Brand Equity As A
Strategic Advantage
Professor Chip Besio
Southern Methodist University
Marketing 5341
Why the Interest in Branding?
Brands are assets
Pressure from Stockholders for
performance
Pressure from competitors
– Most products in a mature marketplace
– Price competition abounds
What is Brand Equity?
 The “added value” endowed by the brand
name
 Key elements: Associations, Awareness,
Perceived Quality, Loyalty
 Intangible, but measurable
Benefits of Brand Equity
 Asset management/leveraging
 Consumer franchise (facilitates loyalty)
 Lower communication costs
 Improved prices/margins/market share
 More power with the trade
More benefits of Brand Equity
Barrier to competitive entry
Effect on financial valuation of the firm
Value to your Consumer
– Recognition, consistency, confidence,
image/status, etc.
Managing Brand Equity
 It primarily involves managing the
consumer’s mind (associations)
 Firm must set objectives for the brand
 Brand equity measurement is a
management essential
 Marketing mix elements should be chosen
to build, not erode, brand equity
How do you build Brand
Equity?
 Making consumers aware of your
brand
 Focusing on the Image your brand
portrays
 Benefiting from comparison by
consumers
What does awareness and
image buy?
 Influences how consumers make
choices
 By changing how choices are made
we can change what is purchased
 Consumers must first be aware
before they can compare.
Brand Equity
 The value your customers perceive to be
uniquely associated with your brand
= Awareness + Associations
 Awareness
– Recall
– Recognition
 Associations
– Perceived Quality
– Image
Brand Awareness
A brand that is not considered
cannot be chosen
A customer cannot consider a
brand unless they are aware of it
I don’t know who you are.
I don’t know your company.
I don’t know your company’s product.
I don’t know what your company stands for.
I don’t know your company’s customers.
I don’t know your company’s record.
I don’t know your company’s reputation.
Now--what was it you wanted to sell me?
MORAL: Sales start before your salesman calls--with
business publication advertising.
Brand Awareness
RECOGNITION
Brand Awareness
RECOGNITION
Increases likelihood of consideration
at the point of purchase
Enhances the salesperson’s initial
contact (industrial)
Enhances in-store promotional
efforts
Increases attention and
comprehension of advertising
Brand Awareness
RECOGNITION
Brand Awareness
RECOGNITION
Free publicity in the
Wall Street Journal
How does this comparison
work?
 Consumers compare other brands to
one brand
 Often that brand serves as the
reference brand.
 Key concept: Loss aversion…when
compared to the reference brand,
losses may loom large.
Consumers judge value by…
The observed price relative to
reference price for the product, and
The observed price relative to the
normal or ‘fair’ price of the product
– Examples:
• Restaurants on Friday nights…
• Super Bowl ticket prices.
This is Reference Dependence.
Implication
If you are the reference brand…
– Improvements on price, quality, etc.
help
– But decreases hurt more…
If you are not the reference brand…
– You are judged relative to the
reference brand
– Any way you differ from the reference
is your loss
Implication
 Reference brands have competitive
advantages,
Q: What are the reference brands in your
product category?
Pricing Implication
 Price cuts will effect different brands
differently
 High quality brands can easily “steal”
market share from low quality brands by
cutting price.
 But lower quality brands will not steal
share from a high quality brands by
cutting price
Responses to price cuts are asymmetric, high
price brands can steal from the poor.
How do you become a
reference brand?
 ‘Strong’ brands that have great
awareness (T.O.M.)
 First Mover Advantage
 Brand most recently purchased
 Sampling, particularly for higher
quality brands
Comparison: Summary
 Having high brand awareness can
make you the reference brand which
can be a significant advantage.
To create value…
 Brand must support a higher reference
price…
 Must maintain this over time, even in the
face of stiff competition…
 Applications:
– To raise price…
• New Models
• Price Bundling
• Etc…
What Strategic Element cannot
be duplicated?
 You lower price, they can eventually
lower price
 You can add a feature, they can
eventually ad that feature
 But…
They cannot use your brand name!!