A brand is a distinguishing name and symbol (such as logo, trademark, or package design) intended to identify the goods or services of an enterprise and to be different from the competitors of the enterprise. A brand thus signals to the customer the source of the product, and protects both the customer and the producer from competitors who would attempt to provide products that appear to be identical (Aaker, 1991).
From the viewpoint of customer, a brand can be defined as the total accumulation of all customer experiences, and is built at all points of contact with the customers (Kapferer, 2004). A successful brand is a product, service, person or place, augmented in such a way that the buyer perceives relevant, unique added values which match their needs most closely (Chernatony and McDonald, 1998).From the statement above, readers can realize the fact that a brand is definitely has something to do with customers.
Strong brands have some more advantages such as enjoying customer loyalty, the potential to charge premium prices, and considerable brand power
to support new product and service launches. As the result, readers can refer that companies must to have thorough understanding of customer beliefs, behaviors, product or service attributes, and competitors so as to fulfill the customers’ needs and to win higher brand power. Besides, powerful brands provide long-term security and growth, higher sustainable profits, and increased asset value because they achieve competitive differentiation, premium prices, higher sales volumes, economies of scale and reduced costs, and greater security of demand (Temporal, 2000).
The Brand “promise” is the essence of the benefits (both functional and emotional) that customers can expect to receive from experiencing a brand’s products/services, which reflects the heart, soul, and spirit of the brand (Knapp, 2000). Successful brands are those brands which adapt well to the environment and thus survive and flourish in the long term even face competition.
In conclusion, a strong brand has a lot of advantages on the competitive market such as preventing from identical product, supplying unique added value to customers and winning customer loyalty and also acquiring sustainable profit from loyal customers.
From the evolution of brand theories, there were so many different definitions on brand.
American Marketing Association (1960) proposed the following company-oriented definition of a brand as:
A name, term, sign, symbol, or design, or a combination of them, intended
to identify the goods or services of one seller or group of sellers and to
differentiate them from those of competitors.
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This definition of brand was the very first concept of brand and also inspired some scholars’ interest on the research of brand. Besides, a new definition no doubt will face some different voice from other scholars.
This definition has been criticized for being too product-oriented, with emphasis on visual features as differentiating mechanisms (Arnold, 1992;
Crainer, 1995). Despite these criticisms, the definition has endured to contemporary literature, albeit in modified form.
Dibb et al. (1997) use the Bennett (1988) variant of the definition which is:
A brand is a name, term, design, symbol or any other feature that identifies one seller's good or service as distinct from those of other sellers.
The key changes to the original definition are the words “any other feature”
as this allows for intangibles, such as image, to be the point of differentiation.
Ambler (1992) takes a consumer-oriented approach in defining a brand as:
Brand is the promise of the bundles of attributes that someone buys and providing satisfaction to customers. The attributes that make up a brand may be real or illusory, rational or emotional, tangible or invisible.
These attributes emanate from all elements of the marketing mix and all the brand's product lines. The attributes of a brand are created using the marketing mix, and are subject to interpretation by the consumer.
There were so many aspects of brand definition that may make readers confusing. But in briefly, whenever a person creates a new name, logo or symbol for a new product or service, we could say he or she created a new
brand on the market.
2.2.1 Brand function
A number of studies have explored the various effects of brand functions from four different aspects and we will discuss above:
Product-related effects
Brand name has been shown to be positively associated with customer product evaluations, perceptions of quality and purchase rates (Day &
Deutscher, 1982; Dodds et al.,1991; Brown & Dacin,1997; Leclerc, et al.,1994;
Rao & Monroe,1998).
This tendency may be increased by the uniqueness of brand associations.
(Feinberg et al., 1992)
Furthermore, familiarity with a brand has been shown to increase customer confidence and attitude toward the brand and also purchase intention (Feinberg et al., 1992; Laroche et al., 1996). Chaudhri and Holbrook (2001) showed brand trust and brand effect combine to determine customer purchase loyalty and attitudinal loyalty and that loyalty leads to greater market share and higher relative price of brand.
Price-related effects
Lots of studies have showed that brand can command larger price differences. (Simon, 1979; Park & Srinivasan, 1994; Agrawal, 1996;
Sethuraman, 1996) And from the view point of competitive, brand leaders draw a disproportionate amount of market share from smaller share company(Allenby & Rossi, 1991; Grover & Srinivasan, 1992; Russell &
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Kamakura, 1994) In addition, lower level of price sensitivity have been found for households that are more loyalty(Krishnamurthi & Raj, 1991)
Communication-related effects
A strong brand needs to communicate to the consumers and to win the fame on the market. A very common way to communicate with a consumer is advertisement. Brown and Stayman (1992) maintain that halo effects related to the positive bias the evaluation of advertising of the brand. Humor in ads seems to be more effective for familiar or already favorably evaluated brand than for unfamiliar or less-favorably evaluated brand. (Stewart & Furse, 1986;
Chattopadhyay & Basu, 1990; Weinberger & Gulas, 1992) Consumers appear to have a more negative reaction with ad tactics such as comparative ads.
(Belch, 1981)
Other advantages associated with more advertising include increased likelihood of been the focus of attention (Dhar & Simonson, 1992) and increased brand interest (Machleit et al., 1993).
Channel-related effects
Montgomery in 1975 found that products that were from the top firm s in an industry had more chance to be accepted in the channel in supermarket.
Some research also supported this found from the finding of most store are more likely to feature famous brands if those store wanted to have high quality image on market (Lal & Narasimhan, 1996).
Briefly speaking, creating a strong brand has more advantages on market than a poor brand when we discuss from competitive view point. That’s also the reason why more and more researches focused on the brand building
methods.
Brand has so many effects and they can add crucial value when the brand is well recognized and has positive associations in the mind of consumers; this concept is also referred to as brand equity. So, next, we will collect some concepts of brand equity.
2.2 Brand equity
When discussing the concept of a strong brand, we need to understand what a strong brand meaning on the market. Therefore, some research started researching on the term “brand equity”. Brand equity is a concept born in 1980s. It has aroused intense interest among business strategists from a wide variety of industries as brand equity is closely related with brand loyalty and brand extensions. Besides, successful brands provide competitive advantages that are critical to the success of companies. A strong brand can also be seen to have higher brand equity. Thus, this chapter will discuss what the meaning of brand equity is.
In simple terms, “brand equity” is a construct that is designed to reflect the real value that a brand name holds for the products and services that it accompanies. Measuring brand equity is considered important because brands are believed to be strong influencers of critical business outcomes, such as sales and market share.
2.2.1 The development of brand equity
The research of concepts of brand equity was becoming popular when
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some researchers have concluded that brand is one of the most valuable assets that a company has. High brand equity levels are said to lead to higher consumer preferences and purchase intentions (Cobb-Walgren et al. 1995), also, higher stock returns (Aaker and Jacobson, 1994). Besides, high brand equity brings an opportunity for successful extensions, resilience against competitors’
promotional pressures, and creation of barriers to competitive entry (Farquhar , 1989).
Then, the concept of brand equity began to be used widely in the 1980s by advertising practitioners (Barwise, 1993). Important academic contributors throughout the 1990s were Aaker (1991), Srivastava and Shocker (1991), Kapferer (1992), and Keller (1993, 1998).
There are two main different perspectives of the study of brand equity-financial, customer based (marketing).
(1) Financial perspective
The first perspective of brand equity is from a financial market’s point of view where the asset value of a brand is appraised (Farquhar et al., 1991；Simon and Sullivan, 1990). The financial perspective of brand equity was normally defined by goodwill, cash flow, financial value, value that can be earned, present discounted value; and evaluate by economic or financial model the present cash that brand can get and also view the brand value as the asset of the company, present the value on the financial statements, as the evidence of some financial behaviors such as stock exchange, M&A (mergers and acquisitions).
(2)Customer based perspective
The second perspective of brand equity is based on customers’
response of the brand name (Keller, 1993; Shocker et al., 1994). Most of the brand equity from marketing perspective defined from customer cognition, attitude, or behaviors. Thus, we can seem that customer based perspective is almost the same as the marketing perspective. The marketing perspective is aim to make the brand product earn higher market position and let the product value become higher than the true value of the same product. Only when brand product gaining positive feeling and value preference can they promote the willing to buy of customers.
There are so many definitions and construct of brand equity. Here are some different definitions from different researchers in Table 2-1
Table 2-1: Concepts of brand equity Researcher Concepts
Leuthesser,1988 The set of associations and behaviors on the part of the brand’s consumers, channel members, and parent corporation that permits the brand to earn greater volume or greater margins than it would without the brand name and that gives the brand a strong,
sustainable, and differentiated advantage over competitors.
Aaker ,1991 The value consumers associate with a brand, as reflected in the dimensions of brand awareness, brand
associations, perceived quality , brand loyalty and other proprietary brand asset.
Swait et al ,1993 The consumer’s implicit valuation of the brand in a market with differentiated brands relative to a market with no brand differentiation. Brands act as a signal or
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cue regarding the nature of product and service quality and reliability and image/status.
Kamakura &
Russell,1993
Customer-based brand equity occurs when the consumer is familiar with the brand and holds some favorable, strong, and unique brand associations in the memory.
Keller,1993 The differential effect of brand knowledge on consumer response to the marketing of the brand. Brand
knowledge is the full set of brand associations linked to the brand in long-term consumer memory
Lassar et al.,1995 The consumers’ perception of the overall superiority of a product carrying that brand name when compared to other brands. Five perceptual dimension of brand equity includes performance, social image, value,
trustworthiness and attachment.
Source: summarized by author
Through the concept of brand equity was first proposed, there have so many different dimensions and so many models of brand equity.
Nevertheless, the Aaker’s brand equity model was the most utilized and most common. (Keller 1993; Motameni & Shahrokhi, 1998; Yoo &
Donthu, 2001; Bendixen et al, 2003; Kim et al, 2003). As the result that Aaker model was used so wildly, this research would also take the Aaker model as the basic framework of this paper.
2.2.2 Aaker’s brand equity model
Figure 2-1: Aaker’s brand equity model
Source: EUROPEAN INSTITUTE FOR BRAND MANAGEMENT (2009)
Aaker’s brand equity model included five dimensions (brand loyalty, brand awareness, perceived quality, brand associations, and other proprietary assets).
(1) Brand loyalty
Aaker(1996):「Loyalty is a core dimension of brand equity. You usually offend your core first because they are connected to the brand and they care. 」
Aaker (1991) defines brand loyalty as the attachment that a customer has to a brand. Grembler and Brown (1996) describe different levels of loyalty.
Behavioral loyalty is linked to consumer behavior in the marketplace that can
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be indicated by number of repeated purchases (Keller, 1998)
Aaker (1996) also identify price premium as the basic indicator of loyalty.
Price premium is defined as the amount a customer will pay for the brand in comparison with another brand offering similar benefits and it may be high or low and positive or negative depending on the two brands involved in the comparison. Thus, we could realize that brand loyalty including two parts, repeated purchases and price premium.
According to Aaker (1996), brand loyalty can be measured as following:
Were you—dissatisfied vs. satisfied vs. delighted—with the product or service during your last use experience?
Would you buy the brand on the next opportunity?
Is the brand the—only vs. one of two vs. one of three vs. one of more than three brands—that you buy and use?
Would you recommend the product or service to others?
(2) Brand awareness
Awareness is a key determinant identified in almost all brand equity models (Aaker 1991, Kapferer1991, Keller 1992, Agarwal &Rao 1996, Krishnan 1996, Marshall & Keller 1999, Mackay 2001).
Aaker (1996) identified other higher levels of awareness besides recognition and recall. He included top-of-mind, brand dominance, brand knowledge and brand opinion. Brand knowledge is the full set of brand associations linked to the brand (Keller, 1993).Aaker conceptualizes brand awareness must precede brand associations. That is where a consumer must first be aware of the brand in order to develop a set of associations (Washburn
and Plank, 2002).
Brand awareness reflects customers’ mind of the brand and there are several levels of awareness including (Aaker, 1996):
• Recognition (Have you heard of the Buick Road master?)
• Recall (What brands of cars can you recall?)
• Top-of-Mind (the first-named brand in a recall task)
• Brand Dominance (the only brand recalled)
• Brand Knowledge (I know what the brand stands for)
• Brand Opinion (I have an opinion about the brand)
(3) Perceived quality
It is “the consumer’s subjective evaluation of the product” (Zeithaml, 1988). Perceived quality provides value for the consumer (Aaker, 1991; Pappu, Quester, & Cooksey, 2005). Perceived quality has also shown to be associated with price premiums, price elasticities, brand usage, and stock return (Aaker, 1996) . Perceived quality can be measured with scales such as the following:
In comparison to alternative brands, this brand
• has: high quality vs. average quality vs. inferior quality
• is: the best vs. one of the best vs. one of the worst vs. the worst
• has: consistent quality vs. inconsistent quality
(4) Brand associations
Brand associations are perceived as elements (nodes) related to the brand in consumer mind which contain the brand meanings (Aaker, 1991; Keller, 1993; Krishnan, 1996; Korchia, 2000).
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Based on the Aaker’s viewpoint in 1996, there were three aspects to measure brand association.
Brand as product (value).
Brand as person (brand personality).
Brand as organization (organizational associations).
Value
The brand-as-product perspective focuses on the brands value proposition which usually involves a functional benefit, is basic to brands in most product classes.
According to Aaker, value can be measured by the following:
whether the brand provides good value for the money
whether there are reasons to buy this brand over competitors
Brand personality
Brand personality is based on the concepts that brand is a person. The brand personality can provide a link to the brands emotional and self-expressive benefits as well as a basis for customer/brand relationships and differentiation.
According to Aaker, brand personality can be measured by the following:
This brand has a personality.
This brand is interesting.
I have a clear image of the type of person who would use the brand.
Organizational associations
The brand-as-organization perspective, is considering the organization (people, values, and programs) that lies behind the brand. Organizational associations that are often important bases of differentiation and choice include
having a concern for customers, being innovative, striving for high quality, being successful, having visibility, being oriented toward the community, and being a global player.
According to Aaker (1996), organization associations can be measured by the following:
This brand is made by an organization I would trust.
I admire the brand X organization.
The organization associated with this brand has credibility
According to Aaker (1996), brand equity can be divided in 5 different dimensions as was told in the brand equity model of Aaker. However, the fifth dimension, other proprietary assets, will not be discussed in this research due to the reason that proprietary asset is more tangible than other dimension that can be measured simply by calculating the target company’s assets. As the result, this research will merely focus on the other four dimensions.
2.3 The studies of brand valuation
There are three different perspectives of brand valuation, asset perspective, customer perspective, and comprehensive perspective.
2.3.1 Asset perspective
The asset perspective is to measure the value of brand asset from corporate finance, which means brand value is reflected in the financial benefits obtained by companies from the brand.
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The Interbrand method and Financial World method are examples of asset perspective. Interbrand method has a basic assumption:
“Brand value is reflected to ensure that brand owners can get a more stable income in the future.” Thus, it is necessary to assess brand value on the basis of the future earnings of company through financial analysis, market analysis and brand analysis.
First, use financial analysis to evaluate the residual earnings of a product or a business, which refers to the balance of the future income from the product or business minus the revenue from the tangible assets.
Second, clear the impact of brand on the industry of the product or service through market analysis, thus determining how many percentages of residual earnings are created by the brand, so as to calculate the brand’s future earnings.
Third, take the analysis from ten areas including authenticity, clarity, brand commitment, brand protection, adaptability, consistency, diversity, visibility, relevance and understandability to determine the coefficient of brand strength, then convert the brand strength coefficient to the discount rate of brand’s future earnings through an S-shaped curve (the discount rate is used when discounting brand future earnings for the current yield).
According to this idea, brand value is calculated as: brand value = future
earnings of brand × brand strength.
Based on the advantages of the Interbrand method, the Financial World method develops its own characteristic with the expert assessing brand market performance to obtain the data of brand’s earnings. Assessment is first built on the company’s sales. The expert judges the average profit margin of industry
according to his experience, and calculates the company’s operating profit, from which excludes profits that have nothing to do with the brand, to acquire the data of pure profit created by brand.
Next, calculate the brand strength coefficient using the Interbrand method.
Finally, calculate the brand value with the formula as follows: brand value =
brand net profit × brand strength.
2.3.2 Customer perspective
Customer perspective is to measure the brand’s status in customers’ hearts from the degree of such aspects as their familiarity with the brand, perception of the brand quality, and association of the brand, etc. Yu and Zhao (2003) believed that customers are the foundation of brand value, and argued that brand value is “the differential response of customers to enterprise marketing activities in the aspects of cognition, emotion, and behavior intention and behavior”.
On this basis, some scholars pointed out that customer- based brand valuation must consider three factors: brand loyalty, perceived quality and brand image. Wang (2004) thought besides the joint action of brand loyalty and brand awareness, brand valuation needs to consider the influence of whether the customer to buy on the real value of brand. Researches under customers’
perspective provide a basis for the quantitative assessment of brand value.
Brand valuation methods based on the customer perspective with quantitative indicators include the premium method and the loyalty factor method. The principle of the premium method is that by calculating how high