Brand equity in question
What is a brand?
Curiously, one of the hottest points of disagreement between experts is the definition of a brand. Each expert comes up with his or her own definition, or nuance to the definition.
A brand is a name, term, sign, symbol, or design which is intended to identify the goods or services of one seller or group of sellers and to differentiate them from those of competitors.
The financial approach measures brand value by isolating the net additional cashflows created by the brand. These additional cash flows are the result of customer’s willingness to buy one brand more than its competitor’s, even when another brand is cheaper. Why then do customers want to pay more? Because of the beliefs and bonds that are created over time in their minds through the marketing of the brand.
In brief, customer equity is the preamble of financial equity. Brands have financial value because they have created assets in the minds and hearts of customers,distributors, prescribers, opinion leaders.
These assets are brand awareness, beliefs of exclusivity and superiority of some valued benefit, and emotional bonding. This is what is expressed in the now classic definition of a brand: ‘a brand is a set of mental associations,held by the consumer, which add to the perceived value of a product or service’. This definition focuses on the gain in perceived value brought by the brand.
How do consumers’ evaluations of a car change when they know it is a Volkswagen, a Peugeot or aToyota? Implicitly, in this definition the product itself is left out of the scope of the brand: ‘brand’ is the set of added perceptions.As a result brand management is seen as mostly a communication task. This is incorrect. Modern brand management starts with the product and service as the prime vector of perceived value, while communications there to structure, to orient tangible perceptions and to add intangible ones.
Later we analyses the relationship between brand and product. A second point to consider is that Keller’s now -classic definition is focused on cognition's (mental associations). This is not enough: strong brands have an intense emotional component.
Brands as conditional asset
Financiers and accountants have realised the value of brands. How does the financial perspective help us in defining brands and brand equity?
- First, brands are intangible assets, posted eventually in the balance sheet as one of several types of intangible asset (a category that also includes patents, databases and the like).
- Second, brands are conditional assets. This isa key point so far overlooked. An asset is an element that is able to produce benefits over a long period of time. Why are brands conditional assets? Because in order to deliver their benefits, their financial value,they need to work in conjunction with other material assets such as production facilities.
There are no brands without products or services to carry them. This will have great consequences for the method of measuring financial value. For now, this reminds us that some humility is required. Although many people claim that brands are all and everything, brands cannot exist without a support (product or service). This product and service becomes effectively an embodiment of the brand, that by which the brand becomes real. As such it is a main source of brand evaluation.
Does it produce high or low satisfaction? Brand management starts with creating products,services and/or places that embody the brand. Interestingly, the legal approach to trademarks and brands also insists on their conditional nature. One should never use the brand name as a noun, but as an adjective attached to a name, as for instance with a Volvo car, not a Volvo.
The legal perspective
An internationally agreed legal definition for brands does exist: ‘a sign or set of signs certifying the origin of a product or service and differentiating it from the competition’. Historically, brands were created to defend producers from theft. A cattle brand, a sign burned into the animal’s hide, identified the owner and made it apparent if the animal had been stolen. ‘Brands’ or trademarks also identified the source of the olive oil or wine contained in ancient Greek amphoras, and created value in the eyes of the buyers by building a reputation for the producer or distributor of the oil or wine.
A key point in this legal definition is that trademarks have a ‘birthday’ – their registration day. From that day they become property, which needs to be defended against infringements and counterfeiting. Brand rights disappear when they are not well enough defended, or if registration is not renewed. One of the sources of loss of rights is degenerescence. This occurs when a company has let a distinctive brand name become a generic term.
Although the legal approach is most useful for defending the company against copies of its products, it should not become the basis of brand management. Contrary to what the legal definition asserts, a brand is not born but made. It takes time to create a brand,even though we talk about launching brands. In fact this means launching aproduct or service. Eventually it may become brand, and it can also cease to be one. What makes a brand recognizable? When do we know if a name has reached the status of abrand? For us, in essence, a brand is a name that influences buyers, becoming a purchase criterion.
A brand is a name that influences buyers
This definition captures the essence of a brand:a name with power to influence buyers. Of course, it is not a question of the choice of the name itself. Certainly a good name helps: that is, one that is easily pronounceable around the world and spontaneously evokes desirable associations. But what really makes a name become a brand are the saliency, differentiability,intensity and trust attached to these associations.
Are the benefits the name evokes
- exclusive and
Brand power to influence buyers relies on representations and relationships. A representation is a system of mental associations. We stress the word ‘system’, for these associations are interconnected. They are in a network, so that acting on one impacts some others. These associations (also called brand image) cover the following aspects:
- What is the brand territory (perceived competence, typical products or services,specific know-how)?
- What is its level of quality (low, middle,premium, luxury)?
- What are its qualities?
- What is its most discriminating quality or benefit (also called perceived positioning)?
- What typical buyer does the brand evoke? What is the brand personality and brand imagery?
Beyond mental associations, the power of aname is also due to the specific nature of the emotional relationships it develops. A brand, it could be said, is an attitude of non-indifference knitted into consumers’ hearts. This attitude goes from emotional resonance to liking,belonging to the evoked set or consideration set, preference, attachment, advocacy, to fanaticism. Finally, designs, patents and rights are of course a key asset: they provide a competitive advantage over a period of time.
In short, a brand exists when it has acquired power to influence the market. This acquisition takes time. The time span tends to be short in the case of online brands, fashion brands and brands for teenagers, but longer for, for example, car brands and corporate brands.This power can be lost, if the brand has been mismanaged in comparison with the competition.Even though the brand will still have brand awareness, image and market shares, it might not influence the market any more .People and distributors may buy because of price only, not because they are conscious of any exclusive benefit from the brand.
What makes a name acquire the power of abrand is the product or service, together with the people at points of contact with the market, the price, the places, the communication – all the sources of cumulative brand experience. This is why one should speak of brands as living systems made up of three poles: products or services, name and concept. (See Figure below)
When talking of brands we are sometimes referring to a single aspect such as the name or logo, as do intellectual property lawyers. In brand management, however, we speak of the whole system, relating a concept with inherent value to products and services that are identified by a name and set of proprietary signs (that is, the logo and other symbols).This system reminds us of the conditional nature of the brand asset: it only exists if products and services also exist .Differentiation is summarized by the brand concept, a unique set of attributes (both tangible and intangible) that constitute the value proposition of the brand.
To gain market share and leadership, the brand must be:
- able to conjure up a big idea, and attractive;
- experienced by people at contact points;
- activated by deeds and behaviors;
One of the best examples of a brand is the Mini. This car, worth US$14,000 in functional value, is actually sold for US$20,000. It is one of the very few car brands that gives no rebates and discounts to prospective buyers,
The brand system
who queue to get ‘their’ Mini. The Mini illustrates the role of both intangible and tangible qualities in the success of any brand. Since it is made by BMW, it promises reliability, power and road-holding performance. But the feelings of love towards this brand are created by the powerful memories the brand invokes in buyers of London in the ‘Swinging Sixties’.
The classic and iconic design is replicated inthe new Mini – and each Mini feels like apersonal accessory to its owner (each Mini iscustomised and different).
The brand triangle helps us to structure most of the issues of brand management:
- What concept should one choose, with what balance of tangible and intangible benefits? This is the issue of identity and positioning. Should the brand concept evolve through time? Or across borders(the issue of globalization)?
- How should the brand concept be embodied in its products and services, and its places? How should a product or service of the brand be different, look different?
- What products can this brand concept encompass? This is the issue of brand extension or brand stretch.
- How should the product and/or services be identified? And where? Should they be identified by the brand name, or by the logo only, as Nike does now? Should organizations create differentiated sets of logos and names as a means of indicating internal differences within their product or service lines? What semiotic variants?
- What name or signs should one choose to convey the concept internationally?
- How often should the brand symbols be changed, updated or modernized?
- Should the brand name be changed?
- Speaking of internationalization, should one globalize the name (that is, use the same name around the world), or the logo,or the product (a standardized versuscustomised product), or the concept(aiming at the same global positioning)? Or all three pillars of the brand system, or only two of them?
Since a brand is a name with the power to influence the market, its power increases as more people know it, are convinced by it, and trust it. Brand management is about gaining power, by making the brand concept more known, more bought, more shared.
In summary, a brand is a shared desirable and exclusive idea embodied in products, services, places and/ or experiences. The more this idea is shared by a larger number of people, the more power the brand has. It is because everyone knows ‘BMW’ and its idea –what it stands for – even those who will never buy a BMW car, that the brand BMW has great deal of power.
The word ‘idea’ is important. Do we sell products and services, or values? Of course,the answer is values. For example, ‘Volvo’ is attached to an idea: cars with the highest possible safety levels. ‘Absolute’ conjures another idea: a fashionable vodka. Levi’s used to be regarded as the rebel’s jeans.