In order to achieve this purpose, we first analyse the concept of brand equity; provide a comprehensive framework for managing brand equity; and finally, we. Managing Brand Equity by David A. Aaker - In a fascinating and insightful examination of the phenomenon of brand equity, Aaker provides a clear and. Managing Brand Equity and millions of other books are available for site Kindle. Managing Brand Equity Hardcover – September 9, This item:Managing Brand Equity by David A. Aaker Hardcover $
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Read Managing Brand Equity by David A. Aaker for free with a 30 day free trial. Read unlimited* books and audiobooks on the web, iPad, iPhone and Android. Mar 22, PDF | Brand equity continues to be one of the critical areas for marketing management. This study explores some of the consequences. Sep 30, PDF | On Jun 30, , Ravi Pappu and others published Defining, measuring and managing brand equity.
First, however, several basic questions must be addressed. For example: What exactly is a brand? Have brand equities been eroding? How do price promotions affect brands? What is behind the pressures for short-run financial results? Can a focus on brand equity provide a counterpoint to the tyranny of short-term financials? A brand thus signals to the customer the source of the product, and protects both the customer and the producer from competitors who would attempt to provide products that appear to be identical.
There is evidence that even in ancient history names were put on such goods as bricks in order to identify their maker. In the early sixteenth century, whiskey distillers shipped their products in wooden barrels with the name of the producer burned into the barrel. The name showed the consumer who the maker was and prevented the substitution of cheaper products. In a brand of Scotch called Old Smuggler was introduced in order to capitalize on the quality reputation developed by bootleggers who used a special distilling process.
Although brands have long had a role in commerce, it was not until the twentieth century that branding and brand associations became so central to competitors. In fact, a distinguishing characteristic of modern marketing has been its focus upon the creation of differentiated brands.
Market research has been used to help identify and develop bases of brand differentiation. Unique brand associations have been established using product attributes, names, packages, distribution strategies, and advertising.
The idea has been to move beyond commodities to branded products—to reduce the primacy of price upon the download decision, and accentuate the bases of differentiation. The power of brands, and the difficulty and expense of establishing them, is indicated by what firms are willing to pay for them. These values are far beyond the worth of any balance sheet item representing bricks and mortar.
An even clearer example of the value of a brand name is licensing. The Fruit Corner tag line, Real fruit and fun rolled up in one, was overshadowed by Sunkist Fun Fruits, a name that said it all.
The value of an established brand is in part due to the reality that it is more difficult to build brands today than it was only a few decades ago. First, the cost of advertising and distribution is much higher: One-minute commercials and sometimes even half-minute commercials are now considered too expensive to be practical, for example.
Second, the number of brands is proliferating: Approximately 3, brands are introduced each year into supermarkets. There were at this writing nameplates of cars, over brands of lipstick, and 93 cat-food brands. It also means that a brand often is relegated to a niche market, and so will lack the sales to support expensive marketing programs.
Despite the often obvious value of a brand, there are signs that the brand-building process is eroding, loyalty levels are falling, and price is becoming more salient. The accompanying insert suggests a series of indicators of a lack of attention to brands which most firms will find familiar. Managers cannot identify with confidence the brand associations and the strength of those associations.
Further, there islittle knowledge about how those associations differ across segments and through time. Knowledge of levels of brand awareness is lacking. There is no feel for whether a recognition problem exists among any segment. Knowledge is lacking as to top-of-mind recall that the brand is getting, and how that has been changing.
There is no systematic, reliable, sensitive, and valid measure of customer satisfaction and loyalty—nor any diagnostic modelthat guides an ongoing understanding of why such measures may be changing. There is no person in the firm who is really charged with protecting the brand equity.
Those nominally in charge of the brand,perhaps termed brand managers or product marketing managers, are in fact evaluated on the basis of short-term measures. The measures of performance associated with a brand and its managers are quarterly and yearly.
There are no longer-term objectivesthat are meaningful. Further, the managers involved do not realistically expect to stay long enough to think strategically,nor does ultimate brand performance follow them. There is no mechanism to measure and evaluate the impact of elements of the marketing program upon the brand.
Sales promotions,for example, are selected without determining their associations and considering their impact upon the brand. There is no long-term strategy for the brand. The following questions about the brand environment five or ten years into thefuture are unanswered, and may have not been addressed: What associations should the brand have?
In what product classes shouldthe brand be competing? What mental image should the brand stimulate in the future? There is evidence that loyalty levels for supermarket products have declined. The ad agency BBDO found a surprising perception of brand parity among consumers throughout the world in 13 consumer product categories. It was noticeably higher for such products as paper towels and dry soup, which emphasize performance benefits, than for products like cigarettes, coffee, and beer, for which imagery has been the norm.
One survey of department-store shoppers involving 11 product categories such as underwear, shoes, housewares, furniture, and appliances documented the erosion of price. This action might not be possible to undo. Are you sure you want to continue? Upload Sign In Join. Home Books Entrepreneurship. Save For Later. Create a List. Managing Brand Equity by David A. Summary The most important assets of any business are intangible: Read on the Scribd mobile app Download the free Scribd mobile app to read anytime, anywhere.
Free Press Released: Dec 1, ISBN: Aaker All rights reserved, including the right of reproduction in whole or in part in any form. Managing brand equity: Includes bibliographical references and index. Brand name products—Valuation—United States—Management. Intangible property—Valuation—United States—Management.
What Is Brand Equity? What Is the Value of a Brand? Brand Associations: Download ebook for print-disabled. Prefer the physical book?
Check nearby libraries with:. Copy and paste this code into your Wikipedia page. Need help? New Feature: You can now embed Open Library books on your website! Learn More. Last edited by ImportBot. August 12, History. Add another edition? Managing brand equity Aaker, David A. Managing brand equity Close. Advertising, of course, creates strong brands which can hold share in the face of discounting. The Use Of Sales Promotion It is tempting to "milk" brand equity by cutting back on brand-building activities, such as advertising, which have little impact upon short-term performance.
Further, declines in brand equity are not obvious. In contrast, sales promotions, whether they involve soda pop or automobiles, are effective -- they affect sales in an immediate and measurable way. During a week in which a promotion is run, dramatic sales increases are observed for many product classes: Promotions provide a way to keep a third-or fourth-ranking brand on the shelf.
They are also attractive to the Pepsis of the world that want to beat Coke and, not so incidentally, squeeze out the 7-Up's of the world. There has been a dramatic increase in sales promotion during the past two decades or so, both customer-directed such as couponing and rebates and trade-directed such as wholesale case discounts.
Coupon distributions grew at an annual rate of Even in categories such as automobiles, price promotions have been the norm. Unlike brand-building activities, most sales promotions are easily copied. In fact, competitors must retaliate or suffer unacceptable losses.
The inevitable result is a great increase in the role of price. There is pressure to reduce the quality, features, and services offered. At the extreme, the product class starts to resemble a commodity, since brand associations have less importance. At that point, promotions look even better with respect to short-term impact, but their value declines.
The enhanced role of promotions is in part driven by measurement. With the advent of the scanner-based databases in food and drug stores, the short-term measures of some marketing actions are better than ever. They show that price promotions affect sales. However, they are not well suited to measure long-term results, in part because such results are difficult to detect in a noisy marketplace, and also because experiments covering multiple years are very expensive to conduct.
Because there are no easy, defensible ways to measure the long-term effects of marketing actions, short-term measures have added influence. The situation is a bit like that of the drunk who looks for car keys under a street light because the light is better than where the keys were actually lost.
The visibility of the short-term success of price promotions and other potentially brand-debilitating activities is fed by the short-term orientation of many marketing organizations.
Brand managers and other key people often are rotated regularly so that they can expect to stay in any one position for only two to five years. This then becomes their time horizon. Worse, during this time they are evaluated on the basis of short-term measures such as market share movements and short-term profitability.
This is in part because such measures are available and reliable while indicators of long-term success are elusive, and, too, because the organization itself is concerned with short-term performance.
Pressures For Short-Term Results Branding decisions take place in organizations experiencing extreme pressures to deliver short-term performance, particularly in the U. A myriad of diverse spokes people, including the chairman of Sony, a political scientist from Harvard, and the authors of the MIT Commission on Productivity, have forcefully concluded that U. A prime reason why American managers might have a short-term focus is the prominence and acceptance of the maximization of stockholder value as the prime objective of U.
The problem is that shareholders are inordinately influenced by quarterly earnings. Their crude model is that future returns will be related to current performance. The resulting need for managers to demonstrate good quarterly earnings percolates into organizational objectives and brand-management evaluation.
As a result, there is intense pressure throughout the firm to deliver good short-term financials. A basic problem is that shareholders usually are incapable of understanding the strategic vision of a firm, in part because they are not privy to strategic decision-making, and also because they cannot interpret the uncertain strategic environment or the complexities of the organization. Further, there is an absence of credible alternative indicators of long-term performance.
After decades of effort, we have been markedly unsuccessful at modeling the long-term value of advertising in the absence of multiple-year field experiments. Measure of new-product effort is similarly difficult to quantify.
Firms can keep track of new product research expenditures, the number of new products, the percent of business associated with products introduced within five years, and so on, but it is difficult to generate measures that are convincing surrogates for long-term performance. The long-term value of activities which will enhance or erode brand equity are similarly difficult to convincingly demonstrate.
Without alternatives, short-term financials fill a vacuum and come to dominate performance measurement. Managing with a long-term perspective is difficult in the face of the shareholder value emphasis, and other pressures, facing U.
What is to be done? Simply put, we need to find measures of long-term performance to supplement or replace short-term financials, measures that will be convincing enough to satisfy shareholders. An analysis of hundreds of heavy-up advertising experiments where heavy advertising is compared to moderate or normal advertising was conducted. On average over half of such heavy-up tests show no significant change in sales at all during the test period. IRI examined 15 of these experiments that did achieve significant sales gains during a test year.
Thus, the impact of advertising may be grossly underestimated if only a one year perspective is employed. Of course, advertising and promotion results are more often expected in months, or even weeks. An asset is something a firm possesses, such as a brand name or retail location, which is superior to that of the competition.
A skill is something a firm does better than its competitors do, such as advertising or efficient manufacturing. Assets and skills provide the basis of a competitive advantage that is sustainable. What a business does the way it competes and where it chooses to do so usually is easily imitated. It is more difficult to respond to what a business is, since that involves acquiring or neutralizing specialized assets or skills. Anyone can decide to distribute cereal or detergent through supermarkets, but few have the clout to do it as effectively as, say, General Mills.
The right assets and skills can provide the barriers to competitor thrusts that allow the competitive advantage to persist over time and thus lead to long-term profits. The challenges are to identify key assets and skills on which the firm should base its competitive advantage, to build upon and maintain them, and then to use them effectively.
The concept of an asset as a generator of a profit stream is familiar, especially when that asset is capitalized and appears on the balance sheet. A government bond is the prototypical example. A factory which houses plant, equipment, and people is another example. But of course a factory, unlike a government bond, requires active management and must be maintained.
The most important assets of a firm, however such as the people in the organization and the brand names , are intangible in that they are not capitalized and thus do not appear on the balance sheet.
Depreciation is not assessed, on "intangible assets," and thus maintenance must come directly out of cash flow and short-term profits. Everyone understands that even in bad times a factory must be maintained, in part because of the depreciation term in the income statement and also because maintenance needs are visible. An intangible asset, by contrast, is more vulnerable, and its "maintenance" is more easily neglected.
Managing The Brand Name One such intangible asset is the equity represented by a brand name. For many businesses the brand name and what it represents are its most important asset -- the basis of competitive advantage and of future earnings streams.
Yet, the brand name is seldom managed in a coordinated, coherent manner with a view that it must be maintained and strengthened. Instead of focusing upon an asset such as a brand, too often American "fast-track" managers get caught up in day-to-day performance measures which are easily available. What caused the share drop in the Northeast? Would a promotion fight off a new product challenge?
How can we combat a new entry? Can we put a name on another division's product and thus provide an interim solution? How can growth be sustained? Can a brand name be used to gain entry into a new product market?
A focus on short-run problems facing the brand can result in an operation that performs well, sometimes over a long time-period. However, the danger is that this performance is achieved by exploiting the brand and allowing it to deteriorate. The brand might be extended so far that its core associations are weakened.
Its associations might be tarnished by expanding its market to include less-prestigious outlets and customers. Price promotions might be used to provide a perceived bargain for customers. The brand should be thought of as an asset, such as a timber reserve. Short-term profits can be substantial if the reserve is depleted without regard to the future but the asset can be destroyed in the process.
It is not enough to avoid damaging a brand -- it needs to be nurtured and maintained. The focus is on improving the efficiency of operations including downloading, product design, manufacturing, promotions, and logistics. A problem, however, is that in such a culture the brand may not be nurtured, and thus may slowly deteriorate. Further, efficiency pressures lead to difficult compromises between cost goals on the one hand and customer satisfaction on the other.
The value of brand-building activities on future performance is not easy to demonstrate.
The challenge is to understand better the links between brand assets and future performance, so that brand-building activities can be justified. What are the assets that underlie brand equity? How do they relate to future performance? Which assets need to be developed, strengthened, or maintained? What is the value of an improvement in perceived quality or brand awareness, for example? If answers to such questions would emerge, there would be more support for brand-building and more resistance to short-term expediency.
All brand-building activities require justification. However, the need is particularly acute in advertising because of the large expenditures involved that are often vulnerable to short-term pressures. Peter A. He warned: The first step in identifying the value of brand equity is to understand what it is -- what really contributes to the value of a brand.
Thus, we now turn to the definitional issue. Subsequently, we shall look at several methods of placing a value upon a brand which will provide additional insight regarding the brand concept.
And, finally, some issues facing those who create or manage brands will be introduced. If the brand's name or symbol should change, some or all of the assets or liabilities could be affected and even lost, although some might be shifted to a new name and symbol.
The assets and liabilities on which brand equity is based will differ from context to context. However, they can be usefully grouped into five categories: Brand loyalty 2. Name awareness 3. Perceived quality 4. Brand associations in addition to perceived quality 5. Other proprietary brand assets -- patents, trademarks, channel relationships, etc.
The concept of brand equity is summarized in Figure The five categories of assets that underlie brand equity are shown as being the basis of brand equity.
The figure also shows that brand equity creates value for both the customer and the firm. Providing Value to the Customer Brand-equity assets generally add or subtract value for customers. They can help them interpret, process, and store huge quantities of information about products and brands.
They also can affect customers' confidence in the download decision due to either past-use experience or familiarity with the brand and its characteristics. Potentially more important is the fact that both perceived quality and brand associations can enhance customers' satisfaction with the use experience.
Knowing that a piece of jewelry came from Tiffany can affect the experience of wearing it: The user can actually feel different. Providing Value to the Firm As part of its role in adding value for the customer, brand equity has the potential to add value for the firm by generating marginal cash flow in at least half a dozen ways. First, it can enhance programs to attract new customers or recapture old ones. A promotion, for example, which provides an incentive to try a new flavor or new use will be more effective if the brand is familiar, and if there is no need to combat a consumer skeptical of brand quality.
Second, the last four brand equity dimensions can enhance brand loyalty. The perceived quality, the associations, and the well-known name can provide reasons to download and can affect use satisfaction. Even when they are not pivotal to brand choice, they can reassure, reducing the incentive to try others. Enhanced brand loyalty is especially important in downloading time to respond when competitors innovate and obtain product advantages.
Note that brand loyalty is both one of the dimensions of brand equity and is affected by brand equity.
The potential influence on loyalty from the other dimensions is significant enough that it is explicitly listed as one of the ways that brand equity provides value to the firm. It should be noted that there exist similar interrelationships among the other brand equity dimensions. For example, perceived quality could be influenced by awareness a visible name is likely to be well made , by associations a visible spokesperson would only endorse a quality product , and by loyalty a loyal customer would not like a poor product.
In some circumstances it might be useful to explicitly include other; brand equity dimensions as outputs of brand equity as well as inputs, even though they do not appear in Figure Third, brand equity will usually allow higher margins by permitting both premium pricing and reduced reliance upon promotions. In many contexts the elements of brand equity serve to support premium pricing. Further, a brand with a disadvantage in brand equity will have to invest more in promotional activity, sometimes just to maintain its position in the distribution channel.
Fourth, brand equity can provide a platform for growth via brand extensions.
Ivory, as we have seen, has been extended into several cleaning products, creating business areas that would have been much more expensive to enter without the Ivory name. Fifth, brand equity can provide leverage in the distribution channel. Like customers, the trade has less uncertainty dealing with a proven brand name that has already achieved recognition and associations.
A strong brand will have an edge in gaining both shelf facings and cooperation in implementing marketing programs. Finally, brand-equity assets provide a competitive advantage that often presents a real barrier to competitors. An association -- e. For example, another brand would find it difficult to compete with Tide for the "tough cleaning job" segment. A strong perceived quality position, such as that of Acura, is a competitive advantage not easily overcome -- convincing customers that another brand has achieved quality superior to the Acura even if true will be hard.
Achieving parity in name awareness can be extremely expensive for a brand with an awareness liability. We now turn to the five categories of assets that underlie brand equity. As each is discussed, it will become clear that brand-equity assets require investment to create, and will dissipate over time unless maintained. Brand Loyalty For any business it is expensive to gain new customers and relatively inexpensive to keep existing ones, especially when the existing customers are satisfied with -- or even like -- the brand.
In fact, in many markets there is substantial inertia among customers even if there are very low switching costs and low customer commitment to the existing brand.
Thus, an installed customer base has the customer acquisition investment largely in its past. Further, at least some existing customers provide brand exposure and reassurance to new customers. The loyalty of the customer base reduces the vulnerability to competitive action. Competitors may be discouraged from spending resources to attract satisfied customers.
Further, higher loyalty means greater trade leverage, since customers expect the brand to be always available. Awareness of the Brand Name and Symbols People will often download a familiar brand because they are comfortable with the familiar. Or there may be an assumption that a brand that is familiar is probably reliable, in business to stay, and of reasonable quality.
A recognized brand will thus often be selected over an unknown brand. The awareness factor is particularly important in contexts in which the brand must first enter the consideration set -- it must be one of the brands that are evaluated. An unknown brand usually has little chance. Perceived Quality A brand will have associated with it a perception of overall quality not necessarily based on a knowledge of detailed specifications.
The quality perception may take on somewhat different forms for different types of industries. However, it will always be a measureable, important brand characteristic. Perceived quality will directly influence download decisions and brand loyalty, especially when a downloader is not motivated or able to conduct a detailed analysis.
It can also support a premium price which, in turn, can create gross margin that can be reinvested in brand equity. Further, perceived quality can be the basis for a brand extension. If a brand is well-regarded in one context, the assumption will be that it will have high quality in a related context. A Set of Associations The underlying value of a brand name often is based upon specific associations linked to it. Associations such as Ronald McDonald can create a positive attitude or feeling that can become linked to a brand such as McDonald's.
The link of Karl Malden to American Express provides credibility, and to some may stimulate confidence in the service. The association of a "use context" such as aspirin and heart-attack prevention can provide a reason-to-download which can attract customers.
A life-style or personality association may change the use experience: The Jaguar associations may make the experience of owning and driving one "different. Hershey's chocolate milk provides the drink with a competitive advantage based upon Hershey's associations. Branding an Ingredient: Nutrasweet Perdue chickens and Chiquita bananas illustrate that a commodity product can be successfully branded.
Each has developed a formidable awareness level and quality reputation for a product that was thought not long ago to be a pure commodity. The Nutrasweet Company, a unit of Monsanto, faced an even more difficult task: The brand had to be strong enough to survive the expiration of the patent in the early s. Their strategy was to create a consumer-level brand name drawing upon the words "nutrition" and "sweet" and symbol the familiar swirl and establish it so firmly that consumers will prefer products with Nutrasweet over the same products from a low-cost competitor.
Although Nutrasweet has advertised extensively, the cornerstone of the brand-creation effort has been their insistence that each of the some 3, products that use Nutrasweet display the brand name and symbol. The brand has been extremely successful in the market: Some fascinating questions emerge: How strong will the Nutrasweet brand be in the face of cheap substitutes?
What will Nutrasweet do to help retain consumer loyalty? Can the firm repeat its success with its newest commodity, the fat substitute Simplesse?