Chapter 9: Creating Brand Equity
LEARNING OBJECTIVES
In this chapter, we will address the following questions:
1. What is a brand and how does branding work?
2. What is brand equity?
3. How is brand equity built, measured, and managed?
4. What are the important brand architecture decisions in developing a branding
strategy?
SUMMARY
1. A brand is a name, term, sign, symbol, design, or some combination of these elements,
2. Brands are valuable intangible assets that offer a number of benefits to customers and
3. Brand equity should be defined in terms of marketing effects uniquely attributable to a
4. Building brand equity depends on three main factors: (1) The initial choices for the
brand elements or identities making up the brand; (2) the way the brand is integrated
5. Brand audits measure “where the brand has been,” and tracking studies measure
6. A branding strategy identifies which brand elements a firm chooses to apply across the
various products it sells. In a brand extension, a firm uses an established brand name
C H A P T E R
9
CREATING BRAND
EQUITY
Chapter 9: Creating Brand Equity
7. Brands may expand coverage, provide protection, extend an image, or fulfill a variety
8. Customer equity is a complementary concept to brand equity that reflects the sum of
lifetime values of all customers for a brand.
OPENING THOUGHT
This chapter will present some challenges to students new to marketing. The concept of a
“brand” is discussed in depth in the chapter and because that concept is much more than a
product, some students will have difficulty in understanding the total concept of a
The second challenge presented in the chapter is the fact that “brands” represent financial
assets to a company and that they are valuable intangible assets that need to be managed
and represents perceived differences in product performances. The instructor can use and
is encouraged to use numerous examples of competing products in a category to
demonstrate to the students the differences and the perceptual differences among and
between like products. An in-class exercise could include asking students to mention
TEACHING STRATEGY AND CLASS ORGANIZATION
PROJECTS
1. At this point in the semester, students are to have their “branding” strategy developed
2. In small groups (five students suggested as the maximum), have them list their
favorite branded product or service (Google, Nike, or others). Based upon the
3. Sonic PDA Marketing Plan Decisions about branding are critical for any marketing
plan. During the planning process, marketers must consider issues related to brand
Chapter 9: Creating Brand Equity
strategies and brand equity. Sonic’s PDA is a new brand name entering the market.
Sonic begins with zero brand equity. A brand is a complex symbol that can convey up
to six levels of meaning: attributes, benefits, values, culture, personality, and user.
Sonic begins with no meaning. Jane Melody has asked you to:
ASSIGNMENTS
Individually, have the students visit Brandchannel (www.brandchannel.com) and a)
choose a brand listed and summarize the views regarding the brand as expressed by
brandchannel.com or b) choose the “papers” icon and read and summarize one of the
papers listed.
Table 9.2 displays the world’s most valuable brands for 2006. Students are to take these
brands and in a research project, find financial, stock, and other information about these
companies. Does the financial valuation metrics account for all of the “brand valuation?”
On the other hand, does the presence of a strong brand provide incremental “value” to the
company beyond tangible assets of the firm? Why or why not?
Chapter 9: Creating Brand Equity
From a reading of Scott Bedbury’s book, A New Brand World, Viking Press, 2002,
students are to comment on the appropriateness of his eight branding principles to the
END-OF-CHAPTER SUPPORT
MARKETING DEBATE—Are Brand Extensions Good or Bad?
Some critics vigorously denounce the practice of brand extensions, as they feel that too
often companies lose focus and consumers become confused. Other experts maintain that
brand extensions are a critical growth strategy and source of revenue for the firm.
Con: The proliferation of brand extensions can cause the parent brand to lose its identity
and individuality with the consumer thus eroding brand equity for the parent brand over
the long haul. When brand extensions fail, the failures of the extensions could impact the
parent brand simply by association. Cannibalization of the parent brand for the extension
if not pre-emptive could erode profits as consumers switch to a less profitable line
extension. Finally, a marketer loses the opportunity to build a new brand with a new
image and equity by the use of brand extensions. The time and money needed to develop
a new brand, if done correctly, can pay off in the end for both the consumer and the firm.
Chapter 9: Creating Brand Equity
MARKETING DISCUSSION
How can you relate the different models of brand equity in this chapter to each other?
How are they similar? How are they different? Can you construct a brand-equity model
that incorporates the best aspects of each model?
Suggested Response:
Brand equity depends on three main factors: the initial choice for the brand elements or
Their similarity rests in their execution and the overall strategic direction of the firm.
Their differences lie in the “role” designated for each brand. As long as the firm identifies
and maintains a consistent “role” for each of its brands, the brand portfolio will and can
maximize coverage and minimize brand interactions and overlaps. If the firm does not
maintain a consistent “role” for each brand it runs the risk of destroying brand integrity.
Marketing Excellence: PROCTER & GAMBLE
1.) P&G’s impressive portfolio includes some of the strongest brand names in the
world. What are some of the challenges and risks associated with being the
market leader in so many categories?
Suggested Answer: Student answers will vary, but good students will note that as a brand
2.) With social media becoming increasingly important and fewer people watching
traditional commercials on television, what does P&G need to do to maintain its
strong brand images?
Suggested Answer: Student answers will vary, but good students will note that P&G is at
3.) What risks do you feel Procter & Gamble will face going forward?
Suggested Answer: Student answers will vary and good students will note or cite Michael
Marketing Excellence: MCDONALD’S
1.) What are McDonald’s core brand values? Have these changed over the years?
Suggested Answer: McDonald’s core brand values are quality, service, cleanliness, and
2.) McDonald’s did very well during the recession in the late 2000s. With the
economy turning around for the better, should McDonald’s change its strategy?
Why or why not?
Suggested Answer: Student answers will vary but good students will note that from
3.) What risks do you feel McDonald’s will face going forward?
Suggested Answer: Student answers will vary and good students will cite Michael
DETAILED CHAPTER OUTLINE
One of the most valuable intangible assets of a firm is its brands, and it is incumbent on
marketing to properly manage their value. Building a strong brand is both an art and a
science. It requires careful planning, a deep long-term commitment, and creatively
designed and executed marketing. A strong brand commands intense consumer loyalty—
at its heart is a great product or service.
Marketers of successful 21st–Century brands must excel at the strategic brand management
Chapter 9: Creating Brand Equity
WHAT IS BRAND EQUITY?
Perhaps the most distinctive skill of professional marketers is their ability to create,
maintain, enhance, and protect brands.
The American Marketing Association defines a brand as “a name, term, sign, symbol, or
design, or a combination of them, intended to identify the goods or services of one seller
The Role of Brands
Brands identify the source or maker of a product and allow consumers to assign
responsibility for its performance to a particular manufacturer or distributor.
A) Consumers learn about brands through experiences with the product and its marketing
program.
The Scope Of Branding
How then do you “brand” a product? A brand is a perceptual entity that is rooted in
reality but reflects the perceptions and idiosyncrasies of consumers.
A) Branding is endowing products and services with the power of a brand.
B) Branding is all about creating differences between products.
Chapter 9: Creating Brand Equity
Defining Brand Equity
Brand equity is the added value endowed to products and services.
A) It may be reflected in the way consumers think, feel, and act with respect to the brand,
as well as in the prices, market share, and profitability the brand commands.
E) A brand has negative customer–based brand equity if consumers react less favorably to
marketing activity for the brand under the same circumstances.
F) There are three key ingredients of customer–based brand equity.
a. Brand equity arises from difference in consumer response.
G) Marketers should also think of the marketing dollars spent on products and
services each year as investments in consumer brand knowledge.
H) The quality of that investment is the critical factor, not necessarily the quantity
(beyond some threshold amount). It’s actually possible to overspend on brand
building, if money is not spent wisely.
I) Brand knowledge dictates appropriate future directions for the brand. A brand
promise is the marketer’s vision of what the brand must be and do for consumers.
Brand Equity Models
Chapter 9: Creating Brand Equity
A) Brand Asset Valuator
Advertising agency Young and Rubicam (Y&R) developed a model of brand
equity called brand asset valuator (BAV). There are four key components:
1. Differentiation
Marketing Insight: Brand Bubble Trouble
Cites the study by Lebar and Gerzema about the proliferation of brands.
A) Brandz
Marketing research consultants Brown and WPP have developed the BRANDZ model
of brand strength, at the heart of which is the BrandDynamics pyramid. According to
this model, brand building follows a series of steps.
• Bonding – Rational and emotional attachments to the brand to the exclusion of
most other brands
Research has shown that bonded consumers build stronger relationships with the
brand and spend more of their category expenditures on the brand than those at lower
levels of the pyramid.
Brand Resonance
The brand resonance model views brand building as an ascending, sequential series
of steps, from bottom to top.
1. Ensuring customers identify the brand and associate it with a specific product class
or need
Chapter 9: Creating Brand Equity
The creation of significant brand equity requires reaching the top or pinnacle of the brand
pyramid:
A) Brand salience refers to how often and how easily consumers think of the brand.
B) Brand performance is how well the product or service meets customers’ functional
needs.
BUILDING BRAND EQUITY
Marketers build brand equity by creating the right brand knowledge structures with the
right consumers. There are three main sets of brand equity drivers:
A) The initial choice for the brand elements or identities making up the brand.
Choosing Brand Elements
Brand elements are trademarkable devices that identify and differentiate the brand.
A) Marketers should choose brand elements to build as much brand equity as
possible.
Brand Element Choice Criteria
There are six criteria for choosing brand elements. The first three—memorable, meaningful,
and likable—are “brand building.”
A) The latter three—transferable, adaptable, and protectable—are “defensive” and help
leverage and preserve brand equity against challenges.
Chapter 9: Creating Brand Equity
Developing Brand Elements
A) Brand elements can play a number of brand-building roles.
B) If consumers don’t examine much information in making product decisions, brand
elements should be easy to recall and inherently descriptive and persuasive.
Designing Holistic Marketing Activities
A) Brands are not built by advertising alone
B) Customers come to know a brand through a range of contacts and touch points:
1) Personal observations
C) A brand contact is any information-bearing experience, whether positive or negative, a
customer or prospect has with the brand, its product category, or its market.
D) Marketers are creating brand contacts and building brand equity through new avenues
such as clubs and consumer communities, trade shows, event marketing, sponsorship,
factory visits, public relations and press releases, and social cause marketing.
Leveraging Secondary Associations
The third and final way to build equity is, in effect, to “borrow it.”
Chapter 9: Creating Brand Equity
That is, create brand equity by linking the brand to other information in memory that
conveys meaning to consumers.
These “secondary” brand associations can link the brand to sources:
1) The company’s branding strategies
Internal Branding
Marketers must adopt an internal perspective to be sure employees and marketing
partners appreciate and understand basic branding notions and how they can help—or
hurt—brand equity.
A) Internal branding is activities and processes that help to inform and inspire employees.
B) Brand bonding occurs when customers experience the company as delivering on its
Brand Communities
Thanks to the Internet, companies are interested in collaborating with consumers to create
value through communities built around brands.
Three characteristics identify brand communities:
1) A “consciousness of kind” or sense of felt connection to the brand, company,
product, or other community members;
3) A shared moral responsibility or duty to both the community as a whole and
Chapter 9: Creating Brand Equity
individual community members.
Brand communities come in many different forms
A) A strong brand community results in a more loyal, committed customer base. Its
activities and advocacy can substitute to some degree for activities the firm would
otherwise have to engage in, creating greater marketing effectiveness and
efficiency.
MEASURING BRAND EQUITY
How do we measure brand equity?
A) An indirect approach—assesses potential sources of brand equity by identifying and
tracking consumer brand knowledge structures.
D) There are important factors marketers should know about brand equity:
1) Fully understand the sources of brand equity and how they affect outcomes of
interest.
3) A brand audit is a consumer-focused series of procedures to assess the health of
the brand, uncover its sources of brand equity, and suggest ways to improve and
leverage its equity.
Marketing Insight: The brand value chain
The brand value chain is a structured approach to assessing the sources and outcomes of
brand equity and the manner in which marketing activities create brand value.
Chapter 9: Creating Brand Equity
The Brand Value Chain
For brand equity to perform a strategic function and guide marketing decisions, marketers
need to fully understand:
A) The sources of brand equity and how they affect the outcomes of interest.
Marketing Insight: What is a brand worth?
Describes the brand valuation process which consists of: market segmentation, financial
analysis, role of branding, brand strength, and brand value calculation.
MANAGING BRAND EQUITY
Because consumer responses to marketing activity depend on what they know and
Brand Reinforcement
As the company’s major enduring asset, a brand needs to be carefully managed so that its
value does not depreciate.
A) Marketers can reinforce brand equity by consistently conveying the brand’s meaning
in terms of:
1) What products it represents?
B) Reinforcing brand equity requires that the brand always be moving forward— in the
right direction and with new and compelling offerings and ways to market them.
C) An important part of reinforcing brands is providing consistent marketing support.
Brand Revitalization
Chapter 9: Creating Brand Equity
Often, the first thing to do in revitalizing a brand is to understand what the sources of brand
equity were to begin with.
A) Are positive associations losing their strength or uniqueness? Have negative
associations become linked to the brand? Then decide whether to retain the same
positioning or create a new one, and if so, which new one.
DEVISING A BRANDING STRATEGY
A firm’s branding strategy reflects the number and nature of both common and
distinctive brand elements. Deciding how to brand new products is especially critical.
A firm has three main choices:
1) It can develop new brand elements for the new product.
2) It can apply some of its existing brand elements.
3) It can use a combination of new and existing brand elements.
F) Brand extensions fall into two general categories:
1) In a line extension, the parent brand covers a new product within a product
category it currently serves.
2) In a category extension, marketers use the parent brand to enter a different product
category.
Chapter 9: Creating Brand Equity
Branding Decision
The first branding strategy is whether to develop a brand name for a product. Today,
branding is such as strong force that hardly anything goes unbranded.
A) A commodity is a product presumably so basic that it cannot be physically
differentiated in the minds of consumers.
C) The use of individual or separate family brand names has been referred to as a “house
of brands” strategy, whereas the use of an umbrella corporate or company brand name
has been referred to as a “branded house” strategy.
Brand Portfolios
A brand can only be stretched so far, and all the segments the firm would like to target
may not view the same brand equally favorably.
Marketers often need multiple brands in order to pursue these multiple segments.
A) Some reasons to introduce multiple brands in a category include:
1) To increase shelf presence and retailer dependence in the store
The brand portfolio is the set of all brands and brand lines a particular firm offers for sale
in a particular category or market segment.
The hallmark of an optimal brand portfolio is the ability of each brand in it to maximize
Chapter 9: Creating Brand Equity
C) Each brand should be clearly differentiated and appealing to a sizable enough
marketing segment to justify its marketing and production costs.
Flankers
Flanker or “fighter” brands are positioned with respect to competitors’ brands so that
more important (and more profitable) flagship brands can retain their desired positioning.
High-End Prestige
The role of a relatively high-priced brand often is to add prestige and credibility to the
entire portfolio.
Brand Extensions
Many firms have decided to leverage that asset by introducing a host of new products
under some of its strongest brand names.
Advantages of brand extensions
Brand extensions have two main advantages:
A) Facilitate new product acceptance
B) Provide positive feedback to the parent brand and company
Chapter 9: Creating Brand Equity
Brand extensions can help clarify the meaning of a brand and its core brand values or
improve consumer perceptions of the credibility of the company behind the extension.
A) Line extensions can renew interest and liking for the brand and benefit the parent
brand by expanding market coverage.
B) One benefit of a successful extension is that it may also serve as the basis for
subsequent extensions.
Disadvantage of Brand Extensions
Line extensions may cause the brand name to be less strongly identified with any one
product.
A) Ries and Trout call this the “line–extension trap.”
the shelf or display space for them.
D) The worst possible scenario is for an extension not only to fail, but to harm the parent
brand in the process.
E) Even if sales of a brand extension are high and meet targets, it is possible that this
revenue will have resulted from consumers switching to the extension from existing
product offerings of the parent brand—called preemptive cannibalizing.
Success Characteristics
Marketers must judge each potential brand extension by how effectively it leverages
existing brand equity from the parent brand, as well as how effectively, in turn, it
contributes to the parent brand’s equity.
A) The most important consideration with extensions is that there is “fit” in the minds of
the consumer.
CUSTOMER EQUITY
Achieving brand equity should be a top priority for any organization.
A) We can relate brand equity to customer equity.
Chapter 9: Creating Brand Equity