Abstract:
Brand Equity enhances value of a product and creates a positive environment for the concerned company to charge a high price. It involves both Component value of a Brand and Brand Value. This article would give an overview on the topic with examples to give a clearer idea.
Brand Equity - Definition
Brand Equity is the aggregation of two aspects of a product:-
Component value of a Brand
Every product prior to marketing possesses a value. It is known as component value of the product.
Brand Value
Aggressive promotion and marketing, makes a product well known to the consumers and transforms it into a brand.
It has been observed that this transformation infuses a value into the same and consequently increases its price. This increased value of a product due to branding is called Brand Value.
Example of Brand Equity
There are many apparel companies in the domestic as well as foreign market. But only a very few have qualified as a brand like Lacoste and Calvin Klein. It can be witnessed that the price range of these well known brands are much higher than the others. The main factor behind this price differential is the added brand value. Thus, brand equity of such product comprises of both 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 for differentiating itself from the rest through aggressive marketing. These promotional channels involve huge costs apart from the ones in 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 bother to pay higher prices for the concerned product.
Protection of Brand Equity
Brand strategies and decisions are heavily dependant on brand equity because this is the most important factor which determines salability of the product. Hence, determination of a product's brand equity requires high degree of accuracy otherwise the decision based upon it might hamper its sale.
A glaring example of it is the losses incurred by Ford Motor Company in the year 2007. The company decided to change the name of the highly popular car Taurus to Freestar. It created confusion among its customer base and consequently its brand equity was hampered. This strategy of name change didn't pay off and Ford has to re-change the car name back to Taurus.
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 as well as protect the brand equity of its product.