keymodels
Brand equity
When and how should brand equity be applied?
Contents
Helps managers answer: To what extent is value driven by our brand?
A corporate or product brand can be a valuable legal and commercial asset. By shaping awareness, preference and loyalty, it may support future revenue and reduce the risk of customer defection. The positive or negative value added by that name and its associations is called brand equity.
When to use it
- To answer: “To what extent does the brand drive value?”
- To monitor a KPI within the marketing and sales perspective.
- To define the required measures, collection method, frequency and source.
- To compare performance with targets, competitors, benchmarks and trends.
Origins
Brand equity became prominent in the late 1980s and early 1990s as managers began treating brands explicitly as assets. David Aaker’s Managing Brand Equity (nineteen ninety-one) organised the concept around awareness, associations, perceived quality, loyalty and proprietary assets. Kevin Lane Keller’s nineteen ninety-three work formalised customer-based brand equity as the different response produced by brand knowledge. Financial valuation and customer-mindset measures address different phenomena and should not be collapsed into an unexplained total.
What it is
Perspective: Marketing and sales.
Key performance question: How much value does the brand create or destroy?
Brand equity is the incremental value attached to products and services because of the brand. It may appear as a price premium paid by consumers or trade partners, stronger long-term loyalty or market-share gains. Saatchi & Saatchi popularised “Lovemarks” for brands whose customers show unusually strong attachment, remain loyal, accept a premium and advocate without payment.
Investors monitor brand equity because a large share of corporate value may lie in intangible assets such as reputation, trademarks, know-how and brand rather than factories or machinery. Damage to customer perception can therefore reduce cash flow and company value. Measurement helps management maintain, build and leverage the asset, improving the return generated from brand investment.
How to use it
Measurement
Combine qualitative diagnosis with quantitative tracking.
Data collection method
Interviews and focus groups reveal which associations exist and whether they are strong, favourable and distinctive.
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