Is Brand Equity a Reflection of Market Share - Essay Example

IS BRAND EQUITY A REFLECTION OF MARKER SHARE What is a brand and branding? According to the American Marketing Association, Brand is a name, symbol, sign, or a combination of all these to identify the services or products of one seller from competitors. Unlike a product that can be copied by a competitor, a brand is unique (Stephen King). Brands are a major player in today’s modern and highly competitive society. Be it any product or service, nothing is recognised 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) Branding is an individual strategy that comes together to form a marketing technique that you use to communicate your product or service to the target audience. It's an umbrella strategy that helps guide the rest of your marketing," explained Kevin Clarke, a Utah-based small business brand and marketing consultant. In today’s times when there is stiff competition everywhere, branding is the only technique that helps you create an individual identity for your product or service and differentiate it from the 10 other similar products available in the market. Brands simplify shopping experience for the consumer, aid in the processing of information about products and services, and makes consumer feel confident of their purchase decision. Managers have also become aware of the fact that the brand has become an important company asset, and focus is needed on the creation of brand equity (Russell Abratt, Geoffrey Bick). Brand equity Let’s begin by finding out what exactly defines brand equity. Brand equity can be defined in numerous ways. In monetary terms, the amount of additional income expected from a branded product over and above what might be expected from an identical, but unbranded product (e.g., a generic brand or store brand label like Big Apple). Generic or store brands sell for significantly less than their name brand counterparts, even when the contents are identical. This price differential is the monetary value of the brand name. By definition brand equity is an intangible asset that is based on the idea that a brand has a greater value than the sum of its tangible assets. A brand becomes a promise for the consumer who views the brand with certain associations and images. For consumer a brand means something that provides quality, is reasonably priced, reduces risk and saves time he or she would otherwise spend on looking after a product or service. How long the consumer continues his or her association depends on how long the brand is able to live to its promises. As long as the product or service is able to meets consumer’s expectations, with no negative feedback or results, the customer is most likely to continue to buy the brand in spite of other similar brands coming in the market. It is the customer-oriented definition of a brand that is at the heart of the concept of brand equity5. Brand equity is all about customer’s awareness and loyalty to the brand. A study indicates that 50 percent of the worth of Pepsi or Coca Cola lies in their trade mark. If that is lost, the company may run into deep losses. The value of brands has been acknowledged by the financial community and was reflected in the prices paid for Kraft and General Foods by Philip Morris, for Nabisco by KKR, and for Pillsbury by GrandMet. Brand equity not only defines value of one product but also effectively helps a company enter new markets, develop new products and burrow deeper into markets it has already entered (Debbie MacInnis, C. W. Park) 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?”.   It is true to some extent that brand equity is not all about brand awareness. It includes a lot more. Let us consider the example of Kleenex. A known name for tissues. Considering the brand awareness the scenario should be that Kleenex should be the first brand to be named when asked to name a tissue. But how true is that? How many people really think that a Kleenex tissue is better than any other tissue? It is really hard to say. Despite so much brand awareness, Kleenex is still not a widely used brand. This proves that brand equity is not merely a function of brand awareness. It also largely depends on the meaning and reach of the brand. And while awareness is a straightforward, quantitative measure, meaning is a much more complicated factor, shaped by a cocktail of actions, communications, opinions and experiences. Despite being successful in creating brand awareness, Kleenex appears to be snowed under lack of differentiation. The sad part is that it is frequently overlooked when a brand is masked by high awareness. And the sad part is that the perils, the focus within brand equity are persistently tilted towards awareness. This can harm brand equity of a product to large extent on long term perspectives. According to Trendwatching, "Whatever the reason for fading away or disappearing, blame it on mergers, globalisation, mis-management, strategic repositioning, or parent companies going broke, Dormandise represents a real value: just imagine the mountains of dollars, euros or yens you could save by not having to create instant name recognition amongst tens of millions of skeptical twenty, thirty or forty-somethings. The bottom-line is that high awareness plus irrelevance does not equal to brand equity. And there is no saying that if you are strong, you got to be bigger. Lets us take the example of Atari. The brand is recently trying to come back from as dead to establish itself in the market once more. But brand awareness cannot help it do so. a lot more work needs to be done to bring the brand out of 8-bit graphics and give it relevance in the world of Playstation and Xbox. Just because a product has been successful in creating brand awareness, it no ways guarantees that the quality would be good as well. High awareness isn't a shortcut to building brand equity, and over-emphasising recognition in the brand equity equation is a quick way to get an immensely distorted picture of your brand's value. .As Charles DuBois says, "The important thing is this: to be able at any moment to sacrifice what we are for what we could become." In other words, don't let so-called "brand equity" hold your brand back from becoming something even greater than it is today. Or, don't be afraid to lose the bird in your hand while you're going after the ones in the bush 7. Brand equity is an asset and is worth holding if it is able to bring maximum possible return on investment you made. Else, you might have to think of some new techniques. Being sufficed by the fact that the audience is aware of your product would not solve the purpose. Another important term related to brand equity is price premium. It is believed that price premium is an indicator or brand equity. But is this conclusion logical. Let us find out. Brand equity is defined as the sum total value of the purchases of consumers who repetitively buy the brand. The function of consumer’s frequency of purchase, the extent of repetition and the relative price they pay for the brand indicates the brand equity. The whole ideal of brand equity is the ability of the product to provide added value that can be used by the company to its advantage to charge lower marketing costs, price premiums and offer great opportunities for customer purchase. If a brand is not managed properly, it can actually have negative brand equity which would drive consumers to have a low perception of the brand that they prescribe less value to the product than they would if they objectively assessed all its attributes/features. This definitely proves that price premium is an indicator of brand equity. One of the attribute identified by Reilly and Schweihs (1999) affecting the value of brand is price premium the product can command over a generic or unbranded product. Let us look at another example of soft drink industry. Minus the brand name what would coca-cola be? Without the brand and all of the marketing dollars that have gone into, it would be nothing more than flavored water. Coke is one of the most prestigious soft drink names in the world due to company’s long term efforts to market, protect, and nurture the brand. However, let us consider that if someone suddenly took their brand name and Brand Equity away from them, Coke would lose hundreds of millions, if not billions, of dollars. This includes lost sales, lost marketing dollars and lost promotions, additional marketing costs to promote a new brand, and significantly lower awareness and trial rates for their new brand. This proves that all the price premium company gets out of coke is related to brand equity and premium price would hugely suffer if the brand equity is lost. Premium price reflects the perceived value of a brand. A high relative price (over1.00) indicates that a brand’s buyers value it more than the others in the category. At the same time, a relatively lower premium price reflects weak brand “pull”. By using relative price in the calculation of brand equity, we introduce the element of perceived value for the money. Premium for the branded product over the unbranded products defines the brand equity. Positive brand equity allows you to charge a price premium relative to competitors with less brand equity. The premise of the price premium approach is that a branded product should sell for a premium over a generic product (Aaker, 1991).This approach has been considered transparent and easy to understand. Conclusion 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). There is no denying that brands sell and brand equity is an important tool to measure the success or failure of a product. However, brand equity in itself is a broad term which cannot be merely associated with brand awareness. Brand awareness is only one part and not the whole concept of brand equity. One of the most important components of brand equity is customer’s loyalty. From financial perspective, it is customer’s loyalty towards the product in addition to being aware of the product is what defines brand equity. As we have see in examples above that a product might be successful in creating brand awareness but that alone does not makes up for brand equity. Unless the product becomes successful in winning customer’s loyalty, the whole point of creating brand awareness is lost. 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. The essential ingredient in brand equity, therefore, is customer loyalty. A brand’s “consumer franchise” is nothing other than the customers who choose it over alternative brands. Their number and frequency of purchase determine its value. In sum, we believe that a brand is a promise made to its customers and to its owners. Promises kept yield loyal customers and will produce a steady stream of profits for years to come. Brand equity is at its root the aggregate value of the future purchases of its customers. And that is what brand marketing must maintain and grow. Price premium of the product is an indicator of growth and success of brand marketing. As if the company is able to charge a price premium for the product over the general products available in markets, it proves that the product has been successful in creating and maintaining its brand equity and vice-a-versa. References Stephen King, WPP group, London, “Managing brand equity, Capitalizing on the value of a brand name” by David a Kaker 1991; The Free Press; New York, USA Kevin Lane Keller; copyright 2002, “Branding and Brand Equity”; Marketing Science Institute; USA Klein, 1999; “The New Strategic Brand Management: Creating and Sustaining Brand Equity Long Term” Jean-Noel Kapferer; 4th edition, Kogan Page; France Russell Abratt, Nova Southeastern University; Geoffrey Bick, University of the Witwatersrand; “Valuing Brands and Brand Equity: Methods and Processes”: Viewed on 4th September 2007, Joel Baumwoll, 1984, “Food for Thought: Brand Equity; Defining and Measuring Brand Equity”, Viewed on 4th September 2007, Debbie MacInnis and C. W. Park, 23rd March, 2004, “Making the Most of Your Brand: Leveraging Brand Equity through Branding Strategies:; volume 4, No 12 Viewed on 4th September 2007, Ingrid Fetell; Senior Brand Consultant, Australia; March 6, 2006, “It's Not the Size of Your Brand Equity - It's How You Use It”; Viewed on 4th September 2007, Reilly, R.F., and Schweihs, R.P. (1999), “Valuing Intangible Assets”, McGraw Hill, New York Aaker, D.A. (1991), “Managing Brand Value: Capitalizing on the Value of a Brand Name”, The Free Press, New York. Barney, Jay B. (1991), “Firm Resources and Sustained Competitive Advantage,” Journal of Management, 17, 99-120. Read More