Brand Equity

Brand equity is the value of a brand that is well-known and conjures positive associations, which helps it remain relevant and competitive.

Learning Objective

List the 10 attributes used to measure brand equity according to marketing professor and brand consultant David Aaker

Key Points

Brand equity can manifest itself in consumer recognition of logos or other visual elements, brand language associations made by consumers' perceptions of quality, and value among other relevant brand attributes.
While many experts have developed tools or metrics to analyze brand equity, there is no universally accepted way to measure it.
Brand equity can be measured quantitatively using numerical values such as profit margins and market share, but this approach fails to capture qualitative elements such as prestige and mental and emotional associations.
Brand attributes used to assess a brand's equity include: differentiation, satisfaction or loyalty, perceived quality, leadership or popularity, perceived value, brand personality, organizational associations, brand awareness, market share, and market price and distribution coverage.
Other ways that a brand equity can be measured (these can be used individually or in combination): at the firm level, at the product level, and at the consumer level.

Terms

brand loyalty
where a person buys products from the same manufacturer repeatedly rather than from other suppliers
David Aaker
He is a consultant and author on the field of marketing, particularly in the area of brand strategy. He is currently the Vice Chairman of Prophet, a global brand and marketing consultancy firm, Professor Emeritus at the Haas School of Business of the University of California, Berkeley, and an advisor to Dentsu, a major Japanese advertising agency. He blogs on Aaker on brands.
brand awareness
The extent to which a brand is recognized by potential customers, and is correctly associated with a particular product. Expressed usually as a percentage of target market, brand awareness is the primary goal of advertising in the early months or years of a product's introduction.
Brand Equity
This phrase describes the value of having a well-known brand name, based on the idea that the owner of a well-known brand name can generate more money from products with that brand name than from products with a less well-known name.

Example

For example, Starbucks can sell its coffee at a higher price than solid market competitors because consumers associate the brand with quality and value. This is why brand equity is oftentimes directly correlated with a brand's profitability.

Full Text

Brand Equity

In marketing, brand equity refers to the value of a brand that is well-known and conjures positive mental and emotional associations. For any given product, service, or company, brand equity is considered a key asset because it helps it remain relevant and competitive. Brand equity can manifest itself in consumer recognition of logos or other visual elements, brand language associations made by consumers' perception of quality, and value among other relevant brand attributes.

When consumers trust a brand and find it relevant, they may select the offerings associated with that brand over those of competitors even at a premium price. For example, Starbucks can sell its coffee at a higher price than solid market competitors because consumers associate the brand with quality and value . This is why brand equity is oftentimes directly correlated with a brand's profitability.

A picture of baristas at work in the first Starbucks coffee shop, Seattle, WA.

Starbucks sells its coffee at a higher price point which is justified by its perceived brand value and quality.

Measuring Brand Equity

Brand equity is strategically crucial, but also very difficult to quantify. As a result, many experts have developed tools or metrics to analyze this asset, although there is no universally accepted way to measure it. For example, while it can be measured quantitatively using numerical values such as profit margins and market share, this approach fails to capture qualitative elements such as prestige and mental and emotional associations.

According to David Aaker, a marketing professor and brand consultant, there are ten attributes of a brand that can be used to assess its strength:

Differentiation
Satisfaction or loyalty
Perceived quality
Leadership or popularity
Perceived value
Brand personality
Organizational associations
Brand awareness
Market share
Market price and distribution coverage

Brand Asset Valuator

Young & Rubicam, a marketing communications agency, has developed the brand asset valuator, a tool to diagnose the power and value of a brand. The agency uses this tool to survey and measure consumers' perspectives along four dimensions:

Differentiation: The defining characteristics of the brand and its distinctiveness relative to competitors
Relevance: The appropriateness and connection of the brand to a given consumer
Esteem: Consumers' respect for and attraction to the brand
Knowledge: Consumers' awareness of the brand and understanding of what it represents

Other ways that brand equity can be measured (these can be used individually or in combination):

At the firm level - Brand equity can be studied as a financial asset by making a calculation of a brand's worth as an intangible asset. For example, a company can estimate brand value on the basis of projected profits discounted to a present value. In turn, the present value can be used to calculate the risk profile, market leadership, stability, and global reach.
At the product level - The price of an equivalent well-known brand can be compared to that of a no-name or private label product.
At the consumer level - This measure seeks to map the mind of the consumer to uncover associations with the given brand. For example, projective techniques can be commonly used to identify tangible and intangible attributes, attitudes, and various perceptions about the brand. Under this approach, the brands with the highest levels of awareness and most favorable and unique associations are considered high equity brands.

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