Increasing importance of brand equity
Description
Brand equity is the customer’s subjective and intangible assesment of the brand, above and beyond its purely perceived value. In a market where many products are rather similar (i.e. commodotization), the brand can have a large effect on whether customers want to buy the product and what price they're willing to pay. Brands therefore add more and more value to the basic product or service.
Example: although a blind test panel learned reseachers that most people prefer Pepsi above Coca-Cola, yet Coca-Cola is much stronger on the market.
Enablers
- Prosperity: Since the common civilian (i.e. customer) is becoming wealthier over the years, they’re now able to afford an demands driven (e.g. image) attitude.
- Globalization: “The world is becoming a common market place in which people – no matter where they live, desire the same products and lifestyles.” (Prof. Levitt, Harvard University)
- Competition: Companies face intensive competition from domestic and foreign brands, resulting in lower profit margins. Branding is the way to differentiate and to create sustainable competitive advantage.
- Consumer knowledge: people know more, have access to more knowledge sources (internet!), can easily compare products via the internet et cetera. All these kind of things underline the increasing importance of brand equity.
Inhibitors
Negative brand equity. Since the importance of brand equity rise, how to manage the positive and protect the brand equity is the critical issue for the company. Single crisis will damage the brand immediately. The best example is Nike and child labor.
Paradigms
- Almost all products are good, it is brand equity (image!) that makes the difference in deciding whether and in what degree the product is able to satisfy customer demands.
- Purchase decisions are based on customers' perceptions. Perceptions can be influenced (“managed” in a certain sense) by marketers, for instance by advertisements.
- A product is more than just a product.
Experts
- P. Kotler and K. Lane (authors “Marketing Management”)
Timing
Emerging since the last decades. Society is transforming from need/product-driven to demand/customer-driven. The trend will go on for the coming years.