BRAND, BRAND NAME & BRAND EQUITY
Brand:
A brand is a person’s gut feeling about a product or service. It is something that lies in your head.
It is a promise that links the product/service to the consumer.
It can be a product or a service that add dimensions that differentiate it in some way from other
products or services designed to satisfy the same need. Thus a brand identifies the seller or maker.
These differences may be functional, rational or tangible related to product performance of the
brands.
Branding means to distinguish the goods of one product from another. Brands identify the source
or the maker of the product and allow customers to assign responsibility to a particular
manufacturer or a distributor. Consumers learn about brands from past experience or marketing
programs.
Functions of a Brand
1) It helps in product handling & tracking
2) It helps in inventory organization & accounting records
3) Brands help the firm to get legal protection for the unique features or aspects of the product.
Brave name can be protected through registered trademarks, manufacturing process can be
protected through patents and packaging can be protected through copyrights & design.
4) Brand shows a certain level of quality so that the buyers can easily choose the product again.
5) Brand loyalty provides predictability and security of demand for the firm.
6) Branding is used as a powerful mean for gaining a competitive advantage.
A brand can thus be defined as a word, symbol or a letter or a group of all these. But it is more
than an identification mark.
It can convey up to six level of meaning
(1) Attributes: A brand brings to mind certain attributes.
Eg: Mercedes suggest well-built, well-engineered, durable, prestige
(2) Benefits: Attributes get translated into functional & emotional benefits.
(3) Values: The brand speaks about the producer’s value.
Eg: Mercedes stands for high performance & prestige.
(4) Culture: Brands also represents a certain culture
Eg: Mercedes represents German culture, organized, efficient & high quality.
(5) Personality: The brand can project a certain personality.
(6) User: Brand suggests the kind of consumers who buys or uses the product.
Brand Name:
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Once brand consensus has been built, then the next step is to select a brand name. The following
must be kept in mind while choosing a brand name.
 Brand name must be short and simple. Long and complicated names must be avoided as
they create difficulty in reading and remembering them.
 Brand name must be easily pronounceable as customers at point of purchase would not ask
for names that are difficult to pronounce.
 Suggestive brand names are better as they can convey the products attributes or benefits.
 The name should be distinctive i.e. it should not lose its identity in a crowded market. A
brand is distinctive when it stands apart from others in the same category.
 A brand name must be selected considering its meaning in other languages. Also some
word may be perfect in one language/culture but offensive in others.
Definition: - Thus a brand name can be defined as a name selected by the advertisers, to identify
a product to the consumer and to set apart from all the products.
Several product variations may exist within a designated brand.
Brand Equity:
Brand equity is added value endowed to product and services. This value may be referred to how
the consumer thinks, feels and acts with respect to the brand, as well as the prices, market share
and probability that brands command to the firm. Brand equity is an intangible asset that has
psychological and financial value to the firm.
Customer based brand equity can be defined as the differential effect that brand knowledge has on
consumer response to the marketing of that brand.
A brand is said to have a the brand equity when consumers react more favorably to a product and
the way it is identified as compared to when it is not.
Brands have different values and power in the market. At one extreme are brands not known by
most buyers, then there are those with high degree of acceptability, and there are those brands
which enjoy a high degree of brand preference and those which command a high degree of brand
loyalty.
There are five levels of customer attitude.
1) Customer will change brand especially for price reason.
2) Customer is satisfied and no change of brand.
3) Customer is satisfied and would incur costs by changing brands.
4) Customer values a brand and sees it as a friend.
5) Customer is devoted to the brand.
Brand equity is highly related to the number of customers who lie in 3, 4 and 5th category.
Advantages of high brand equity
1) The company will have more leverage in bargaining with distributors and retailers because
customers expect them to carry the brand.
2) The price charged can be higher than the competitors as the brand has higher perceived quality.
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3) The company can more easily launch extensions as the brand name carries high credibility.
4) Brand offers the company some defense against price competition.
Brand switching analysis:
In any market for a certain product there is some percentage of consumers who are sticking to one
brand and there are some percentages of customers who are shifting from one brand to another.
This is possible in a successive purchasing that a customer who purchases a brand may stick to the
first brand or may switch to another.
The aggregate brand switching behavior displayed by large groups of customers from one time
period to another maybe described probabilistically. The probabilistic descriptions as given by
transition matrix, whose elements give the probabilities of various change’s which may occur.
If
is the probability that the customer will switch from brand to brand from one period to
next; the transition matrix is:
From
/
:- are the probabilities that customer will stick to brand
& brand
respectively
𝑃𝐴𝐵 :- % of customers shifting from 𝐴 to 𝐵
𝑃𝐵𝐴 ∶ −% of customers shifting from 𝐵 to 𝐴
Here the sum of row elements = 1
Either the customer will purchase 𝐴 or 𝐵. But sum of columns need not be one as the company
wants to promote its sales i.e. more and more customers retained/stick to their own brand and also
attract the competitors.
Customers to their brand i.e. 𝑃𝐴𝐴 and 𝑃𝐵𝐴
Let us consider the transition matrix
From\ To
A
B
A
B
𝑃𝐴𝐴 = 0.8
𝑃𝐵𝐴 = 0.4
𝑃𝐴𝐵 = 0.2
𝑃𝐵𝐵 = 0.6
i.e. 80% of customers will stick to A and 20% of customers will shift to B.
Similarly, 60% of customers will stick to B and 40% of customers will shift to A
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If this matrix is true at each point of transition then a steady state is reached regarding the market
shares of brand A and brand B.
PERIOD
1
2
3
4
5
6
7
A
50
50*0.8+50*0.4 = 60
60*0.8+40*0.4 = 64
65.6
66.24
66.496
66.65
B
50
50*0.2+50*0.6 = 40
60*0.2+40*0.6 = 36
34.4
33.76
33.504
33.35
Thus a steady state is reached when A’s market share is 66.67% and B’s market share is 33.33%
We now show that steady state is independent of initial market share.
Here we start with initial market shares as 50% each and settled to 2/3 and 1/3. If we started with
something else the steady state would have been 2/3 and 1/3
Example: - If we start with initial shares as 75% and 25%
PERIOD
1
2
3
4
5
6
7
8
A
75
70
68
67.2
66.85
66.75
66.7008
66.68
B
25
30
32
32.8
33.12
33.25
33.29
33.32
Hence here also we reach the steady state 2/3 and 1/3 respectively
 If the transition probability matrix is given by:
𝐴
𝐵
A 
1 

B 1  
 
And initial shares are 𝑆 and (1 − 𝑆) then in the next stage we will have
𝛼
1−𝛽
(𝑆, (1 − 𝑆)) (
) = (𝑆1 , (1 − 𝑆1 )) (say)
1−𝛽
𝛽
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Further in the second stage
𝛼
(𝑆, (1 − 𝑆)) (
1−𝛽
1−𝛼
𝛼
) = (𝑆 , (1 − 𝑆)) (
𝛽
1−𝛽
= (𝑆2 , (1 − 𝑆2 )) (say)
1−𝛼 2
)
𝛽
Similarly, in the 𝑛𝑡ℎ stage transition, we will have
(𝑆 , (1 − 𝑆)) (
𝛼
1−𝛽
1−𝛼 𝑛
) = (𝑆𝑛 , (1 − 𝑆𝑛 ))
𝛽
Now for steady state 𝑛 → ∞
𝛼
 lim (𝑆 , (1 − 𝑆)) (
1−𝛽
n
company
1−𝛼 𝑛
) → steady state independent of initial market shares of the
𝛽
Use of transition probability matrix
To see if everything is normal and what will be the market share and see if the promotional efforts
are effective and if it will increase 𝑃𝐴𝐴 and 𝑃𝐵𝐴 . Suppose they have an expenditure on promotional
efforts for shifting the probabilities.
Is it beneficial for the company?
If the market shares changes, profit also changes. If this profit compensates for the expenditure on
promotion effort on changing the transition probability matrix, then the company will go for it.
Now we’ve a promotional campaign to get the matrix
(
0.9 0.1
)
0.5 0.5
and initial market shares of the company is 50% each
We see the market shares before and after promotional efforts.
Gain in share
0
Period
1
A
50
B
50
5
10
14
15.6
16.24
16.49
2
3
4
5
6
7
60
64
65.6
66.24
66.50
66.67
70
78
81.2
82.48
82.99
Then we see the gain in market shares at different transitive points.
Assumptions:
1. The probability of purchase of a given brand depends upon the immediate previous purchase
and not on the entire past history.
i.e. it has a Markovian property (forget-fullness) i.e. it forgets what happened in the past.
In brand switching it may not be true and may depend on entire past history.
2. The total market is constant. Every consumer makes purchases in every time period. But this
may not be true. To overcome this we introduce no purchase.
From\ To
A
B
No purchase
A
B
No purchase
𝑃𝐴𝐴
𝑃𝐵𝐴
𝑃0𝐴
𝑃𝐴𝐵
𝑃𝐵𝐵
𝑃0𝐵
𝑃𝐴0
𝑃𝐵0
𝑃00
The modification creates another problem because we’re having Markovian property. Suppose in
the immediate past, there is an event of no purchase, then what happens in the next will depend on
the previous time period, i.e no purchase whereas it should depend on which brand he purchased.
3. The model does not take into account at the validation of quantity purchased by a consumer
during a time period.
From\ To
A
B
A
0.6
0.3
B
0.4
0.7
Markov model assumes that he forgets the past purchase and bases his purchasing behavior only
on the most recent purchase, the satisfaction derived from it and the attraction of other brands.
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