Tuesday, April 1, 2008

Brand Equity Unfolded

In the last post we have seen a general definition for ‘Brand Equity’. Once that has been understood, now it is time to look at what Brand Equity technically means.
The Equity of any Brand can be said to be made up of two components:
1. Brand Stature
2. Brand Strength

Brand Stature is nothing but a report card of the brand, i.e. an indicator of what the brand has been and its effect and relationship with various stakeholders till now.

Brand Strength, unlike Brand Stature, is not a lagging indicator. It is a leading indicator. It is made up of those elements that tend to tell us what is the brand potential and how differentiated and relevant it is going to be in times to come.
Therefore, if one looks in terms of time, Brand Equity covers the past, present and the future strength of a brand.The figure below shows how the equity of a brand can be plotted on a grid. The Stature is taken on the x-axis while the Strength on the y-axis.

There are a number of models that are used for Brand Equity, and all of them come up with different factors on which the equity depends. But whether it be factors taken in the Aaker’s Model, in Young and Rubicam’s (Y&R) Model, or any other model, all the factors can be placed either under Brand Stature or under Brand Strength.

For example, in Y&R’s Model called the Brand Asset Valuator (BAV), four key dimensions (factors) of Brand Equity are:

1. Differentiation: Perceived Distinctiveness
2. Relevance: Personally Appropriate
3. Esteem: Perceived Quality and Increase in Popularity
4. Knowledge: Awareness and Understanding

If we were to club these dimensions under our two components, we would get the following two equations:

1. Brand Stature = Brand Esteem + Brand Knowledge
2. Brand Strength = Brand Differentiation + Brand Relevance

After going through this post and the last one, I think we have at least understood the basics of what Brand Equity is…. I hope that when someone asks us what this phrase means, we won’t be stumped and will be able to give a general and a technical definition, sufficient for us to impress the other I guess!! ;-)