Brand Equity

A brand is a name or symbol used to identify the source of a product. When developing a new
product, branding is an important decision. The brand can add significant value when it is well
recognized and has positive associations in the mind of the consumer. This concept is referred to
as brand equity.

What is Brand Equity?

Brand equity is an intangible asset that depends on associations made by the consumer. There are
at least three perspectives from which to view brand equity:

 Financial - One way to measure brand equity is to determine the price premium that a
brand commands over a generic product. For example, if consumers are willing to pay
$100 more for a branded television over the same unbranded television, this premium
provides important information about the value of the brand. However, expenses such as
promotional costs must be taken into account when using this method to measure brand
equity.
 Brand extensions - A successful brand can be used as a platform to launch related
products. The benefits of brand extensions are the leveraging of existing brand awareness
thus reducing advertising expenditures, and a lower risk from the perspective of the
consumer. Furthermore, appropriate brand extensions can enhance the core brand.
However, the value of brand extensions is more difficult to quantify than are direct
financial measures of brand equity.
 Consumer-based - A strong brand increases the consumer's attitude strength toward the
product associated with the brand. Attitude strength is built by experience with a product.
This importance of actual experience by the customer implies that trial samples are more
effective than advertising in the early stages of building a strong brand. The consumer's
awareness and associations lead to perceived quality, inferred attributes, and eventually,
brand loyalty.

Strong brand equity provides the following benefits:

 Facilitates a more predictable income stream.

 Increases cash flow by increasing market share, reducing promotional costs, and
allowing premium pricing.
 Brand equity is an asset that can be sold or leased.

However, brand equity is not always positive in value. Some brands acquire a bad reputation that
results in negative brand equity. Negative brand equity can be measured by surveys in which
consumers indicate that a discount is needed to purchase the brand over a generic product.

Building and Managing Brand Equity

In his 1989 paper, Managing Brand Equity, Peter H. Farquhar outlined the following three stages
that are required in order to build a strong brand:
 1. Introduction - introduce a quality product with the strategy of using the brand as a
platform from which to launch future products. A positive evaluation by the consumer is
important.
2. Elaboration - make the brand easy to remember and develop repeat usage. There should
be accessible brand attitude, that is, the consumer should easily remember his or her
positive evaluation of the brand.
3. Fortification - the brand should carry a consistent image over time to reinforce its place
in the consumer's mind and develop a special relationship with the consumer. Brand
extensions can further fortify the brand, but only with related products having a perceived
fit in the mind of the consumer.

Alternative Means to Brand Equity

Building brand equity requires a significant effort, and some companies use alternative means of
achieving the benefits of a strong brand. For example, brand equity can be borrowed by
extending the brand name to a line of products in the same product category or even to other
categories. In some cases, especially when there is a perceptual connection between the products,
such extensions are successful. In other cases, the extensions are unsuccessful and can dilute the
original brand equity.

Brand equity also can be "bought" by licensing the use of a strong brand for a new product. As in
line extensions by the same company, the success of brand licensing is not guaranteed and must
be analyzed carefully for appropriateness.

Managing Multiple Brands

Different companies have opted for different brand strategies for multiple products. These
strategies are:

 Single brand identity - a separate brand for each product. For example, in laundry
detergents Procter & Gamble offers uniquely positioned brands such as Tide, Cheer,
Bold, etc.
 Umbrella - all products under the same brand. For example, Sony offers many different
product categories under its brand.
 Multi-brand categories - Different brands for different product categories. Campbell
Soup Company uses Campbell's for soups, Pepperidge Farm for baked goods, and V8 for
juices.
 Family of names - Different brands having a common name stem. Nestle uses Nescafe,
Nesquik, and Nestea for beverages.

Brand equity is an important factor in multi-product branding strategies.

Protecting Brand Equity

The marketing mix should focus on building and protecting brand equity. For example, if the
brand is positioned as a premium product, the product quality should be consistent with what
consumers expect of the brand, low sale prices should not be used compete, the distribution
channels should be consistent with what is expected of a premium brand, and the promotional
campaign should build consistent associations.

Brand management
Brand management is the application of marketing techniques to a specific product, product
line, or brand. It seeks to increase a product's perceived value to the customer and thereby
increase brand franchise and brand equity. Marketers see a brand as an implied promise that the
level of quality people have come to expect from a brand will continue with future purchases of
the same product. This may increase sales by making a comparison with competing products
more favorable. It may also enable the manufacturer to charge more for the product. The value of
the brand is determined by the amount of profit it generates for the manufacturer. This can result
from a combination of increased sales and increased price, and/or reduced COGS (cost of goods
sold), and/or reduced or more efficient marketing investment. All of these enhancements may
improve the profitability of a brand, and thus, "Brand Managers" often carry line-management
accountability for a brand's P&L (Profit and Loss) profitability, in contrast to marketing staff
manager roles, which are allocated budgets from above, to manage and execute. In this regard,
Brand Management is often viewed in organizations as a broader and more strategic role than
Marketing alone.

The annual list of the world’s most valuable brands, published by Interbrand and Business Week,
indicates that the market value of companies often consists largely of brand equity. Research by
McKinsey & Company, a global consulting firm, in 2000 suggested that strong, well-leveraged
brands produce higher returns to shareholders than weaker, narrower brands.[citation needed] Taken
together, this means that brands seriously impact shareholder value, which ultimately makes
branding a CEO responsibility.

Principles of brand management

A good brand name should:

 be protected (or at least protectable) under Trademark law.

 be easy to pronounce.
 be easy to remember.
 be easy to recognize.
 be easy to translate into all languages in the markets where the brand will be used.
 attract attention.
 suggest product benefits or suggest usage (note the tradeoff with strong trademark protection.)
 suggest the company or product image.
 distinguish the product's positioning relative to the competition.
 be attractive.
 stand out among a group of other brands.