Brand equity is an intangible asset that depends on associations made by the consumer. There are at least three perspectives from which to view brand equity:
• Financial - One way to measure brand equity is to determine the price premium that a brand commands over a generic product.
For example, if consumers are willing to pay $100 more for a branded television over the same unbranded television, this premium provides important information about the value of the brand.
However, expenses such as promotional costs must be taken into account when using this method to measure brand equity.
• Brand extensions - A successful brand can be used as a platform to launch related products.
The benefits of brand extensions are the leveraging of existing brand awareness thus reducing advertising expenditures, and a lower risk from the perspective of the consumer.
Furthermore, appropriate brand extensions can enhance the core brand.
However, the value of brand extensions is more difficult to quantify than are direct financial measures of brand equity.
• Consumer-based - A strong brand increases the consumer's attitude strength toward the product associated with the brand.
Attitude strength is built by experience with a product.
This importance of actual experience by the customer implies that trial samples are more effective than advertising in the early stages of building a strong brand.
The consumer's awareness and associations lead to perceived quality, inferred attributes, and eventually, brand loyalty.
Strong brand equity provides the following benefits:
• Facilitates a more predictable income stream.
• Increases cash flow by increasing market share, reducing promotional costs, and allowing premium pricing.
• Brand equity is an asset that can be sold or leased.
However, brand equity is not always positive in value.
Some brands acquire a bad reputation that results in negative brand equity.
Negative brand equity can be measured by surveys in which consumers indicate that a discount is needed to
purchase the brand over a generic product.
• Financial - One way to measure brand equity is to determine the price premium that a brand commands over a generic product.
For example, if consumers are willing to pay $100 more for a branded television over the same unbranded television, this premium provides important information about the value of the brand.
However, expenses such as promotional costs must be taken into account when using this method to measure brand equity.
• Brand extensions - A successful brand can be used as a platform to launch related products.
The benefits of brand extensions are the leveraging of existing brand awareness thus reducing advertising expenditures, and a lower risk from the perspective of the consumer.
Furthermore, appropriate brand extensions can enhance the core brand.
However, the value of brand extensions is more difficult to quantify than are direct financial measures of brand equity.
• Consumer-based - A strong brand increases the consumer's attitude strength toward the product associated with the brand.
Attitude strength is built by experience with a product.
This importance of actual experience by the customer implies that trial samples are more effective than advertising in the early stages of building a strong brand.
The consumer's awareness and associations lead to perceived quality, inferred attributes, and eventually, brand loyalty.
Strong brand equity provides the following benefits:
• Facilitates a more predictable income stream.
• Increases cash flow by increasing market share, reducing promotional costs, and allowing premium pricing.
• Brand equity is an asset that can be sold or leased.
However, brand equity is not always positive in value.
Some brands acquire a bad reputation that results in negative brand equity.
Negative brand equity can be measured by surveys in which consumers indicate that a discount is needed to
purchase the brand over a generic product.