Building Brand Equity   

The importance of brand equity

Definition of brand equity: How consumers feel about a brand relative to its competition. Brand equity measures the "emotional attachment" consumers feel for a product.

As brand equity grows, it becomes harder and harder to persuade consumers to change brands.

Remember, habit and experience are powerful determinants of product choice (and geography is often the most determinant of habit and experience). 

Many systems in place to measure brand equity. Advertisers must stay finely tuned to the state of their brands.

Brand equity determinants

Advertising is probably the biggest determinant in creating brand equity. Brand equity is a result of:

• Differentiation-must be perceived as different
• Relevance-must satisfy consumer needs
• Esteem-consumers must like it
• Knowledge-consumers must know about it

Factors related to brand equity:

• Brand vitality: combination of differentiation and relevance
• Brand stature: combination of esteem and knowledge

Brand Awareness

Brand awareness measures the consumer's familiarity with a product or service. Creating brand awareness is one of the most important goals of advertising.

Consider, for instance, these three soft drinks.

• Coca Cola
• Pepsi Cola
• RC Cola

RC Cola has been on the market for decades, but has never even come close to reaching the level of brand awareness that Coke and Pepsi have achieved.

Higher brand awareness usually translates to higher sales and profitability. It also helps shield the product from competition. This results in a higher market share.

Products with great brand awareness sometimes don’t even have to sell themselves, but they have to be advertised to maintain or “defend” their market share.

Market share, which is a result of branding and brand awareness, is the primary contributor to ROI (return on investment).

Brand Extensions

Brand extension is also sometimes known as "brand stretching."

When a company already has a well known product and well developed image, it may create a new product in a different category. For instance, Jello-gelatin created a brand extension when it created Jello pudding pops.

There are several benefits to brand extensions. The new products increase awareness of the brand name and also create a possible new profit center.

Other examples of brand extensions include:

• When Ralph Lauren began producing home furnishings in addition to clothing under its Polo brand.
• When Arm and Hammer extended its brand to include oral and laundry care products to its baking soda line.
• When the Virgin Group added game stores and video stores to its existing transportation group.
   

Related Pages: Branding Overview, Target Marketing, Brand Life Cycle