Brand Decisions 189
Brand Equity
Brands vary in the amount of power and value they have in the marketplace. At one
extreme are brands that are not known by most buyers. Then there are brands for
which buyers have a fairly high degree of brand awareness.Beyond this are brands with
a high degree of brand acceptability.Next are brands that enjoy a high degree of brand
preference.Finally there are brands that command a high degree of brand loyalty.Aaker
distinguished five levels of customer attitude toward a brand:
- Customer will change brands, especially for price reasons. No brand loyalty.
- Customer is satisfied. No reason to change the brand.
- Customer is satisfied and would incur costs by changing brand.
- Customer values the brand and sees it as a friend.
- Customer is devoted to the brand.
Brand equityis highly related to how many customers are in classes 3, 4, or 5. It is
also related, according to Aaker, to the degree of brand-name recognition, perceived
brand quality, strong mental and emotional associations, and other assets such as
patents, trademarks, and channel relationships.^7 High brand equity allows a company
to enjoy reduced marketing costs because of high brand awareness and loyalty, gives a
company more leverage in bargaining with distributors and retailers, permits the firm
to charge more because the brand has higher perceived quality, allows the firm to
more easily launch extensions because the brand has high credibility, and offers some
defense against price competition.
Some analysts see brands as outlasting a company’s specific products and facili-
ties, so brands become the company’s major enduring asset. Yet every powerful brand
really represents a set of loyal customers. Therefore, the fundamental asset underlying
brand equity is customer equity.This suggests that the proper focus of marketing plan-
ning is that of extending loyal customer lifetime value,with brand management serving as
a major marketing tool.
Unfortunately, some companies have mismanaged their greatest asset—their
brands. This is what befell the popular Snapple brand almost as soon as Quaker Oats
bought the beverage marketer for $1.7 billion in 1994. Snapple had become a hit
through powerful grassroots marketing and distribution through small outlets and
convenience stores. Analysts said that because Quaker did not understand the brand’s
appeal, it made the mistake of changing the ads and the distribution. Snapple lost so
much money and market share that in 1997, Quaker finally sold the company for $300
million to Triarc, which has since revived the floundering brand.^8
Branding Challenges
Branding poses several challenges to the marketer (see Figure 4-3). The first is
whether or not to brand, the second is how to handle brand sponsorship, the third is
choosing a brand name, the fourth is deciding on brand strategy, and the fifth is
whether to reposition a brand later on.
To Brand or Not to Brand?
The first decision is whether the company should develop a brand name for its prod-
uct. Branding is such a strong force today that hardly anything goes unbranded,