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Brand equity







Definition of Brand Equity

A brand is a name or a symbol of a company for a product. When a company develops a new product, branding is a very important step. The brand gives a certain value to a product; the value depends on the consumer's opinion - if the product is well recognized in the minds of them or not. This phenomenon is called brand equity- the tangible and even more, the intangible value that a brand adds to a product or to a service.




The Value of a Brand


Brand equity has several factors with which the value of a brand can be expressed:

1. The monetary value is the amount of the income expected from a branded product in contrast to what might be expected from an identical, but unbranded product.

Example: Grocery stores sell unbranded versions of branded products. The branded and unbranded products are produced by the same companies, with the same system and the same ingredients but they carry a store brand label like Spar apple juice which is also produced by Rauch.

2. The intangible value of a product that can not be expressed by the price or by its features.

Example: Nike has created many intangible benefits for their athletic products by associating them with star athletes. Children and adults want to wear Nike's products to feel some association with these star athletes. It is not the physical features that keeps the demand high for their products, but the marketing image that has been created.

3. The perceived quality of a brand, which are the overall perceptions of quality and image a product has, independent of its physical features.

Example: The brand names of Mercedes and BMW are synonymous for high-quality, luxurious automobiles. Years of marketing, image and quality building have lead consumers to associate a high level of quality in everything they produce.

4. Brand extension, which means that a company uses a successful brand as a platform to launch new products. The benefits of brand extensions are the influence of existing brand awareness to the consumer to reduce the costs of advertising and a lower risk for the customer.

Example: If a consumer is satisfied with skis made by "Head" he or she normally is faithful to that brand and will buy his or her ski canes and maybe even the glasses from that company

If a company has a strong brand equity they normally have the following benefits:

§ Brand equity makes it easy to predict the income of a new product that is launched

§ Brand equity increases the cash flow of a company by increasing the market share, it reduces promotional costs and allows premium pricing

§ Brand equity is a value that can be sold or leased



Negative Brand Equity


A badly mismanaged brand can also have negative brand equity, meaning that potential customers have such low perceptions of the brand that they think the product has less value cause they couldn't build their objective opinion of all the features of the new product. Some brands even get a bad reputation that results in negative brand equity.




Example for Brand Equity



Coca-Cola


One of the best examples for brand equity is in the soft drink industry. Without a brand name and all of the marketing dollars that have gone into it, Coca-Cola would be nothing more than flavoured water. Because of the company's long-term marketing efforts and protection and nurturing of their brand name, Coke is one of the most recognizable brands in the world. However, even this marketing giant has trouble with its own brand equity when they handle it improperly (e.g. New Coke). If someone suddenly took their brand name and brand equity away from them, Coke would lose hundreds of millions of dollars.




Building and Managing Brand Equity


There are three stages that must happen in order to build a strong brand:


1. Introduction: A company should introduce a new product with the strategy of using the brand as a platform on which future products can be launched. The customer should associate the same impress as he did with the product before.


2. Elaboration: A company should make the brand easy to remember and so cause repurchase. There should be brand attitude, that is, the consumer should easily remember his or her positive impress of the brand.


3. Fortification: The brand should carry a consistent image over time to get its place in the consumer's mind again if there's a new product and develop a special relationship with the consumer. Brand extensions can further fortify the brand.




Managing Multiple Brands


Different companies have chosen different brand strategies for multiple products.


These strategies are:


Single brand identity à A separate brand for each product.


Example: The Coca-Cola company also produces other soft drinks than only Coke. They are Fanta, Sprite, etc. which are all uniquely positioned and independent from the others and each of these products is single branded although they're produced by the same company.


Umbrella à All products under the same brand.


Example: Sony offers many different product categories such as cameras, music players, television, etc. under one brand.


Multi-brand-categories à Different brands for different product categories.


Example: Minolta produces office machines and also photo films. But the photo films' brand name is Konica.


Family of names à Different brands having a common name stem.


Example: Nestlé uses Nescafe, Nespresso, Nesquik and Nestea for their drinks.




Protecting brand equity


The marketing mix of a company should concentrate on building and protecting brand equity. For example, if the brand is positioned as a premium product, the quality of the product should be consistent with what consumers expect of the brand, low prices should not be used.


A company should not launch a product if the prediction of it is bad because this would be inconsistent with the consumer's perception of the brand. Extensions should also be avoided if the core brand hasn't got a good position on the market yet


Alternative means of brand equity


Building brand equity needs a significant effort, and some companies use alternative means to reach the benefits of a strong brand. Brand equity can be borrowed by using the name for a line of products in the same product category or even for other categories.


Example: This often appears in addition to advertising stuff for example of Mercedes. Mercedes does not only sell cars but also advertising stuff like t-shirts, flags or caps but the brand, the star, is only borrowed.


In some cases, especially when there is a perceptual connection between the products, such extensions are successful. In other cases, the extensions are unsuccessful and can lower the brand equity of a product.




Vocabulary:


brand equity - Markengleichheit


to develop - entwickeln

tangible - greifbar, wahrnehmbar


amount - Betrag

grocery store - Lebensmittelgeschäft

feature - Kennzeichen, Nutzen


benefit - Vorteil


demand - Nachfrage


to perceive - wahrnehmen


perception - Wahrnehmung


association - Verbindung


extension - Ausweitung

to launch - auf den Markt bringen, Markteinführung


prediction - Vorhersage


market share - Marktanteil

premium - herausragend, super-


bad reputation - schlechter Ruf


effort - Bemühung

nurturing - Pflege, Erziehung

improperly - ungewohnt, unpassend


elaboration - Ausarbeitung


repurchase - Wiederkauf


fortification - Erinnerung

to fortify - erinnern, befestigen


stem - Stamm

core brand - Ur,- Haupt- oder Stammmarke


significant - bedeutsam

means - Mittel

 
 



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