21MM101 – BRAND MANAGEMENT

LECTURE MATERIAL – LP7

Brand Equity

Brand equity refers to the value and strength of a brand, which is determined by the
perception and recognition it holds in the minds of consumers. It represents the intangible
assets and reputation a brand possesses, which can result in increased customer loyalty, market
share, and financial performance. Here are some detailed notes on brand equity
Definition: Brand equity is a concept that encompasses the value and worth of a brand in the
eyes of consumers. It reflects the positive associations, emotional connections, and overall
perception that consumers have towards a brand.

Meaning and Measuring Brand Equity

Brand Equity is the value and strength of the Brand that decides its worth. It can also be defined
as the differential impact of brand knowledge on consumer’s response to the Brand
Marketing. Brand Equity exists as a function of consumer choice in the market place. The
concept of Brand Equity comes into existence when consumer makes a choice of a product or
a service. It occurs when the consumer is familiar with the brand and holds some favourable
positive strong and distinctive brand associations in the memory.

Brand Equity can be determined by measuring:

 Returns to the Share-Holders.

 Evaluating the Brand Image for various parameters that are considered
significant.
 Evaluating the Brand’s earning potential in long run.

 By evaluating the increased volume of sales created by the brand compared to

otherbrands in the same class.
 The price premium charged by the brand over non-branded products.

Factors contributing to Brand Equity

1. Brand Awareness
2. Brand Associations
3. Brand Loyalty
4. Perceived Quality: refers to the customer’s perception about the total quality of the
brand. While evaluating quality the customer takes into account the brands performance
 on factors that are significant to him and makes a relative analysis about the brand’s
quality by evaluating the competitors’ brands also. Thus quality is a perceptual factor
and the consumer analysis about quality varies. Higher perceived quality might be used
for brand positioning. Perceived quality affect the pricing decisions of the
organizations. Superior quality products can be charged a price premium. Perceived
quality gives the customers a reason to buy the product. It also captures the channel
member’s interest. For instance - American Express.
5. Other Proprietary Brand Assets: Patents, Trademarks and Channel Inter-relations
are proprietary assets. These assets prevent competitors attack on the organization.
They also help in maintaining customer loyalty as well as organization’s competitive
advantage.
Components of Brand Equity: Brand equity is typically composed of various interrelated
components, including:
Brand Awareness: The extent to which consumers recognize and recall a brand. It
involves brand recognition (identifying the brand when encountered) and brand recall
(retrieving the brand from memory).
Brand Associations: The mental connections and attributes linked to a brand in the
consumer's mind. These associations can be functional (related to product performance),
symbolic (reflecting social or personal identity), or experiential (based on past experiences
with the brand).
Perceived Quality: The consumer's perception of a brand's superiority, reliability, and
excellence compared to competitors. It is influenced by factors such as product
performance, customer service, and reputation.
Brand Loyalty: The degree of customer commitment and repeat purchasing behavior
towards a specific brand. Loyal customers are more likely to choose the brand over
alternatives, even in the presence of competitive offers.
Brand Assets: Tangible and intangible elements that contribute to brand equity. This
includes patents, trademarks, copyrights, brand heritage, customer relationships, and other
proprietary assets.
 Importance of Brand Equity:
a. Competitive Advantage: Strong brand equity provides a competitive advantage by
differentiating a brand from its competitors. It helps in capturing market share and
maintaining a premium pricing position.
b. Customer Perception: Brand equity influences how consumers perceive a brand.
Positive brand associations and a strong reputation can enhance consumer trust, credibility,
and purchase intentions.
c. Brand Extensions: Brands with high equity can leverage their positive associations to
introduce new products or expand into new markets more easily. Consumers are more likely
to accept and trust brand extensions from reputable brands.
d. Financial Value: Brand equity has financial implications. Strong brands command
higher market valuations, increased revenue streams, and improved profitability. Brand
equity is often considered an intangible asset on a company's balance sheet.
Building and Managing Brand Equity:
a. Consistent Branding: Maintain a consistent brand identity across all touchpoints,
including visual elements, messaging, and brand voice. Consistency fosters familiarity and
strengthens brand associations.
b. Brand Communication: Develop effective marketing and communication strategies to
build brand awareness and shape positive brand perceptions. This includes advertising,
public relations, social media, and other promotional activities.
c. Deliver Superior Quality: Ensure that the brand consistently delivers high-quality
products or services that meet or exceed customer expectations. Positive experiences
contribute to brand reputation and loyalty.
d. Customer Engagement: Foster meaningful interactions with customers to build
emotional connections and brand loyalty. Engage with customers through personalized
experiences, social media interactions, loyalty programs, and exceptional customer service.
e. Brand Monitoring: Continuously monitor brand performance, consumer feedback, and
market trends to identify opportunities and potential threats to brand equity. Regularly
assess brand health metrics such as brand awareness, brand loyalty, and customer
satisfaction.
By understanding and actively managing these components, companies can cultivate and
enhance their brand equity, which in turn leads to long-term business success and sustainable
competitive advantage in the marketplace.
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