Brand Equity

        Brand equity is a valuable tool that allows companies to achieve a high demand for their respective products at premium prices. The definition of brand equity can be stated as an intangible asset of added value that results from the favorable image, impressions of differentiation, and the strength of consumer attachment to a company name, brand name, or trademark (Belch 56). Brand equity is so desirable because it allows a brand to generate greater sales and higher margins than it could without the brand name, providing the company with a competitive advantage (Belch 56).

        When consumers are making purchasing decisions, a strong brand identity increases the chances that the consumer will recognize and remember the brand name product. It also can contribute to buyer’s perceptions of product quality, reinforce customer loyalty, and lead to repeat purchases (Boone 402). In general, the companies that have high brand equity, usually have a large market share too (Boone 402). If consumers have a favorable image of the product, they may give little attention to price differences if they believe the product is of high quality (Boone 402). In essence, brand equity is the reputation of the brand in the eyes of the consumers.

        To help you understand what exactly brand equity is, think about the following question: "What causes some products like Coca-Cola, Hershey’s chocolate, and Campbell’s soups to be deep brands and to profit from a price premium while other colas, candies, and soups do not?" (Grassl) The aforementioned companies have high brand equity because they have a positive image, established brand, and reputable product. Consumers perceive brand equity as the value added to a product by associating it with a brand name and other distinctive characteristics (Grassl).

        Brands are products that are distinguished from others of the same category by accidental features such as brand names or design and by the higher awareness and knowledge that consumers have of them (Grassl). Sometimes a brand name can represent a product category like how Kleenex and Rollerblades have come to stand for their respective product categories of paper tissues and in-line skates. A brand is more than just a product; it’s both a physical and perceptual entity. The physical aspect of a brand is the actual product and its packaging, however the perceptual aspect of the brand is in the consumer’s mind (Grassl).

        Brand equity is crucial in advertising since the main objective is to promote and sell the product. The advertising agency Young and Rubicam developed the Brand Asset Valuator, which is a model to help evaluate brand equity. The four criteria included in the model are differentiation, relevance, esteem, and knowledge (Boone 402). Differentiation is the ability for a brand to stand apart from its competitors (Boone 402). Strong brands must have a feature that no competitors can match, at least in the consumer’s eyes and minds. A few brands that have strong differentiation are Disney, Rolls Royce, Porsche, Victoria’s Secret, and Rolex (Boone 402).

        The second component of the Brand Asset Valuator is relevance, which is the actual and perceived importance of the brand to a large consumer market segment (Boone 402). Some of the brands that have high relevance are AT&T, Hallmark, Kodak, and Campbell’s Soups.

        Esteem is another part of the model and it is the perceived quality and consumer perceptions about the growing or declining popularity of a brand (Boone 402). Positive public opinion increases a brand’s esteem, however a negative reputation can reduce the brand’s esteem. Some brands that have high esteem are Hershey’s, Rubbermaid, and Disney. One brand that has a negative esteem as of recently is Microsoft because of the antitrust lawsuits and monopoly acquisitions.

        The final criteria for the Brand Asset Valuator is knowledge, which is the extent of the consumer’s awareness of the brand and understanding of its identity (Boone 402). Some brands that fit this category are Coca-Cola, Jell-O, Kodak, Campbell’s, Crest, Pepsi, and Evian. Promoting a brands’ core values are important in increasing knowledge. Evian water promotes purity, while Pepsi expresses that it’s cool, and for Coke, it’s always Coca-Cola (Lindsay).

        The packaging of a product can be very important because it can help establish and build brand equity. The package is a part of the image of the brand and it has value if it makes the consumer pick it up, purchase it, and want buy it again (Lindsay). Many companies realize that packaging can be very important and they develop special departments like structural design, specifically to cater for these needs. Materials, shapes, and graphics are being reinvented under the persuasion of such diverse influences as deregulation, computer technology and trendy fashion, while an emphasis on "image" now drives innovation to record heights of design and engineering sophistication (Lindsay). A structural design department is in charge of catching the shopper’s attention, along with how the package feels and how it opens and dispenses (Lindsay). For instance, Evian’s bottles have distinctive crags in its shoulders for high brand identification and easy collapsibility for more compact recycling storage (Lindsay). Another example of how packaging effects brand equity are Mott’s 64-ounce plastic apple juice bottle which includes a built-in handle for easier mobility. A third example are the 30-can Pepsi Cubes which helped the consumers and the store at the same time. The Cube helped the shoppers by making it easier to carry with the handle, and it helped the store because the cases took less merchandise space and they were easier to stack and set up displays. These three products provide a functional advantage, along with easy identification for the consumers.

        Distinctive packaging is risky because it entails lots of planning, commitment, and investment. The package designer must understand everyone’s needs. The marketing department wants a unique package. Product development wants a package that is easy to deliver and use. The engineering and manufacturing department wants a package that’s inexpensive and easy to handle while the operations departments wants maximum line efficiency and an easy product to produce (Lindsay). When developing a successful package, it’s important to always add value. Distinctive and convenient packaging will cause consumers to remember and value the product and brand, and may eventually help build its long term equity (Lindsay).

Brand Leverage

        Having a strong brand equity can benefit a company in many ways. Brand leverage is when a company capitalizes on its brand equity by using the existing brand name for new products (Hawkins 356). Brand leverage could be considered a double-edge sword because while it can increase profit tremendously, it doesn’t work for everyone.

        Some examples of brand leverage failures include Levi Strauss trying to develop tailored suits which consumers thought were a cheap product, and Harley-Davidson wine coolers which had nothing to do with motorcycles (Hawkins 356). Campbell’s had to change the name of its spaghetti sauce to Prego because consumers didn’t think Campbell’s was an authentic Italian product (Hawkins 356). The major producers of baby oil and other toiletries, Johnson & Johnson, tried unsuccessfully to introduce a line of perfume (Grassl). Bic saw similar failures when trying to promote women’s pantyhose and perfumes (Grassl).

        While it is somewhat difficult to accomplish brand leverage successfully, it can be done. One of the recent examples of successful brand leverage can be seen in the Tommy Hilfiger clothing company. They were able to extend its name to fragrances, home products (towels, linens, etc...), shoes, suits, ties, underwear, eye-wear, bath and body, among other things. The Hilfiger company also sponsors golfers, musicians/tours, athletes, race car drivers, and even a movie, The Faculty, in which the company paid to have all the actors wear Tommy clothing.

        Another company that is experiencing success in brand leverage is the tea company, Celestial Seasonings. They are in the process of building retail store to increase the company’s brand equity. Walt Freese, general manager of Celestial Direct Group stated, "The Celestial Seasonings retail store is intended first and foremost as a brand building effort, like Niketown; as a way to deepen our relationship with the consumer and extend the Celestial Seasonings equity (Thompson 16)." Approximately 70 percent of sales from the Celestial Seasonings catalog are from non-tea products, such as bath and body items (Thompson 16). Currently Celestial Seasonings is second in the tea business behind Lipton, however while Lipton’s sales only rose 4.2 percent to $254 million last year, Celestial Seasonings’s sales rose 18.9 percent to $97 million (Thompson 16).

        Some other examples of successful brand leverage include Jell-O and Calvin Klein. Jell-O ventured into ready-to-eat dessert, yogurt, and ice pops (Grassl). The clothing company Calvin Klein extended its product line to fragrances, suits, underwear, and eye-wear. If brand leverage can be attained, a brand can be very successful and profitable.

        When promotion is used, the company has to make sure the promotion represents the quality of the brand. Microsoft was one of the first software manufacturers to create brand equity for its name. When Microsoft products are on sale or promoted, the name Microsoft is so strong that the consumers think about the good price they’re getting on the product (Pollack 14). However, aggressive price promotions can lessen brand equity over time (Pollack 14). An example of this are with the Ford Taurus and rebates. Ford aggressively used rebates to persuade customers to purchase the Taurus, and when Ford stopped giving the rebates, the customers stopped buying the car because they didn’t believe that the Taurus was worth that much.

        A recognized, respected name instills confidence among consumers and one of the greatest risks to a firm is to harm its brand equity (Conway 81). Damage to brand equity can have an immediate impact on sales and market share. For instance, in the mid-1970's, Schlitz Brewing Company was number two in the beer market behind Budweiser (Medcalf 9). The Schlitz management decided to save money by cutting back on the brewing cycle and by reducing the barley malt used in production, bit by bit (Medcalf 9). The public noticed the differences and Schlitz was permanently bumped from its position as a major brand of beer (Medcalf 9). In 1985, Coca-Cola decided to change its original formula and promoted New Coke, but it was rejected worldwide (Grassl). Soon thereafter, Coca-Cola changed back to its original formula and called it Coca-Cola Classic. Consumers know what to expect from Coke and cannot be tricked into accepting anything else for the real thing (Grassl).

        Brand equity is everywhere in the marketplace, from low-involvement products to high-involvement products. By flipping through any magazine and looking at the advertisements, brand equity can be found. In the March 2000 issue of Maxim, most of the advertisements are of products which have high brand equity like Nike, Guess, Calvin Klein, Nautica, American Eagle, Perry Ellis, Armani, and Jim Beam. The advertisements in Men’s Health are similar like Ralph Lauren, Gap, Tommy Hilfiger, Volkswagen, and Bose. Almost every advertisement in these magazines were of high brand equity and most of the readers would agree that these are high quality products.

        Perhaps the most recognizable brand is Coca-Cola. Almost everyone can recognize the red and white can with the script logo to be Coca-Cola. Coke has been building its equity base since the last century with an emphasis on heritage, which is translated positively in the consumers’ minds (Lenderman 86). Many brand leaders of seventy years ago like Kodak, Wrigley, Coca-Cola, Morton Salt, and Campbell’s Soups are still brand leaders today (Grassl).

        To get a better understanding of brand equity and how it’s used in advertisements, the following ads have been included. The first advertisement is for Nautica clothing. It’s a two-page, black and white ad. The first page uses isolation by only having the name Nautica in the middle of the page. The second page is of three young adults having a good time. Just by looking at this page, the reader cannot tell what kind of clothing the ad is for. The advertisement is to associate consumers that Nautica is relaxed and fun.

        Perry Ellis clothing is the second advertisement included. This advertisement portrays young women in white men’s dress shirts with the words, "Perry Ellis - For Men," on the bottom of the page. Like the previous ad, just by looking at the advertisement, the reader cannot tell what kind of clothing is being portrayed. This ad is aimed at young males and supposed to trigger the good feeling when girlfriends wear their boyfriends’ clothing.

        The third ad is a one page, color ad for Bose stereos. The advertisement includes pictures of Bose’s wide variety of products and the copy of the ad reminds the reader of Bose’s high quality through their extensive research.

        The next ad is for Calvin Klein’s Eternity. This is a one-page, black and white ad depicting a father and a son having a good time. This advertisement is to remind young, male adults with kids, that even though they have responsibilities, they still can keep up with fashion and smell good.

        The final ad is for Tommy Hilfiger’s Freedom fragrances for both men and women. This ad is a one-page, color ad depicting a male and a female celebrating their freedom. These ads don’t have to explain their products because all of the companies listed above have high brand equity and the reader can determine their own perceptions of the brand.

        Welch’s grape juice is trying to build on its brand equity by going back to the basics and concentrate on quality grape juice. Randy Papadellis, Welch’s marketing vice president stated, "We began to understand brand equity and we went back to the basics (Lenderman 86)." Welch’s began to do studies on their grape juice and expressed the benefits of grape juice to the public. Two years ago, Welch’s study found that white grape juice is better for infants and toddlers than apple juice (Lenderman 86). Another study showed that drinking an eight-ounce glass of grape juice a day was better than taking an aspirin a day to help anti-clotting effects on the heart (Lenderman 86). "All we are doing is confirming conventional wisdom," says Papadellis. "Now we are able to introduce grape juice to lots of people who never tried it before. We are doing a lot of research, and you’ll be very surprised when we release more information about grape juice (Lenderman 86)."

    Another example of successful brand equity is Playboy. In 1988, CEO Christie Hefner took over Playboy and she refocused the company on its core business of product marketing and soft-porn entertainment (Medcalf 9). She concentrated on the importance of protecting the brand image and promised to guard the Playboy icon of the famous bunny profile more closely (Medcalf 9). Today, Playboy’s Product Marketing Group works closely with licensees on a variety of high quality products, such as hand-rolled cigars, watches, and casual and business wear for both men and women (Medcalf 9). While concentrating on the top selling monthly magazine in the world, Playboy also veered off and introduced Playboy TV and Playboy Online. Since Ms. Hefner took over the business in 1988, Playboy has experienced a 35 percent increase in shareholder’s equity (Medcalf 9).

        Some other examples of successful brand equity are with Tylenol aspirin and Godiva Chocolates. When it comes to purchasing aspirin, many consumers will pay a significant premium, sometimes almost double, for Tylenol aspirin compared to store brands of aspirin, even though they are chemically identical (Hawkins 355). With the Tylenol name, consumers feel a sense of security and believe they are purchasing a safe product when the store brand aspirin is exactly the same. Godiva Chocolates command a premium price because of their high quality as well as the strong brand equity they have developed through advertising (Belch 56). With everything else being equal, consumers will most likely choose the brand in which they are most familiar with or the brand in which they possess the most favorable attitude toward.

1.    A company having high brand equity would typically experience everything EXCEPT:

a.) Increase market share
b.) Greater sales volume
c.) Increase in capital expenditures
d.) Competitive advantage

2.) Which answer is NOT part of the Brand Asset Valuator

a.) Attitude
b.) Knowledge
c.) Esteem
d.) Relevance

3.) For packaging design, what two criteria should the package satisfy?

a.) Size and Reliability
b.) Function and Identification
c.) Cost and Function
d.) Size and Identification

4.) Brand leverage is:

a.) The actual and perceived importance of the brand to a large consumer market segment
b.) When a company capitalizes on its brand equity by using the existing brand name for new products
c.) An intangible asset of added value that results from the favorable image, impressions of differentiation, and the strength of consumer attachment to a company name, brand name, or trademark
d.) The perceived quality and consumer perceptions about the growing or declining popularity of a brand

5.) Which of the following words is most closely identified with the concept of brand equity? 

a.) Efficiency
b.) Boring
c.) Reputation
d.) Relevance

*Answers are at the bottom of the page

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Belch, George E. and Michael A. Belch. Advertising and Promotion : An Integrated Marketing Communications Perspective. Fourth Edition. Boston, Massachusetts : Irwin McGraw -Hill. 1998.

Boone, Louis E. and David L. Kurtz. Contemporary Marketing : Wired. Ninth Edition. Fort Worth : Dryden Press. 1998.

Conway, Peter B. "Protect Brand Equity In The Global Marketplace." Best’s Review. Feb. 1998 : 8.

Grassl, Wolfgang. "The Reality of Brands : Towards an Ontology of Marketing." The American Journal of Economics and Sociology. April 1999 : 313 - 59.

Hawkins, Del I.., Roger J. Best, and Kenneth A. Coney. Consumer Behavior : Building Marketing Strategy. Seventh Edition. Boston, Massachusetts : Irwin McGraw - Hill. 1998.

Lenderman, Max. "Welch’s On Its Way." Beverage World. 15 Oct. 1997 : 86.

Lindsay, Dean. "Shaped To Sell : Package Innovation Can Boost Revenue, Decrease Costs and Build Brand Equity." Beverage World. 15 March 1997 : 91 - 2.

Maxim Magazine. March 2000.

Medcalf, Laura. "Lessons From the Pages of Playboy : The Purveyor of Soft Porn Has Much to Teach Marketers About Nurturing Brand Equity." Marketing. 4 August 1997 : 9.

Men’s Health. March 2000.

Pollock, James. "Boost or Bust? Marketers Relate Promotions to Brand Equity." Marketing. 15 May 1995 : 14.

Thompson, Stephanie. "Celestial Seasonings Sets Retail ‘Brand Equity’ Lab." Advertising Age. 13 Sept. 1999 : 16.