From brand assets to brand equity.

One of the most important constituent of brand is its equity. Ever since I became a marketing student, I have come across many definitions of brand equity. According to Prof. Kotler, “Brand equity is the added value endowed on products and services. It may be reflected in the way consumer think, feel, and act with respect to the brand, as well as in prices, market share, and profitability the brand commands for the firm.”

However, I found the best definition in Kapferrer. According to him, brand equity or financial value of a brand is “the difference between the extra revenue generated by the brand and the associated costs for the next few years, which are discounted back to today.” The rate of discount and the number of years are derived from the market.
The definition takes care of the investment a company makes in a brand the extra revenue it generates from it. Before coming across this definition, I thought brand awareness, brand image, perceived quality etc as brand equity. The ‘added value’ factor was not clear in totality. These things are however, non monetary and these are called brand assets.

Referring back to Kapferrer, Brand Assets mean

· Brand awareness,

· The level of perceived quality as compared to competitors,

· The level of confidence, of significance, of empathy, of liking,

· The richness and attractiveness of the images conjured up by the brand, intangible values which are linked the consumption of the brand.

These factors determine the perceived value of the brand, compared to competitors becoming source of attractiveness and loyalty.

It is important that these non monetary factors can yield monetary results. I feel that there are companies which have high brand assets, like Ford, GM and Crystler. These three companies have invested a lot on their brand in the past. However, over last few years, these three big companies have been struggling to make profits (even before recession). I think one big factor is that these companies were unable to bring down the costs; therefore the difference between gains and costs of brand has been too low. People may argue that it is quite logical that if the costs are high, the profit will be low. So where does brand equity comes into picture? Well, that is why some brands are better than others. I am sure few will deny that Toyota has more brand equity than the other three. Moreover, everything ultimately boils down to profits.

Dhara is another classic example in Indian context. Despite having high brand asset value, the brand equity is very low.

So, the question is, how does a company moves from brand asset to creating brand equity? Well, I think brand assets can induce trial, however for repeat purchase the customer should not only feel added perceived value in the brand, but also that this is brand which satisfies my need in the best possible way. Here, non tangible ‘patents’ (product by one company), process compliance (helpful not only in manufacturing, but also in services) etc comes into picture. I believe these two are just indicators; there can be many other factors which contribute to brand asset converting to brand equity.

I feel that companies should keep evaluating their brand equity vs. their brand assets. If the correlation starts going down, companies must find out the reasons and take corrective measures, if any.