Question

As you probably know, brand equity is becoming increasingly important factor to successful brands. Brand equity has the ability for firms to gain additional market share, at a price premium, with increased customer loyalty, and greater acceptance of new products. It also provides significantly more access to more retailer channels and easier ability to enter new markets. Professional valuation companies that rank firms on the brand equity value consider how much the brand contributes to additional profitability. Here are the top 10 brands for 2015 as determined by Millward Brown

1. Apple
2. Google
3. Microsoft
4. IBM
5. Visa
6. AT&T
7. Verizon
8. Coca-Cola
9. McDonalds
10. Marlboro

1. Only a few years ago Coca-Cola was the most valuable brand in the world, a position it had held for a long time. Do you think it is possible for Coca-Cola to every regain the number one spot?
2. How is it possible that the Marlboro (cigarette) brand is still in the top 10 most valuable brands in the world – given it is prohibited from advertising in many countries? Therefore, to what extent do you think that advertising spend influences overall brand equity?

Answer 1

Brand equity is a measure of the value of the 'Brand'.

'Brand' refers to the Name, Logo, Symbol, Tagline, Jingle and other such trademarked proprietary cues being used by an organization to distinguish its offering from other competitors, and to provide positioning and brand promise cues to the customer.

There are cases where a single brand may be used across many products.E.g. Google is an umbrella brand that encompasses offerings such as Search, Maps and Ads. Other brands such as Virgin straddle diverse categories such as Airlines & Music. It follows that investment in building a brand can be used to market multiple products, and thus be a source of competitive advantage to an organization. Therefore, it is considered important for organizations to invest in building strong brands.

Brand valuation methodology differs from one organization to another and may take into account various factors such as Brand Awareness, Attitude towards the brand, Intention to purchase, Current customer base, Customer satisfaction and Recommendation scores. The aim of the exercise is to quantify the value of the brand in terms of its contribution to the business success of organization as measured by metrics such as its profitability.

Coca-Cola is one of the most popular brands across the world. It has kept pace with the changing times by diversifying its business and offerings. Coca-Cola is still among the top 10 brands in a list dominated by technology brands. If Coca-Cola continues to innovate and invest in brand building and does a better job of it than the technology brands, then it is possible for it to regain the number one spot again in the future. Coca-Cola as a brand has endured for over a hundred years, and it has the potential to leverage its rich legacy and again emerge as a leading brand. The wave of technology brands poses a challenge to Coca-Cola but this challenge is surmountable. It depends on the strategy that Coca-Cola adopts in the midst of this technology onslaught.

Advertising spend are one of the contributors to brand equity but not the only one. Advertising helps to generate awareness about a brand and tells consumers about the brand promise. However, once a brand name is fairly well known and its brand promise well established, the incremental impact of advertising on brand equity may not be dramatic. In the case of Marlboro, though the brand does not advertise or is prohibited from advertising, it does enjoy significant saliency in its category e.g. many people may think of Marlboro when they think of cigarettes as a category. Packaging, merchandising and retail space displays are some of the ways in which Marlboro may continue to remind customers about its existence. These visual and residual mental cues have helped Marlboro to maintain its brand equity.

It follows from the Marlboro example that advertising spends may influence the overall brand equity, but is not the only influencer. Brand equity can be impacted through multiple modes, and advertising is just one of them.