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Brand equity is a set of brand assets and liabilities linked to a brand, its name and symbols, that add to or subtract from the value provided by a product or service to a firm and/or to that firm’s customer. For assets or liabilities to underlie brand equity they must be linked to the name and/or symbol of the brand. If the brand’s name or symbol should change, some or all of the assets or liabilities could be affected and even lost, although some might be shifted to a new name and symbol. The assets and liabilities on which brand equity is based will differ from context to context. However, they can be usefully grouped into five categories: 1. Brand loyalty 2. Brand awareness 3. Perceived quality 4. Brand associations in addition to perceived quality 5. Other proprietary brand assets such as patents, trademarks, channel relationships, etc.
Brand loyalty, long a central construct in marketing, is a measure of the attachment that a customer has to a brand. It reflects how likely a customer will be to switch to another brand, especially when that brand makes a change, either in price or in product features. As brand loyalty increases, the vulnerability of the customer base to competitive action is reduced.
A brand will have associated with it a perception of overall quality not necessarily based on a knowledge of detailed specifications. Perceived quality will directly influence purchase decisions and brand loyalty, especially when a buyer is not motivated or able to conduct a detailed analysis. It can also support a premium price which, in turn, can create gross margin that can be reinvested in brand equity. Further, perceived quality can be the basis for a brand extension. If a brand is well-regarded in one context, the assumption will be that it will have high quality in a related context.
The underlying value of a brand name often is based upon specific associations linked to it. Associations such as Ronald McDonald can create a positive attitude or feeling that can become linked to a brand such as McDonald’s. If a brand is well positioned upon a key attribute in the product class (such as service backup or technological superiority), competitors will find it hard to attack.
OTHER PROPRIETARY BRAND ASSETS
The last three brand-equity categories we have just discussed represent customer perceptions and reactions to the brand; the first was the loyalty of the customer base. The fifth category represents such other proprietary brand assets as patents, trademarks, and channel relationships. Brand assets will be most valuable if they inhibit or prevent competitors from eroding a customer base and loyalty. These assets can take several forms. For example, a trademark will protect brand equity from competitors who might want to confuse customers by using a similar name, symbol, or package. A patent, if strong and relevant to customer choice, can prevent direct competition. A distribution channel can be controlled by a brand because of a history of brand performance.