Towards Customer Equity: should marketers shift focus from brand equity?

Table Of Contents

Towards Customer Equity: should marketers shift focus from brand equity?

Abstract

Introduction

Brand equity revisited

Brand Equity from customer’s point of view

Customer based Brand equity (CBBE):

Brand Identity:

Brand Meaning:

Brand Relationships:

From Brand equity to Customer equity:

A research evidence showing the importance of customer equity concept: (Clancy & Kreig: 2009)

Why to focus so much on customer equity? Some evidences:

Conclusion:

References:

Towards Customer Equity: should marketers shift focus from brand equity?

Abstract

A strong brand, having high brand equity generates higher revenue for the company. Brand Equity, as evidenced, results from a strong mental association that the customer links with the brand. It can be considered as the sum of customers’ assessments of a brand’s intangible qualities. Therefore, it cannot be a true measure of the marketing efforts of a company, though it was perceived so long to be so. Customer Equity, of late, has been identified as a basis to build powerful customer-centric marketing programs, which are more effective in highly competitive business scenario. There are three drivers of customer equity— value equity, brand equity, and relationship equity. Today's turbulent business environment is in requirement of maximizing the value of a company's customer assets. This stresses further the importance of focusing on Customer Equity as a customer-centric approach, rather than on Brand Equity, basically a product-centered approach.

Key words: Brand, Brand Equity, Customer Equity, CBBE model, Relationship Equity, Value Equity.

Introduction

Brands have traditionally been placed at the center-stage by most of the marketers, while brand equity playing the role of a hero that can add value to a product and can generate “an own-able, trustworthy, relevant, distinctive promise to consumers” (Brand Equity Board). Of late, however, there has been a shift of focus from brand to customer, particularly owing to the theories and concepts proposed by Blattberg & Deighton (1996) and by Rust, Zeithaml & Lemon (2000). The concept of Customer equity, thus, is getting importance, of course quite logically. According to the proponents, focusing on the customers, even at the expense of a brand, is more profitable for a marketer following a path of growth. This paper, based on secondary research, intends to investigate whether this is really a paradigm shift from the much popularized brand equity concept, or rather a complement to it.

Brand equity revisited

“A brand exists when it has acquired power to influence the market” (Kapferer: 2004). This power is reflected through the brand’s ability to provide a better value to its customers than the competitors. Brand Equity is this added value that ensures that the brand would be perceived by the customers to be a better choice. Brand equity, in some theories, has been conceptualized as an impact on the mental association that the customer creates with the brand (Keller: 1993). In some other views, it is the profit potential of the brand (Kapferer: 2004). The second one recommends four indicators of brand equity as aided brand awareness, spontaneous brand awareness, consideration set at the time of purchase decision and whether the brand has already been consumed.

A strong brand, having high brand equity generates higher revenue for the company. When a brand is having high equity, it has more influence on its customers, making them more loyal. As a result, market share increases. The influence, however, may be a result of strong mental association with the brand built up over time. When brand loyalty is high, sales tend to remain stable over a considerable period of time, if not following a growth. A strong brand will also enjoy good distribution, because intermediaries will be interested to carry the brand, even in case of fierce competition for shelf space, because consumer demand would be high. Having a good share of the market, the company can price the brand as high as price elasticity would also be less pronounced in this case. All this contributes to a high net profit for the company. In Percy & Elliott’s (2007) view, a high brand equity enhances brand loyalty, trade leverage, price and margins, supports marketing programs and provides a platform for brand extensions, thus creating higher value to the company in forms of profits.

Brand Equity from customer’s point of view

Brand Equity, as evidenced, results from a strong mental association that the customer links with the brand. This association emanates from brand awareness, which triggers a memory linked to the brand. The attitude toward the brand, created out of this strong bond, develops into a strong liking or preference towards the brand over time. The preference, most of the times, may even go beyond any objective consideration of the product. Thus the preference gets biased on the basis of emotion and affect – how people ‘feel’ about a brand, and eventually generates brand equity.

According to Aaker(1991), brand awareness not only evokes a feeling of familiarity but also suggests a “presence, commitment and substance for the brand”. In purchase situations, brand awareness can take either of the two forms: recognition and recall (Rossiter & Percy: 1997). At the point of purchase, the ability to recognize a brand is the recognition brand awareness. In other purchase decisions, when the need for the product is already identified, the brand name has to be recalled from memory. It is called as brand recall. But in both the cases, the brand has to be ‘salient’ ie how easily the brand can be evoked from memory. If a brand remains at the top of mind, requires less cues or reminders to recall, and has all the brand elements (name, logo, symbol, sign etc.) strongly linked to some memory association, we can say that brand salience is higher. The brand elements, in this case, have their own role to play in creating an identity for the product. In Keller’s (2003) view, a highly salient brand is one that customers always make purchase of or think of the brand across several situations in which it could be consumed or employed.

When brand association is strong, positive and unique, it leads to strong brand attitude. Attitude basically is an assessment of benefits, which again is a result of attributes. Keller (2003), however, differentiated between the two from the viewpoint that benefits include the personal values and meanings that consumers attach to a brand’s attributes and are seen as either of functional, symbolic and experiential. Thus a judgment is formed in the mind of the consumer based on the knowledge and assumption about a brand and the emotional attachment with it. This judgment eventually generates a trust in the brand, forming a favourable brand attitude.

Favourable brand attitude is an inevitable element in defining the brand preference leading to loyalty. According to Franzen(1999), brand loyalty is reflected in a “high degree of bonding with the brand”. Brand loyalty provides the marketer with many advantages like reduced marketing costs (through less cost of promotion, less cost on maintaining favourable brand attitude, and less cost to persuade repeat purchases), increased entry barrier for competitors and better leverage with the trade.

Elliott & Percy suggest a ‘Model of Brand Equity Synthesis’ which explains the importance of brand attitude in forming brand equity, with due emphasis on brand awareness, brand loyalty, emotional attachment and financial value as other contributors.

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Objective characteristics Subjective characteristics

“Objective and subjective characteristics of a brand lead to knowledge and assumptions of it. This reflects the target market’s cognitive understanding of a brand, and may be further understood in terms of the functional vs emotional realm that define the social psychology of brands.

Brand awareness is an obvious, but also critical component of brand equity. Many studies have shown a strong correlation between strong brand equity and high levels of brand awareness. In fact, some people even use brand salience as a rough measure of brand equity.

Emotion is important because there are emotional associations in memory with which someone is aware. …. Brand loyalty, that is true attitudinal brand loyalty, is a contributor to as well as a consequence of brand equity, hence the two-way arrow in the model. As favourable brand attitude builds, leading to increases in brand equity, the target market becomes more loyal to the brand, and as the brand is more regularly purchased and used, that behaviour in itself reinforces and helps build brand equity. Financial value too enjoys a two-way relationship with brand equity. A strong brand equity will lead to significant financial advantages for a brand in its market, as we have seen. At the same time, because of the leverage available as a result of strong brand equity, marketing strength is available to sustain and build brand equity.”(Elliott & Percy: 2007)

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