Brand equity is the added value endowed to products and services with consumers. It may be reflected in the way consumers think, feel and act with respect to the brand, as well as it prices, market share and profitability it commands. Companies can create brand equity for their products by making them memorable, easy to recognise, superior and quality and more reliable.
In simple words, Brand equity refers to a value premium that a company generates from a product with a recognizable name when compared to a generic equivalent or the value of the brand as determined by the consumer’s perception of the brand (which can be positive or negative) (also known as customer based brand equity).
An example of a brand with high brand equity is Apple. Although Apple products are very similar in terms of feature to other brands, the demand, customer loyalty and company’s price premium are among the highest in consumer tech industry. Apple ranks consistently as one of the most valuable brands in the world.
What are the components of brand equity?
The most important components of brand equity are the following:
- Brand Recognition: When we come across brands like Google or Apple or Amazon.com, we instantly recognise it. These brands have become household names and therefore carry significant brand equity.
- Brand awareness: Ideally, the company would want to make the customers as brand-aware as possible, let them know that why the company is in business, help them understand the product, make the product indispensable to the customers.
- Customer Experience: Negative customer experience can have significant repercussions for a business’s brand equity, just as a positive customer experience can improve brand equity. Customer experience refers to the customer’s perception of the product or service.
- Customer Preference: When the customers routinely choose a particular companies products over those of competitors, the company’s brand equity skyrockets. Customer preference plays a big role in how a company is perceived by the general public and by a specific target market.
- Customer Retention: It follows customer preference. If the customers prefer a particular company’s products over those of the competitors, they will keep coming back for more.
- Perceived Quality: Perceived quality refers to the amount of money a customer believes that a product is worth rather than the actual price tag on the product.
- USP: A company isn’t worth much without a USP. A unique selling proposition is a differentiating factor that sets apart one product from its competitors.
A brand has a positive customer based brand equity when customers react more favourably to a product and the way it is marketed when the brand is identified than when it is not identifies. A brand has a negative customer based brand equity when customers react less favourably to marketing activity for the brand under the same circumstances.
What are the key ingredients of customer-based brand equity?
There are three different key ingredients of customer-based brand equity:
- Brand equity arises from differences in consumer response. If no difference occur, the brad-name product is essentially a commodity, and competition will probably be placed on the price.
- Difference in response are a result of consumer’s brand knowledge, all the thoughts, feelings, images, experiences, and beliefs associated with the brand. Brands must create a strong, favourable and unique brand associations with customers as have Toyota (reliability) or Amazon.com (convenience and wide selection).
- Brand equity is reflected in perceptions, preferences, and behaviour related to all aspects of the marketing of a brand. Stronger brand earns greater revenue.
Why is brand equity important?
Brand equity is not just essential for Fortune 500 companies but even those in the knowledge Commerce market.
- Consumers often make decisions based on brand equity. They buy products from companies in which they have confidence, those they recognize, and ones that consistently provide value. Without brand equity, the company would lose the market market share to the competitors.
- If a particular company ever wants to raise prices, they will need a significant brand equity.
Brand Equity Model:
Keller’s brand equity Model: It is perhaps the most popular model. It helps business to figure out how to increase brand equity based on the most important components. It is also known as CBBE model which stands for Customer based brand equity. As marketing evolved, the focus shifted on the consumers and the companies were faced with one important question which was “ how to establish a connection with the customers?” and the answer was to build a strong brand. Hence, the CBBE model came into existence.
The CBBE model is actually a pyramid that tells us how to build a brand equity by understanding the customers and implementing strategies accordingly. If there is a connection between the brand and the customer, it will result in a positive brand equity and hence the brands stands a better chance of acquiring and retaining the customers, thereby giving a huge advantage of the companies.
Example : Brands like Nike and Adidas which are focused on sports gear and equipment. It is through years of targeting and then branding in this category that they have been able to build a solid brand equity. Same is the case with luxury sports car market brands like BME and Audi, which have worked hard to reach where they are today.
What are the four levels of the brand equity triangle?
Level 1: Brand identity or who you are?
Brand identity is the way the customers look up to a brand and how they distinguish each brand from another. It is how the brand defines itself in the eyes of the customer.
Brand identity is built when customers are aware of the products the company offers. The company here is supposed to build a strong brand identity for the benefit of the brand and to attract as well as retain the customers.
Since brand identity is the first step in Keller’s Brand equity model, it is the most important step and the base of the Brand equity pyramid. If the base is strong, the pyramid will be stronger. Thus, the stronger the brand identity you build from the start, the better it is for the brand.
For example: Mercedes-Benz is a premium luxury car manufacturer established in 1902. It is a brand recognised everywhere. It is a part of “German Big 3” along with Audi and BMW, the best selling car manufacturers in the world.
Level 2: Brand Meaning or what are you?
Once the customer is aware of the brand, he/she wants to know more about the brand. He/she would like to know whether the brand is reliable, good to use over a long period of time, if it offers good customer service and other important information. The customer is understanding what the brand is and trying to know more about it.
This level of Keller’s Brand equity model is divided into 2 parts:
A) Brand Performance – The performance of the brand is important for the customer. Companies like Bosch, Siemens, Caterpillar and many others have become what they are because of their performance over time. Not only physical products, even services like Google, Microsoft, Apple Operating systems are loved and trusted because of their performance over time. There are 5 further factors in performance which are considered:
- Product Features
- Product Reliability
- Customer Service
- Style and Design
- Pricing of the product or service.
B) Brand Imagery – In this, the company analyses the image of the brand in the eyes of the customer, how the customer perceives the brand, whether the brand is considered to be rugged or soft.
BMW needs to be rugged but Barbie needs to be soft as a brand. Targeted marketing and word of mouth can build a strong brand image for the brand.
Continuing with the Mercedes example: Mercedes-Benz cars are world renowned for their safety. Indeed, the German automakers were the first to introduce the airbag with ABS system. Cars are renowned for their comfortable and refined leather trims (Performance).
Also, It is known as a “masculine brand”, notably through the design of its cars and it doesn’t hesitate to communicate this.
Level 3: Brand Response or what are the feelings for the brand?
Once a customer buys the product, he builds up expectations towards the brand and the purchase. If the reality matches the expectations, the customer will be happy and have positive feelings about the brand. If the product goes beyond expectations, it will generate word of mouth and may turn the customer to become a brand advocate. Such positive experiences generate “Feelings” in the minds of customers.
However, if the experience is bad, the customer is left with negative feelings for the brand which can also be known as “Judgements”. As per Keller’s Brand equity model, a brand which has more feelings then judgements is a brand which benefits in building brand equity. Hence, the Brand response is higher up in the Brand equity pyramid.
The balance between “Judgements and feelings” is important for the brand to build a brand equity. If there are too many customers holding negative judgements for the brand, the company may try its level best to sell the products but the products will not sell in the market due to these judgements. As a result, the measurement of post-sale behaviour and brand response in the market is essential for a company which is serious about building brand equity. Companies need to build positive feelings for which they need holistic marketing so that the customer is happy.
Considering the features and the history, Benz cars are seen as prestigious and high quality.
Level 4: Brand Resonance – A strong Brand relationship:
A brand advocate is one who has reached the final level of the Brand equity pyramid in Keller’s Brand equity model. There are very few brands which reach this level. This is a level where there is a huge social and psychological connect of the brand with the customer.
Harley Davidson is a brand which is the epitome of Brand resonance in the CBBE Model. Harley Davidson bikers are known to love their bikes and the feeling of the ride and generally Harley is the only bike they ride. Not only are the customers connected with the brand, if they find another user using the same brand, a connection is built between the 2 customers as well. It’s like finding another friend just because he uses a brand you love.
Continuing with the Mercedes example: Even if the people are not purchasing the car, many people are still connected to it through social media (17m likes on Facebook) and other websites.
The various factors for brand resonance are
- Behavior
- Values and attitude
- Engagement of customers
- Connection and feelings
Pioneer brands try to achieve the level of Brand resonance in the Keller’s Brand equity model.
The takeaway from Keller’s Brand equity model is that it is not easy to build a brand and to do the same you need to start holistically. All your departments across all locations need to be working towards a common goal in mind – Brand resonance and a connection with the end customer.
2019-10-13-1570957810