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Brand Equity – Assets and Liabilities

Brand equity has been defined as a set of brand assets and liabilities linked to a brand, its name, and its symbol that add to or subtract from the value provided by a product or service to a firm and/or to that firm’s customers. If the brand’s name or symbol should change, some or all of the assets or liabilities could be affected and even lost, although some might be shifted to a new name and symbol. The assets and liabilities on which brand equity is based will, according to Aaker (1991), differ by context. However, they can be grouped into five categories:

1. Brand Loyalty

2. Brand Name (Awareness)

3. Perceived Quality

4. Brand Associations

5. Other Proprietary Brand Assets

Brand Loyalty –

For any business, it is expensive to gain new customers and relatively inexpensive to retain existing ones, especially when the existing customers are satisfied or happy with the brand. Competitors may even be discouraged from spending resources to attract already satisfied customers. Further, higher loyalty means greater trade leverage; since customers expect the brand to be always available.

Brand Name Awareness –

People will often buy a familiar brand because they are comfortable with the familiarity or they assume that a brand that is familiar is probably reliable and of reasonable quality. When consumers feel uneasy about a product’s name, they will avoid the product – and that translates into the loss of sales. Brand names should be easy for customers to visualize, and this involves pronunciation and spelling.

Perceived Quality –

A brand will have associated with it a perception of overall quality, which is not necessarily based on knowledge of detailed specifications. The quality perception may take on somewhat different forms for different types of industries. Perceived quality means something different for Compaq or IBM than for Coca-Cola or Pepsi. Perceived quality will directly influence purchase decisions and brand loyalty, especially when a buyer is not motivated or able to conduct a detailed analysis. It can also support a premium price, which, in turn, can create gross margin that can be reinvested in brand equity. Further, perceived quality can be the basis for a brand extension. If a brand is well-regarded in one context, then the assumption will be that it will have high quality in a related context.

Brand Associations –

The underlying value of a brand name often is based upon specific associations linked to it. The associations, for example, of the car brand Jaguar may make the experience of owning and driving one “different”. If a brand is well positioned upon a key attribute in the product class (such as technological superiority), then competitors will find it hard to attack. If they attempt a frontal assault by claiming superiority via that dimension, there will be a credibility issue. They may be forced to find another, perhaps inferior, basis for competition. Thus, an association can be a barrier for competitors.

Other Proprietary Brand Assets –

This fifth category represents such other proprietary brand assets as patents, trademarks, and channel relationships. Brand assets will be most valuable if they inhibit or prevent competitors from eroding a customer base and loyalty. These assets can take several forms. For example, a trademark will protect brand equity from competitors who might want to confuse customers by using a similar name, symbol, or package. A patent, if strong and relevant to customer choice, can prevent direct competition. A distribution channel can be controlled by a brand because of a history of brand performance.