Brand Equity

It is a well recognised but still widely debated concept that there is a financial value which attaches to a brand name.

 A brand can and should be an enduring and profitable asset for its owners. Recognising this fact, many brand owners have sought to place the monetary value of a brand on the balance sheet, in the same way that they would that of a capital asset, such as a factory. A brand, however, does not have foundations built of concrete and steel.

When John Stuart, then Chairman of Quaker Oats Ltd., stated, “If the business were split up, I would take the brands, trademarks, and goodwill, and you could have all the bricks and mortar – and I would fare better than you ” He was recognising that brands exist in the minds of their potential consumers, and that what those consumers think of a particular brand determines the value it has to its owner.

A brand’s foundations are, therefore, composed of peoples’ intangible mental associations about it. In placing a value on a brand, we are placing a value on the strength and resilience of those associations.

Up until now, however, there has been no systematic means of assigning to this consumer equity a financial value that is related to the overall worth of the brand. Nor has survey research offered a consistent way of understanding and assessing that consumer equity. This has impaired the ability of decision makers to properly manage their brand’s equity to maximise the long-term profit realised from their asset.

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