Brand Equity vs Consumer Equity


“Brand Equity” describes the economic value attributable to a brand name and the ability
to generate more income from products associated with that brand versus products from lesser or unknown brands (Leuthesser, et al., 1995; French & Smith, 2013; Spry, et al., 2011). Importantly, Kim et al (2003) found brand equity was equally important within services industries as with physical products.

Jooste, et al (2012) define brand equity as the positive deferential effect on customer response to a product or service that results from the association with the brand name. Aaker & Joachimsthaler (2000), on the other hand, refer to brand equity as a strategic asset that can be the basis of competitive advantage and long term profitability.

This paper will explore how brands have sought to increase brand value through four principles –Brand Awareness, Brand Associations, Perceived Quality and Brand Loyalty. It will then explore newer principles that place value generation within the ambit of the customer’s direct influence, concluding how brands should evolve their communications.

Brand Equity is the asset associated with the brands’ strength in the market (Dibb, et al., 2006). Companies with higher brand equity could reduce marketing costs whilst able to charge higher prices as the brand would have higher perceived quality, also allowing the company to easily launch brand extensions (Kotler, 2000).
Figure 1, The Major Elements of Brand Equity (Dibb, et al., 2006, p. 11)

According to Kotler (2000) higher brand equity correlated to higher brand name value and perceived brand quality of a higher standard and stronger associations by customers.  Brand equity can thus be illustrated using Figure 1 where brand equity is attributed to four divisions, brand name awareness, brand loyalty, perceived brand quality and brand associations.

Brand Awareness
Kotler (2000), defined a brand as a term, symbol or name that identifies the producer or seller of the product or service. This recognition may also be through a combination of these identifiers.

To make a purchase, customers need to be able to identify the sellers’ brand with sufficient detail (Dibb, et al., 2006). Brand awareness is the anchor to which all other attributes and values are linked, with unaided brand awareness more valuable than aided awareness (Romaniuk, et al., 2004).

Brand awareness, is the familiarity or a liking for the brand and a signal of subsistence or commitment to the brand (Jooste, et al., 2012). A brand is therefore recognised and gets preference over other brands because customers are aware of its value.

Brand Associations
Brand Associations are the images and symbols associated with the brand or a brand benefit (Aaker, 2004). Examples would be the Swoosh logo that associates it with the sportswear company Nike, four interlinking rings associate the customer with Audi, or the five coloured, offset and interlinked rings associating it with the Olympic Games.

These marks are so strong in their association with the brand that they can be separated into their elements or combined with others and still be easily recognised.
Figure 2, Symbols and Marks used by brands to create associations

Perceived Quality
Perceptions of quality by customers has been shown to be directly associated price elasticities and the ability to command a premium, and reduce product returns which negatively impact revenue in the short term and in the long term the ability to build loyalty (Aaker, 1996). Often involved is a competitor comparison and the ability to give the customer a cue as an appropriate reference on your own quality.

Brand Loyalty
To cultivate a larger market and/or revenue share through customer loyalty, brand leadership brings differentiation that can be used as a powerful tool to leverage the brand as an asset (Aaker & Joachimsthaler, 2000)

Loyalty from customers is an indispensable and valuable asset to companies, it helps forecast demand, creates a barrier to entry and also impacts profits due to the willingness of customers to pay premium prices (Hakala, et al., 2012). Based on Aaker’s model as outlined in Jooste et al (2012), brand loyalty reduces marketing costs, attracts new customers and reduces the time to respond to competitive threats.

Kevin Keller developed an alternate model known as Customer-Based Brand Equity (CBBE). CBBE’s foundation is that in order to build a strong brand companies should shape the feelings and thoughts; customers have about their product. This requires building the correct experiences around the brand, so that customers have positive thoughts, opinions, beliefs, feelings, and perceptions toward the brand (Keller, 2001). Remembering that a key pillar in supporting CBBE, remains the existence of initial brand awareness (Romaniuk, et al., 2004).

Within a pyramid, Keller’s model is explained by going through four levels required to create a successful brand.
Figure 3, adapted from Keller’s pyramid model (Keller, 2003)
Brand identity – the need to make sure that the brand stands out, and customers recognise it and are aware of it.
Brand meaning – the building blocks of meaning are performance and imagery. Performance is how well the product meets the customers’ needs and imagery how well the product meets the customers physiological and social needs.
Brand responses – how customers judge and respond at an emotional (feelings) level to their perceptions of whether the product has met the promises it made regarding credibility, quality and superiority vs competing brands.
Brand Relationships – being at the top of the pyramid is indicative of the difficulty to reach this position. But as the most desirable position to reach, the brand would have achieved brand resonance where customers feel a deep, psychological bond with the brand. The attitudinal attachment seen from customers’ fosters loyalty and active engagement around the brand.

Keller argued the most valuable block in brand building is brand resonance, and that occurs once the other blocks have been established. The result is a brand which customers will actively seek and have a high degree of loyalty towards. Keller’ in explaining his model, felt that upon achieving true resonance other benefits would flow such as higher price premiums (margin) and greater efficiency and effectiveness of marketing communications (Keller, 2001) (Keller, 2003).

Whilst Keller’s model builds upon Kotler’s (2000) explanations, it adds the emotional attribute that appeals to the customer. The foundation of CBBE is the creation of familiar brands with strong, positive and absolutely unique brand associations. In order to achieve this level of higher loyalty, brands need to be in touch with the needs and desires of the customer and ensure they meet those by altering themselves to appeal to those traits and not try sell them features and benefits of existing products. Hence it’s not the brand that gives you the equity, but it’s the customer that passes their value onto your brand.

“Customer-based brand equity is defined as the differential effect of brand knowledge on consumer response to the marketing of the brand” (Aaker, 2004, p. 8).

Renowned advertising executive Kevin Roberts, describes how brands need to establish deep emotional connections with existing and potential customers and to accomplish this, marketers should be in tune with customers’ needs and wants. “Brand managers no longer own ‘their brand’. Brands are owned by the people who love them” Roberts as quoted (Cameron, 2015).

Roberts’ marketing concept where brands are replaced by Lovemarks (Roberts, 2004), is explained through the use of selling concepts and communications strategies.
Figure 4, Love Respect Axis (Saatchi & Saatchi, n.d.)

Roberts states that traditional marketing is extinct, as brands are becoming ubiquitous and commoditised. Roberts holds that in order to build successful brands, the focus should be on advertising (marketing communications), and that through the explosion of social media control has shifted from the marketer to the customer, who now directly influences perceptions about a brand (Cameron, 2015). The key to avoid brand extinction according to Roberts is that winning loyalty from customers remains a very real and important focus.

The effect of an actual Lovemark would be that there would be unquestionable loyalty beyond all rational attributes of price or benefit. Brands using emotion to foster love and reputation will tend to win across market share, both volume and margin.

The Lovemark theory describes five ways to be successful as a brand (Roberts, 2015):

Be Inspirational –build experiential environments that physically and emotionally inspire persons within the realm of the brand. Moving away from traditional messaging to creating an experience that the customer is able to experience both at the point of purchase, but also socially within a digital ecosystem.
Be Participatory – don’t be constrained to one part of the value chain and expect for instance, that distributors or retailers are communicating with your customers. All companies need to realise that customers need direct interaction and feedback with the brands themselves, not the resellers.
Be Visual – since most customers see the product prior to feeling, touching or using it, visual impression is paramount. A visual journey with the brand is far more productive than getting the customer to decode other types of messaging.
Be Fast – be agile in the ability to respond to customers changing preferences and market trends, having the courage to fail and quickly incorporate learning to revise direction.
Be Intimate – brands are about one on one relationships between themselves and each customer. Brands are becoming part of the customers’ social experience, where customers also use the brands to project images of how they wish to be perceived. By cultivating friendships, brands become easier for customers to share empathy, love and trust with.

Both CBBE and Lovemarks  are underpinned by the principles of not only appealing to the rational side of the customer but shifting focus to appeal primarily to the emotions of customers which elicit not only cognitive reaction but true emotional bonding with the brand and the only path to true loyalty (Keller, 2001) (Saatchi & Saatchi, n.d.). But the key difference is that they advocate focussing on the customer not the brand. Building customer equity not brand equity, as loyal customers are what ultimately drive higher profitability.

Keller (1993, p. 3) defined brand associations as "informational nodes linked to the brand node in memory that contain the meaning of the brand for consumers". By focusing on an emotional level, the bonds created are not only stronger, but far longer lasting, fostering a greater sense of loyalty. With the rapid development of one to one marketing, especially through the use of social media and online marketing, a brand is now in a position to be able to communicate tailored or personalised messaging to an individual customer to appeal to their specific emotional side and build individual relationships (Balakrishnan, et al., 2014).

Figure 5 Global Digital Trends (Kemp, 2016)

Online channels for sharing and participatory activities represent an increasingly important way to communicate targeted messages to each different segment of customers, in contrast with mediums such as billboards, radio and TV and print where a brand had a singular message which would be received indiscriminatingly by all who saw or heard it (Murdough, 2009). Brands can now measure effectiveness through the conversations that the customers themselves start and contribute to, either with the brand or amongst other customers.

“If you make customers unhappy in the physical world, they might each tell six friends. If you make customers unhappy on the Internet, they can each tell 6,000 friends.” Jeff Bezos founder of Amazon (Stevens, 2010).

Marketers should no longer interrupt customers with messages but are now required need to interact with customers to be successful.

To become a successful brand, that also allows for future brand extension, it is best not to use descriptors of the actual product in the brand name (Aaker, 2004). Amazon uses a non-descript name with a play in its logo showing convenience A to Z.
Figure 6, Amazon's brand extensions

Whilst Amazon began as an online book reseller, it has evolved into the largest e- commerce platform by 2014 ( Investor Relations, 2016). Amazon grew into many different categories of business, on average adding one new category per year, but also sold more product lines augmented with the introduction of its own new products which competed with both brick and mortar and digital companies. Consistent to its promise with every extension was quality of service and quick delivery.

Amazon discovered early on, that the more the customer was involved with the brand the more likely they would act as a brand ambassador themselves. To respond, Amazon in 1996 introduced ‘Affiliate Marketing’ where customers who recommended products to their networks were financially rewarded for the referral (Amazon , 2016). Amazon has continued to build a community around their core brand which not only refers persons to buy, but vigorously act as brand ambassadors.

Figure 7, Applying Keller’s framework to Audi (Facebook, 2016) (Audi, 2015) (Audi USA, 2016)

With a lineage dating back to 1899 and originally known as Auto Union, Audi has been through many evolutions and in 1968 adopted the brand Audi (Audi USA, 2016). Audi has successfully used marketing as a means of selling activities and built its business by creating brand awareness, brand associations, perceptions around quality and finally loyalty to the brand. When applying Keller’s framework to Audi, it can be observed that this previous marketing implementation has not fallen away, rather as customer have become more astute and aware as Audi have evolved their approach to branding and communication.

Whilst the principles described by Kotler (2000) are still to be found, Audi have extended their reach by appealing to the emotions of prospective and current customers on each level and how these meet the customers actual or perceived needs. Audi achieve this using their point of parity such as ‘Modern’, ‘Sporty’ reinforcing though their points of difference, through aspirational associations within their motorsports program.

Figure 8, Rolex endorsements (Google, 2016)
Rolex make extensive use of endorsements through sporting stars and musicians with emotive statements to support the aspiration characteristics of the brand, Berens, et al’s (2005) research found that when the brand was not dominant in the message and was used in an endorsed strategy customer attitudes would be significantly more positive towards the brand.

Although a brand has very high brand equity does not mean customers plan to purchase or importantly can afford to purchase (Penz & Stöttinger, 2012). But they may still aspire to purchase, and so persons who do not intend to become customers are still important as they still create dialogue about the brand, generating aspirational value and perceived quality.

Luxury brands such as Cartier, Rolex, and Hermes maintain active social media presence to stimulate dialogue around their brands, even though the majority of persons interacting with them may not be able to afford the products.

From customer service to the digital journey to retail ambiance, customers’ associations with a brand are based on how it makes them feel. “One of the most important things to understand about a brand is that its value is highly individualised. A customer might grow tired of a brand, or more captivated, independent of how other customers are responding to it.” (Rust, et al., 2004).

Keller and Roberts have not disposed the concepts of brand equity, rather they argue that in building a brand the traditional approaches are no longer valid in a globalised world which has been accelerated with the advent of the internet and its ability to share information across time zones and cultures in an instant.

Being able to push out an extensive marketing message used to be a barrier to entry, but social media marketing is levelling the field, brands no longer need large budgets to impart their messages and this phenomenon is creating a more competitive environment as smaller or previously niche brands are challenging incumbent large brands.

With more than third of global web traffic in 2015 via mobile devices, and expected to rise by 5% annually (Kemp, 2016), brands are competing for attention within a limited screen sizes, which makes succinct messages all the more important.

Reasons (benefits) lead to a conclusion a customer draws about a product, whereas emotion leads to action. The direct product involvement by customers may be considered to considerably influence brand loyalty, and thus control any equity related to the brand.

Selling activities have evolved from shouting a message at a customer, to initiating, and maintaining a dialogue with customers individually. Building Brand Equity is evolving marketing from a return on investment model to fetching return on involvement with the customer.

[Grant Marais]

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