Brand Equity and Associated Metrics - Essay Example

Brand Equity and Associated Metrics Name Course Name and Code Date Organizations operate based on different fundamental requirements, but the most important aspect is the generation of revenues to the shareholders. The current business environment is very competitive, and marketing management understands the importance of employing different strategies and approaches to sustain the goals and objectives of the organization. Moreover, the objective of many organizations is building and sustaining shareholder value through delivering competitive returns to respective shareholders (Kahneman & Tversky 2011, p. 146). To accomplish this requirement, branding is integral. In addition, branding outlines and advances effective leadership that makes the organization in championing shared vision. The organization should be able to be managed through the employment of metrics for the purpose of balancing short and long term performance and perspectives of the organization. Numerous types of brand metrics exist that aims to quantify brand equity. The purpose of this essay is to discuss brand equity and associated metrics, why marketing management should employ or not employ brand metrics, and influence of brand metrics towards the success of an organization. Numerous stakeholders understand the importance of brand equity: financial analysts and markets, media, distribution channels, and the customer and the firm. However, the customer is the most important component in the definition of brand equity since the choices of the customer determines the success or organization failure relative to the brand (Yoo, Donthu & Lee 2000, p. 199). Brand equity plays a crucial role with customer knowledge regarding the brand, any perceived differences and the purchase decisions and behavior. The associations and knowledge attached to any brand usually have a direct influence on shareholder value and brand’s financial performance (Baldauf, Cravens & Binder 2003, p. 229). In defining brand equity, many factors are brought together. Brand equity combines brand strength measure and it is inclusive of financial, preference and knowledge (Martensen & Grønholdt 2004, p. 43). Each of these three metrics are crucial, and any marketing department should ensure brand portfolio should be highly rated. Through such an approach, an organization with strong brands and is better placed to optimize financial outcome. Therefore, brand equity is the ability of a strong brand name to be able to generate more revenues when compared to a weaker brand name; it is attributed to the perception of consumers that products and services with stronger brand name are comparable better than those with weaker brand name (Yoo, Donthu & Lee 2000, p. 198). Marketing research and theorists have continued to assert that brand equity is a crucial asset for the organization, and it is the most important component that drives the financial value of an organization. Some of the important components that may be used in brand equity valuation include brand values, customer’s perception of quality, consumer’s brand language, visual elements, profit margins and changing marketing share. Even though brand equity is crucial in understanding an organization, it is usually hard to quantify. Many experts and academics have developed models and tools to analyze brand, but the experts lack concurrence (Baldauf, Cravens & Binder 2003, p. 228). The major challenge that academics and marketing professionals has to deal with is the difficulties of reconciling qualitative and quantitative equity values. Quantitative values include profit margin and market share while qualitative values include customer’s knowledge and values held by the customer based on a given brand (Washburn & Plank 2002, p. 59). Therefore, the misunderstandings make it difficult to formulate and implement a single model or tool that can be utilized in the calculation of brand equity. The aim of brand equity metrics and associated metrics purposes to measure brand value. A brand factors into consideration product perceptions relative to consumers, image, logo and name (Yoo & Donthu 2001, p. 9). In creating the awareness, marketing communication is crucial through packaging and advertising, which allows creation of focus between the consumers and brand’s organization. A brand also embodies a promise about the product in terms of value dimensions, performance and quality, which are crucial in customer’s decision making. When consumers appreciates a given brand, it is easier for the consumers continuing purchasing the products from the same brand based on earlier experience on the product; the customers are ready to acquire brand related products even if at a premium price. Measuring brand equity factors into consideration different information and approaches. It may include analyzing a brand in different levels that include firm, product and consumer. At the firma level, brand metrics is premised on measuring a brand as a financial asset (Chen & Green 2012, p. 245). For instances, through the use of market capitalization, and subtract both “measurable” intangible assets and tangible assets, the remaining value is the brand equity. In fulfilling this approach, the brand value is estimated through utilization of projected profits and then discounted to a present value (Lee, Lee & Wu 2011, p. 1100). Equality specialists can determine the discount rate reflecting the brand global reach, brand stability, market leadership and risk profile. Moreover, brand valuation, which to some extent, is similar to brand equity (Tolba 2011, p. 59). The firm level brand metric calculation is easier when compared to other methods because it employs mostly financial records and with the help of experts, it is easier to estimate brand equity. Product level is another metric employed in understanding brand equity. This is possible in those instances whereby the analyzer can compare a branded product with another product that has a private label (Tolba & Hassan 2009, p. 367). For example, the difference in the product price might be directly associated with the brand. In addition, another method that can be employed is the revenue premium approach whereby an organization sells branded product at a premium even though it is comparable to non-name label product. Moreover, marketing mix can be used in determining the brand equity. For example, through the use of the marketing mix, it is possible for an organization to isolate “incremental” and “base” sales, and it is assumed that brand equity measure is approximate to the sale base (Buil, de Chernatony & Martinez 2008 p. 388). Furthermore, advanced marketing mix modeling allows identification of floating base that is able to capture changes in brand equity within a given time. Moreover, growth rate may be employed in understanding brand equity (Burmann, Jost-Benz & Riley 2009, p. 392). The growth possibility of a brand is determined by estimate number of prospective customers including customers’ segments loyalty level determines brand equity and brand strength. Hence, the ability in which the brand name drives sales and growth improves its overall equity. Furthermore, preference metrics is used in measuring brand’s competitive position relative to other competing brands (Christodoulides & Chernatony 2010, p. 50). Customers have numerous preference levels ranging from mere familiarity and awareness to becoming loyal, and organization can easily continue benefiting the revenue wise from the give customer base. A brand that has a strong preference and it is easier for an organization to pass through the many levels leading towards loyalty. Apart from the product level, consumer level aims to understand the customer mind and defines the association between the customer and the brand. Some customers directly associates a brand to certain features or components within the product. The customer level seeks to measure the brand image e.g. the brand association and awareness, which incorporates recognition and recall (Romaniuk & Sharp 2004, 138). Through the use of projective techniques and association tests, it is possible to uncover intangible intentions, attitudes, attributes and tangible information about the brand. Those brands with high equity have a higher levels of unique, favorable, strong and awareness associations. In addition, lifetime value is crucial in appreciating brand equity (Keller & Lehmann 2003, p. 28). Lifetime value is an average value that is obtained through obtaining the life value of consumers then divided into geographical markets, product segments and other segments defined by other fundamental factors (Magali & Cliquet 2012, p. 142). The lifetime value metric determines whether the product brand continues to extract additional value from consumers throughout the brand lifecycle. The three calculation strategies: firm, product and customer are based on approximations. It means the information obtained may not infer what actual take place within an organization (Ambler, Kokkinaki & Puntoni 2004, p. 480). The appropriate strategy of understanding the brand equality and its associates, it is imperative to employ more than one metric. Therefore, an organization aiming to understand its brand equity should use diverse metric strategies to improve the quality of information calculated. Understanding brand equity is important for an organization since the marketing management and board members would be able to formulate and implement strategies that address the “weak” brand. Many organizations and investment companies’ employs brand equity metrics to determine the viability of any acquisition. Through the use of such metrics, appropriate and effective decisions may be made that guides decision-making process (Kahneman 2003, p. 702). In using brand equity information, it is possible for organization management to understand negative vs. positive brand equity. Many academics and professionals assert positive brand equity is common since the customers do not factor into consideration the price, rather the consumers are after the benefit received or quality (Kabiraj & Shanmugan 2011 p. 287). Moreover, positive brand equity can be improved through marketing initiatives, which include promotion, PR, and advertising. Negative brand equity occurs when catastrophic events to the product brand takes place doubled with negative press attention; such scenarios affect the brand immensely. These are some of the instances whereby an organization may appreciate the importance of brand equality and its associates. On the other hand, an organization may not appreciate the use of brand equity. There are some of the products and services that are of high value and customers appreciate its associated benefits. In addition, some organizations associate lack of a single and referable approach that may be used in calculating brand equity. Using different models and frameworks create a scenario whereby organization management and marketing teams may be confused. For example, one side of management might propose one approach, the other side of management process another strategy; in those instances, when the management team is split. In such scenarios, it is difficult for an organization to determine the appropriate methodology and hence prefer not to calculate brand equity. Brand equity and associated metrics are an important benchmark for any organization to determine the position of an organizational product relative to competitive brands. Organizations with strong brand equity are better placed to generate more revenues compared to organizations with weaker brand name. However, no single approach exist that may be utilized to quantify brand equity. It is attributed to the different fundamentals and approaches that may be employed in assessing a brand. For example, some professionals and academics prefer the use of the product as the basis of quantification while other professionals and academics may premise their metrics on customer. Lack of appropriate and acceptable model means that differing calculation outcomes on a single brand may exist. Moreover, the use of brand equity and associated metrics are appreciated by some organizations because of rich information that can be obtained from such analysis but someone an organization refuses to utilize the process because of divisions within the management and lack of acceptable model that may be employed in calculation process. Nevertheless, professionals and academicians should create a specific model or approach that is suitable to different scenarios. 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