Brand equity refers to the value and strength of a brand that stems from consumers’ perceptions, experiences, and associations related to the brand. This concept encompasses both the tangible and intangible aspects that contribute to a brand’s market position and the loyalty it commands among its customer base. Brand equity is pivotal because it can influence a brand’s ability to command premium pricing, its competitiveness in the market, its overall market share, and its resilience to competitive pressures.
Keller’s Brand Equity Model and Aaker’s Brand Equity Model are two prominent frameworks in the field of marketing, each offering a unique perspective on how to build and measure brand equity. Understanding these models can help businesses craft strategies that enhance their brand’s value in the eyes of consumers. Both models recognize the critical role of brand equity in achieving competitive advantage, but they approach it from slightly different angles.
Keller’s vs. Aaker’s Brand Equity Model: Which wins?
Keller’s Brand Equity Model, also known as the Customer-Based Brand Equity (CBBE) Model, focuses on the consumer’s perspective and the process by which a brand gains its strength. It outlines a set of steps:
- Brand Identity,
- Brand Meaning,
- Brand Responses, and
- Brand Relationships.
Keller’s model emphasizes the importance of a brand’s identity in the consumer’s mind, built through unique brand associations, leading to positive customer responses and strong brand relationships.
On the other hand, Aaker’s Brand Equity Model takes a broader view, identifying five dimensions of brand equity:
- Brand Loyalty,
- Brand Awareness,
- Perceived Quality,
- Brand Associations, and
- Other Proprietary Brand Assets (like patents and trademarks).
Aaker’s framework suggests that these dimensions collectively contribute to a brand’s equity, focusing on both consumer perception and the brand’s assets.
Which model best evaluates brand equity?
The primary difference lies in their focus: Keller’s model is more consumer-centric, delving into the psychological process behind brand equity building. In contrast, Aaker’s model provides a more holistic view, incorporating both consumer perceptions and tangible brand assets. Both models offer valuable insights, but the choice between them may depend on the specific goals and context of a brand’s equity-building efforts. Businesses looking to strengthen their brand’s market position can benefit from understanding both models to develop a comprehensive brand strategy.
Why Brand Equity Matters in Brand Growth
Understanding and nurturing brand equity is essential for businesses aiming to sustain long-term growth and profitability. It not only enhances marketing efficiency but also contributes to expanding the customer base and retaining existing customers. In essence, brand equity is a critical asset that reflects the value a brand brings to its customers beyond the physical products or services it offers.
Academic research highlights the significant correlation between brand equity and successful business outcomes, including profitability, market share, and overall firm value. A study conducted on the U.S. automotive market analyzed data from 6,410 observations across 17 brands “covering 76% and 75% of market shares in both economy and luxury markets”). It found that attitudinal loyalty and satisfaction are strong predictors of brand preference and purchase intention, confirming that customer-based brand equity constructs positively correlate with brand market performance This supports the idea that strong brand equity not only enhances customer loyalty but also significantly contributes to a company’s financial success and market dominance.
Further empirical evidence on the relationship between investment in the brand value chain and firm performance was demonstrated in a study focusing on Amazon.com, Inc. The study, which analyzed financial statements from 2010 to 2021, concluded that investments in marketing and research and development (R&D) positively affect brand equity, customer satisfaction, and brand resonance. Specifically, it found a direct and indirect positive impact of these investments on firm profitability and market value, showcasing that strategic investment in brand-related activities mitigates risks and enhances the company’s market valuation (SpringerOpen).
What’s the Difference Between Brand Equity and Brand Value?
“Brand value” and “brand equity” are closely related terms in the field of marketing and brand management, but they refer to different aspects of a brand’s strength and worth.
Brand equity refers to the value derived from consumer perception, experiences, and associations with the brand, beyond the physical product or service itself. It encompasses both the positive and negative sentiments that customers hold towards a brand, influencing their buying decisions and loyalty. Key components of brand equity include brand awareness, brand associations, perceived quality, and brand loyalty. A strong brand equity means customers have a favorable view of the brand, are more likely to purchase from it, and even pay a premium for its products or services over competitors. Brand equity is qualitative and relates to consumers’ perceptions and attitudes.
Brand value, on the other hand, is a more quantifiable measure, often expressed in monetary terms. It represents the financial worth of the brand as an intangible asset. Calculating brand value involves estimating the overall financial performance of a brand, including future earnings potential, market share, and revenue attributable directly to the brand’s name and reputation. Brand value is important to investors, shareholders, and for the purposes of mergers and acquisitions. It provides a tangible measure of the financial significance of the brand’s equity.
So while brand equity focuses on the consumer’s subjective perception and relationship with the brand, brand value translates this equity into a financial metric, indicating the economic worth of the brand to its owners – such as in licensing or valuation of the business. Both concepts are crucial for understanding a brand’s market position and for guiding strategic decisions aimed at enhancing its strength and value.
Why Brand Equity Matters? The Takeaway
Conventional marketing wisdom and quantitative business intelligence all collectively underline the critical importance of nurturing brand equity through consistent marketing efforts, customer relationship management, and investment in brand innovation. They demonstrate a clear link between a strong brand equity foundation and a company’s ability to achieve superior market performance, suggesting that brand equity is not just a marketing asset but a strategic business asset contributing to long-term success.
Brand equity improves other – even seemingly unrelated – business outcomes. How do brands build brand equity? The first step is planning. Criterion Global specializes in strategic media buying and international advertising, leveraging their expertise to maximize your brand’s visibility across global markets. This comprehensive understanding of diverse consumer landscapes creates actionable impact that ensures brand messages are not just seen, but felt by their intended audience. Moreover, their data-driven approach to strategy formulation ensures that every advertising dollar is spent efficiently, optimizing return on brand equity investment. Collaborating with Criterion Global means gaining access to measurable gains in brand equity, for brands looking to make a lasting impact in their industry.
Recommended Reading:
- How to Build Brand Equity [Barbie® Case Study]
- Linking customer‐based brand equity with brand market performance: a managerial approach. Tolba, A.H., Hassan, S.S., Journal of Product & Brand Management, on Emerald Insight.
- Elsayed, R.A. The effect of investment in the brand value chain on profitability and market value of the firm: lesson of success taken from Amazon. Futur Bus J 9, 19 (2023).
- How Amazon Budgets for Brand Investment [Criterion Global Case Study]