Overview

The key messages in this guide are:

• Brand Equity is built on the basis of deep relationships with consumers. These are formed when brands effectively address consumers' functional and, more importantly, emotional needs.
• The real strength of a brand’s relationship begins when it delivers a highest-level emotional benefit: the Brand Promise.
• Brand Equity is important because it creates the following for the brand:
  • Shareholder value
  • Competitive advantage
  • Growth opportunities
• The process for developing Brand Equity enables the Brand Team to set the long-term direction for the brand (i.e., the Brand Vision).

In this guide, you learn:

What is Brand Equity?

Brand Equity is defined as the values and impressions, both long-lasting and fleeting, which affect consumers’ choice of brand to purchase. These values and impressions are created by their:

Consumers receive the brand’s message through:

• Advertising
• Promotions
• Packaging
• Public relations
• Sponsorships
• Partnerships

• Word-of-mouth
• Third party endorsements

The consumers' relationship with the brand is established by these brand experiences (prior and new) and communications. This means that Brand Equity is built (or diminished) in essentially every touch point where the consumer interacts or experiences the brand.

Example: brands with strong equities

Consider the values and impressions you associate with these brands:

• Adidas
• Boeing
• Cadbury’s or Hershey’s
• Dell computers
• Dolce & Gabbana
• JetBlue or EasyJet
• Manchester United
• Michelin
• Porsche or Aston Martin
• Pringles potato chips
• Sony
• The New York Times or The Economist
• Virgin
• Volvo

Why is Brand Equity important?

Brand Equity is important for three major reasons:

Brand Equity creates shareholder value

• Building Brand Equity establishes a bond with consumers and drives the desired consumer behavior.
• Identifying, rationalizing, and taking steps to own the Brand Promise can ensure that the brand is emotionally connected with consumers, which establishes loyalty and commitment. Brands with high loyalty and commitment levels can command a premium price.
• High brand equity therefore drives higher, faster, more profitable and less risky cash flows for the business.

Examples of Brands strong Brand Equity:

These brands have created long-term, consumer-preferred franchises that deliver reliable streams of revenue and profit to their brand owners.

Brand Equity Building creates competitive advantage

• Few brands manage their equity consistently and at every consumer touch point.
• Even fewer link their Brand Equity to marketplace and financial performance indicators.
• Brand Equity is a facet of the brand that is often misunderstood and under-used.
  Developing a process to consistently measure, plan and develop Brand Equity is the true path to building strong brands and a sustainable competitive advantage.

Brand Equity management creates business growth opportunities

The process of defining a Brand Vision (the second phase of the Brand Equity Process) requires an in-depth consumer understanding. The vision reveals the opportunities for the brand, both within the current business category and in new categories and businesses.

Example

Dove’s enhanced self-image through skin care equity enabled them to extend from soap into moisturizer and other beauty care categories (where growth and margins are higher).

Virgin's “Good deal for consumers” equity enabled them to extend to categories as diverse as insurance, phones, airlines, and even wedding dresses.

How do you develop Brand Equity?

Brand Equity is based on three components:

Brand Promise

Category-specific Equities:

• A specific set of performance or expectations that contribute to the category’s success.
• For example, in the oral care category, these could include cavity prevention and tooth whitening benefits. These are essential functional benefits that a winning oral care brand will need to deliver. In addition, the benefit of say “oral centered self confidence” is also an important emotional benefit that the brand will need to deliver.
• Category specific equities are required qualifications that must be earned and maintained before the brand can own its Brand Promise.

General Equities:

By measuring General Equities you can benchmark the brand with others in any product category and compare it to other brands.

Brand Equity is a critical driver of two financial performance indicators:

You measure these three equity components individually and then combine the results into a single Brand Equity scorecard. If Brand Equity scores rise relative to competitive brands and to benchmarks set for it, the brand’s financial performance should improve (measured in top line revenue growth and brand gross margin).