Brand Equity



Brand Equity

Most valuable intangible assets

Recognition of the value of brand equity as an asset for a firm suggests a need to demonstrate how this asset generates a return. This is perhaps best reflected in the ability of the firm to extend the brand to new products. The assumption behind the managerial decision to extend a brand is that the benefits of brand awareness and a positive brand image can be carried over to a new product category. The expected benefits of brand extension include lower advertising and awareness-building investments, and ease of positioning. A large body of research on brand extensions lends support to this assumption but also provides some caveats. For example, brand associations do transfer to new products which are similar in attributes or proximate in concept (Sullivan 1992).

Associations may also transfer to distant extensions, provided the original brand is of a high quality or extensions occur in sequential order. Distant extensions may be perceived as a better fit when the existing brand is broad, in as much as it already represents a variety of products. However, the cognitive structure of broad brands can have an important impact on the specific brand associations brought to mind when evaluating an extension and consequently may affect perceptions of fit. For example, brands such as Honda, Nike and Levi's which are broad brands, are nevertheless, strongly associated with a single-product category. On the other hand, brands such as Bic, Siemens and Kraft may be associated with a number of different product categories. Contextual cues on cognitive structure can have a significant impact on the extendibility of brands (Smith 1992).

Defining brand equity

The brand is considered one of the most valuable intangible assets, becoming the centerpiece of the strategy and management of most companies. It has identified a source of competitive advantage and a possible guarantee of future growth. Thus, its importance derives not only from the opportunities and challenges that can be generated in the current competitive environment, but also by the potential dynamics involving the use of a stable brand to penetrate new markets.

The brand has traditionally been defined as a name, term, sign, symbol, design or combination of them intended to identify the goods and services of one seller or group of sellers in order to differentiate them from their competitors. However, this technical definition only makes sense if we consider the characteristics of the context in which it arose, where the brand performed the function of identifying the product as vital information that would facilitate the purchase process. Subsequently, the role of the brand within the marketing strategy has been extended, being used by manufacturers as a way to witness the quality and control the entry of products in certain sectors (Park 1991).

The significance acquired within the company, becoming a key player in the process of defining the strategy of positioning and differentiation, has led to the emergence of a new conception of it related to the way customers perceive. Thus, the brand begins to be seen ...