Brand equity
Brand equity is the value built-up in a
brand. The value of a company's brand equity can be calculated by comparing the expected future revenue from the branded product with the expected future revenue from an equivalent non-branded
product. This calculation is at best an approximation. This value can comprise both tangible, functional attributes (eg. TWICE the cleaning power or HALF the fat) and intangible, emotional attributes (eg. The brand for people with style and good taste).
An investment in brand equity is commonly claimed to work through the creation of brand knowledge. This knowledge in turn consists of two aspects of a brand: brand image and brand awareness. Brand image, in this context, consists of the mental associations consumers make with the brand. Brand awareness is composed of the strength of the brand in consumers' minds, for example their ability to recall the brand. The combination of the two is sometimes referred to as the
customer franchise. Firms may seek to influence brand equity, but it is the consumer who determines brand equity and its value.
It can be positive or negative. Positive brand equity is created by a history of effective
promotion and consistently meeting or exceeding customer expectations. Negative brand equity is usually the result of bad management.
Positive brand equity can be a significant
barrier to entry for prospective competitors. The greater a company's brand equity, the greater the probability that the company will use a
family branding strategy rather than an
individual branding strategy. This is because family branding allows them to leverage off the equity accumulated in the core brand. This makes
new product introductions less risky and less expensive.
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