Creating Brand Equity

The American Marketing Association defines a brand as "a name, term, sign, symbol, or design, or a combination of them, intended to identify the goods or services of one seller or group of sellers and to differentiate them from those of competitors." A brand adds dimensions that differentiate the offering in some way from other offerings designed to satisfy the same need. These differences may be functional, rational, or tangible - related to product performance of the brand. They may also be more symbolic, emotional, or intangible - related to what the brand represents.

The Role of Brands

Brand identify the source or maker of a product and allow consumers - either individuals or organizations - to assign responsibility for its performance to a particular manufacturer or distributor. As consumers' lives become more complicated, rushed, and time-starved, a brand's ability to simplify decision making and reduce risk becomes invaluable.

Brands also perform valuable functions for firms.

• Simplify product handling or tracing.
• Organize inventory and accounting records. 
• Offers the firm legal protection for unique features or aspects of the product.

The brand name can be protected through registered trademarks; manufacturing processes can be protected through patents, and packaging can be protected through copyrights and proprietary designs.  Theses intellectual property rights ensure that the firm can safely invest in the brand and reap the benefits of a value asset. Loyalty also can translate into customer willingness to pay a higher price - often 20 percent to 25 percent more than competing brands.

The Scope of Branding

Branding is endowing products and services with the power of a brand. It's all about creating differences between products. For branding strategies to be successful and brand value to be created, consumers must be convinced there are meaningful differences among a category's brands. It is possible to brand a physical good (Ford, Flex automobile), a service (Singapore Airline), a store (Nordstorm), a person (snowboarder Shaun White), a place (the city of Sydney), an organization (American Automobile Association), or an idea (free trade).

Defining Brand Equity

Brand equity is the added value endowed on products and services. It may be reflected in the way consumers think, feel, and act with respect to the brand, as well as in the prices, market share, and profitability the brand commands. A brand has positive customer-based brand equity when consumers react more favorably to a product and its marketing when the brand is identified, than when it is not identified. A brand has negative customer-based brand equity if consumers react less favorably to its marketing activity under the same circumstances.

Three key ingredients of customer-based brand equity are -

1. Brand equity arises from differences in consumer response.
2. Differences in response are a result of consumer's brand knowledge, all the thoughts, feelings, images, experiences, and beliefs associated with the brand.
3. Brand equity is reflected in perceptions, preferences, behavior related to all aspects of the brand's marketing.

Stronger brands lead to greater loyalty and revenue, larger profit margins, less vulnerability to competition, and increase marketing communications effectiveness. A brand promise is the marketer's vision of what the brand must be and do for consumers.

Fig. BrandDynamics Pyramid

 

Fig. Brand Resonance Pyramid

Building Brand Equity

Marketers build brand equity by creating the right brand knowledge structures with the right consumers.

Choosing Brand Elements

Criteria for Choosing Brand Elements

For Building the Brand

• Memorable: Is the element easily recalled and recognized at purchase and consumption? Example Tide
• Meaningful: Is the element credible and suggestive of the category? Does it suggest something about an ingredient or a brand user? Example: DieHard
• Likable: Is the element appealing and inherently likable visually, verbally, and in other ways? Example: Flickr

For Defending the Brand

• Transferable: Can the element introduce new products in the same category or other categories? Does it add brand equity across geographic boundaries and segments? Example: Amazon.com
• Adaptable: Can the element be adapted and updated? Example: Betty Crocker image
• Protectable: Is the element legally and competitively protectable? Can the firm retain trademark rights? Example: Yahoo!

Measuring and Managing Brand Equity
For brand equity to guide strategy and decisions, marketers need to fully understand

1. the sources of brand equity and how they affect outcomes of interest
2. how these sources and outcomes change, if at all, over time. Brand audits are important for the former; brand tracking for the latter.

Devising a Branding Strategy

A firm's branding strategy reflects the number and nature of both common and distinctive brand elements. Deciding how to brand new product is especially critical. A firm has three main choices -
    (1) develop new brand elements for the new product
    (2) apply some of its existing brand elements
    (3) use a combination of new and existing brand elements

Brand Portfolios

The brand portfolio is the set of all brands and brand lines a particular firm offers for sale in a particular category or market segment. Brands can also play a number of specific roles as part of a portfolio.

• Flankers - flanker or "fighter" brands are positioned with respect to competitor's brands so that more important flagship brands can retain their desired positioning. 
• Cash cows - some brands may be retained despite dwindling sales because they remain profitable with virtually no marketing support.
• Low-end entry level - the role of a relatively low-priced brand in the portfolio may be to attract customers to the brand franchise.
• High-end prestige - a relatively high-priced brand can add prestige and credibility to the entire portfolio.

Brand Extensions

Many firms leverage their most valuable asset by introducing new products under their strongest brand names. In fact, most new products are line extensions - typically 80 percent to 90 percent in any one year. Brand dilution occurs when consumers no longer associate a brand with a specific product or highly similar set of products and start thinking less of the brand.

Brands serve as the "bait" that retailers and other channel intermediaries use to attract customers from whom they extract value. Customers are the tangible profit brands to monetize their brand value.

Personal Opinions

Coca-Cola is the most valuable brand equity in the world. Brand name is important in marketing because companies stand behind their brands and standards. Consumers spend more money on brands because of their standard and guaranteed quality of their products. Personally, I will pay more attention to brand when it comes to fruits, vegetables or foods (Example: Dole) because I know some big brands in food industry will stand behind their labels. I do not really concern about brands in clothing, jewelery, cosmetics, and so on. Building up brand equity is good for a company to make big profit and reap on the return but personally, I care much less when it is not related to foods or drugs.