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Brand Equity · 22 November 2005, 05:13 by Admin

Brand equity is a set of assets (and liabilities) linked to a brand’s name and symbol that adds the value provided by a product or service to a firm and/ or that firm’s customers. The major asset categories are:

1.Brand name awareness

2.Brand loyalty

3.Perceived quality

4.Brand associations

5.Patents, Trademarks and other Proprietary brand assets.

Over 21,000 new products were introduced in 1995 alone, yet history tells us that better than 90% of them won’t be on the shelf a year later. Why such a high failure rate and why has this been a historical trend? The development of a successful product – which includes the product, the package, the product’s name and identity – is a challenging, but not insurmountable task. The likelihood for success can be greatly enhanced if one focuses on certain critical issues. Clear product definition and proper execution and implementation of that definition can lead to success and longevity in the market.

Throughout the 1980’s and 90’s, there has been a growing corporate emphasis on increasing shareholder value (i.e. making the stock price rise). Typical headline-grabbing stories of these decades have included waves of layoffs, corporate restructuring and an emphasis on operating efficiencies.

The most important assets of any business are intangible: its company name, brand, symbols, and slogans, and their underlying associations, perceived quality, name awareness, customer base, and proprietary resources such as patents, trademarks, and channel relationships.

These assets, which comprise brand equity, are a primary source of competitive advantage and future earnings. Yet, research shows that managers cannot identify with confidence their brand associations, levels of consumer awareness, or degree of customer loyalty. Moreover, in the last decade, managers desperate for short-term financial results have often unwittingly damaged their brands through price promotions and unwise brand extensions, causing irreversible deterioration of the value of the brand name.

In a fascinating and insightful examination of the phenomenon of brand equity, it is extremely important to know how to avoid the temptation to place short-term performance before the health of the brand and, instead, to manage brands strategically by creating, developing, and exploiting each of the assets in turn.

Large sums of money become invested in the process. Even if poor consumer test results occur, companies may continue on when they should postpone or cancel the launch. Companies must first listen to the voice of the consumers early in the process and know how to translate the market’s messages.

The voice of the consumer is a critical one to hear but one that many firms have difficulty in translating into products. Many companies hear the words spoken by the consumers and work hard to deliver on them but, as is often the case, what is said and what is actually meant (by the consumer) may be very, very different.

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