Brand Equity Models: Factors that influence the strength of your brand

We want to discuss and share not only what is Brand Equity, but also how to use it and why it is important to manage your brand all while keeping Brand Equity in mind, especially in times of crisis or uncertainty.

1. What does Brand Equity mean?

If we get “biblical”, Kotler and Keller state: “Brand Equity is the added value that is assigned to a product or service from the brand it carries. It can be reflected in the way consumers think, feel and act about it, as well as in the prices, market share and profitability that the brand generates for the company”. Thus, it is a very important intangible asset for companies because of its psychological and financial usefulness.

In plain words, Brand Equity is the reason why we often do not pay what things cost, but what they mean. Brand Equity is the result of branding.

Brand Equity is made up of ‘brand’ and ‘equity’ (value, capital), and although it is a relatively modern concept, there are primitive examples of branding, going back hundreds or even thousands of years: from herbal mixtures, branded as love potions, to the splinters that were supposed to be the remains of Jesus’ cross, for example.

2. What is a brand?

A brand exists for three equally important reasons:

  1. It identifies and separates from the competition.
  2. It is a sign of a certain level of guarantee (good, bad or average, but guarantee nonetheless) that simplifies the buying process / is a way to save consumers time during the process of evaluating alternatives.
  3. A brand offers consumers a tool for self-expression. In marketing we tend to think that it is the last one that we are concerned with, but this is not true.

For example, if we think of Apple and Samsung. Two brands that are great examples of masterfully constructed Brand Equity, it is easy to identify the three points behind the brand proposition of both manufacturers. And it is also easy to see that few consumers actually pay for what a Smartphone costs, barely 15 euros, but they pay for ‘the guarantee’ of the brand, the ‘convenience’ / ‘simplification’ in the search and purchase process. We are not spending hours researching the technology behind it, and analysing which is the best technology, but we believe the Brand Proposition of one brand or another. For what it ‘means’ for the personal expression of each one, to use an iPhone or a Galaxy.

Consumers do not think “I want this because it’s a dual-SIM, 64GB, 12-megapixel hexa-core smartphone”. Consumers think “I want an iPhone”. 

Likewise, packaging is also one of the key ways to build Brand Equity. Anyone who has bought – or opened – an Apple branded pack knows what I mean. Apple has taken the concept of unboxing to a new level, as a pillar of its branding. Another example is Tiffany’s & Co. which also made packaging a key element of branding, patenting its iconic “Tiffany’s blue”.

Tiffany's & Co. Packaging
Tiffany’s & Co. Packaging

3. What is Brand Equity made up of?

The discussion on how it is measured and what the components of Brand Equity are varies over time and according to each industry/market. The most widely accepted measurement is Kevin Keller’s Costumer-Based Brand Equity.

It is presented to support brand building management, with a hierarchical design, represented in a pyramid, which involves starting at the bottom and working your way up to the top. The four dimensions considered in the model are:

  1. Brand Identity, related to the knowledge of the brand, which ranges from identifying the name or logo to knowing which product category it belongs to and its possible uses.
  2. Referring to what the brand means to the consumer and the tangible or intangible associations that they make to engrave them in their memory, Brand Meaning
  3. Brand Responses, which aims to elicit responses associated with what consumers think or feel about the brand.
  4. Loyalty: at the top of the pyramid is the dimension known as Brand Relationships, i.e., the relationship of customers to the brand in terms of loyalty, attachment and likelihood of building a community with the brand.
keller, brand identity

A B2B brand, such as Intel or Latex, would be measured differently from a FMCG brand, such as Coca Cola or Puma. But almost everyone agrees with most of the elements in the order expressed by K. Keller.

4. Why do we want high Brand Equity?

Brand Equity is a brand ROI, which is the additional -economic- return of selling branded vs unbranded products. Since in marketing we like to measure everything, it is essential data to know if the non-tactical investment has a long-term impact on the value of a brand (which it does).

Strong Brand Equity allows us to influence the market: which brands successfully launch the most innovative products in most industries? And which brands are fastest to reach the level of penetration needed to influence a product category? In the vast majority of cases, the brands with the highest Brand Equity.

High Brand Equity allows us to increase the perceived value to the consumer and therefore raise prices.

Brand Equity plays a fundamental role in increasing the Holy Grail of marketing: consumer loyalty.

brands 2020

5. How are the different components executed?

In order to stop talking about big brands like Apple. Let’s use a much simpler example: let’s take a lemon drink.

At the first level, a lemon drink must have a name and a logo to have an identity. We give it a consistent image, a name like “Fanta”, a slogan like “the refreshing drink”, a price and distribution. Fanta is now already a brand with a separate identity from the other carbonated lemon drinks.

At the second level, to be “meaningful”. Fanta could make its lemons fair trade and communicate this in its advertising, social media etc.

At the third level, response. Fanta researches the needs of its consumers and discovers, for example, that they are more concerned about sugar intake than about fair trade.

Fanta could then decide to bring out a Fanta Zero, without sugar and fair-trade ingredients, thus responding to a new consumers who are very committed to their health and the environment.

At the last level, loyalty and relationships. Fanta could raise the conversation about the ingredients of carbonated beverages or about fair trade, through actions, lobbying to bring about legislative changes or improvements in the quality requirements of the sector, thus leading the trend of preference of its target, innovation and also being a tool of self-expression for consumers who want to take part in this conversation in their daily lives.

As we can see, building Brand Equity is basically strategic, not tactical. It is a marathon which iconic brands have known and know how to run. Perhaps they are great brands precisely because they know how to run marathons?

About the author: Coral Puig | Regional Director Asia
• Regional Director Asia Little Buddha
• Marketing Professor at HKUST Business School
• Former Partner at The Love Comes Asia
July 13th, 2021 | Branding
Little Buddha Brand Design Agency

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