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Introduction
As far back as 5000BC, identity marks were used on pottery. However, these
ancient marks identified the owners of the goods rather than the manufacturer.
In the twelfth century, the use of trademarks became widespread. Craft guilds
required that members mark their goods so that the quantity and quality of
products could be controlled (Sudharshan, 1995). Brand names and
trademarks usually guarantee that products bearing the marks will be of
uniform quality. Branding also enables a producer to obtain the benefits of
offering products with unique or superior quality and provides an opportunity
to transfer this identifiable relationship to other products or services.
The value of brand is indicated by the money paid by firms that have
acquired consumer package goods with strong brand names. Procter and
Gamble paid 2.6 times Richardson-Vicks’ book value, Nabisco sold for 3.2
times book value, and General Foods sold for 3.5 times book value
(Business Week, 1995). The enduring nature of brands is illustrated by brand
names such as Coca-Cola, Phillip Morris, Levi’s, McDonald’s, Nabisco,
Kellogg, Kodak, Del Monte, Wrigley, Gillette, Campbell, Lipton, and
Goodyear – all among brand leaders in the USA in both 1925 and 1985
(Financial World, 1996; Wurster, 1987).
Brand is a complex New brands in a global marketplace have little chance of rivaling established
phenomenon brands. To create a brand from scratch requires huge investments. The
process may take years, and its probability of success is slim. Empirical
research has shown that massive sums spent on advertising are not always
justified by short-term sales. The return on this investment is translated into
other less tangible brand awareness, image, and loyalty. The above examples
illustrate why, in recent years, a great deal of attention has been devoted to
the concept of brand equity (e.g. Ambler, 1995; Baldinger and Rubinson,
1997; Blackston, 1995; Cook, 1997; Johnson, 1996; Meer, 1995; Upshaw,
1995). The dominant model of branding in the twentieth century was the
manufacturer as mega-advertiser. McKinsey (1994) believes that the
traditional model of branding is no longer the only way, nor can it dominate
in the future. According to Murphy (1990), brand is a complex phenomenon:
“not only it is the actual product, but it is also the unique property of a
specific owner and has been developed over time so as to embrace a set of
values and attributes – both tangible and intangible – which meaningfully
and appropriately differentiate products which are otherwise very similar.”
The primary capital of many businesses is their brands. The notion that a
brand has an equity that exceeds its conventional asset value was developed
by financial professionals. The escalation of new product development costs,
and the high rate of new product failure, has led manufacturers to engage in
brand extension (Tauber, 1988).
JOURNAL OF PRODUCT & BRAND MANAGEMENT, VOL. 7 NO. 4 1998, pp. 275-290 © MCB UNIVERSITY PRESS, 1061-0421 275
A comprehensive model This paper, has several objectives. First, the marketing and finance
of global brand equity perspectives of brand equity will be presented and integrated, and their
interrelationships will be shown. Second, the different measurements of brand
equity will be presented. Next, a comprehensive model of global brand
equity, which we believe is capable of both estimating the brand equity more
accurately and showing the sources of the equity, will be presented.
Marketing perspective
Aaker (1991) has provided the most comprehensive definition of brand
equity to date:
A set of brand assets and liabilities linked to a brand, its name and symbol, that
adds to or detracts from the value provided by a product or service to a firm and/or
to the firm’s customers.
Aaker has also synthesized some contemporary thinking about marketing and
depicted a comprehensive yet parsimonious set of factors that contribute to the
development of brand equity (Aaker, 1996a). He has contemplated that, to a
greater extent, the equity of a brand depends on the number of people who
purchase it regularly. Hence, the concept of brand loyalty is established as a
vital component of brand equity. Strong effects of brand recognition on choice
and market share are discussed and documented extensively in marketing
literature. That is why Aaker regards the concept of brand awareness as a
second component of brand equity. Considering the PIMS findings (Buzzell
and Gate, 1987), perceived quality is included as another significant
component. Other proprietary brand assets – such as patents, trademarks, and
established channel relationships – constitute the final component.
Measuring a brand’s Shocker (1993) has contended that the above components are accepted
value largely on the basis of their face validity and little attempt is made to
demonstrate their relative importance or possible interrelationship. The
impression left is that higher brand loyalty, awareness, and perceived quality
are necessary for creating and maintaining brand equity. Tradeoffs among
the factors of the models are not discussed. Also lacking are substantial
references to the financial or accounting aspects of brand equity, or even to
the controversy that has characterized attempts to value brands as assets on
balance sheets. Measuring a brand’s value means identifying the sources of
this value. Marketers, therefore, are interested in the process by which the
value of a brand was created.
Financial perspective
Simon and Sullivan (1993) have presented a financial-market-value-based
technique for estimating a firm’s brand equity. The stock price is used as a
basis to evaluate the value of the brand equities. Brand equity is defined as
“the incremental cash flows which accrue to branded products over
unbranded products”. The estimation technique extracts the value of brand
equity from the value of the firm’s other assets. First, the macro approach
BRAND
Brand Brand EQUITY
Multiple Profits
Key
Aaker Model
Simon & Sullivan Model
Global Market Brand Brand Interbrand Model
Potential Type Support Trend
Where:
GBE = global brand equity
—
M = maximum possible multiple in the industry
Wij = the importance of factor J in country I
CBPF = the value of customer base potency factor j in country I
ij
CPF = the value of competitor potency factor j in country I
ij
GPF = the value of global potency factor j in country I
ij
BNE = brand net earning
—
Notes: The brand strength percentage will not be directly multiplied by M. It
will be determined through application of S-curve.
Brand multiple
The calculation of brand multiple requires the calculation of brand strength,
which in turn needs a detailed review of each brand in terms of its
positioning, the market in which it operates, its competition, and its past
performance. The brand strength will be determined through a multi-staged
process utilizing a combination of techniques explained in “alternative
Competitive Potency
♦ Brand Trend Brand Net Earnings =
Brand Multiple x Brand Return – = GBE
♦ Brand Support Generic Return
♦ Brand Protection
♦ Competitive Strength
Global Potency
• Market Factors
• Promotion & Personal
selling Factors
• Distribution Factors
• Product Factors
• Price Factors
• Regulation Factors
–1 +1
Competitive potency
• Brand trend: certain brands have survived the passage of time better
than others by undergoing continuous renewal to keep up with changes
in needs and consumer lifestyles. In evaluating this factor, special
attention will be paid to long-term developments in brand image and
awareness.
• Brand support: Those brands which have enjoyed continuous support
are more valuable than those which have received some support without
any long-term consistency. Heavy advertising and sales support
expenditures, or strong advertising share, can indicate relative market
prominence.
• Brand protection: since the brand has economic value, it attracts not
only predators but also counterfeiters. Brand legal protection seeks to
protect the brand by registering not only the name but other
distinguishing features associated with brand, such as design, packaging,
and logo.
Established status Competitive strength: the established status of a brand defines the basic
defines the basic stability stability of the brand. Older brands, which in the course of time have built a
of the brand loyal and satisfied customer base, should be considered the very substance
of the market. In the USA, Coca-Cola, General Electric, and IBM are as
prominent as Hoover in the UK and Bayer in Germany. We are now well
aware of the link between market share and profitability, as well as the
strategic advantage of having a dominant relative market share. These
criteria become even more important with fast-moving consumer goods,
where major retailers are inclined only to hold on to market leaders (Buzzell
and Gate, 1987). Research and development expenditures indicate that a
company is supporting the brand to maintain its innovativeness and
uniqueness.
Global potency
Constraints on A company acquiring a brand naturally seeks to profit from it. To valuate a
globalization brand requires auditing the brand, using a manageable number of criteria to
predict future potential, both within its own market and beyond. The brand’s
overall profile according to those criteria will indicate its strength. Successful
brands have already established themselves in their home markets. When
they are globalizing their operations, important differences between the
References
Aaker, D.A. (1991), Managing Brand Equity: Capitalizing on the Value of a Brand Name,
The Free Press New York, NY.
Aaker, D.A. (1996a), “Measuring brand equity across products and markets”, California
Management Review, Vol. 38, Spring, No. 3, pp. 102-20.
Aaker, D.A. (1996b), Building Strong Brands, Free Press, New York, NY.
Allen, D. (1990), “Creating value, the financial management of brands”, in “Report of the
committee on cost and profitability analysis for marketing”, Accounting Review,
Supplement to Vol. 47, pp. 575-615.
Ambler, T. (1995), “Building brand relationship”, December 1, Financial Times.
Baldinger, A.L. and Rubinson, J. (1997), “In search of the holy grail: a rejoinder”, Journal of
Advertising Research, January-February, pp. 18.
Brand awareness
Recognition Customer survey
Recall Customer survey
Top-of-mind recall Customer survey
Brand extension possibilities Customer survey
Brand association
Value perception Customer survey
Organizational association Customer survey
Product differentiation Customer survey
Perceived quality
Competitor frame of reference Customer survey
Brand support
Consistent brand investment Compustat, and 10-K’s
Brand protection
Registered trademark share Company’s record