Running Head: CRITICAL ESSAY 1

Student Name: xxx

Student Number: xxx
Word count: 1983
MKTG7502 Assessment 1 – Critical essay, 2022 Semester 1
Is financial-based brand equity or customer-based brand equity more important to
ongoing firm success? Why?
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Introduction
In this highly competing and vigorous world, a brand acts as paramount for an
organization, which helps to achieve the primary result of market segmentation and product
differentiation strategies. According to Tasci (2021), in the field of marketing, brand equity
can be defined as a relationship between brands and customers. Brand equity has also been
defined and driven to be investigated from two perspectives such as financial and consumer.
This critical analysis is written with the goal of debating whether 'financial-based brand
equity (FBBE)' or 'customer-based brand equity (CBBE)' is more significant for long-term
corporate performance, as well as reasons. In order to secure long-term corporate
performance, the article contends that the CBBE approach to brand equity seems to be
more vital than the FBBE method. An overview of Brand equity, FBBE, and CBBE are
discussed with the help of theoretical evidence. Finally, with supporting reasons, it is
analyses CBBE as the most essential brand equity, followed by a conclusion.
Overview of Brand equity
A brand is the most valuable asset of a business. Jeff Bezos, founder of Amazon
stated “Your brand is what other people say about you when you’re not in the room” (Source:
Arruda, 2016). As per this quote, brand equity can be stated as the service quality
perception by customers above other items. When compared to a similar alternative, brand
equity refers to a value premium that an ongoing firm earns from a service with a distinctive
name. The benefits associated with building a strong brand with substantial equity are
plentiful for start-ups and established companies alike (Keller & Brexendorf, 2019). Further,
Beig and Nika (2019), argued that brand equity can be described as characteristics of
awareness, familiarity, favourability, strengths, and brand associations that consumers hold
in their minds. Thus, it can be stated that the presence of brand equity aids firms in
distinguishing their goods from the competitors in the market based on customer perception
and brand awareness.
When people perceive benefits and costs associated with something, brand equity
can help them create relationships between those perceptions. With its strong brand image
and unique value proposition, the company can differentiate its services from its competitors
(Wu, et al., 2020). Strong brand equity enables businesses to handle both competitive
markets and crisis events with a lower degree of vulnerability by improving perceived
performance of brand and maximizing awareness (Zahari, et.al., 2020). In order to analyse
the importance of brand equity for ongoing firm success, several different models and
approaches of brand equity are beneficial, including FBBE and CBBE.
FBBE
FBBE is one of the effective theories to analyse the brand value in the market. The
main goal of FBBE is to determine the monetary value of a company's brand equity. It is
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discussed in the study given by Nguyen, Dadzie & Davari (2013) that brand equity is the
estimated cash flows accumulating to branded items that go beyond the retained earnings
flowing to non-branded products. Therefore, the complete worth of a brand that has a
separate value that is put aside as an asset to measure or sell, can be defined as FBBE. So,
the FBBE theory helps to measure the brand power by focusing on both the economy and
the commercial potential of the business, such as its market power and relation to work
(John, Kilumile & Tundui, 2019). The application of FBBE theory focuses on behavioural
finance approach. A brand equity component is a demand enhancement component and
can be used in analysing a firm's other assets. It is also mentioned by Tasci (2021) that the
main benefits of the FBBE approach to brand equity are that it improves the company's profit
margins, it may easily expand the company, and the company's brand equity offers it
bargaining strength. For example, Apple Inc. the company has a strong brand value, which
attracts the target customers to buy a luxurious expensive phone. It eventually enhances
brand value in financial terms. On the other hand, it does not provide useful information to
marketers who need to build effective marketing campaigns and gain familiarity with brand
equity processes (Keller & Brexendorf, 2019). This is the limitation of the FBBE model.
CBBE
Customer-based brand equity (CBBE) is a term that describes how a company's
performance is linked to its customers’ perceptions. The CBBE model is a sales tactic that
may assist businesses in developing a promotional strategy that appeals to their target
groups and consumers. It is asserted by Beig and Nika (2019) that CBBE measures a range
of characteristics that impact consumers' thinking and feeling about a brand and shows the
advantage of the strong brand image on the performance of the firm. For example, Nike has
created a strong brand image by emphasizing customer value in terms of offered services,
innovation in the available product range, comfort brand logo and value for customers, etc.
In support of this Tasci (2021), mentioned that customers are influenced by a variety of
factors, including value, performance, trust, social image, and commitment. Consequently,
brand understanding is important for creating difference and driving brand equity. As a
result, CBBE helps advertisers to learn how a brand might be implanted in the minds of
customers.
Building a great brand has been proved to bring a variety of financial benefits to
businesses, which has become a key focus for many. According to Keller & Brexendorf
(2019), creating a strong brand entails four steps (see figure 1).
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Figure 1: Customer-based Brand Equity Pyramid (Source: Cottan-Nir, O. & Lehman-

Wilzig, 2018)
Ultimately, CBBE is a significant theory of brand equity to analyse the perception of
consumers on the brand image of a firm. As a result, for advertisers to build brand equity,
marketers must establish favourable customer reactions and a good brand image via
distinctive and powerful brand connections. Further, the CBBE technique is advantageous to
marketers as it enables customers to undertake a successful brand evaluation and resulting
in increased repeat purchases. An effective CBBE approach can lead to fewer expenses
including increases in sales and profit. Furthermore, this approach has obvious ramifications
for businesses, such as implementing marketing efficacy, premium pricing achievement,
brand expansion performance, and long-term company performance.
Most important equity
The CBBE strategy to brand equity has been found as more significant to long-term
corporate performance. It is analysed in the study of Tasci (2020) that CBBE demonstrates
the importance of a customer's attitude toward a brand and influences a brand's failure or
success in comparison to FBBE. It underlines the importance of creating a strong base for a
good opinion about a brand. The main reason for its significance is that it allows for a distinct
perspective on what corporate reputation is and how it should be developed, monitored, and
managed (Zahari, et.al., 2020), which is not possible in FBBE. Further, CBBE measurement
also aids in determining customer knowledge, action, mentality, impression, and relationship
with a certain brand. Consequently, all of these characteristics are critical for an
organization's long-term growth and success (Tasci, 2021). It is because of good consumer
perceptions, attitudes, behaviours, and knowledge have a beneficial impact on purchasing
action intentions, assuring a brand's long-term sustainability.
A high significance and value of the CBBE model can be understood with the help of
the CBBE model explained by Keller (See figure 1). Through a pyramid, CBBE model
illustrates multiple degrees of client comprehension and branding techniques. Each tier of
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the pyramid symbolizes a distinct facet of branded promotion that adds to the overall
customer-brand connection. According to Iglesias et al., (2020), consumers' brand identities
have a dual character that appeals to their minds (rational appeal) and hearts (emotional
appeal). Additionally, consumers might process information in a cognitive style that is mostly
analytic or intuitive. Brand identity is at the first level of the pyramid since it reflects the basic
characteristics of the brand of a firm (Cottan-Nir & Lehman-Wilzig, 2018). Further, the
second level is to define the meaning of the brand. Tasci (2020) exhibited that customers
may get more detailed knowledge about the product at this level of the pyramid. It contains
information about the company's core values, expertise, and the features of the product
offer. According to Fetscherin, Veloutsou & Guzman (2021), brand strength should be the
outcome of the brand meaning building process. Companies may increase their consumers'
understanding of both the brand and the product by creating successful brand imaging and
brand performance, therefore attracting and retaining them for a lot longer.
The next level of the CBBE model is the brand reaction. This is the practice of
figuring out how clients react to different components of the brand. Clients may have certain
expectations of the brands to enjoy, and businesses must be aware of these expectations
(Cottan-Nir & Lehman-Wilzig, 2018). A brand might try to exceed customers' expectations
by delighting or surprising them with a creative advertising strategy or promotional offers, for
example, McDonald's happy meal offer, Tesco’s gift voucher offers, etc. These campaigns
help to influence buyers' decisions as well. It is also one of the main reasons that CBBE's
strategy to brand equity is more successful and crucial to a company's long-term
sustainability.
Though, the fourth level of CBBE is brand resonance, which reflects the customer-
company connection. Consumers are likely to be extremely involved in a brand whenever it
develops brand resonance. They could take interest in various social media campaigns, the
company’s objectives, and other marketing efforts (John, Kilumile & Tundui, 2019).
Consumers who have a positive experience with a brand are more likely to tell friends and
family about it. It also fosters a sense of brand loyalty, which may influence their decision to
buy from a specific rather than from the competitors. As a result, this level of the model
taught businesses and marketers how to leverage brand identity into brand resonance and
superior consumer loyalty to achieve long performance and development.
With a critical analysis of CBBE and FBBE approaches, it is analysed that the
effectiveness of CBBE is higher than FBBE. There are several reasoning behind this. For
example, with the help of FBBE, companies can evaluate the total market value of their
brand. FBBE does not allow the firm to implement a brand-building pyramid to influence the
perception of the customers (Cottan-Nir & Lehman-Wilzig, 2018). On the flip side of the
coin, CBBE provides clear assistance to marketers to develop a direct connection with the
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customers and influence buying behaviour by identifying brand resonance. This is essential
to retain customers by creating a direct relationship between the brand and its users (Tasci,
2021). Further, in comparison to FBBE, CBBE also provides benefits of understanding the
market demands, changing consumer's trend and their purchasing behaviour, which is a
limitation for FBBE. So, CBBE is highly important over FBBE in terms of knowing about the
target customers, their loyalty for the brand, leading innovation in brand promotion
strategies, and increasing marketing performance of the brand.
Conclusion
To conclude, the purpose of the essay is to analyse whether FBBE or CBBE is more
significant for long-term corporate performance. Based on the above critical discussion, it
can be claimed that, in today's dynamic and highly competitive market condition, developing
brand equity is critical for organizations to secure long-term survival and prosperity. Both the
FBBE and CBBE techniques for measuring brand equity are useful because they produce
strong measurements of brand equity. However, the CBBE approach to brand equity is more
significant than the FBBE strategy in terms of influencing customer buying behaviour. The
key reason is that using a consumer-based brand equity theory allows marketers to learn
more about the early stages of developing brand equity as well as consumer purchasing
habits. Moreover, this information might be used to create more successful marketing
strategies and campaigns, assuring the company's protracted survival. This cannot be done
by implementing the FBBE model. The CBBE model serves as a benchmark against which
brands may measure their success.
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