- Written by Ronald van Haaften
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2.1.6 Brand equity
Brand equity is the financial value of a brand which provides capital/value to products and services. Brand equity is related to future returns that customers generate to the product or service. Developed brand assets in the past, enable the brand to leverage her strength and should deliver future value to the brand. Hence brand equity fulfils a bridging role where it connects the past to the future. Kapferer distinguishes three levels; (1) brand assets, (2) brand strength and (3) brand value. The sequence from past to future is a conditional consequence which differs in time due to competitive and environmental changes (Kapferer, 2007:14). See figure 2.14.
Figure 20. From awareness to financial value (Kapferer, 2007:14).
Kotler and Keller argue that the value of a brand is directly related to the perception and mind set of prospects and customers. It reflects the direct and indirect brand experience of what they have seen, heard, learned, thought and felt over time (Kotler and Keller, 2006:276). A strong brand characterizes it self by a strong customer base, or even better by a sustainable base of loyal customers. For that reason the customer determines the future attractiveness of a brand and its brand equity. Kapferer recommends four indicators of brand equity (Kapferer, 2007:17):
- Aided brand awareness, measures whether the brand has the power to evoke long-lasting images, memories, and emotions.
- Spontaneous brand awareness (unaided awareness), measure of salience
- Evoked set, also called consideration set.
- Previous consumption of the brand.
Kotler and Pfoertsch came to the conclusion that, no matter which brand equity paradigm is used; brand equity drivers are built around four key drivers which leverage consumer’s perceptions of the brand: (1) perceived quality, (2) name awareness, (3) brand associations and (4) brand loyalty (Kotler & Pfoertsch, 2006:70).
Hence brand equity is an intangible asset that delivers (financial) value to the customers on one hand and value to the organization on the other hand. From a company perspective Anderson and Narus (as quoted in Kotler & Pfoertsch, 2006:69) addressed brand equity in a preferred customer response of:
- Greater willingness to try a product or service
- Less time needed to close the sale of an offering
- Greater likelihood that the product or service is purchased
- Willingness to award a larger share of purchase requirement
- Willingness to pay a price premium
- Less sensitive in regard to price increase
- Less inducement to try a competitive offering
This is also congruent with Aaker and Joachimsthaler who defined brand equity as: “…a set of brand assets (or liabilities) linked to a brand’s name and symbol that adds to (or subtract from) a product or service” (Aaker and Joachimsthaler, 2000:17).
Aaker formed his brand equity model around the five categories of brand assets:
- Brand loyalty.
- Brand awareness.
- Perceived quality.
- Brand associations.
- Other proprietary assets.
Aaker determines the five categories as the main determinants of brand equity which deliver positive or negative value to the customer and organization. See figure 21. Each category can be seen as a brand asset that creates value. It’s of vital importance to understand the source that creates value and the way it creates value, these are the indicators/ effect as displayed in figure 21 (Aaker, 1996:8).
Figure 21. How brand equity generates value (Aaker, 1996:9).
Aaker has set 10 brand equity measurement variables, based on the first four primarily categories of the equity model in figure 21. The measures should reflect brand equity and forces that drive the market. Next to that, the measures should be sensitive and it should be applicable across brands, product lines and markets (Aaker, 1996:317). See figure 22.
Figure 22. The brand equity Ten (Aaker, 1996:319).
Kotler and Keller argue that the foundation of brand equity is formed by the brand knowledge of the consumers. Brand knowledge enables the consumer to differentiate brands and guides the mind and response to marketing activities as a result of this knowledge (Kotler and Keller, 2006:278). The reason why brand equity occurs and how marketeers can create this is captured in Keller’s definition: “Customer-based brand equity occurs when the consumer has a high level of awareness and familiarity with the brand and holds strong, favourable, and unique brand associations in memory.” Keller labelled this as customer based brand equity (CBBE) and developed a CBBE pyramid model, also known as the “brand resonance pyramid” (Keller, 2007:48). See figure 23.
Figure 23. Customer based brand equity pyramid: CBBE-model (Keller, 2007:60-61).
The model is build around 4 sequential steps from bottom to top, where each next step is conditional to the success of achieving the objectives of the previous step, situated on the right side of figure 23. Parallel on the four steps Keller defined 4 questions customers ask them self about the brand, situated on the right side of figure 23. The four steps of CBBE pyramid are structured in six core building blocks with a rational route on the left side: performance and judgement, and an emotional route on the right side: imagery and feeling.
The means by which brand equity is build, may differ from time to time and on customer group/segmentation. Whether this is based on geographic zone, country, product, culture is not relevant as long as marketers understand the relevance of each building block in relation to the target group (Keller, 2007:86-87). Keller argues that global active organizations need to build their global customer based equity model on his “Ten commandments of Global Branding” (Keller, 2007:607-627);
- Understand similarities and differences in the global branding landscape.
- International markets will vary in many aspects and brands can loose easily their local relevance due to local consumer behaviour and local competitive market forces.
- Don’t take shortcuts in brand building.
- Local brand awareness and positive brand image come first, before successful marketing programs can be exported into new local markets to build sustainable long term brand equity.
- Establish marketing infrastructure.
- Logistics are very important, the product needs to be manufactured, distributed, sold and consumed. Marketing infrastructure encompasses international chain distribution for products and market intelligence.
- Embrace integrated marketing communication.
- Successful global active brands will establish integrated marketing communication programs, which safeguard brand heritage and brand positioning across all traditional and non-traditional communication tools.
- Cultivate brand partnership.
- Successful global active brands establish partnership to access local distribution channels within their international markets.
- Balance standardization and customization.
- One of the aspects of globalization is the blend of global and local brand elements, as well in product and price strategies. The balance needs to be reviewed, measured, managed and set against the most efficient and effective global marketing programs.
- Balance global and local control
- Building global brand equity depends heavily on the balance of internal integration and differentiation. Key aspects are local responsiveness, integration (scale of economy) and globally dispersed knowledge diffusion. Basically it captures standardization of core brand aspects and local adaption of secondary aspects.
- Establish operable guidelines
- To guide local marketers across the globe, operable guidelines need to be established which should capture a brand charter and a clear product line strategy.
- Implement a global brand equity measurement system.
- A set of organizational processes- 3 implementation steps(1) brand equity charter, (2 brand equity reports, (3) brand equity responsibilities)
- Leverage brand elements.
- Core brand elements should be standardized for global purposes and selected very carefully to leverage the global brand. This captures the verbal and nonverbal elements as well which can have a severe impact on the effectiveness of global marketing programs.
Organizations are able to build a reputable brand by understanding the correlation between brand awareness and brand value. It is extremely important to create a consistent, unambiguous, transparent and recognizable balance between the internal qualities and external tangible and intangible signs without discrepancy in the association set in the mind of the stakeholders. A reputable brand is the most efficient of external signals to create value (Kapferer, 2007:21).