Brand equity measure

From CEOpedia | Management online

Brand equity measure is a key decision criterion which influence marketing managers and marketing mix strategy on national and international market. The measurement allows to assess the competitive possibilities of the brand. By comparing the results of various studies, we have the opportunity to follow the current competitive situation of our brand. Brand equity is influenced by attitudes and behaviour of customers, how particular brand is perceived and how this influence customers decision, company revenue and company profits. Measuring brand equity is complex process which involve identification of how particular brand is perceived, and how this perception lead to financial results. As such this involve measuring of tangible values (money) and comparing them to intangible, hard to measure, quantities (perceptions, attitudes) or customer preferences. Knowledge of this value is crucial during research on brand and preparation of company strategy. For Aaker[1], brand equity is a collection of brand assets and liabilities associated with a brand name or logo that add value to both the consumer and the brand owner.

Aaker defined the most effective criteria for describing brand equity [2]:

  • They should closely reflect brand equity.
  • They should include the measurement of market factors, because these describe the possibilities in sales and profits in the future.
  • They should be sensitive to changes in the value of equity.
  • It should be possible to implement in as many market segments as possible.

Components of the brand's equity

The brand's equity consists of six elements[3]:

1. Brand awareness means that the customers are aware of the brand and can associate it with the specific product/category. Awareness triggers the rest of the components of the brand equity building process. Brands with a high level of recognition have a positive impact on purchasing decisions in all phases of consumer decision making. The leading indicator of consumer awareness of your company is "participation in a conversation" or the amount of time a brand appears in everyday conversations about the products and services that you offer.

2. Brand loyalty. A brand loyal person repeatedly chooses one brand over others offering the same product. Loyal customers not only result in repetitive sales, but they also are the best source for word of mouth marketing. A loyal and satisfied customer also has a tendency to recommend the brand to other people.

  • how many customers are coming back?
  • how often they come back?
  • would you recommend the product or service to others?

3. Brand associations is anything which the customers think of or relate to the brand. Interactions with the brand give rise to the associations. These could be employees, color, advertisements, voice, language, experience, etc. Advertisements, online & offline presence, and pre-sale, sale, and post-sale interactions give rise to brand associations.

4. Perceived quality - Customers assess the brand by comparing its offering to the offerings of the competitors on the basis of certain qualitative and quantitative parameters. Products with high perceived quality are attractive for all levels of distribution channels, they provide a solid basis for higher margins that increase profitability.

5. Brand experience is the aggregate of experiences of the customer with the product offered and the brand overall. It includes pre-sale, sale, and post-sale experiences with the brand along with the experiences with the product offered.

6. Brand preference is the use of the company's products or services, even if there are equally priced and equally available alternatives. Brand preferences are important for companies because they provide customer loyalty rates, the success of their marketing tactics and the strength of individual brands.

Brand equity assessment tools

Brand Asset Valuator (Young & Rubicam) According to this model, brand equity is composed of four elements. It consists of:

  • Differentiation.
  • Relevance.
  • Esteem.
  • Knowledge.

These elements define both the current characteristics of the brand as well as its potential weaknesses and threats and opportunities. Their mutual relations are important, showing the strength of the brand expressed by high gross margins and other competitive advantages.

BrandDynamics (SMG/KRC) It is based on two dimensions: the value of the consumer, which expresses the size of the potential sale and qualitative factors that determine the sale.

Brand Building (NPD Group) The most important assumption of the model is that brand equity is based on consumer loyalty and repeatability of purchase. The creative aspect is the ability to find a relationship between consumer attitudes and their shopping activities. The technique divides consumers into several groups depending on the degree of loyalty (truly loyal, sensitive and potentially loyal).

Brand Equity Tracking (Tandemar) The model developed at Tandemar includes five area of brand capital:

  • Uniqueness - whether the brand has a unique image and / or attributes of the product.
  • Knowledge - brand recognition and the level of knowledge about it.
  • Popularity - what is the opinion of a given brand.
  • Relevance - how important it is to use a brand from the point of view consumer.
  • Binding - how strongly the user is connected with the brand in the sense of purchasing and using.

Examples of Brand equity measure

  • Brand Awareness: Brand awareness measures the public's recognition of a brand. This is often done through surveys and market research. A brand awareness study can measure how well-known a brand is, how easily people can identify the brand, and how well people can recall the brand. For example, Nike's brand awareness is very high, so most people can identify the Nike logo and will be able to recall the brand name when prompted.
  • Brand Loyalty: Brand loyalty measures how likely customers are to continue to purchase from a particular brand. Brand loyalty studies can measure customer satisfaction, how often customers repurchase from a specific brand, and whether customers prefer that brand over others. For example, Apple customers tend to be highly loyal to the brand, preferring Apple products to those of other brands.
  • Brand Equity: Brand equity measures the overall value of a brand, taking into consideration its awareness, loyalty, and the perceived value of the brand. Brand equity studies can measure the overall value of a brand, how customers perceive the brand, and the emotional connection customers have with the brand. For example, the brand equity of Coca-Cola is very high given its long history, strong customer loyalty, and the emotional connection customers have with the brand.

Advantages of Brand equity measure

Brand equity measure provides a variety of advantages that can be used to inform decisions and strategies in marketing. These advantages include:

  • Ability to assess the level of customer loyalty to a brand - This is especially helpful for brands that are trying to increase brand recall and recognition. By measuring brand equity, companies can determine how well their brand resonates with customers and identify areas to improve.
  • Ability to understand the strength of the brand in the market - Measuring brand equity can provide an understanding of how well the brand is performing compared to competitors. It also allows companies to track their progress and make necessary adjustments to stay ahead of the competition.
  • Ability to measure the brand’s impact on sales and revenue - By understanding the impact of the brand on sales and revenue, companies can determine the return on investment of their marketing efforts. This can help them determine which strategies are most effective and which need to be adjusted.
  • Ability to assess customer sentiment towards the brand - Brand equity measures can provide insights into how customers view the brand. This can help marketers to identify areas where the brand can be improved to better meet customer needs and expectations.
  • Ability to inform marketing strategies and decisions - By understanding the brand’s position in the market, companies can make informed decisions about their marketing strategies and tactics. This can help them focus their efforts on the most effective tactics for achieving their goals.

Limitations of Brand equity measure

Brand equity measure is a key decision criterion which influence marketing managers and marketing mix strategy on national and international market. However, there are some limitations associated with it. These include:

  • It can be difficult to accurately measure brand equity, as it is based on consumer perception, which may be difficult to quantify.
  • It does not take into account the brand's competitive environment or the ability for a brand to adapt to changing market conditions.
  • The results of brand equity measurement may be difficult to interpret, as the data may not accurately reflect the brand's overall performance.
  • It may be difficult to develop brand equity measures that are applicable across different markets and cultures.
  • It does not take into account the long-term effects of a brand's marketing activities.

Footnotes

  1. ↑ Aaker D. A., (1991)
  2. ↑ Aaker D. A., (1996)
  3. ↑ Aaker D. A., (1996)


Brand equity measure — recommended articles
Brand value chain — Perceived quality — Analysis of customer — Customer loyalty — Market segmentation process — Incremental sales — Client satisfaction — Importance of market segmentation — Key success factors

References

Author: Marta Bodzioch

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