Brand equity – assets and liabilities
Brand equity is defined as the set of brand assets and liabilities associated with a brand, its name, and its symbol that add to or subtract from the value provided by a product or service to a firm and/or to that firm’s customers. If the brand name or symbol changes, some or all of the assets or liabilities may be affected and even lost, although some may be moved to a new name and symbol. According to Aaker (1991), the assets and liabilities on which brand equity is based will vary according to context. However, they can be grouped into five categories:
1. Brand loyalty
2. Brand name (awareness)
3. Perceived quality
4. Brand associations
5. Other own brand assets
Brand Loyalty –
It is expensive for any business to acquire new customers and relatively cheap to retain existing ones, especially when existing customers are satisfied or satisfied with the brand. Competitors may even be discouraged from spending resources to attract already satisfied customers. Furthermore, higher loyalty means greater commercial leverage; as customers expect the brand to be always available.
Brand Awareness –
People often buy a familiar brand because they feel comfortable with the familiarity or assume that a familiar brand is likely to be reliable and of reasonable quality. When consumers feel uneasy about a product’s name, they will avoid the product – and that translates into lost sales. Brand names should be easy for customers to visualize and this includes pronunciation and spelling.
Perceived Quality –
A brand will have an overall quality perception associated with it, which is not necessarily based on knowledge of detailed specifications. The perception of quality can take slightly different forms for different types of industries. Perceived quality means something different to Compaq or IBM than it does to Coca-Cola or Pepsi. Perceived quality will directly influence purchase decisions and brand loyalty, especially when the buyer is unmotivated or unable to perform detailed analysis. It can also maintain a premium price, which in turn can create a gross margin that can be reinvested in brand equity. In addition, perceived quality can be a basis for brand extension. If a brand is well rated in one context, then the assumption will be that it will have high quality in a related context.
Brand associations –
The core value of a brand name is often based on specific associations associated with it. Associations with, for example, the Jaguar car brand can make the experience of owning and driving one ‘different’. If a brand is well positioned on a key attribute in the product class (such as technological superiority), then competitors will find it difficult to attack it. If they try a frontal attack by claiming superiority through this dimension, there will be a credibility problem. They may be forced to find another, perhaps inferior, basis for competition. Thus, an association can be a barrier to competitors.
Other Brand Own Assets –
This fifth category represents such other proprietary brand assets as patents, trademarks, and channel relationships. Brand assets will be most valuable if they deter or prevent competitors from undermining customer base and loyalty. These assets can take several forms. For example, a trademark will protect brand equity from competitors who may want to confuse customers by using a similar name, symbol or package. A patent, if strong and relevant to the customer’s choice, can prevent direct competition. A distribution channel may be controlled by a brand due to a history of brand performance.
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