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How to Succeed in Branding – Part 3

Posted by Administrator On February - 15 - 2010

Brand Equity – When a product has its own brand name, certain benefits will be associated with the product. On the other hand, should the same product not have such a brand name, then the associated benefits will be greatly reduced.

Consider the following example which illustrates Brand Equity:

In the early 90s, the Ford Motor Company decided that all new or redesigned cars should have brand names that began with the letter “F”. This corresponded with the previous tradition of naming all sport utility vehicles manufactured since the Ford Explorer with the letter “E”. Following this strategic decision by Ford, an analyst expressed concern that renaming the well known Windstar with the name Freestar would lead to a certain amount of confusion amongst the consumer which would subsequently affect brand equity. The aging Taurus, which became one of the most significant cars in American auto history would be dropped in favour of three entirely new names, all starting with “F”, viz. the Five Hundred, the Freestar and the Fusion. The result of this change was that, by 2007, the Freestar was no longer in production, the Five Hundred name was no loner in use and the Taurus was brought back for the next generation of that car. The “Ford Five Hundred” brand was recognised by less than half of the people interviewed, whilst an overwhelming majority were familiar with the “Ford Taurus” brand.

The three most common ways of measuring a brand, i.e. quantifying its brand equity, are as follows:

In Terms of the Firm – This approach measures the brand in terms of it being a financial asset. A calculation is made as to how much the brand is worth when treated as an intangible asset. This can be done by considering the value of the firm, in terms of its market capitalisation, and removing the total value of all the company’s tangible assets and any measurable intangible assets. The corresponding residual value would be that of that company’s brand equity.

In Terms of the Product – The traditional product brand measurement compares the price of an unnamed or private label product to a product that corresponds as much as possible. The difference in price is therefore due to the brand.

In Terms of the Consumer - This approach strives to measure the awareness, in respect of recall and recognition, and brand image, which refers to the overall associations that the brand has, in the eyes of the consumer. Techniques that are commonly used to discover the real and intangible attributes of the brand, consumer attitudes and their intentions concerning the brand include tests involving free association and methods of projection. The outcome is that brand that have attained high levels of awareness together with strong, positive and particular associations are considered as high equity brand.

Brand equity is brought about by the application of appropriate marketing techniques. This incorporates the bringing together of effective advertising, public relations as well as product promotion. As the value of a company’s brand equity increases, it is likely that the company will use a strategy based not on individual branding but, instead, on the application of family branding. The reason for this is that family branding allows a company to leverage the value of the equity which has been built up in the core brand. Brand loyalty, product awareness and the appreciation of quality are all characteristics that are intertwined in the concept of brand equity.

- Peter Radford

One Response to “How to Succeed in Branding – Part 3”

  1. Bruce says:

    Some great examples of the old saying that goes something like – when you got a good thing going, don’t mess with it.