Brand Equity Is Clearly Important

Marketing Essay
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Brands being at the heart of marketing and business strategy and thus to build a
strong brand equity is known to be the key drivers in the success of a business
(Martense and Gronholt, 2000). In this perspective, it is paramount that a
management and a measurement system of the brand equity. The competitive
advantage that companies with high brand equity have is that they have the
opportunity to provide potential extensions and thus creating barriers to competitive
entry (Lassar, Mittal and Sharma, 1995). Srivastava and Shocker (1991) discusses
that customers evaluate brand equity which according to them consists of two
components; brand strength and brand value.
Brand Equity has always been examined from two different perspectives which is
either financial or customer based. Recently, theoreticians have observed that the
consumer is a rational decision maker who, based solely on its fulfillment of
functional needs, chooses a product. Researchers have furthermore, developed and
tested many accounting methods for evaluation of the brand name's asset value.
Looking at the second perspective which is customer based, is where a consumer
response to a brand name is evaluated (Lassar, Mittal and Sharma, 1995). However
the consumers are no longer satisfied with only the high quality services and goods
but nowadays, consumers' purchase decision are mainly influenced by the emotional
benefits associated to the brand. Referencing Martensen and Gronholt (2000, p.74),
"Consequently, today's companies attempt to differentiate themselves by creating
associations in the minds of consumers that add extra value in the form of emotional
benefits, which extend beyond product attributes and functional benefits." Taking
this statement in consideration, adds to Aaker's (1991) suggestion that brand
associations, brand awareness, brand loyalty, perceived quality and other propriety
based assets which underlie brand equity. Focusing on the customer-based
perspective; customer-based brand equity is the motivating force for constant
increase in the financial gain. Also, managers do not acquire any customer-based
measure so as to calculate brand equity. Lassar, Mittal and Sharma (1995) discovered
in their research that only one attempt to measure customer-based brand equity has
been established.

According to a customer-based brand equity perspective as suggested by Keller

(2003), the indirect approach to measure brand equity tries to assess potential
sources for brand equity by measuring consumer's attitude towards the brand or
brand awareness. Taking the indirect approach in consideration, it is useful in
recognizing what aspects of the brand awareness may theoretically cause the
differential response that in turn builds brand equity in the marketplace. Because
any one measure only normally captures one specific aspect of brand knowledge,
multiple measures is a better approach so as to account for the multi-dimensional
nature of the brand knowledge by the consumers.
The perception of consumer-based brand equity has mainly been derived from
cognitive psychology and information economics. Keller (1993) looked at consumerbased brand equity only from a consumer psychology viewpoint. They also defined it
as 'the differential effect of brand knowledge on consumer response to the marketing
of the brand' (Keller, 1993). According to this conceptualization, a brand will have a
negative (positive) value if the consumer reacts less (or more) favorably to the
marketing mix of the product or service in question which she/he relate to the brand
name rather than the marketing mix of another unbranded product which is
identical. The responses of the consumer towards the marketing mix of a brand can
be interpreted at various stages of the purchase decision-making sequence, and there
are different characteristics that are taken into consideration such as preference,
choice intentions and actual choice.
A model developed by Sasson N and Doron I (2008), which is known as 'The TefenGlobes-Giza model' is based on premium pricing, it is a method designed to analyze
the actual net value that the brand is estimated to produce for the company, and also
to other links in the value chain along the years. This model focuses on the basic role
of the brand so as to create a preference based on which the consumer can be
charged a premium. So, the monetary value that the brand develops is the total
premium revenues gathered from the consumer, minus the brand's maintenance cost
(support, advertising and so on), and it is all capitalized based on risk of the brand
minus the rate of its growth. There are many other models alongside the TefenGlobes-Giza model which is used in business circles so as to calculate brand value.
One well known model is Interbrand Model. Interbrand model which has been
developed by Omnicom, works it out by ranking the leading brands in the world
markets every year and also the brands that are leading in selected markets. This
methodology of this model measures the brand value in three different phases; first

the financial forecasting then secondly identifying revenues from the model or any
service that is originated from the company's intangible assets and finally
establishing an estimate of the future revenues that are originated from the
intangible assets over a period of six years. But the Tefen model can measure more
than just the brand value of the companies unlike the Interbrand model, the Tefen
model can also measure the brand value of the products. This is significantly
important in the FMCG (fast moving consumer goods) market where companies
have recently developed into 'houses of brands' such as P&G and Unilever.
There is another model explained by Martensen and Gronholdt (2000) which is the
conceptual Brand Equity Model which is formulated as a causal model as shown in
Figure 1 below. The model in turn links the final response variable, customer-brand
relationships, to the drivers leading to emotional brand evaluations and rational
brand evaluations, which are in turn linked to the product quality, service quality,
price, brand promise, brand differentiation and brand trust and credibility. In this
model there are two routes that are being proposed so as to create brand strength
which is an emotional route and a rational route as well as a combination of both
these routes. Martensen and Gronholdt (2000, p.76) states in their article that 'the
development of the model is based on relevant theories and empirical surveys, as
well as practical experience with the measurement of branding, brand performance
and loyalty'
Fig.1 The Consumer-Based Brand Equity Model
(Source: The Asian Journal on Quality 2000, p.75)

Customer-based brand equity has been explained by Lassar, Mittal and Sharma,
(1995) in their article as the contra-distinct effect of brand awareness taking into
consideration consumer response to the marketing of the brand. Thus brand equity is
analyzed from the perception of the individual consumer. Thus, customer-based
brand equity takes place when the consumer is pretty familiar with the brand and
holds some strong, favorable, and unique brand associations in their memory
(Kamakura and Russell, 1991). Based on this definition by Lassar, Mittal and
Sharma, (1995), they believe that there are five important characteristics to consider
when defining brand equity. Lassar, Mittal and Sharma, (1995) defines the five
important considerations in their article which are; 'First, brand equity refers to
consumer perceptions rather than any objective indicators. Second, brand equity

refers to a global value associated with a brand. Third, the global value associated
with the brand stems from the brand name and not only from physical aspects of the
brand. Fourth, brand equity is not absolute but relative to competition. Finally,
brand equity positively influences financial performance.' Following their results in
the research they carried out, it is recommended by Lassar, Mittal and Sharma,
(1995) that firms should measure the equity associated with their specific brand on a
regular basis. They have provided a simple paper and pencil instrument to measure
the company's brand equity and the advantage of this scale is the ability to measure
individual dimensions of brand equity. This measurement will indeed enable
companies to properly evaluate their marketing strategies and also if the brand
equity is seen to have taken a toll, the feedback from consumers will help in
identifying the problems; advertising or positioning problem and also providing
feedback on where improvements need to be made.
Unlike the previous studies, which focus on preferences, Kamakura and Russell
(1993) have examined consumers' actual purchase behavior by means known as
segmentwise logit model. The empirical estimation of the model is based on real
purchase data from supermarket at the checkout counter using the checkout
scanners. Eventually it lead to the breakdown of the brand equity into two major
sources decomposing the brand value into tangible and intangible components. They
eventually decompose the brand value leaving the Intangible brand value so as to
enable the managers to manage the sources of the value but this approach does not
evaluate the consumer-based equity at the individual consumer level. According to
Swait et al. (1993) the entire utility value used is attached to a brand rather than
isolating specific parameters. The argument put forward by Swait et al. (1993) is that
brand equity affects the components of the utility function throughout and therefore
any measure of brand equity should show total utility. Based on this point, Swait et
al. (1993) proposed a new measure of consumer-based brand equity which is called
'Equalisation Price'(EP), encompassing 'the monetary expression of the utility a
consumer attributes to a bundle consisting of a brand name, product attributes and
price' as stated by them. Shankar et al. (2008) have developed model of brand equity
that encompasses financial and consumer survey data. The two increasingly
dependent components of brand equity offer value and relative brand importance.
Relative brand importance is a measure that searches to isolate the effect of the
brand image on consumer utility which is relative to the effect of different factors
affecting consumer choice. Although this method is beneficial as it combines both
financial and consumer data, it makes comparing the brand with rival brands

difficult as the competitors financial measures are often unavailable at the brand
level.
Lassar et al. (1995) have taken an indirect indirect approach to measuring customerbased brand equity which they defined as: 'the enhancement in the perceived utility
and desirability a band name confers on a product'. Based on previous studies Lassar
et al. (1995) suggested five customer-based brand equity dimensions, namely; value,
performance, social image, trustworthiness and commitment. Taking a more holistic
approach, Vzquez et al. (2002) define consumer-based brand equity as being the
'overall utility that the consumer associates to the use and consumption of the brand;
including associations expressing both functional and symbolic utilities'. The
resulting scale developed by Vzquez et al. (2002) has a number of advantages over
previous methods of brand equity measurement. Unlike previous methods which
comprise complex statistical modeling, the Vzquez et al. (2002) method is relatively
easy to run. The developed scale also elaborates on the sources of consumer-based
brand equity through four dimensions. Finally, the scale allows measurement at the
individual level.

Although there is an overall agreement vis-a-vis the brand to the product, extra
approaches to measure brand equity have nowadays given way to a more holistic
metrics to be used. Having looked at mainly customer-based brand equity, there are
two main measurement methods that have been identified. The first method is to
quantify brand equity directly and the other method is to measure brand equity
through demonstrable dimensions or through price premium. I believe that there is
no such thing a specific or unique measure for brand equity, it all depends on the
market sector and life-stage of the brand so as to select an appropriate set of
measures to assess the brand equity.