Brand Equity

A brand is a name or symbol used to identify the source of a product. When developing a new
product, branding is an important decision. The brand can add significant value when it is well
recognized and has positive associations in the mind of the consumer. This concept is referred to
as brand equity.

What is Brand Equity?

Brand equity is an intangible asset that depends on associations made by the consumer. There are at
least three perspectives from which to view brand equity:

 Financial - One way to measure brand equity is to determine the price premium that a brand
commands over a generic product. For example, if consumers are willing to pay $100 more
for a branded television over the same unbranded television, this premium provides
important information about the value of the brand. However, expenses such as
promotional costs must be taken into account when using this method to measure brand
equity.

 Brand extensions - A successful brand can be used as a platform to launch related products.
The benefits of brand extensions are the leveraging of existing brand awareness thus
reducing advertising expenditures, and a lower risk from the perspective of the consumer.
Furthermore, appropriate brand extensions can enhance the core brand. However, the value
of brand extensions is more difficult to quantify than are direct financial measures of brand
equity.

 Consumer-based - A strong brand increases the consumer's attitude strength toward the
product associated with the brand. Attitude strength is built by experience with a product.
This importance of actual experience by the customer implies that trial samples are more
effective than advertising in the early stages of building a strong brand. The consumer's
awareness and associations lead to perceived quality, inferred attributes, and eventually,
brand loyalty.

Strong brand equity provides the following benefits:

 Facilitates a more predictable income stream.

 Increases cash flow by increasing market share, reducing promotional costs, and allowing
premium pricing.

 Brand equity is an asset that can be sold or leased.

However, brand equity is not always positive in value. Some brands acquire a bad reputation that
results in negative brand equity. Negative brand equity can be measured by surveys in which
consumers indicate that a discount is needed to purchase the brand over a generic product.
Building and Managing Brand Equity

In his 1989 paper, Managing Brand Equity, Peter H. Farquhar outlined the following three stages
that are required in order to build a strong brand:

1. Introduction - introduce a quality product with the strategy of using the brand as a platform
from which to launch future products. A positive evaluation by the consumer is important.

2. Elaboration - make the brand easy to remember and develop repeat usage. There should be
accessible brand attitude, that is, the consumer should easily remember his or her positive
evaluation of the brand.

3. Fortification - the brand should carry a consistent image over time to reinforce its place in
the consumer's mind and develop a special relationship with the consumer. Brand
extensions can further fortify the brand, but only with related products having a perceived
fit in the mind of the consumer.

Alternative Means to Brand Equity

Building brand equity requires a significant effort, and some companies use alternative means of
achieving the benefits of a strong brand. For example, brand equity can be borrowed by extending
the brand name to a line of products in the same product category or even to other categories. In
some cases, especially when there is a perceptual connection between the products, such
extensions are successful. In other cases, the extensions are unsuccessful and can dilute the original
brand equity.

Brand equity also can be "bought" by licensing the use of a strong brand for a new product. As in line
extensions by the same company, the success of brand licensing is not guaranteed and must be
analyzed carefully for appropriateness.

Managing Multiple Brands

Different companies have opted for different brand strategies for multiple products. These strategies
are:

 Single brand identity - a separate brand for each product. For example, in laundry
detergents Procter & Gamble offers uniquely positioned brands such as Tide, Cheer, Bold,
etc.

 Umbrella - all products under the same brand. For example, Sony offers many different
product categories under its brand.

 Multi-brand categories - Different brands for different product categories. Campbell Soup
Company uses Campbell's for soups, Pepperidge Farm for baked goods, and V8 for juices.

 Family of names - Different brands having a common name stem. Nestle uses Nescafe,
Nesquik, and Nestea for beverages.

Brand equity is an important factor in multi-product branding strategies.

The marketing mix should focus on building and protecting brand equity. For example, if the brand is
positioned as a premium product, the product quality should be consistent with what consumers
expect of the brand, low sale prices should not be used compete, the distribution channels should be
consistent with what is expected of a premium brand, and the promotional campaign should build
consistent associations.

Finally, potentially dilutive extensions that are inconsistent with the consumer's perception of the
brand should be avoided. Extensions also should be avoided if the core brand is not yet sufficiently
strong.
 The Marketing Mix
(The 4 P's of Marketing)
Marketing decisions generally fall into the following four controllable categories:

 Product

 Price

 Place (distribution)

 Promotion

The term "marketing mix" became popularized after Neil H. Borden published his 1964 article, The
Concept of the Marketing Mix. Borden began using the term in his teaching in the late 1940's after
James Culliton had described the marketing manager as a "mixer of ingredients". The ingredients in
Borden's marketing mix included product planning, pricing, branding, distribution channels, personal
selling, advertising, promotions, packaging, display, servicing, physical handling, and fact finding and
analysis. E. Jerome McCarthy later grouped these ingredients into the four categories that today are
known as the 4 P's of marketing, depicted below:

The Marketing Mix

These four P's are the parameters that the marketing manager can control, subject to the internal
and external constraints of the marketing environment. The goal is to make decisions that center the
four P's on the customers in the target market in order to create perceived value and generate a
positive response.
Product Decisions

The term "product" refers to tangible, physical products as well as services. Here are some examples
of the product decisions to be made:

 Brand name

 Functionality

 Styling

 Quality

 Safety

 Packaging

 Repairs and Support

 Warranty

 Accessories and services

Price Decisions

Some examples of pricing decisions to be made include:

 Pricing strategy (skim, penetration, etc.)

 Suggested retail price

 Volume discounts and wholesale pricing

 Cash and early payment discounts

 Seasonal pricing

 Bundling

 Price flexibility

 Price discrimination
Distribution (Place) Decisions

Distribution is about getting the products to the customer. Some examples of distribution decisions
include:

 Distribution channels

 Market coverage (inclusive, selective, or exclusive distribution)

 Specific channel members

 Inventory management

 Warehousing

 Distribution centers

 Order processing

 Transportation

 Reverse logistics

Promotion Decisions

In the context of the marketing mix, promotion represents the various aspects of marketing
communication, that is, the communication of information about the product with the goal of
generating a positive customer response. Marketing communication decisions include:

 Promotional strategy (push, pull, etc.)

 Advertising

 Personal selling & sales force

 Sales promotions

 Public relations & publicity

 Marketing communications budget

Limitations of the Marketing Mix Framework

The marketing mix framework was particularly useful in the early days of themarketing
concept when physical products represented a larger portion of the economy. Today, with marketing
more integrated into organizations and with a wider variety of products and markets, some authors
have attempted to extend its usefulness by proposing a fifth P, such as packaging, people, process,
etc. Today however, the marketing mix most commonly remains based on the 4 P's. Despite its
limitations and perhaps because of its simplicity, the use of this framework remains strong and many
marketing textbooks have been organized around it.