What Is Brand Equity, Apart From a Reflection of Market Share - Essay Example

BRAND EQUITY –WHAT IS IT APART FRO REFLECTION OF MARKET SHARE What is Brand Equity? Brands are a major player in today’s modern and highly competitive society. Be it any product or service, nothing is recognized without a brand name. Brands penetrate all spheres of our life; be it social, economical, culture, financial, or even religion or sports. We all want to endure products or services that are known and trustworthy. Because of this pervasiveness they have come under growing criticism (Klein, 1999) Brands are intangible assets that produce added benefits for the growth and profit of business. Brand equity is all about popularity of a product or service with the consumers. Thus brand equity indirectly reflects market share of a product. For example if you have gone out to buy a soft drink from the market and you have two options: coca cola or a brand x, which is not so common. Which one do you think you will go for? The power of a Brand Consider brands like GAP, The body shop, IKEA, or Starbucks Coffee What all does these brands provide us? Inclusion of user communities and trust that our particular brand would provide us value for money and serves the higher purpose of social relevance. Also, most importantly it helps us save us from confusion to go for what and what not. Brand gives us a clear choice and does the thinking for us. Value built up in a brand is known as brand equity. Positive reviews and association of consumers to a particular brand defines its brand equity. This signifies that brand equity is directly proportional to its consumer awareness. The value of a company's brand equity can be calculated by comparing the expected future revenue from the branded product with the expected future revenue from an equivalent non-branded product. Branding has a large effect on the price that customers pay in a market that has similar products. Undoubtedly, brands add value to a service or product. Brand equity describes brands as well as its component value. Brand equity for any product can be viewed from three perspectives: Financial- For example, if consumers are ready to shell out extra dollars to buy a particular brand of mobile phone over another brand, this premium provides information on the power and popularity of brand which represents its brand equity. Brand extensions-A successful brand provides an easy platform for a company to launch related products. Leveraging of existing brands help reduce the advertising and marketing expenditure on new brand launched. Further, appropriate brand extension significantly enhances the core brand. However, the value of brand extension is more difficult to quantify than are direct financial measures of brand equity Consumer-based- Customer’s attitude strength towards a product associated with a brand is significantly known to improve with a strong brand. Experience with a product plays a vital role in increasing the attitude strength of customer. Customer’s awareness and experience with a brand lead to the perceived quality, inferred attributes, and eventually brand loyalty. Benefits of Brand Loyalty Brand equity is an asset that can be reused, leased, and sold. Also, it leads to increase market share which increases the cash flow, allow premium pricing, and reduce promotional costs and facilitates more predictable income stream Three elements of brand equity Brand awareness Brand loyalty Levels of customer loyalty Managing Brand Equity In his 1989 paper, Managing Brand Equity, Peter H. Farquhar outlined following stages to build a strong brand: Introduction-A positive evaluation by customer is important for establishing brand equity. The introduction of the product should be strategize to use brand as a platform for launching future products. Elaboration- Ensure that the brand should be able to develop repeated usage and most importantly, it should be easy to remember. Fortification- The brand should be able to develop a special relationship with the consumer. Brand extensions can fortify the brand only when the related products have a perceived fit in the mind of the consumer. A product is something that is made in a factory; a brand is something that is bought by a customer. A product can be copied by a competitor; a brand is unique. A product can be quickly outdated; a successful brand is timeless. What all does Brand Equity reflect apart from market share? There is no doubt that brand equity reflects market share for any given product or service. Brand equity defines the popularity of a product or service with customers. More popular a product is more is its usage or market share. But brand equity is not all about market share of a product or service. It is also about quality of products, its promises and offerings. It’s about customer loyalty to the product and its longitivity in the competitive market. Even though all these factors in all lead to market share of a product but they are also independent entities that hold individual value in defining a brand’s equity. Brand equity is about the various components and elements that work together to define the success or failure of a product. The elusive notion of brand equity is operationalized in a “share tiering” framework with a combination of multiple constructs: (1) relative barrier or brand price, (2) brand quality perceptions, (3) brand purchase loyalty, and (4) self-report future brand purchase trend. This general measurement framework for “true” brand equity when applied longitudinally permits the evaluation of marketing ROI. In market where there are lots of products, it is brand and brand equity that helps a consumer or customer chooses a product. Promotional efforts are recognized as a potent tool for managing brands, with in-store displays, feature advertising, and price promotions key components of a traditional promotional mix (e.g., Blattberg and Neslin 1990). The brand consists of a functional element and also an emotional or associative element. If a brand has been giving consistent quality and price to consumer it will undoubtedly leave behind competitive products which are less known. This establishes the statement that brand equity is a reflection of marker share. Macé and Neslin (2004) and Bell, Chiang, and Padmanabhan (1999) show that product- or brand-specific characteristics can explain significant variation in promotion elasticities. In addition, Slotegraaf, Moorman, and Inman (2003) show that brands with higher equity are able to generate higher immediate returns from their marketing mix efforts- Can brand equity manage to maintain the market share with new competitors coming in? Certainly it can. In spite of 100 new brands coming in, Levis and numero uno still has the largest market share in denim market. The reason is simple: it has managed to win and maintain the trust of customers all these years even while 100 new brands entered the market. If a brand succeeds in keeping upto what it promised, it can certainly maintain its market share: But it needs to keep upto certain expectations and promises: The brand promise should be right promise. No false claims can make a brand successful on long term basis. Also, the product or service must then deliver on that promise and the brand identity must then represent the promise at all points of contacts over the year. It should not be mere promotional promises but long lasting commitments. Most importantly, the brand equity must add value to the promise Brand size and Brand Equity Brand Equity is the sum total of all the different values people attach to the brand, or the holistic value of the brand to its owner as a corporate asset. Brand equity is seen by many as a goal of marketing activity. Huge sums of money are spent on building and monitoring brand equity. Brand equity is seen by many as the key difference between brands that will continue to be successful and those that will not. It is akin to the idea of ‘brand strength or ‘brand value’. But not everyone is so enthusiastic about brand equity. Andrew Ehrenberg, for instance, doubts it reflects anything other than brand size, saying”if you’re so strong, why aren’t you bigger?”. This statement holds true in some scenarios but not always. For example, some cosmetics brands which are exclusive but expensive are bought by fewer people. On the other hand some cosmetics brands like Revlon, Olay, and L’Oreal have established a brand equity and customer loyalty. These brands are equally strong to brands that are exclusive but due to competitive price and good quality have a loyal customer base and big market. Is price premium an indicator of brand equity? It is claimed that higher priced brands have more equity, Let us see how this statement fits in today’s scenario. Let us try to understand the concept of price premium and premium price and the difference between the two. Most brands that have positive equity should be able to command a premium price. The fact is that if a brand is not able to command a price premium, the whole exercise to establish brand equity is futile. Differentiating between price premium and premium price is vital here. Price premium implies the ability to command a premium over and above what an equivalent product would receive without the benefit of a brand name. On the other hand premium price suggests following a high-price strategy, Two most common examples of premium price yet superior brands are Ray ban and Microsoft. Microsoft which is the second most valuable name in IT industry has used low price strategy for all its products globally and we are aware that it is the most renowned brand. Thus, in the case of Microsoft, overwhelming market share and aggressively low pricing have combined to produce a price premium resulting in significant economic profits. At the same time we should not forget that the low price strategy for Microsoft worked because of its brand awareness and brand loyalty. This attributes to the consistent quality maintained by the Microsoft. Therefore this conclusion is not logical that price premium is an indicator of brand equity. It is wrong to claim that only higher priced brands have more equity. It has to be combination of brand awareness, brand loyalty, price premium and most important quality. Conclusion Brands sell- this is a fact that cannot be denied in today’s times. With the innovation in advertising, marketing and communication technologies, there has been rising awareness in consumers towards brands. Reaserch and studies have established that- From a resource-based view (RBV) perspective, resources that are valuable, rare and imperfectly mobile provide positional advantages that enable a sustainable competitive advantage (Barney 1991; Wernerfelt 1984). With respect to the underlying value of a brand, higher equity brands generate higher market outcomes, such as revenue premium, than similar products without a strong brand name. Brands that are successful in winning customer’s loyalty are definitely there to stay while brands that fail to keep up their promises made to consumers vanish in some time. Therefore, we can always see from the market scenario that some products come and are available commonly in market for years while some products come and go. This definitely establishes that brand equity is a true reflection of market share. Products that own large pies of market share are definitely more popular with customers while others less known brands come and target certain percentage of market and vanish after sometime. Quality plays an important role in establishing brand awareness and customer loyalty leading to brand equity. References Rita Clifton, John Simmons, Sameena Ahmad, 2003, 2004; $21.75; “Brands and Branding”; United States and Canada Barney, Jay B. (1991), “Firm Resources and Sustained Competitive Advantage,” Journal of Management, 17, 99-120. Bell, David R., Jeongwen Chiang, and V. Padmanabhan (1999), “The Decomposition of Promotional Response: An Empirical Generalization,” Marketing Science; 18 (4), 508-526; United States and Canada Christina Hays, Lisa Ingram, Gulnar Surveyor, “Branding and brand equity”. Available: http://fisher.osu.edu/~leone_7/mba848/nov23_99.ppt#336,1,Branding and Brand Equity[2007]’ USA Klein, 1999; ;$37.77, “The New Strategic Brand Management: Creating and Sustaining Brand Equity Long Term” Jean-Noel Kapferer; France Macé, Sandrine and Scott A. Neslin (2004), “The Determinants of Pre- and Postpromotion Dips in Sales of Frequently Purchased Goods,” Journal of Marketing Research, 41 (August), 339- 350. Macé, Sandrine and Scott A. Neslin (2004), “The Determinants of Pre- and Postpromotion Dips in Sales of Frequently Purchased Goods,” Journal of Marketing Research, 41 (August), 339- 350. Peter H. Farquhar (1989); “Managing brand equity”. Available: www.netmba.com/marketing/brand/equity [2007] Stephen King, WPP group, London,$30.14, “Managing brand equity, Capitalizing on the value of a brand name” by David a Kaker; New York, America Slotegraaf, Rebecca J., Christine Moorman, and J. Jeffrey Inman (2003), “The Role of Firm Resources in Returns to Market Deployment,” Journal of Marketing Research, 40 (August), 295-309 Thomas J.  Reynolds and Carol B.  Phillips; In Search of True Brand Equity Metrics: All Market Share Ain't Created Equal. Available: http://journals.cambridge.org/action/displayAbstract;jsessionid=FCDE7BFADDC902F7D3AC89AC22028A3D.tomcat1?fromPage=online&aid=364786[2007] Wernerfelt, Birger (1984), “A Resource-based View of the Firm,” Strategic Management Journal, 5, 171-180 Read More