Differentiating between brandassets, strength and value

It is time to structure and organise the many terms related to brands and their strength,and to the measurement of brand equity.Some restrict the use of the phrase ‘brand equity’ to contexts that measure this by its impact on consumer mental associations(Keller, 1992). Others mention behavior: for example this is included in Aaker’s early measures (1991), which also consider brand loyalty.

In his late writings Aaker includes market share, distribution and price premium in his 10 measures of brand equity (1996). The official Marketing Science definition of brand equity is ‘the set of associations and behavior on the part of a brand’s customers, channel members and parent corporation that permits the brand to earn greater volume or greater margins than it could without the brand name’ (Leuthesser, 1988).

This definition is very interesting and has been forgotten all too quickly. It is all-encompassing,reminding us that channel members are very important in brand equity. It also specifically ties margins to brand associations and customers’ behavior. Does it mean that unless there is a higher volume or a higher margin as a result of the creation of a brand,there is no brand value? This is not clear, for the word ‘margin’ seems to refer to gross margin only, whereas brand financial value is measured at the level of earnings before interest and tax (EBIT).

To dispel the existing confusion around the phrase brand equity (Feldwick, 1996), created by the abundance of definitions, concepts,measurement tools and comments by experts,it is important to show how the consumer and financial approaches are connected, and to use clear terms with limited boundaries (see Table below):

  • Brand assets.These are the sources of influence of the brand (awareness/ saliency, image, type of relationship with consumers), and patents.
  • Brand strengthat a specific point in time as result of these assets within a specific market and competitive environment.They are the ‘brand equity outcomes’ if one restricts the use of the phrase ‘brand equity’to brand assets alone. Brand strength is captured by behavioral competitive indicators:market share, market leadership,loyalty rates and price premium (if one follows a price premium strategy).
  • Brand value is the ability of brands to deliver profits. A brand has no financial value unless it can deliver profits. To say that lack of profit is not a brand problem but a business problem is to separate the brand from the business, an intellectual temptation. Certainly brands can reanalyzed from the standpoint of sociology, psychology, semiotics, anthropology, philosophy and so on, but historically they were created for business purposes and are managed with a view to producing profit.

Only by separating brand assets, strength and value will one end the confusion of the brand equity domain (Feldwick, 1996 takes a similar position). Brand value is the profit potential of the brand assets, mediated by brand market strength.

In Table below, the arrows indicate not a direct but a conditional consequence.

From awareness to financial value

The same brand assets may produce different brand strength over time: this is a result of the amount of competitive or distributive pressure. The same assets can also have no value at all by this definition, if no business will ever succeed in making them deliver profits, through establishing a sufficient market share and price premium.

For instance if the cost of marketing to sustain this market share and price premium is too high and leaves no residual profit, the brand has no value. Thus the Virgin name proved of little value in the cola business: despite the assets of this brand, the Virgin organization did not succeed in establishing a durable and profitable business through selling Virgin Cola in the many countries where this was tried. The Mini was never profitable until the brand was bought by BMW.

Table above also shows an underlying time dimension behind these three concepts of assets, strength and value. Brand assets are learnt mental associations and affects. They are acquired through time, from direct or vicarious, material or symbolic interactions with the brand. Brand strength is a measure of the present status of the brand: it is mostly (market share, leadership, loyalty,rice premium).

Not all of this brand stature is due to the brand assets. Some brands establish leading market share without any noticeable brand awareness: their price is the primary driver of preference. There are also brands whose assets are superior to their market strength: that is, they have an image that is far stronger than their position in the market(this is the case with Michelin, for example).

The obverse can also be true, for example of many retailer own brands. Brand value is a projection into the future. Brand financial valuation aims to measure the brand’s worth, that is to say, the profits it will create in the future. To have value, brands must produce economic value added (EVA),and part of this EVA must be attributable to the brand itself, and not to other intangibles(such as patents, know-how or databases).

This will depend very much on the ability of the business model to face the future. For instance, Nokia lost ground at the Stock Exchange in April 2004. The market had judged that the future of the world’s number one mobile phone brand was dim. Every wherein the developed countries, almost everyone had a mobile phone.

How was the company still to make profits in this saturated market? If it tried to sell to emerging countries it would find that price was the first purchase criterion and delocalisation (that is, having the products manufactured in a country such as China or Singapore) compulsory. Up to that point, Nokia had based its growth on its production facilities in Finland. Nokia’s present brand stature might be high, but what about its value?

It is time now to move to the topic of tracking brand equity for management purposes. What should managers regularly measure?

Strategic Brand Management Related Practice Tests

Strategic Management Practice Tests
Brand Equity In Question What Is A Brand? Differentiating between brandassets, strength and value Tracking Brand Equity Goodwill: The Convergence Of Finance And Marketing How Brands Create Value For The Customer How Brands Create Value For The Company Corporate Reputation And The Corporate Brand Strategic Implications Of Branding What Does Branding Really Mean? Permanently Nurturing The Difference Brands Act As A Genetic Programme Respect The Brand ‘contract’ The Product And The Brand Each Brand Needs A Flagship Product Advertising Products Through The Brand Prism Brands And Other Signs Of Quality Obstacles To The Implications Of Branding Brand And Business Building Are Brands For All Companies? Building A Market Leader Without Advertising Brand Building: From Product To Values, And Vice Versa Are Leading Brands The Best Products Or The Best Value? Understanding The Value Curve Of The Target Breaking The Rule And Acting Fast Comparing Brand And Business Models: Cola Drinks From Private Labels To Store Brands Evolution Of The Distributor’s Brand Are They Brands Like The Others? Why Have Distributor's Brands? The Financial Equation Of The Distributor’s Brand The Three Stages Of The Distributor’s Brand The Case Of Decathlon Factors In The Success Of Distributor's Brands Optimising The Dob Marketing Mix The Real Brand Issue For Distributors Competing Against Distributor's Brands Facing The Low-cost Revolution Should Manufacturers Produce Goods For Dob's? Brand Diversity: The Types Of Brands Luxury, Brand And Griffe Service Brands Brand And Nature: Fresh Produce Pharmaceutical Brands The Business-to-business Brand The Internet Brand Country Brands Thinking Of Towns As Brands Universities And Business Schools Are Brands Thinking Of Celebrities As Brands The New Rules Of Brand Management The Limits Of A Certain Type Of Marketing About Brand Equity The New Brand Realities We Have Entered The B To B To C Phase Brand Or Business Model Power? Building The Brand In Reverse? The Power Of Passions Beginning With The Strong 360° Experience Beginning With The Shop The Company Must Be More Human, More Open Experimenting For More Efficiency The Enlarged Scope Of Brand Management Licensing: A Strategic Lever How Co-branding Grows The Business Brand Identity And Positioning Brand Identity: A Necessary Concept Identity And Positioning Why Brands Need Identity And Positioning The Six Facets Of Brand Identity Sources Of Identity: Brand Dna Brand Essence Launching The Brand Launching A Brand And Launching A Product Are Not The Same Defining The Brand’s Platform The Process Of Brand Positioning Determining The Flagship Product Brand Campaign Or Product Campaign? Brand Language And Territory Of Communication Choosing A Name For A Strong Brand Making Creative 360° Communications Work For The Brand Building Brand Foundations Through Opinion Leaders And Communities The Challenge Of Growth In Mature Markets Growth Through Existing Customers Line Extensions: Necessity And Limits Growth Through Innovation Disrupting Markets Through Value Innovation Managing Fragmented Markets Growth Through Cross-selling Between Brands Growth Through Internationalisation Sustaining A Brand Long Term Is There A Brand Life Cycle? Nurturing A Perceived Difference Investing In Communication No One Is Free From Price Comparisons Branding Is An Art At Retail Creating Entry Barriers Defending Against Brand Counterfeiting Brand Equity Versus Customer Equity: One Needs The Other Sustaining Proximity With Influencers Should All Brands Follow Their Customers? Reinventing The Brand: Salomon Adapting To The Market: Identity And Change Bigger Or Better Brands? From Reassurance To Stimulation Consistency Is Not Mere Repetition Brand And Products: Integration And Differentiation Specialist Brands And Generalist Brands Building The Brand Through Coherence Defining The Core Identity Of The Brand Confirming The Presence Of Brand Core Facets In Each Product Identifying The Role Of Each Product Line In The Construction Of The Brand Graphically Representing The Overall System Of The Brand Checking The Coherence Worldwide The Three Layers Of A Brand: Kernel, Codes And Promises Respecting The Brand Dna Managing Two Levels Of Branding Growth Through Brand Extensions What Is New About Brand Extensions? Brand Or Line Extensions? The Limits Of The Classical Conception Of A Brand Why Are Brand Extensions Necessary? Building The Brand Through Systematic Extensions: Nivea Extending The Brand To Internationalize It Identifying Potential Extensions The Economics Of Brand Extension What Research Tells Us About Brand Extensions Avoiding The Risk Of Dilution Balancing Identity And Adaptation To The Extension Market Segments Assessing What Should Not Change: The Brand Kernel Preparing The Brand For Remote Extensions Keys To Successful Brand Extensions Is The Market Really Attractive? An Extension-based Business Model: Virgin How Execution Kills A Good Idea: Easycar Brand Architecture The Key Questions Of Brand Architecture Type And Role Of Brands The Main Types Of Brand Architecture The Flexible Umbrella Brand The Aligning Umbrella Brand (masterbrand) Choosing The Appropriate Branding Strategy New Trends In Branding Strategies Internationalising The Architecture Of The Brand Some Classic Dysfunctions What Name For New Products? Group And Corporate Brands Corporate Brands And Product Brands Multi-brand Portfolios Inherited Complex Portfolios From Single To Multiple Brands: Michelin The Benefits Of Multiple Entries Linking The Portfolio To Segmentation Global Portfolio Strategy The Case Of Industrial Brand Portfolios Linking The Brand Portfolio To The Corporate Strategy Key Rules To Manage A Multibrand Portfolio The Growing Role Of Design In Portfolio Management Does The Corporate Organization Match The Brand Portfolio? Auditing The Portfolio Strategically A Local And Global Portfolio – Nestlé Handling Name Changes And Brand Transfers Brand Transfers Are More Than A Name Change Reasons For Brand Transfers The Challenge Of Brand Transfers When One Should Not Switch Analysing Best Practices Transferring A Service Brand How Soon After An Acquisition Should Transfer Take Place? Managing Resistance To Change Factors Of Successful Brand Transfers Brand Turnaround And Rejuvenation The Decay Of Brand Equity The Factors Of Decline Distribution Factors When The Brand Becomes Generic Preventing The Brand From Ageing Rejuvenating A Brand Growing Older But Not Ageing Managing Global Brands The Latest On Globalisation Patterns Of Brand Globalisation Why Globalise? The Benefits Of A Global Image Conditions Favouring Global Brands The Excess Of Globalisation Barriers To Globalisation Coping With Local Diversity Building The Brand In Emerging Countries Naming Problems Achieving The Delicate Local–global Balance Being Perceived As Local: The New Ideal Of Global Brands? Local Brands Can Strike Back The Process Of Brand Globalisation Globalising Communications: Processes And Problems Making Local Brands Converge Financial Valuation And Accounting For Brands Accounting For Brands: The Debate What Is Financial Brand Equity? Evaluating Brand Valuation Methods Brand Valuation In Practice The Evaluation Of Complex Cases What About The Brand Values Published Annually In The Press? Strategic Brand Management Interview Questions