Two questions often arise in brand marketing: What makes a brand strong? and How do you build a strong brand? To help answer both, we introduce the concept of customer-based brand equity (CBBE). Although a number of useful perspectives concerning brand equity have been put forth, the CBBE concept provides a unique point of view on what brand equity is and how itshould best be built, measured, and managed.
Defining Customer-Based Brand Equity
The CBBE concept approaches brand equity from the perspective of the consumer whether the consumer is an individual or an organization or an existing or prospective customer. Understanding the needs and wants of consumers and organizations and devising products and programs to satisfy them are at the heart of successful marketing. In particular, marketers face two fundamentally important questions: What do different brands mean to consumers? and How does the brand knowledge of consumers affect their response to marketing activity?
The basic premise of the CBBE concept is that the power of a brand lies in what customers have learned, felt, seen, and heard about the brand as a result of their experiences over time. In other words, the power of a brand lies in what resides in the minds and hearts of customers. The challenge for marketers in building a strong brand is ensuring that customers have the right type of experiences with products and services and their accompanying marketing programs so that the desired thoughts, feelings, images, beliefs, perceptions, opinions, and experiences become linked to the brand.
We formally define customer-based brand equity as the differential effect that brand knowledge has on consumer response to the marketing of that brand. A brand has positive customer-based brand equity when consumers react more favorably to a product and the way it is marketed when the brand is identified than when it is not (say, when the product is attributed to a fictitious name or is unnamed). Thus, customers might be more accepting of a new brand extension for a brand with positive customer-based brand equity, less sensitive to price increases and withdrawal of advertising support, or more willing to seek the brand in a new distribution channel. On the other hand, a brand has negative customer-based brand equity if consumers react less favorably to marketing activity for the brand compared with an unnamed or fictitiously named version of the product.
Let’s look at the three key ingredients to this definition: (1) “differential effect,” (2) “brand knowledge,” and (3) “consumer response to marketing.” First, brand equity arises from differences in consumer response. If no differences occur, then the brand-nam product can essentially be classified as a commodity or a generic version of the product. Competition, most likely, would then just be based on price. Second, these differences in response are a result of consumers’ knowledge about the brand, that is, what they have learned, felt, seen, and heard about the brand as a result of their experiences over time. Thus, although strongly influenced by the marketing activity of the firm, brand equity ultimately depends on what resides in the minds and hearts of consumers. Third, customers’differential responses, which make up brand equity, are reflected in perceptions, preferences, and behavior related to all aspects of brand marketing, for example, including choic of a brand, recall of copy points from an ad, response to a sales promotion, and evaluations of a proposed brand extension.
The simplest way to illustrate what we mean by customer-based brand equity is to consider one of the typical results of product sampling or comparison tests. In blind taste tests, two groups of consumers sample a product: one group knows which brand it is, the other doesn’t. Invariably, the two groups have different opinions despite consuming the same product. These branding effects occur in the marketplace too. For example, at one time, Hitachi and General Electric (GE) jointly owned a factory in England that made identical televisions for the two companies. The only difference was the brand name on the television. Nevertheles itachi televisions sold for a $75 premium over the GE televisions. Moreover, Hitachi sold as many sets as GE despite the higher price.
We formally define customer-based brand equity as the differential effect that brand knowledge has on consumer response to the marketing of that brand. A brand has positive customer-based brand equity when consumers react more favorably to a product and the way it is marketed when the brand is identified than when it is not (say, when the product is attributed to a fictitious name or is unnamed). Thus, customers might be more accepting of a new brand extension for a brand with positive customer-based brand equity, less sensitive to price increases and withdrawal of advertising support, or more willing to seek the brand in a new distribution channel. On the other hand, a brand has negative customer-based brand equity if consumers react less favorably to marketing activity for the brand compared with an unnamed or fictitiously named version of the product.
Let’s look at the three key ingredients to this definition: (1) “differential effect,” (2) “brand knowledge,” and (3) “consumer response to marketing.” First, brand equity arises from differences in consumer response. If no differences occur, then the brand-nam product can essentially be classified as a commodity or a generic version of the product. Competition, most likely, would then just be based on price. Second, these differences in response are a result of consumers’ knowledge about the brand, that is, what they have learned, felt, seen, and heard about the brand as a result of their experiences over time. Thus, although strongly influenced by the marketing activity of the firm, brand equity ultimately depends on what resides in the minds and hearts of consumers. Third, customers’differential responses, which make up brand equity, are reflected in perceptions, preferences, and behavior related to all aspects of brand marketing, for example, including choic of a brand, recall of copy points from an ad, response to a sales promotion, and evaluations of a proposed brand extension.
The simplest way to illustrate what we mean by customer-based brand equity is to consider one of the typical results of product sampling or comparison tests. In blind taste tests, two groups of consumers sample a product: one group knows which brand it is, the other doesn’t. Invariably, the two groups have different opinions despite consuming the same product. These branding effects occur in the marketplace too. For example, at one time, Hitachi and General Electric (GE) jointly owned a factory in England that made identical televisions for the two companies. The only difference was the brand name on the television. Nevertheles itachi televisions sold for a $75 premium over the GE televisions. Moreover, Hitachi sold as many sets as GE despite the higher price.
When consumers report different opinions about branded and unbranded versions of identical products which almost invariably happens it must be the case that knowledge about the brand, created by whatever means (past experiences, marketing activity for the brand, or word of mouth), has somehow changed customers’ product perceptions. This result has occurred with virtually every type of product conclusive evidence that consumers’ perceptions of product performance are highly dependent on their impressions of the brand that goes along with it. In other words, clothes may seem to fit better, a car may seem to drive more smoothly, and the wait in a bank line may seem shorter, depending on the particular brand involved.
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