareness and might escort to unexpected touch-point,
thereby, leading to increase in brand equity since consumers will know about it.
Brand Association
When consumers can relate to a brand name, they are associated with it. It is basically
everything about a brand that is retained in the memory of consumers. They are tied up with the
nodes of the brand psychologically (Mathieson, 2005).
Customers create an association with the promotional activities as well as the place where
it is sold. Customer relationship management, after-sales services, augmented value and also
packaging is now regarded as a very important tool so that customers recognize the brand
instantly. If packaging is beyond classic, it will lead to greater association or relation with the
brand due to its appeal.
Customers association with the brand increases with every encounter they have with
respect to the brand including word of mouth specifically in this digital era and this is where the
association is formed from what and how the consumers get to know about the brand. Brand
5

equity will enhance when there is an enhancement in the association with the brand. The more
consumers get to know about the brand, the more they will trust it and will not hesitate to buy it.
They will even be ready to pay more for the brand. Thus, this is a crucial point as this is the point
which will lead to the other step of brand equity.
Perceived Quality
Perceived quality is the perception of the brand in the mind of consumers (Jacoby &
Olson, 1985). In other words, it is the positioning of the brand in the brain. It shows whether the
consumer is associated with the brand in a positive way or negative way. This is why it is
important to assess the brand equity.Consumers perceive about a brand through various means
such as the promotion, trial, experiential marketing, and also the behavioral aspects towards it
(Wang & He, n.d.).
Pricing of the brand is another determinant of the perception. If the price is high,
consumers will think of it as a premium brand. On the other hand, if marketers try to price the
brand in a wrong way such as Louis Vuitton for $20, they will have doubts in their mind and they
will think of the brand being desperate to be sold since nobody is buying it due to bad quality.
This is where brand equity plays its role. If the perceived quality is negative, equity will be
negative. People will not pay for the brand about which they have negative judgments. Perceived
quality leads to the next tier which is brand loyalty.

Brand Loyalty
Consumer is loyal to a brand when he prefers one brand over other homogenous core
product brands for a long period of time. Traditionally, it was known as constant repeat purchase.
However, one research shows that this is not necessary anymore (Czerniawski & Maloney,
6

1999). For instance, a consumer with average salary may buy TAG Heuer once in two years. Not
only this, his loyalty will be true when he will quote positive comments regarding the brand.
Loyalty is the factor that leads to good reputation after purchase and develops equity. However,
equity also leads to brand loyalty.
In order to understand the relation between brand equity and loyalty, there are two situations

Brand Loyalty when high naturally leads to brand equity

Brand Equity is high but loyalty is less. For example, there are two milk brands. The first
one has a brand name and is recognized by many people but people do not buy it often
and prefer the other one, thereby, leading to less loyalty.

Whatsoever the situation is, loyalty towards the brand and equity has a deep relationship.

Customer Based Brand Equity

Customer based brand equity is the attitudinal response of a consumer towards the brand
(Keller, 1991). It basically shows how a consumer has to be tackled when it comes to brand
management. A business has the goal of satisfying the wants and needs of a consumer and to
manage the brandr leading to the generation of positive attitude and behavior of consumer. It has
to study consuer deep down and has to conduct extensive research. There are three levels in
consumer based equity.
Level 1: Salience
The information regarding the awareness of consumers is of great importance, thus it is
required that the businesses research about the in-depth knowledge of consumers ("Editorial
Board", 2015).

Level 2: Performance and Imagery

Performance is the provision of the needs and wants of consumers in terms of
functionality, quality and after sales service ("Increasing technical levels and product quality",
1964). In fact, it should cover all the levels of a product. On the other hand, imagery is how
consumers think or judge about the brand after observing its performance. The key point
indicator such as word of mouth can measure it.
Level 3: Consumer Experience and Feedback
The last level discusses how consumers feel after experiencing the performance of the
product. It can be either actual judgment or perceived judgment (Bell, Raiffa, &Tversky, 1988).
These levels when completed lead to the businesses successful branding and brand
equity. The difference is that the normal brand has to develop the brand later on after its creation;
however, companies develop Customer Based Brand Equity after thorough research so that they
analyze every step and do not make mistakes. This is very essential specifically in the
contemporary world of competition where careful steps are required to generate greater market
share and greater return on investment in the brand and lastly, for long term benefit. Good brand
equity will lead to revenue streams throughout the life of the brand.

Corporate brand
Corporate brand is the brand name of an entity of the company providing products and
services rather than the products and services itself (Li, n.d.). It is very important for companies
to be successful to not only sell the products based on the brand name but also to achieve the
goal of establishing a successful brand name and ultimately the goal of reaching to the vision of

the company. When many recognize a company, it is on the path of success. All the brands
should be known under the umbrella of their existence.
For example, when you think of Big Mac, you know that is the production of McDonalds
and the name of McDonalds itself is a brand. People buy Big Mac because they trust McDonalds.
Any new product offered to consumers will be tried by them only after they gain trust in the
company. Very few consumers are willing to take risks when it comes to expending in a product
by a totally new company. Hence, for a company to sell its products and build customer base, it
is essential to first create a trustworthy market image.

Elements of brand equity forming Corporate Brands

Firstly, if there is great awareness of the brand name, it will be enough for a successful
brand equity valuation of a company (Knipp, 2009). In order to understand this, let us consider
the example of Microsoft. People know about it or are aware about the brand in their mental map
irrespective of whether they are using it or not. This has created the value of the brand itself.
Secondly, people associate with the brand. If they see HP laptop, they know that the software HP
is using is purchased by Microsoft and that software is Windows. Ingredient co-branding itself
defines the association of the brand whether people know about it or not. Thirdly, due to its
extensive awareness, association and knowledge, people perceive the brand to be positive.
People will see every brand brought by Microsoft, such as Windows Phone, of good quality.
Lastly, due to perceived quality, there are people who trust and purchase products offered
by Microsoft. Even the Anti-Virus they will purchase will be offered by Microsoft because they
think that any program should be saved by the companys own developments. This is the loyalty

that they will give to Microsoft as a whole. Thus, the above elements will build the corporate
brand in terms of equity (Clark, 2004).
The following three short examples are an excellent example to apply the elements of brand
equity practically.
Example 1: Apple
Apple is a very famous and trendy brand. Few years ago, it did not have a high perceived
value because of Nokias rule. After the introduction of its iPhone series, people got awareness
about it but they were still loyal to Nokia (Sabbatini, n.d.). As time passed by, the introduction of
upgraded series of iPhone and iPad led to an increase in the association and positive perceived
quality in the minds of consumers. Now consumers are loyal to both, the company and brand.
The power of branding is so strong that whatever Apple develops, the logo will sell it, be it a
watch or a Mac Air book.
Example 2: Coca-Cola
Coca-Cola Company has the fourth highest equity and is among the top companies in the
world. It created brand awareness among masses which, in turn, has created customer association
with the brand. Their advertising is one of the major aspects that are creating an emotional bond
with people. Their recent campaign, share the feeling is gaining popularity at a faster rate
however; still many people possess open happiness association with coke. People have positive
and economical perceived quality regarding the brand and also there are many people who prefer
Coke over Pepsi, thus being loyal to Coke. However, even if they consume Pepsi, still many
people consider Cokes equity greater than that of Pepsi (Noel, 2009).

10

Example 3: Nestl
Nestle is the famous and renowned company that has achieved brand equity due to its
brand portfolio. It has created awareness amongst people emotionally such as with the brands
Dairy Milk, Maggi and so on ("Nestle: Different perspectives on the evidence base", 2006).
People are associated with the brand due to various promotional activities and advertisements
and they do consider that the brand has a high perceived value. People, however, are price
sensitive and are not loyal when they have to choose between a product by Unilever and a Nestle
product when it comes to pricing. This is another example when the equity is high but still
people are not loyal to a brand.

Conclusion
It can be concluded that brand equity is a critical parameter of developing a business and
attracting consumers towards it. It is designed to replicate the real worth that a brand name
pertains for the products and services that a company has to offer. It is an important factor to
gauge a companys outcome in terms of sales and market share. The branded products
perpetually carry a higher cost than non-branded or store items even when the manufactured
good is itself a commodity such as sugar. Hence, the higher price is mainly due to the influence
of the brand.

11

Bibliography
Reid, K. M. &. S., 2008. The birth of brand: 4000 years of branding. Business History, 50(4), pp.
419-432.
"Brand." The Oxford Pocket Dictionary of Current English. 2009. Retrieved May 10, 2016 from
Encyclopedia.com: http://www.encyclopedia.com/doc/1O999-brand.html
Editorial

Board.(2015).

Endocrinology,

156(5),

2C-

2C.http://dx.doi.org/10.1210/endo.2015.156.issue-5.edboard
Bell, D., Raiffa, H., &Tversky, A. (1988).Decision making. Cambridge: Cambridge University
Press.
Increasing technical levels and product quality. (1964). Glass And Ceramics, 21(12), 734-734.
http://dx.doi.org/10.1007/bf00674872
Noel, H. (2009). Consumer behaviour. Lausanne, Switzerland: AVA Academia.
Sabbatini, P. The Microsoft Case.SSRN Electronic Journal.http://dx.doi.org/10.2139/ssrn.223769
Nestle: Different perspectives on the evidence base. (2006). Br J Midwifery, 14(8), 493-493.
http://dx.doi.org/10.12968/bjom.2006.14.8.21646
12

Aaker, D. & Biel, A. (1993).Brand equity & advertising.

Hillsdale, N.J.: Lawrence Erlbaum Associates.Knipp, V. (2009).Trust the brand. Hamburg
[Germany]: DiplomicaVerlag.
Keller, K. (1991). Conceptualizing, measuring, and managing customer-based brand equity.
Cambridge, Mass.: Marketing Science Institute.
Esure Case Study: Increasing Brand Awareness Through Targeted Marketing. (2005). Indiana.
Jacoby, J. & Olson, J. (1985).Perceived quality. Lexington, Mass.: LexingtonBooks.
Mathieson, R. (2005). Branding unbound. New York: AMACOM.
Ind, N. (1997). The corporate brand. Washington Square, N.Y.: New York University Press.
Knipp, V. (2009).Trust the brand. Hamburg [Germany]: DiplomicaVerlag.
Clark, K. (2004). Brandscendence. Chicago, IL: Dearborn Trade Pub.
Czerniawski, R. & Maloney, M. (1999).Creating brand loyalty. New York: AMACOM.
Vision statement.(1989). [Laguna Niguel, Calif.?].
Wang, C. & He, J. Brand management in emerging markets.
Kapferer, J. (1994). Strategic brand management. New York: Free Press.
Brodie, R. (2009). From goods to service branding: An integrative perspective.
Marketing Theory, 9(1), 107-111. http://dx.doi.org/10.1177/1470593108100064

13