Brand Equity

Brand equity
If there is one end goal for all of a marketer’s duties and responsibilities, it would be the building
up of brand equity.
Brand Equity refers to the value of the brand. Ideally, this value would be expressed in the form
of peso values. Unfortunately, figuring out the peso value of a brand is not quite that simple to
do. This is because brand equity is, for the most part, intangible and near speculative. That is to
say, there is really no way to figure out the exact value of a brand in real time.
Brand equity can be calculated using the following ingredients:
 The Present Value (PV) of the income stream from an average customer of the brand,
also known as the Customer Lifetime Value (CLV). CLV is the present value of the
anticipated profit stream S (anticipated revenues minus anticipated costs) throughout the
customer’s lifetime relationship with the brand.
 The current market size of the brand (MS)
 The average expected growth rate of the brand from here on (G).
 The expected commercial lifespan of the (LS), which is pretty much a rough estimate but
can be set to 20 years for practical purposes.

The following set of equations summarize how the brand value can be calculated:
𝑌
𝑠𝑡
𝐶𝑙𝑉(𝑖, 𝑌) = ∑
(𝑙 + 𝑖)𝑡
𝑡=0

Where:
CLV= Customer Lifetime Value
Y= average expected number of years of loyalty of customer to brand
S= Anticipated average annual profit per customer, in pesos
i= interest rate (for opportunity cost)
t= time period 0.. Y (years from year 0 to year Y)

Brand Valuation
Since there is no clear way to estimate brand equity in terms of monetary value, marketers have
resorted to utilizing non-monetary measure of brand value. These brand valuators can be a
number of metrics.
Marketers will have to construct their own brand asset value by creating an index out all these
disparate metrics. An index is as single number that summarizes the quantifications of essential
brand elements that have to be monitored. It could be something like:
Brand Value Index= (number of patrons) x .15+ (number of facebook likes) x .05+ (average
rating for brand) x .30 …

Developing a new brand

A well-designed brand strategy can help to enhance a products chances of being accepted by the
market and of surviving for the long term. But you cannot just plug in the first words that come
to mind and scribble an ad hoc logo to go with it. The following is a recommended process for
building up a new brand.
Step 1. Develop the Brand Strategy
 Product Information. What are the products or services that the brand shall be
representing? A detailed discussion of the proposal product line up, even future products,
is in order.
 Market Information. Who are the target market that the brand will be catering to? What
are their rangers, life cycle stages, socio- economic classes, behavior, likes and dislikes,
occupations, and recreational activities, personalities, and aspirations?
 Trademark criteria. Should be the name be short or should be expository? Knowing
these details will help in narrowing down the search process for variable trademarks.
 Brand name objectives. What should the brand name accomplish in the minds of the
consumers?
Step 2. Develop the creative theme
While the first step was all about laying the groundwork, this step is all about building up the
look feel of the brand.
The elements in this step will take off from the groundwork of the first step, so issues such as
brand name objectives and market information will be applied to the points of this step.

 Brand personality
 Inferences and connotations
 Color palette and style
 Font
 Visual cues
 Acceptable uses and materials
 Retail placement
Step 3. Create the name
finally, after all the groundwork has been laid, it is now time to create the actual brand name.
  Keep it short. Notice how the most memorable brand names are only up to three
syllables long.
 Make it easy to pronounce and remember. It will not pay to have a brand name to
spell, remember, or pronounce.
 It should translate well in target market. Especially if you plan on selling your product
to the international market, your brand name should not connote anything negative in
those territories.
Brand names can be:
 Eponyms or names people such as the founders or even historical people.
 Descriptive connoting something about the product itself or its benefits
 Abbreviation or portmanteaus
 Symbolic or image-driven
 Synthetic
Step 4. Test the name
So, this step is all about testing your selecting brand name and its impact and signifiers to your
target market.
Step 5. Screen for the trademark availability
Finally, if your proposed brand passes the test marketing, you will need to make sure that is
actually available at the intellectual property office.
Going beyond one product
Small enterprise would likely begin with just one product, effectively behaving just like a single
business unit. Sooner or later, however, the business will likely need to expand its product line.
Why should firm expand their offerings? Mostly, it will be about economies of scope. Whereas
economies of scale pertains to the reduction in costs of goods when production is ramped up,
economies of scope pertains to the reduction in overhead costs that is possible when the
enterprise produces more than one good.
The simplest way to expand a product portfolio is by stretching the product line. From one single
mid- priced pen, for instance, a fledgling stationery manufacturer can build a product line by
launching a high-priced pen or perhaps a low-priced one.
The product mix
The product mix is the set of all products that a business offers for sale and is categorized along
the following dimensions:
 Length- the length of the product line
 Width- the number of different product lines carried
 Depth- the number of variants per product in a line.
Length pertains to the number of products offered in a product line. This is actually important
point because what you do not want is to have two different products in the line that
inadvertently target the same target market. If this happens, then cannibalization is the result,
with one product simply stealing market share from the other.
As always, there are exceptions to this rule. For instance, certain firms would launch product
variants that still target the same market or threaten to cannibalize their own products. “instead of
others eating into our market share, let us eat it ourselves”
For example, Coca-Cola offers three variants of coke, namely Coca-Cola, Coca-Cola light, and
Coca-Cola zero. There is arguably a high risk of cannibalization between Coke light and Coke
zero as both brands target essentially the same health-conscious market.
Width refers to the number of product lines that a marketing entity may have. For example, P
and G’s product mix
Table 2
P and G product mix
Hair care House hold Laundry/ detergent Skin care
Clairol hair care Mr. clean ariel Camay beauty soap
Household cleaners
Head and shoulders Pampers disposable bonux ivory
diapers
pantene Downy fabric Olay skin products
conditioner
Vital session Tide laundry Old spice
detergent
safeguard
Secret anti-
perspirants and
deodorants

a company can start out with a simple product line and then eventually expand its width by
introducing a new product category.
Depth pertains to variety, which is typically manifested as flavors, colors, sizes, or formulations,
for a particular product. An example would be ice cream coming in different flavors such as
vanilla and chocolate, with each new flavors expanding the depth of the product even further.