Brand equity is a priority topic for both practitioners and academics. This article presents a new conceptual framework that establishes brand equity and brand value as two distinct constructs. Brand equity moderates the impact of marketing activities on consumer’s actions, implies a consumer based focus, and represents one of many factors that contribute to brand value, which we define the sale or replacement value of the brand, and which implies a company-based perspective.It is possible for a pioneering brand that has established a new category to build brand equity during the time when competitors do not yet exist. Consider Apple’s iPod.
iPod continued leadership more than five years after introduction due to the positive equity built during the time before it faced competition. We can say that brand equity represents what the brand means to consumers, whereas brand value represents what brand means to company. Consider the Rolex brand.I think everyone agrees that Rolex has brand equity. But maybe now we don’t plan to purchase one.
And that fact that a person decides to not purchase is not proof that brand equity does not exist. Figure 1 presents a simplified version of the process a firm might follow to value a brand. Basically, the valuation process is approached from the perspective of the firm and involves “following the money” as it flows from marketplace into the firm and then tracking how this activity impacts shareholder value.Starting with marketplace activity, Individual-level outcomes (purchase) are aggregated up to a brand-level outcomes directly impact the value of the brand. What Figure 1 lacks is an explanation for where the individual-level outcomes come from. Figure 2 shows how the environment, with all its information contributes to brand knowledge.
Consumer based brand equity than impacts the individual-level outcomes that are observable in the marketplace. Brand equity resides within, and is specific to each consumer.Therefor a single, ndividual-level, objective measure of “true” brand equity exists because brand equity resides within consumers, not within the brand. Both the salience of the promise and the level of equity affect the degree to which a consumer’s input- outcome link is moderated (Figure 3), and thus, the impact of equity on observable outcomes. The brand equity construct is conceptually similar to attitude strength, and should manifest the interpersonal advantages of strong brands.Thus defined, brand equity should result in 1.
biased processing of information, 2. persistent attitudes or beliefs that are, 3. resistant to change, 4. behaviours that are influenced by those beliefs. Brand Value: Brand value represents what a brand means to a focal company. We can define brand value as the sale or replacement value of the brand.
Current value is based on projected profits that will grow to a firm that fully leveraged the existing brand equity. Current value defines what is for a particular firm, whereas appropriable value defines what can be, if brand equity is fully leveraged.Brands generate value for their owners through two general mechanisms: directly though the sales volume and profitability by a firm resources and capability and indirectly by lowering costs in areas such as HR. Therefore, customer equity, a CLV-based approach, captures only a part of overall brand value, since it does not include the overhead cost-reducing benefits of strong brands.
From a managerial perspective, the ultimate goal of brand management and brand equity research should be to understand how to leverage equity to create value.
