This is a phrase that you very often hear: “This brand has strong equity” or, “if you do that, the brand’s equity will erode,” and so on.
So what does the expression mean? Brand equity can be easily understood as being the same as brand health. Does the term explain itself? Yes, it does, and is the same as saying that when brand health is high, the brand is in a good position.
So, what kind of performance measures tell us that a brand is healthy? When the sales show an upward curve?
Yes, sales is, of course, very important. But actually, when we use the term ‘brand health’ or ‘brand equity’, we are not actually talking about the sales data. That term normally refers to certain other indices from a market performance point of view. Broadly, there are four key measures
— Awareness
— Behaviour
— Disposition
— Position / Image
So, do sales not figure in this mix at all?
Well, not directly, but behaviour is a measure that does capture sales to some extent. Let us go through each of these measures and then it will be clearer.
Awareness is quite simply the proportion of target consumers who are aware of the brand. This figure naturally needs to be high, for how will consumers buy a brand if they are not even aware of it? Within awareness, we have a key measure called Top-of-Mind awareness, which is the proportion of consumers who mention the brand name first when asked which brands they are aware of.
Behaviour refers to consumers’ purchase and usage behavior. Simply put, it is the proportion of consumers who say that they use / buy this particular brand.
Role of disposition
And does have some correlation with sales? Quite a close correlation, as a matter of fact.
Disposition is the extent to which consumers say that they like the brand. One of the measures here is the proportion of consumers saying that the brand is their favourite or preferred brand.
But how is that different from the brand that they buy?
It can sometimes be different. There are situations where the brand that they want to buy is not quite affordable
For example, you may want to buy a Merc, knowing perfectly well that you can’t afford it
While that’s an extreme example, but it does explain the point. But affordability is not the only constraint. Sometimes it could be availability in nearby shops. And at other times, it could be availability in a desired pack size.
So, the favourite brand may not be the one which is always bought? And, does the term image explain itself? It means the image that the brand stands for?
Composite measures
That is exactly what it means. But just to make it absolutely clear, an image itself can be created along 2-3 dimensions. A brand can create an image on the basis of the profile of consumers it targets and/or the benefits it promises to consumers and/or the pricing strategy.
And all these measures together tell us about the brand equity or health. As mentioned earlier, we can use these terms more or less interchangeably.
However, isn’t this too complicated for a brand manager to keep so many things in mind when thinking about the equity of the brand?
But, they don’t need to do that. They can use some composite measure — a brand equity index. Different companies have different methods of calculating this index, but basically it is a composite measure of the measures mentioned here.
To read more from the FundaMental section, click here .