You are on page 1of 13

Topics in Strategic Marketing Management

CUSTOMER-BASED BRAND EQUITY

ABSTRACT

Brand equity is a concept used in the marketing industry which defines the significance of an accepted brand name. The idea is simple; the holder of an accepted brand name can make more money from products with that brand name than from products with a less well-known name. It is considered that consumers react more amiably to a product with a well-known name than they do to products with less well-known names. Strong brand equity can create a strong competitive advantage which is an essential element for the success of companies. Nevertheless, there is not a general ground emerged for the content and the measurement of brand equity. It has been examined from financial and customer-based perspectives. This paper studies the customer-based brand equity which deals with the consumer reaction to a brand name. It examines the scope of customer-based brand equity from various literatures within the area of customer-based brand equity.

1. Brand Equity, the Definition

Brands present the image of value for customers and companies usually referred to as customer-based and financial-based brand equity, respectively. (Lindemann, 2010) The first perspective of brand equity is from a financial markets point of view where the asset value of a brand is appraised (Farquhar, Han, & Ijiri, 1991) Customer-based brand equity is consumers brand beliefs and attitudes that affect purchase behavior. (Rego, Billett, & Morgan, 2009) Customer-based brand equity, that is to say the value for customers, is about being able to assign responsibility to a particular product, in order to simplify decision-making process of customers. A brand indicates a guaranteed level of quality so that satisfied consumers might select the products another time. It is an important tool for the loyalty of the customers. Customer loyalty is an invaluable asset for firms as it can provide security and predictability of demand, create barriers against other firms trying to enter the market, and also translate into the willingness of customers to pay premium prices. (Kotler & Keller, 2006) An indication of the importance of well-known brands is the premium asset valuation that they obtain. (Lassar, Mittal, & Sharma, 1995) For example, 90% of the total price of $220 million paid by Cadbury-Schweppes for the Hires and Crush product lines of Procter & Gamble is attributed to brand assets. (Kamakura & Russell, 1991) Studying the general literature on brand equity brings plenty of definitions for it. The following table demonstrates the variety of current definitions and concept of brand equity.

Description of the Concept of Brand Equity The set of associations and behaviors on the part of the brands consumers, channel members, and parent corporation that permits the brand to earn greater volume or greater margins than it would without the brand name and that gives the brand a strong, sustainable, and differentiated advantage over competitors.

Study

(Leuthesser, 1988)

The value consumers associate with a brand, as reflected in the dimensions of brand awareness, brand associations, perceived quality, brand loyalty and other proprietary brand asset.

(Aaker, 1991)

The consumers implicit valuation of the brand in a market with (Swait, Erdem, differentiated brands relative to a market with no brand Louviere, & differentiation. Brands act as a signal or cue regarding the nature of Dubelaar, 1993) product and service quality and reliability and image/status.

Customer-based brand equity occurs when the consumer is familiar (Kamakura & with the brand and holds some favorable, strong, and unique brand Russell, 1993) associations in the memory.

The differential effect of brand knowledge on consumer response to the marketing of the brand. Brand knowledge is the full set of brand associations linked to the brand in long-term consumer memory. The consumers perception of the overall superiority of a product carrying that brand name when compared to other brands. Five perceptual dimension of brand equity includes performance, social image, value, trustworthiness and attachment. Brand equity is: (1) Loyalty (brands real or potential price premium), (2) loyalty (customer satisfaction based), (3) perceived comparative quality, (4) perceived brand leadership, (5) perceived

(Keller, 1993)

(Lassar, Mittal, & Sharma, 1995)

brand value (brands functional benefits), (6) brand personality, (7) (Aaker, 1996) consumers perception of organization (trusted, admired or credible), (8) perceived differentiation to competing brands, (9) brand awareness (recognition & recall), (10) market position (market share), prices and distribution coverage.

Researches in brand equity through the years result in many different sorts of dimension of brand equity that can be related to a brand. Nevertheless, the common denominator in all models is the utilization of one or more dimension of the Aaker model. (Keller, 1993) According to the model the consumer-based brand equity is an asset of four dimensions that are brand awareness, brand associations, perceived quality and brand loyalty.

Brand Equity
Brand Awareness Perceived Quality Brand Association Brand Loyalty

Brief Dimensions of Brand Equity

2. Measuring Customer Based Brand Equity, the Four Dimensions

Brand equity is defined as the value that consumers associate with a brand. (Aaker, 1991) It is the consumers perception of the general excellence of a product carrying that brand name when compared to other brands. It refers to consumers perception rather than any objective indicators. (Lassar, Mittal, & Sharma, 1995). A framework for measuring customer-based brand equity can be presented by using Aakers four dimensions of brand equity.

a. Brand Awareness Keller (2003) describes brand awareness as the customers ability to recall and recognize the brand as reflected by their ability to identify the brand under different conditions and to link the brand name, logo, symbol, and so forth to certain associations in memory. According to Aaker (1996) there are levels of awareness other than recall and recognition. He introduces top-of-mind, brand dominance, brand knowledge and brand opinion. Briefly, top-of-mind awareness level includes the first-named brand in a recall task for a potential customer. The level of brand dominance means it is the only brand that is recalled. Brand knowledge and opinion is the level that the potential customer has an opinion about the brand.

According to Aaker (1996), recognition could be important for new or niche brands. Recall and top-of-mind are more sensitive and meaningful for well-known brands. Brand knowledge and brand opinion can be used to enhance the measurement of brand recall to a certain extent. Aaker believes brand awareness must go before brand associations. That is where a consumer must first be aware of the brand in order to develop a set of associations. (Washburn & Plank, 2002)

b. Brand Associations Aaker (1991) claimed that the fundamental value of a brand name is the presence of associations its meaning to people. Purchase decisions and brand loyalty are based on those associations. Keller (1993) defined brand associations as the other informational nodes linked to the brand node in memory and contained the meaning of the brand for consumers. There are a various ways that brand associations can provide value. An association can affect the processing and recall of information, provide a point of differentiation, provide a reason to buy, create positive attitudes and feelings and serve as the basis of extensions. The associations that a well-established brand name provides can influence purchase behavior and affect user satisfaction. (Tuominen, 1999) Brand associations consist of all brand-related thoughts, feelings, perceptions, images, experiences, beliefs, attitudes (Kotler & Keller, 2006) and is anything associated in memory to a brand. Chen (2001) categorized two types of brand associations - product associations and organizational associations. (Chen, 2001) Product associations include functional attribute associations and non-functional associations (Chen, 2001) Functional attributes are the tangible features of a product (Keller, 1993). While evaluating a brand, consumers link the performance of the functional attributes to the brand. (Lassar, Mittal, & Sharma, 1995) If a brand does not perform the functions for which it is designed, the brand will has low level of brand equity. Performance is defined as a consumers judgment about a brands fault-free and long-lasting physical operation and flawlessness in the products physical construction. (Lassar, Mittal, & Sharma, 1995) Nonfunctional attributes include symbolic attributes (Aaker, 1991) which are the intangible features that meet consumers needs for social approval, personal expression or self-esteem (Keller, 1993). Consumers have the social image, trustworthiness, perceived value, differentiation and country of a brand (Chieng Fayrene & Lee, 2011).

o Social Image Social Image contributes to brand equity. It is defined as the consumers perception of the esteem in which the consumers social group holds the brand. It includes the attributions a consumer makes and a consumer thinks that others make to the typical user of the brand. (Chieng Fayrene & Lee, 2011)

o Perceived Value Lassar et al. (1995) argue that perceived value is the perceived brand utility relative to its costs, assessed by the consumer and based on simultaneous considerations of what is received and what is given up to receive it. Consumer choice of a brand depends on a perceived balance between the price of a product and all its utilities. (Lassar, Mittal, & Sharma, 1995) A consumer is willing to pay premium prices due to the higher brand equity. (Kotler & Keller, 2006)

o Trustworthiness Brand equity considerations (Lassar, Mittal, & Sharma, 1995) regard trustworthiness of a product as an important attribute in assessing the strengths of a brand. Lassar et al. (1995) describes trustworthiness as the confidence a consumer places in the firm and the firms communications and as to whether the firms actions would be in the consumers interest. Consumers place high value in the brands that they trust.

o Differentiation Differentiation of products means deliberately choosing a different set of activities to deliver a unique mix of value (Porter, 1996). Leuthesser (1988) states that the underlying determinants of consumer-based brand equity are that brands provide benefits to consumers by differentiating products, as they facilitate the processing and retrieval of information (Hoyer & Brown, 1990).

o Country of Origin Brand country of origin must also be considered. The origin is the place, region or country to which the brand is perceived to belong by its customers (Thakor & Kohli, 1996) Country of origin is known to lead to associations in the minds of consumers (Aaker, 1991; Keller, 1993).

o Organizational Associations Organizational associations include corporate ability associations, which are those associations related to the companys expertise in producing and delivering its outputs and corporate social responsibility associations, which include organizations activities with respect to its perceived societal obligations (Chen, 2001).

According to Aaker (1996), consumers consider the organization that is the people, values, and programs that lies behind the brand. Brand-as-organization can be particularly helpful when brands are similar with respect to attributes, when the organization is visible (as in a durable goods or service business), or when a corporate brand is involved. On the other hand, corporate social responsibility (CSR) is influencing the development of brands nowadays, especially corporate brands as the public wants to know what, where, and how much brands are giving back to society. Both branding and CSR have become crucially important now that the organizations have recognized how these strategies can add or detract from their value (Blumenthal & Bergstrom, 2003). Cause Related Marketing is a commercial activity by which businesses and charities (or causes) form a partnership with each other to market an image, product or service for mutual benefit (Adkins, 1999). In 2004 in United Kingdom, consumers of TESCO were offered the Computers-for-Schools-program, a Cause-Related marketing (CRM) program launched by TESCO to increase computer literacy of school leavers subsidized through an annual voucher redemption promotion. AVON rose over 10 million through a CRM campaign, which was donated to the Breakthrough Breast Cancer program. PERCOL introduced the Coffee Kids Charity Program in favor of children in the coffee growing communities, which is subsidized by means of a percentage of PERCOLs coffee sales (Business in the Community, 2004)

c. Perceived Quality Aaker (1991) presents perceived quality as the customer's perception of the quality or superiority of a product or service regarding its meant purpose, relative to alternatives. Perceived quality is, simply, a perception by customers. It differs from several related concepts: Actual or objective quality: the extent to which the product or service delivers superior service Product-based quality: the nature and quantity of ingredients, features, or services included Manufacturing quality: conformance to specification, the "zero defects" goal

Perceived quality cannot necessarily be objectively determined, in part because it is a perception and also because judgments about what is important to customers are involved. An evaluation of washing machines by a Consumer Report expert may be competent and unbiased, but it must make judgments about the relative importance of features, cleaning action, types of clothes to be washed, and so on that may not match those of all customers. After all, customers differ sharply in their personalities, needs, and preferences. Perceived quality is an intangible, overall feeling about a brand. However, it usually will be based on underlying dimensions which include characteristics of the products to which the brand is attached such as reliability and performance. To understand perceived quality, the identification and measurement of the underlying dimensions will be useful, but the perceived quality itself is a summary, global construct (Aaker, 1991). The concept of perceived quality is classified in two groups of factors that are intrinsic attributes and extrinsic attributes. (Zeithaml, 1988) The intrinsic attributes are related to the physical aspects of a product (e.g. color, flavor, form and appearance); on the other hand, extrinsic attributes are related to the product, but not in the physical part of this one (e.g. brand name, stamp of quality, price, store, packaging and production information (Bernues, Olaizola, & Corcoran, 2003).

d. Brand Loyalty According to Aaker (1991) brand loyalty represents the core of a brands equity. Perceived quality, brand associations and brand awareness provide reasons to buy and affect satisfaction. Loyalty could arise from a brands perceived quality or associations, but could also occur independently. Yet, the nature of this relationship is unclear. On the other hand, loyalty can induce a higher perceived quality (for example, a potential customer has a better evaluation of a brand if that brand is perceived as having a loyal customer base), stronger associations (the brand can be associated to elements characterizing its loyal customers), or increase awareness (loyal customers tend to provide brand exposure to new customers through mouth to mouth communication). Thus, brand loyalty is both an input and an output of brand equity and it is both influenced by and influences the dimensions of brand equity (Moisescu, 2006). Brand-loyal consumers may be willing to pay more for a brand because they perceive some unique value in the brand that no alternative can provide (Reichheld, 1996). This uniqueness may derive from greater trust in the reliability of a brand or from more favorable affect when customers use the brand (Chaudhuri & Holbrook, 2001). Accordingly, brand loyalty leads to greater market share when the same brand is repeatedly purchased by loyal consumers, irrespective of situational constraints (Assael, 1998). Moreover, because of various affective factors, loyal consumers may use more of the brand-that is, may like using the brand or identify with its image (Upshaw, 1995). In brief, superior brand performance outcomes such as greater market share and a premium price (relative to the leading competitor) may result from greater customer loyalty. This loyalty, in turn, may be determined by trust in the brand and by feelings or affect elicited by the brand (Chaudhuri & Holbrook, 2001). Aaker (1991) has discussed the role of loyalty in the brand equity process and has specifically noted that brand loyalty leads to certain marketing advantages such as reduced marketing costs, more new customers, and greater trade leverage. In addition, some researchers suggest other loyalty-related marketing advantages, such as favorable word of mouth and greater resistance among loyal consumers to competitive strategies (Dick & Basu, 1994). other descriptive

Grembler and Brown (1996) define varied degrees of loyalty. Behavioral loyalty is linked to consumer behavior in the marketplace that can be indicated by number of repeated purchases or commitment to rebuy the brand as a primary choice (Oliver, 1999). Cognitive loyalty which means that a brand comes up first in a consumers mind, when the need to make a purchase decision arises, that is the consumers first choice. The cognitive loyalty is closely linked to the highest level of awareness (top-of-mind), where the matter of interest also is the brand, in a given category, which the consumers recall first. Thus, a brand should be able to become the respondents first choices (cognitive loyalty) and is therefore purchased repeatedly (behavioral loyalty) (Keller, 2008) Chaudhuri & Holbrook (2001) state that brand loyalty is directly related to brand price. Price premium is the basic indicator of loyalty. It is defined as the amount a customer will pay for the brand in comparison with another brand offering similar benefits and it may be high or low and positive or negative depending on the two brands involved in the comparison. (Aaker, 1996)

3. Conclusion
It is imperative to know how much equity a brand commands in the market as building strong brand equity is a very successful strategy for differentiating a product/service from its competitors (Aaker, 1991). This paper has analyzed the aspects of customer-based brand equity from academic literature and gives the essential depth of understanding and measure of brand equity. It begins with the analysis of various understandings and definitions of brand equity in the literature. Then it examines the contribution of brand association, brand awareness, perceived value and brand loyalty to brand equity.

The Summary of Components for Customer Based Brand Equity

Brand Recognition

Brand Recall

Top-of-Mind Brand Awareness Brand Dominance

Brand Knowledge

Brand Opinion Functional Product Attributes Non-functional Product Attributes

Social Image

Trustworthiness

Perceived Value

Customer Based Brand Equity

Brand Associations Corporate Ability Corporate Social Responsibility Intrinsic Attributes Perceived Quality Extrinsic Attributes Frequency of Repurchase Brand Loyalty Top-of-Mind Differentiation

Country of Origin

Price Premium

Bibliography
Aaker, D. (1991). Managing Brand Equity. New York: Free Press. Aaker, D. (1996). Measuring brand equity across products and markets. California Management Review, 38 (Spring), 102-120. Adkins, S. (1999). Cause Related Marketing. London: Reed Educational and Professional Publishing Ltd. Assael, H. (1998). Consumer Behavior and Marketing Action. Cincinnati, OH: South-Wester. Bernues, A., Olaizola, A., & Corcoran, K. (2003). Extrinsic attributes of red meat as indicators of quality in Europe: an application for market segmentation. Food Quality and Preference, 14(4), 265-276. Blumenthal, D., & Bergstrom, A. J. (2003). Brand councils that care: Towards the convergence of branding and corporate social responsibility. Brand Management, 10(4/5), 327-341. Business in the Community. (2004). Cause related marketing case studies. Chaudhuri, A., & Holbrook, M. B. (2001). The Chain of Effects from Brand Trust and Brand Affect to Brand Performance: The Role of Brand Loyalty. Journal of Marketing, 65 (2), 81-93. Chen, A. (2001). Using free association to examine the relationship between the characteristics of brand associations and brand equity. Journal of Product & Brand Management, 10(7), 439451. Chieng Fayrene, Y., & Lee, G. (2011). Customer Based Brand Equity: A Literature Review. Journal of Arts Science & Commerce, 33-42. Dick, A. S., & Basu, K. (1994). Customer Loyalty: Toward an Integrated Conceptual Framework. Journal of the Academy of Marketing Science, 22, 99-113. Farquhar, P., Han, J., & Ijiri, Y. (1991). Recognizing and Measuring Brand Assets. Marketing Science Institute. Gremler, D., & Brown, S. (1996). The loyalty ripple effect: appreciating the full value of customers. International Journal of Service Industry Management, 10(3), 271-93. Hoyer, W., & Brown, S. (1990). Effects of brand awareness on choice for a common, repeat-purchase product. Journal of Consumer Research, 17(September), 141-8. Kamakura, A. W., & Russell, G. J. (1993). Measuring brand value with scanner data. International Journal of Research in Marketing, 10, 9-22. Kamakura, W., & Russell, G. (1991). Measuring Consumer Perceptions of Brand Quality with Scanner Data: Implications for Brand Equity. Marketing Science Institute, 91-122.

Keller, K. (1993). Conceptualizing, measuring, and managing customer-based brand equity. Journal of Marketing, 57(1), 1-22. Keller, K. (2008). Strategic Brand Management. NJ: Prentice Hall. Kotler, P., & Keller, P. (2006). Marketing Management. Upper Saddle River, NJ: Pearson Education. Lassar, W., Mittal, B., & Sharma, A. (1995). Measuring Customer-Based Brand Equity. Journal of Consumer Marketing, 12(4), 11-19. Leuthesser, L. (1988). Defining, measuring and managing brand equity: A conference summary. Cambridge, MA: Marketing Science Institute. Lindemann, J. (2010). The Economy of Brands. Basingstoke: Palgrave McMillan. McAdam, R., & Leonard, D. (2003). Corporate Social Responsibility in a Total Quality Management Context: Opportunities for Sustainable Growth. Corporate Governance, 3(4), 36-45. Moisescu, O. I. (2006). A Conceptual Analysis of Brand Loyalty as Core Dimension of Brand Equity. Oliver, R. L. (1999). Whence Consumer Loyalty. Journal of Marketing, 63(Special Issue), 33-44. Porter, M. (1996). What is Strategy. Harvard Business Review , 61-78. Rego, L. L., Billett, M. T., & Morgan, N. A. (2009). Consumer-Based Brand Equity and Firm Risk. Journal of Marketing, 47-60. Reichheld, F. F. (1996). The Loyalty Effect: The Hidden Force Behind Growth, Profits and Lasting Value. Boston: Harvard Business School Press. Swait, J., Erdem, T., Louviere, J., & Dubelaar, C. (1993). The equalization price: A measure of consumer-perceived brand equity. International Journal of Research in Marketing, 10, 23-45. Thakor, M. V., & Kohli, C. S. (1996). Brand Origin: Conceptualization and Review. Journal of Consumer Marketing, 13(3), 27-42. Tuominen, P. (1999). Managing Brand Equity. The Finnish Journal of Business Economics, 65-100. Upshaw, L. (1995). Building Brand Identity. New York: John Wiley & Sons. Washburn, J., & Plank, R. (2002). Measuring brand equity: an evaluation of a consumer-based brand equity scale. Journal of Marketing Theory and Practice, 10(1), 46-62. Zeithaml, V. (1988). Consumer perceptions of price, quality, and value: a means-end model and synthesis of evidence. Journal of Marketing, 52(3), 2-22.