The value of a brand is often referred to as brand equity. Another way of looking at brand equity is the marketing and financial value associated with a brand’s position in the marketplace. Brand equity usually has ties to brand name awareness, brand loyalty, brand quality, and other attributes shown in Exhibit 7.4.
Although brand equity is hard to measure, it represents a key asset for any firm and an important part of marketing strategy. Exhibit 7.6 lists the world’s 25 most valuable brands. Brands like these take years to develop and nurture into the valuable assets that they have come to represent. This reality makes it easier and less expensive for firms to buy established brands than to develop new brands from scratch. For example, Johnson & Johnson’s acquisition of Pfizer’s consumer products unit allowed the company to add several powerful brands to its portfolio—Listerine, Sudafed, Visine, Neosporin, and Nicorette.
The equity associated with these brands would have taken Johnson & Johnson decades to develop on its own.8 Brand equity stems from four elements: brand awareness, brand loyalty, brand quality, and brand associations.9 Brand awareness and brand loyalty increase customer familiarity with a brand. Customers familiar or comfortable with a specific brand are more likely to consider the brand when making a purchase. When this familiarity is combined with a high degree of brand quality, the inherent risk in purchasing the brand decreases dramatically.
Brand associations include the brand’s image, attributes, or benefits that either directly or indirectly give the brand a certain personality. For example, customers associate 7-Up with ‘‘uncola,’’ Charmin tissue with ‘‘squeezably soft,’’ Michelin tires with family safety, Allstate insurance with ‘‘the good hands,’’ and Honeycomb cereal with a ‘‘big, big bite.’’
Associations like these are every bit as important as quality and loyalty, and they also take many years to develop. Unfortunately, it is also possible for brand associations (and brand equity) to be negative. Earlier in the chapter, we described how Kia has enjoyed recent success through new product development. Unfortunately for Kia, however, the South Korean carmaker has struggled with a weak quality image associated with its brands. To counteract this negative brand association, Kia backs its products with a 10-year, 100,000-mile powertrain warranty.10
