Managing Brand Equity

What is Brand?

A brand is a distinguishing name and/or symbol (such as logo, trade-mark, or package design) intended to identify the goods and services of either one seller or a group of sellers, and to differentiate those goods or services from those of competitors. A brand thus signals to the customer the source of the product, and protects both the customer and the producer from competitors who would attempt to provide products that appear identical.

What is Brand Equity?

Brand Equity is a set of brand assets and liabilities linked to a brand, its name and 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. They can be grouped into five categories:

1. Brand Loyalty
2. Name Awareness
3. Perceived Quality
4. Brand Associations in addition to perceived quality
5. Other proprietary brand assets-patents, trademarks, channel relationships, etc.

Figure 1: Brand Equity

Providing Value to the Customers: 

Brand-equity assets generally add or subtract value for the customers. They can help them interpret, process, and store huge quantities of information about products and brands.

Providing Value to the Firm:

As part of its role in adding value for the customer, brand equity has the potential to add value for the firm by generating marginal cash flow by enhancing programs to attract new customers or recapture old ones. Brand Equity can enhance brand loyalty and also provide a platform for growth via brand extension.  

What is Brand Loyalty?

The Brand loyalty of the customer base is often the core of a brand's equity. If customers are indifferent to the brand and buy with respect to features, price, and convenience with little concern to the brand name, there is likely little equity. If they continue to purchase the brand even in the face of competition with superior features, price, and convenience, substantial value exists in the brand and perhaps in its symbol and slogans. 

Figure 2: Brand Loyalty

There are several levels of loyalty as the above figure suggests. Each level represents a different marketing challenge and a different type of asset to manage and exploit.

1. The Bottom Loyalty Level: It is the non-loyal buyer who is completely indifferent to the brand. This buyer maybe termed as a switcher or price buyer. 
2. The Second Loyalty Level: This includes buyers who are satisfied with the product or at least not dissatisfied. These buyers may be treated as habitual buyers.
3. The Third Loyalty Level: This consists of those who are also satisfied and have switching costs-costs in time, money, or performance risk associated with switching. This group might be called switching-cost loyal.
4. The Fourth Loyalty Level: This level consists of those that truly like the brand. Their preference may be based upon an association such as a symbol, a set of use experiences, or a high perceived quality. This group might be termed friends of the brand because there is a emotional/feeling attachment. 
5. The Fifth/Top Loyalty Level: They have a pride of discovering and/or being users of a brand. The brand is very important to them either functionally or as an expression of who they are. This group's confidence is such that they will recommend the brand to others.

Measuring Brand Loyalty

• Behavior Measures: A direct way to determine loyalty, especially habitual behavior, is to consider actual purchase patterns.
• Switching Costs: An analysis of switching costs can provide insight into the extent to which switching costs provide a basis for brand loyalty. 
• Measuring Satisfaction: A key diagnostic to every level of brand loyalty is the measurement of satisfaction and dissatisfaction.
• Linking of the Brand: A positive affect can result in resistance to competitive entries. It can be much harder to compete against a general feeling of liking rather than a specific feature.
• Commitment: The strongest brands, the ones with extremely high equity, will have a large number of committed customers. 

Maintaining and Enhancing Brand Loyalty

1. Treat the Customer Right
2. Stay Close to the Customer
3. Measure/Manage Customer Satisfaction
4. Create Switching Costs
5. Provide Extras

References: Managing Brand Equity by David A. Aaker

Ayush Agrawal

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