How to manage BRAND EQUITY!!!

The purpose of this article is to discuss and elaborate the main issues encountered in managing brand equity. In order to achieve this purpose, we first analyse the concept of brand equity; second, we provide a comprehensive framework for managing brand equity; and finally, we distinguish different ways to leverage and measure brand equity.  Brand equity can be regarded as a managerial concept, as a financial intangible asset, as a relationship concept or as a customer-based concept from the perspective of the individual consumer. The main asset dimensions of brand equity can be grouped into brand loyalty, brand awareness, perceived quality and brand associations. There are three alternative ways to leverage brand equity: first building it, second borrowing it, or third buying it.

In a general sense, brand equity is defined in terms of the marketing effects uniquely attributable to the brand. That is, brand equity relates to the fact that different outcomes result from the marketing of a product or service because of its brand element, as compared to outcomes if that same product or service did not have hat brand identification. Although a number of different views of brand equity have been expressed, they all are generally consistent with the basic notion that brand equity represents the ”added value” endowed to a product or a service as a result of past investments in the marketing for the brand.

The brand can have a powerful symbolic significance - The brand can in itself imply status, enhance image and project or augment lifestyle so that the ownership of the brand becomes of value in its own right, while from the supplier’s perspective, it can not only assist in differentiating the offering, but also lead to brand loyalty, deter market entry and, well deployed, enable its owners to command higher prices and profit margins.

The main asset dimensions of brand equity can be grouped into brand loyalty, brand awareness, perceived quality and brand associations.

Brand loyalty represents a favorable attitude toward a brand resulting in consistent purchase of the brand over time. It is the result of consumers’ learning that only the particular brand can satisfy their needs. Brand awareness is the ability of a potential buyer to recognise or recall that a brand is a member of a certain product category.

Brand awareness involves a continuum ranging from an uncertain feeling that the brand is recognised to a belief that it is the only one in the product category. Perceived quality can be defined as the customer’s perception of the overall quality or superiority of a product or service relative to alternatives.

Perceived quality cannot necessarily be objectively determined, because perceived quality itself is a summary construct. Brand associations may include, e.g., product attributes, customer benefits, uses, life-styles, product classes, competitors and countries of origins.

Brand associations can affect the processing and recall of information, provide a point of differentiation, provide a reason to buy, create positive attitudes and feelings and serve as the basis of brand extensions.

There are three alternative ways to leverage brand equity: firstly building it, secondly borrowing it, or thirdly buying it.

Brand equity can be built by creating positive brand evaluations with a quality product, by fostering accessible brand attitudes to have the most impact on consumer purchase behavior and by developing a consistent brand image to form a relationship with the consumer. Many firms borrow on the brand equity in their brand names by extending existing brand names to other products. Two types of extensions can be distinguished: a line and a category extension. The later is frequently also called brand extension. The third way to leverage brand equity is to buy it through acquisition or licensing. Given the potential difficulties associated with building brand equity, there is a trend toward acquiring well-established brands

Brand equity can be measured by the incremental cash flow from associating the brand with the product. Incremental cash flow also results from premium pricing and reduced expenses. Brand valuation is a relatively new phenomenon. Many different methods have been proposed because financial accounting standards for valuing intangible assets vary across countries. However, little consensus has emerged about how brand performance should be measured.

Strong brands in a product category have obvious value to the trade, as well as to the firm. Brand equity from the trade’s perspective is measurable in brand leverage over other products in the market. This source of added value comes from easier acceptance and wider distribution of a strong brand. Well-known consumer brands pay lower slotting fees and are given more shelf facings for new products than weaker brands. Brand leverage also protects against private labels. Less leverage means that market shares are eroded and less expensive generic brands become dominant. There is evidence that distributors want brand names as a means of making the product easier to manage in a number of respects: easier to handle, easier to identify suppliers, easier to maintain quality standards, and easier to increase buyer preference.

Brand equity from an individual consumer’s perspective is reflected by the increase in the strength of associations an individual has for a product by using the brand. Successful branding means lower uncertainty in purchasing. There is also less need for an extensive decision making process on the part of the customer. Brands carry with them certain assurances of product quality and reliability in use. Product identification in large, cluttered supermarkets, department stores or mass merchandising outlets is facilitated. There are also psychological benefits to the customer using brands.

Brands have gained renewed interest in recent years. Brand managers realise that after years of look-alike advertising and over-coping with me-too brands, they now live in a world of product parity. Hard competition ensured through short-term price promotions reduces the profitability of brands leading manufactures to examine ways to enhance loyalty toward their brands. In addition, faced with the increasing power of retailers manufacturers of consumer products realise that having the strongest brands is vital to strengthening their presence with retailers. Furthermore, the escalation of new product development costs coupled with the high rate of new product failures has led firms to acquire licenses, and extend brand names to a degree unseen in previous decades.

Start-ups are at an advantage when it comes to defining their brand and competing in a crowded marketplace but one could argue that it is not just established companies that stand to benefit most from the idea of brand equity. Start-ups, too, those taking that first step into the big bad world of business, must also consider their brand worth, as this will help them to define themselves in the coming years and steer the company to a profitable end goal.

Fledgling brands need as much support as possible, and so the search for customers is first and foremost. However, it's critical at this early stage to focus on the essence of brand values and begin to cultivate these.

Understandably, the nature and value of brand equity is very hard to quantify as tactics such as word of mouth play a large part in its establishment. Measurable marketing campaigns are only one of many potential strategies for brand development, and with the continuing dominance of social media, this is not likely to change any time soon.

But this almost impossible task of putting a price on brand equity does not mean that it should not play a major part in the marketing strategy. On the contrary, the role it plays should take the lead, providing the brand essence that all other marketing strategies and ideas can develop from, ensuring translation of brand values to sales and profit.

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