Brand Equity

Brand equity refers to the effects we achieve by marketing and outcomes that accrue to a product
with its brand name compared with those that would accrue if the same product did not have the
brand name. But the most important thing which is considered in these marketing efforts is
consumers' knowledge, which means consumer knowledge is the basis which
manufacturers/advertisers use to respond differently or adopt appropriately adept measures for the
marketing of the brand. The increasing popularity of the study of brand equity is due to the fact that
brand equity is considered most valuable assets that a company has . Brand equity is one of the
factors which contribute to the financial value of a brand. Other elements which can be used in the
valuation of brand equity are changing market share, profit margins, consumer recognition of logos
and other brand associations made by consumers, consumers' perceptions of quality and other
relevant brand values.

Brand equity is an intangible asset that depends on brand associations made by the consumer. There
are at least three perspectives from which we can understand Brand equity:

 Financial Perspective - One way includes measuring brand equity to determine the price
premium a brand commands over a generic product. For example, if consumer’s willingness
to pay is $100 more for a branded television over the same unbranded television, this
increased Willingness to pay provides important information about the value of the brand.
However, expenses such as promotional costs need to be considered while measuring brand
equity.
 Brand extensions  perspective- This perspective basically tries to find out how a successful
brand can be used as a platform to launch related products. The benefits of brand
extensions are many like leveraging of existing brand awareness thus reducing promotion
expenditures, and a lower risk from the perspective of the consumer. Furthermore,
appropriate brand extensions are used for enhancing the core brand. However,
quantification of the value of brand extensions is more difficult than direct financial
measures of brand equity.
 Consumer’s perspective - A strong brand signifies the consumer's attitude toward the
product associated with the brand. The reinforcement of the positive attitude is increased by
the experience with a product. The consumer's brand awareness and associations lead to
perceived quality, inferred attributes, and eventually brand loyalty which is a important
metrics to measure Brand equity.

Some of the significant benefits of Strong brand equity are the following:

 Ensures a more predictable income stream.

 Increasing cash flow due to increase in market share, reduced promotional costs, and
charging price premium.
 Brand equity can also be used as an asset which can be sold ,leased or licensed which
contributes to increased income.

However, brand equity of some brands can be negative in value the reason being bad reputation of
some brands. One way to measure negative brand equity is by surveys in which consumers indicate
that a discount is needed to purchase the brand over a generic product.
Building and Managing Brand equity:

In 1989 Peter H. Farquhar in his paper Managing Brand Equity, outlined the following three stages
that are required in order to build a strong brand:

1. Introduction stage- Introduction of a quality product using brand as a platform which can

also be used to launch future products.
2. Elaboration – Increased brand awareness and repeat usage.
3. Fortification - the brand should project a consistent image over the time for reinforcing its
place in the consumer's mind and for developing a special relationship with the consumer.
Brand extensions can be used for further fortification of the brand, but that also with
related products having a perceived fit in the mind of the consumer.

Alternative means to develop brand equity

Building brand equity requires immense effort, and so some companies use alternative means of
achieving the benefits of a strong brand. For example, brand equity can be developed or borrowed
by extending the brand name to a line of products in the same product category or even to other
categories. These extensions are useful and successful when there is a perceptual connection
between the products. But sometimes these extensions are unsuccessful and can dilute the original
brand equity.

Brand equity also can be "bought" by licensing a strong brand for a new product. As already
mentioned the success of brand licensing is not guaranteed and must be analyzed carefully for
appropriateness before doing the same.

Protecting Brand Equity

The marketing mix should target at building and protecting brand equity. For example, if the brand is
projected as a premium product, there should be consistency among product quality and consumer
expectations of the brand i.e. low prices should not be used compete, the distribution channels
should be consistent with what is expected of a premium brand, and the promotional campaign
should build consistent associations.

Finally, potentially dilute extensions that are inconsistent with the consumer's perception of the
brand should be avoided. Extensions should also be avoided if the core brand is not yet sufficiently
developed.

Measuring Brand equity

Brand equity is measured by the following parameters:

a) Loyalty: Customers pass through various levels of preference towards the brand which
ranges from mere awareness and familiarity to strong loyalty and repeat purchases of the
same brand. A strong brand has the brand equity to move its customers from merely
preferring the brand towards being brand loyal. Brand loyalty comes from two stages:
a. Brand’s ability to maintain loyal customers
b. Brand’s ability to convert potential switchers who have been using other brands.
Using the Colombo Morrison method, loyalty index can be calculated which is a weighted
average of repurchase and switching indices.
We have also used the Share tier approach, and tried to monitor how the loyal consumers
perceive our brand to be, with regard to the quality and price of the brand. For this, we have
followed several indices such as price-quality metrics.

b) Price premia: How much premium are the customers willing to pay for the offering if it is
associated with the brand? It is calculated by taking into consideration price that customers
pay for the same product/offering when it is unbranded and how much they pay with the
brand associated with the product/offering. We have used the Van Westerndorp method to
measure the price sensitivity of the customer for a brand.

c) Leveragability: Leveragability is the potential energy to extend a brand successfully into

related, or even unrelated, product categories. Brands are increasingly seen as financial
assets, so the business need to exploit them will grow – and diversification is a lucrative
strategy to many businesses. The degree to which a brand can be extended to diverse
categories determines the “brand elasticity” of the brand. Milward Brown model has
been used to measure brand elasticity for Indigo.