Abstract:
Brand equity involves both the component value of a brand and brand value. Brand equity enhances the value of a product and creates a positive environment for the company to increase prices.Brand Equity is defined as the aggregation of two aspects of a product. The first being the component value of a Brand. This is a product’s value prior to marketing.
The second is brand value. It is the increased value of a product due to branding.
Branding has been shown to transform the perceived value of a product by making it well known to customers through aggressive promotion and marketing.
It has been observed that this transformation infuses a value into the name and consequently increases its price.
One example demonstrates the importance of brand equity in the clothing market. There are many apparel companies in domestic as well as foreign markets. But only a few have qualified themselves as a brand like Lacoste and Calvin Klein have. Clearly, the price range of these well known brands is much higher than the others. The main factor behind this price differential is the added brand value. Thus, brand equity of such product includes its component as well as the brand value.
Brand Equity and Increased Product Price
Every company in the market tries to create a niche for itself by differentiating itself from other companies by marketing aggressively. These promotional channels involve enormous costs in addition to that of production. These promotional investments are done in order to develop brand equity of the product.Brand Equity generates positive feeling among the consumers about the product. This in turn creates a unique relationship between the product and its customer. This relationship generates commitment among the customers for buying the branded product in the future. This brand loyalty sometimes becomes so strong that the customers don't mind paying higher prices.
Protection of Brand Equity
Brand strategies and decisions are heavily dependent on brand equity because this is the most important factor which determines the saleability of a product. Therefore, determination of a product's brand equity must be accurate or the decisions based on this information might deter its sale.One glaring example of inaccurate brand value assessment is the tremendous loss incurred by Ford Motor Company in the year 2007. The company decided to change the name of the popular car known as Taurus to Freestar. The renaming created confusion among its customer base and consequently its brand equity was hampered. This strategy didn't pay off and Ford had to change the name back to Taurus.
In conclusion, brand equity differentiates a product from its peers and helps it to generate value for itself through increased brand loyalty. Hence, a company should have a proper assessment about its product's brand equity otherwise the brand strategies based on it may backfire. Therefore, a company needs to create and protect the brand equity of its product.
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