Managing brand equity Brand Equity

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Managing brand equity

Transcript of Managing brand equity Brand Equity

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    M A N A G I N G B R A N D E Q U I T YLTA 1 / 9 9 P . 6 5 1 0 0

    PEKKA TUOMINEN, Ph.D. (Econ. & Bus. Adm.)

    Turku School of Economics and Business Administration



    Managing Brand Equity


    The purpose of this study 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. The concept of brand equity emerged in the early 1990s.

    Brand equity can be regarded as a managerial concept, as a financial intangible asset, as a relation-

    ship 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 build-

    ing it, second borrowing it, or third buying it. Brand equity can create advantages and benefits for the

    firm, the trade or the consumer.

    Key Words: Brands, Brand Equity, Brand Management


    The historical evolution of brands has shown that brands initially have served the roles of dif-

    ferentiating between competing items, representing consistency of quality and providing legal

    protection from copying. Apart from providing the offering with the badge of its maker, there-

    by indicating legal ownership of all the special technical and other relevant features that the

    offering may possess, 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

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    brand becomes of value in its own right. Its accepted qualities can simplify the decision mak-

    ing process by reducing perceived risk while from the suppliers 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. (Bradley 1995, 522

    524; Egan Guilding 1994, 450453)

    1.1 Different characteristics of brands

    A brand is a name, term, sign, symbol, or design, or a combination of them intended to identi-

    fy the goods or services of one seller from among a group of sellers and to differentiate them

    from those of the competitors. Thus, a brand identifies the seller or manufacturer. Under trade-

    mark law the seller is granted exclusive rights to the use of the brand name in perpetuity. This

    differs from other assets such as patents and copyrights that have expiration dates. If a com-

    pany treats a brand only as a name, it misses the point of branding. The challenge in branding

    is to develop a deep set of meanings for the brand. Perhaps the most distinctive skill of profes-

    sional marketers is their ability to create, maintain, protect, and enhance brands. (Kotler 1994,


    Two principal approaches to branding can be identified: 1) manufacturer brands and 2)

    private label brands which are also called own label, distributor, retailer, dealer or store brands.

    Manufacturer brands usually contain the name of the manufacturer. These brands appeal to a

    wide range of consumers who desire good quality and a low risk of poor product performance.

    Manufacturers, which brand their products, face a decision of whether to use individual or fami-

    ly brands or a combination. Manufacturers sell their brands in many competing retail outlets,

    spend large sums on promoting them and frequently run co-operative advertisements with retail-

    ers so that costs can be shared. Recently, there has been considerable growth in private label

    brands, whereby channel members such as retailers are able to sell products using their own

    brand name or label. By doing so these retailers do not incur the large promotional cost normal-

    ly associated with manufacturers brands. Part of this cost saving is usually passed on to the con-

    sumer in the form of a lower price. Private label brands mean that retailers have greater control

    over the supplier, since private labels have become more powerful. (Bradley 1995, 529535;

    Burton Lichtenstein Netemeyer Garretson 1998, 293306; Hankinson Cowking 1993,

    106119; Keegan Moriarty Duncan 1995, 326; Kotler 1994, 448-451)

    A successful brand is an identifiable product (consumer or industrial), service, person or

    place, augmented in such a way that the buyer or user perceives relevant and unique added

    values, which match their needs closely. If a brand provides good service over many years of

    regular use, it acquires added values of familiarity and proven reliability. The added values

    can come for example, from experience of using the brand, e.g., familiarity, reliability, risk

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    reduction and character; from the kind of people who use the brand, e.g., rich and snobbish,

    young and glamorous; from a belief that the brand is effective, e.g., promised satisfaction and

    delivered uniform and consistent quality; from the appearance of the brand, which is one of

    the prime functions of packaging; and from a manufacturers name and reputation. (Bradley

    1995, 517519; de Chernatony McDonald 1992, 1819; Doyle 1998, 169170; Jones 1986,


    Consumers feelings about themselves are often reflected in their brand choices and the

    particular associations embedded for them in brand personalities. One way to build a relation-

    ship between a brand and a consumer is to create an appealing brand personality that is, to

    associate human characteristics with a brand to make it more attractive to consumers. This

    works because personality is generally seen as a bundle of traits e.g., friendliness, neighbor-

    liness and responsibility which make a person distinctive. A considerable amount of research

    has focused on how the personality of a brand enables a consumer to express his or her own

    self, and ideal self, or specific dimensions of the self through the use of a brand. Further brand

    personality can be viewed as a key way to differentiate a brand in a product category, as a

    central driver of consumer preference and usage, and as a common denominator that can be

    used to market a brand cross cultures. (Aaker 1997, 347350; Keegan Moriarty Duncan

    1995, 319)

    Advertising and sponsorship are often used to convey images of prestige or success by

    associating the brand with personalities. Beliefs in efficacy can be created by comparative eval-

    uations and rankings from, e.g., consumer associations and industry endorsements. The design

    of the brand can clearly affect preference by offering cues to quality. In many situations a

    strong company name attached to a new product will provide confidence and incentive to

    trial. (Doyle 1998, 169170)

    A brand can be seen consisting of generic or core, expected, augmented and potential

    levels. The generic level is the commodity form that meets the buyers or users basic needs.

    Within the expected level, the commodity is value engineered to satisfy a specific targets min-

    imum purchase conditions, such as functional capabilities, availability and pricing. With in-

    creased experience, buyers and users become more sophisticated, so the brand would need to

    be augmented in more refined ways with added values satisfying both emotional and function-

    al needs. The augmented brand provides a range of basic ancillary services not associated

    with the core brand. These include guarantees, credit and purchase terms, customer service,

    installation, training and delivery. With even more experience with the brand, it is only crea-

    tivity that limits the extent to which the brand can mature to its full potential level. (Bradley

    1995, 515516; de Chernatony McDonald 1992, 160166; Christopher Payne Ballan-

    tyne 1991, 5762; Doyle 1998, 174179)

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    Brands vary in the amount of power and value they have in the marketplace. Brands are

    complex entities, but ultimately they reside in consumers minds. Consumers are not passive

    recipients of marketing activity and consequently branding is not something done to consum-

    ers, but rather something customers do things with. Brands can be seen developing through

    evolutionary stages. At one extreme are brands that are unknown to most buyers in the mar-

    ketplace. Further, there are brands for which buyers have a fairly high degree of brand aware-

    ness as measured either by brand recall or recognition. Beyond this are brands that have a

    high degree of brand acceptability, i.e., most customers would not resist buying them. Then

    there are brands, which enjoy a high degree of brand preference. They would be selected over

    the others. Finally, there are brands that command a high degree of brand loyalty. (de Cherna-

    tony 1993, 174175; Kotler 1994, 445)

    With the advent of experienced buyers and increasingly sophisticated marketing tech-

    niques, de Chernatony and McDonald (1992, 3141) have identified eight different functions

    of brands. These functions include brand as 1) a sign of ownership; 2) a differentiating device;