Below is an excerpt from John McKeown’s December 2016 Monthly IP Bulletin.
There is no universal definition of “brand equity”. However, there is a commonality in the definitions which have been put forward by writers in the field.
David Aaker, an authority on branding, has described brand equity as “a set of brand assets and liabilities linked to a brand, its name and symbol that add to or subtract from the value provided by a product or service to a firm and/or to that firm’s customers”[1].
Kevin L. Keller has defined customer-based brand equity as the differential effect of brand knowledge on consumer response to the marketing of the brand. Customer-based brand equity involves consumers’ reaction to an element of the marketing mix for the brand in comparison with the reactions to the same marketing mix elements attributed to a fictitiously named or unnamed version of the product or service. Positive brand equity occurs when the consumer is familiar with a brand and holds some favorable, strong or unique brand associations in memory.[2]
The Marketing Science Institute has described brand equity as being a “set of associations and behaviors on the part of a brand’s consumers, channel members and parent corporation that permits the brand to earn greater volume or greater margins than it could without the brand name and that gives a strong, sustainable, and differentiated competitive advantage”.[3]
More recently, Aaker has described brand equity as being made up of brand awareness, brand loyalty and brand associations. Brand awareness differentiates brands along a recall/familiarity dimension and can provide a sustainable competitive difference. Brand loyalty is the resistance to switching that comes from a loyal customer base. A brand association is anything that is directly or indirectly linked in the consumer’s memory to the brand. The management of brand equity should be strategic and visionary instead of tactical and reactive.[4]
Keller suggests that brand equity may be built in three ways: through selection of the brand elements; the mix employed in the brand marketing program; and secondary associations.[5]
Brand equity is important for a number of reasons. First, brand equity serves as an estimate of the value of a brand. A brand may become more valuable than the physical assets which make up a business. There have been many corporate acquisitions where the amount paid for the subject companies was significantly greater than the balance sheet values of the concrete assets owned by the companies. The difference represented the value of the brand portfolios owned by the target companies.
Second, considering brand equity can assist in the management of the components which make up the brand and allow those engaged in marketing decisions to make more efficient use of corporate resources. Brand owners are expected to create brand equity and to justify investments in marketing strategies by reference to increased brand equity.
Finally, the concept of brand equity can be important in the context of enforcing rights. In particular it is frequently argued that a loss of brand equity is irreparable and impossible to calculate.
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These comments are of a general nature and not intended to provide legal advice as individual situations will differ and should be discussed with a lawyer.
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[1]. David Aaker, Managing Brand Equity, (New York: The Free Press, 1991), at 15.
[2] . Kevin L. Keller, “Conceptualizing, Measuring and Managing Customer Based Brand Equity” (1993) 57 Journal of Marketing, January at 1.
[3] . Rajendra Srivastava, Allan Shocker, “Brand equity: a perspective on its meaning and measurement”, Cambridge Massachusetts: Marketing Science Institute Working Paper, 91-124.
[4] . David Strategic Market Management, 10th edition (John Wiley & Sons, Inc. 2014) at p. 150.
[5] . Kevin L. Keller, Strategic Brand Management, (Upper Saddle River, NewJersey: Prentice Hall 1998) at 68.