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concept Brandequityas a relational TimAmbler Received revisedform):22nd February,1995 Tim Ambler is Grand Metropolitan Senior Research Fellow at the London Business School, where his prime focus for research and teaching is the management of international brands. Before taking up his appointment he was Joint Managing Director of International Distillers and Vintners Ltd. He is also a consultant to the Grand Met, The Century Council in Los Angeles and smaller companies for strategy, marketing, training and education. Katie Vandyck 1991 mari sed by Macrae. l In thi s con text, t he brand equity concept has re-emerged for hree practitioner reasons: Balancing short termism. Maximising immediate profits may be at the expense of the longer term (balancedorientation). Evaluating brand performance (control). Evaluating alternative courses of future action (prediction). In parallel, there has been a shift in marketing thinking from short-term, transaction orientation2 towards long-term value building Both brand equity and relationship marketingare through relationships. 1n this portrayal, usupractitionerand academic atcontinuing to receiue ally known as relationship marketing,a the tention. Measuremcnt the holistk brand entity of rand is a partnerof the consumer with corn’s necessary balancethe focus on short- term to patible values and personalities;sthey have ‘a proftability as well as providing controlfor the marketing function and comparing alternatiue relarionship that is conceptually courses action. The needfor longer-termthinkof represented as a value-laden network.

T ing has also driuen the perceptionof marketing as value enhancement through a network of relationThis paper brings togethei brand equiry ships. As brand equity has yet to be successfully and relationship marketing. These important purposes,pracreducedto money ualues these ut imprecise concepts will be formalised and will haueto rely on the marketing indicatitioners then integrated. For substantialprogress,imin tors but thesemay be re-expressed terms of the proved measurement methodologies are esend-user’s and intermeiliate customers’ relationsential.

Some existing inconsistenciesand ships with the brand. Further work is neededto diflculties will be demonstrated. Brand equity which also reducethose to the fewest measures may be measured in terms of its relationships predict sensitiuely future prof tability. with consumers, retailers and other players that make up the market network. The paper AasrRlcr INTRODUCTION Branding is receiving fresh attention as a result of increased salesby private label, ‘e retailer brands and other cheaper alternatives, sometimes packaged in similar ways.

Some question the extent to which branding is needed. Much of these arguments are sum- concludes with some practical recommendations and suggestionsfor future research. BRANDEOUITY There are two main perspectives of brand eouitv: the financials view is the econornic ma rk et worth of a brand asana ss e e its valu at ion. T his evalua tesb ran d. or brand guage as all expenditures and assets, Marketers, however, see brand equiry as the mp or t anc e of a brand to its customers . This evolved from managers, advertising agenciesand other consultanciesconcerned with building long-term consumer franchises. In this view brand equiry uses non- f i nanci al measures,such as atti tudes. B ut despi te these di fferences, both groups recogni se that successfulbrandi ng creates val ue for both suppl i ers and custol ners. This ‘added value’ is central to the concept of brand equiry. to There is a third viewrl that brand strength is adequately measured by market share and that the concept of brand equity is therefore redundant. TABLE 1 Manxenruc

Eourw SERVTCE Coupames’MelsuResoF BRAND Measure Components ReJerenecs Image power (Landor Associates) familiariry esteem Winters 7991 ” Equitrend (Total Research Corporation) qualiry perceptions (11-point scale) Winters L991 The conversionmode willingness to continue purchasinga brand Winters 1991 Equiry monitor (Yankelovich,clancy, Shulman) factors that createequiry attitudinal equiry behavioural equiry economlc equlty Winters 1991 ;Yankelovich Partners 1 gg4t3 DDB Needham Worldwide brand awareness liking (1 0-point scale)x perceived qualiry (1 0-point scale) Brand equiry index (Longman-Moran Analytics Inc. arket sharex relative price x durabiliry index (consunrers future expectations the brand) w i nters 1991; Moran 1. 994’o Consumer brand equicy (Leo Burnett Brand Consultancy) sales, distribution Broadbent1992’5 BrandAssett”valuator di{Ferentiation relevance = vitaliry esteemx familiariry = magnitude/stature All = BrandAsset Y oung& R ubi cam 1994′ ” Me a sure mentis sue srv ill be returned to later. ‘Brand equiry’ should first be defined.

The term began to be used rvidelY by United Statesadvertisingpractitionersin the early 1980sand led to academicinterest that focused on how to manage and benefit from rand equity as well as ho’,v to define and luleasure it. 17 Comparing the two main streamsof literature revealsconfttsionls beiself and the valuc of the asset. tween the assct The scepticalview holds valuations to be so variable that the brand equiry has no validiry. A house, an asset,nray have many different valuations depending on the circumstances used for valuation, eg, for and assr. mptions sale,purchase,insurance,probate. The variations of valuation neither change the assetitself nor deny its existence. ‘Brand equity’ and ‘brand valuation’, in this paper, refer to the assetand its financial worth respectively. Much of the development of the brand equiry concept has been provided by advertising agencies,consultants and other marketi! ,g service companies. Table 1 sets out a sele’ctibnof measures. St. ilr”rt”rr” and Shockerle provide a representative definition of brand equiry: a bundle of intellectual properties such as patents, trademarks, and channel relationships.

Brand equiry is such a rich concept that it is w orth exami ni ng i ts contponents i n mor e detail: ‘as e t’ of associa ti onsnd behavi ours on the part of a brand’s customers, channel members and parent corporation that permits the brand to earn greater volume r greater margins than it could without the brand name and that gives a strong, sustainableand differential advantage” In a similar vein, Aaker20defined brand equlty as: ‘a set of assetsand liabilities linked to a brand, its name and symbol, that add to or subtract from the value provided by a product or service to a firm andlor that firmi custorners. His five components of brand equiry are: brand loyalry; nalne awareness; perceived quality, brand associationsin addition to perceivedqualiry; and It is baseilon attitudesbut this includesbeThe ‘tri-component’21 view of hauiours. ‘ atti tudes’ i ncl udes cogni ti ve el e m ent beliefs), an affective element (like/dislike), and a behavioural element. Restated, therefore, a brand’s equiry relates to the totality of all the stored beliefs, likes/dislikes and behaviours of those involved with the brand. In simpler language, we are mosdy dealing with their habits. 2From time to time, cognitive processes be reset. For many brands, most of the time, brand equity can be seen as the sum of the habitual behaviours of those in the distribution channel. driuen. Depending It is not Just consumer on the marketing situation, the ultimate consumer, or end user, may be more or less important than the immediate customer. Likewise the relative importance of influence agents, such as specialist journalists or professionaladvisers,outside the distribution channelswill be determined by circumstances.

A generic definition of brand equity should leave such matters open. the asset It distinguishes from its ualuation. Brand equiry is a marketing derived asset that has financial value in terms of futur:e profit and cash flow. systems. ‘Extended inJormation It includes minds’ refer to mernory and Programmed decision support systems for the various customers in addition to whatever they rnay have in their own rninds. For example, when a purchasing lerk at a supermarket requests vodka w hi ch the computer transl atest o an order for Smirnoff, that programming is part of Smirnoffs brand equiry. tlistribution. It includes brand auailability Habits and extended minds will include the space habitually provided to the brand at all levels of the distribution channels. otherwise the definition rvould require adjustment for the accumulated distribution for the brand, a stored benefit that has usually been acquired over time with much effort and expense. It is long-term, relatiotrslip oiiertted. a tri tu des inc luded in brand eq u ityare th o se whic h ac c u mu lateove r ti me .

Brand equity is the result of long-term relationshipsbetween those involved in the marketing (branding) processrarher than one-off transactions. Taking these components together, brand equiry can be defined as: ‘The aggregation of all accumulated atticudesin the extended minds of consumers, distribution channels and influence agents, that Nill enhance future profits and longterm cash flow. ‘ or more succinctly: ‘The surn of brand relationships rvith those in the market, weighted by their i mportance, that w i I I enhance future profits and cash flow. Measurement difliculties will be considered fter a more formal outline of the relationship marketing perspective. THE RELATIONAL PARADIGM The perception of the market as a network of relationshipshas a number of sourcesincluding economics,23Scandinavia2a and the U SA . 25A speci aledi ti on (Fal 1 1983) of the Journal of Marketing was devoted to new marketing theory with a number of alterna- TABLE 2Tne cotsrnucrs OF THE RermorunrplRrorcm A networkof dyadic relational linkages, or relationships, between acors.

These are asymmetric: the relationship between x and y, as seen by x, Ra, may not be equal to, northe reverse of, the relationship as seen by y, ‘e Rr*. Th. e relationships will, typically, be weak, le low involvement. The actors, the brand represented as a ‘person’ and the other groups le with which the btand significantly interacts. Actors may be internal to the company as well as external; choice is based on the extent of interaction in terms of human and financial resources.

Using actor equivalence techniques,32each homogeneous group is shown as a single The goals o_toutputs of the network, from the brand rnanager’s point of view, are ultimately profits, or shareholder value, but there is a degree of”choice as to whether profits are take in the short term or stored in the network. ih. . gains which are achieved but not yet distributed to the brand owner can be seen as brand equity. 33 Competitionmay be shown either by additional nodes for each brand or by expressingrelationships as compararive, ‘e relative to cornpetition.

Inputs applied to each node in terms of human and financial resources,eg nroney, time, energy, power. A single, dyadic, relationallinkagc,R, may be non-metric. is expressedas a vector, the comporrents of which :qr tives to the traditional’neo-classical’ representation. 26 These strandsrvere brought together as ‘relationship marketing’27and the ‘Relational Paradigrn’. 28 The central conceptsare: Marketing is rooted in exchanges from which both parties benefit as a result of co-o pera ti on, not c o mpeti ti on. This is not a zero sum game. Competition is thus important, but secto o n d a ry .

It i s , Ofc o u rs e , essenti al ensure choice, fairnessand innovation. The market is a network of ‘value-laden relationships’connecting the brand, customers at all levels in the distribution channels,including end consumers,and other influence groups, such as advertising agencies. Some systemsinclude networks internal to the marketing organisation. Long-term relationships reduce risk as well as transaction costs and are thus enefi ci al for both si des. A topi cal example is Efficient Consunrer Response (E C R ) i n u. hi ch suppl i er and retailer Distribution co-operation reducesrvaste. hannel sprovi de much of the relat ionship nrarketing literature. 30 It is generallyboth cheaper and easierto retain an existing custonler, through good rel ati onshi p marketi ng, th an to obtain a new one. While this perception of markets has widespreadendorsement??lthe paradigm has had I i mi ted fornral devel opment. S ome constructs are set out in Table 2 Marketing process is therefore the managerial activiry to improve the relationships in the erwork from the perspectiveof the brand in order to improve brand equiry some of which rnay be distributed as short-term profits.

This concept of nrarketing inputs in the form of human and financial resourcesand previous Figure The marketingprocess Implementatlon Markeling mix and other Profitsfrom: Volume up Costsdown Priceup decisions Building brand equiry being subjected to marketing process and resulting in profits, waste and brand equiry to be carried forward has been previouslfa shown as the figure. Thus this representation not only formalises the Relational Paradigm (RP) but

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