Between Equity and Valuations, What Brands Represent

We all talk of brand equity, especially in the advertising and brand communications industry. The Economic Times in India even has an advertising and marketing supplement called Brand Equity. What exactly do we mean, when we speak of brand equity?

The term has come to encompass many aspects of a brand’s growth, from brand awareness and top-of-mind recall to brand associations, brand preference and finally, brand loyalty. If it could all be captured in one word, it would probably be brand salience – how important and pervasive is the brand in the customer’s life?

That is when one is looking at brands from the consumer’s point of view, of course. How is it different when viewed from the company’s standpoint? At a very simplistic level, companies seek to build a customer base and grow their revenues and profits over time through the brands they offer. As Peter Drucker once said, the purpose of business is to create customers. On the other hand, customers seek functional and emotional benefits so that they may improve the quality of their lives and realise their personal aspirations and ideals.

Where they meet, is when companies make products and create brands that are relevant to consumers, and when consumers make them part of their lives. The connection between consumers and products and companies is the relationship that I call a brand. And that’s what we folks in the advertising and brand communications industry are meant to do: to help client organisations build and grow their brands. The connection between consumers and companies through brands requires:

  • A relevant product or service that provides a differentiated benefit
  • Innovations that meet existing or latent customer requirements
  • Communication that seeks to persuade and connect with consumers

Brand equity is a measure of the strength of that relationship, of the brand. In all the years that I was a writer in advertising in India, I have had the opportunity to understand, appreciate and use brand-building tools such as the OMI strategy blueprint, the Hofstede model of cultures for developing a brand’s architecture while at Ogilvy and even attended a strategy workshop on Stephen King’s T-Plan (Thompson Plan) during my short stint at Contract Advertising, Delhi before returning to Ogilvy.

It is only in the past couple of decades, while I have been putting down my own thoughts on brands and brand strategy that I realise I still have plenty more reading to do on the subject. I had heard of David A Aaker, Professor Emeritus of Marketing at Haas School of Business, UC Berkeley, years ago, but came across his Brand Equity Model only recently. It focuses on four dimensions of a brand’s equity:

  • Brand awareness
  • Brand associations
  • Brand consideration
  • Brand loyalty

I also came across Kevin Lane Keller’s (Marketing Professor at Tuck School of Business, Dartmouth College, US) Customer-Based Brand Equity Model, which seems to focus more on the consumer’s point of view because, after all, brands are built in consumers’ hearts and minds. Keller has a pyramidical ladder that takes consumers from brand identity at the lowest level, through brand performance, brand imagery and brand judgements and brand feelings to the summit which is brand resonance. In his view, brand resonance is much more than brand loyalty because it goes beyond repeat purchase.

I do intend reading more by these authors and professors and have just ordered the book, Building Strong Brands, by David A Aaker. In the meantime, my thoughts turn to brands that are not products or services, but corporations. Do companies, or corporate brands as I refer to them, have a different set of dynamics at work when relating to consumers as brands?

How do companies increase their salience or equity in the minds of consumers, except through their products and services? In any case, companies seem to be at least one step removed from customers, with no direct and immediate relationship with them. And if the strength of corporate brands cannot be measured through brand equity as perceived by consumers, then are brand valuations their only measure?

A corporate brand like Pernod Ricard can create better and more knowledgeable consumers of wines and spirits; Image: Pixabay

I firmly believe that corporate brands too can be built in much the same way as product and service brands are. For example, if we take a wines and spirits company such as Pernod Ricard, what connects Pernod Ricard to its consumers?

  • Products that fulfil consumer’s needs and indeed, exceed their expectations
  • A user experience that helps consumers realise their personal ideals, which in the case of Pernod Ricard, would be to become a better and more knowledgeable consumer of wines and spirits.

In the case of JLR, it would be state-of-the-art vehicles that help us transition to a cleaner and less congested world. While, in the case of Tata Motors, it would be to help millions realise the pleasure of road travel, as I have already written before.

In other words, corporate brands too can offer relevant and meaningful benefits that help customers improve their lives and achieve their aspirations. In a sense, this kind of engagement with customers probably coincides with what David Aaker calls brand loyalty and what Kevin Lane Keller calls brand resonance. This is, of course, not to be confused with the much bandied-about “brand purpose”. Brand purpose, as I understand it, is a social purpose beyond business transactions. For example, it would be promoting responsible drinking for Pernod Ricard, while for JLR, it would be environment conservation.

Jaguar Land Rover could take us to cleaner, connected mobility in a sporty, British way; Image: Pixabay

Returning to the brand equity and valuations subject, there appear to be several attempts at brand valuation exercises, which I have written about before. On the other hand, there are also brand equity studies based on consumer surveys. David Aaker writes about at least a couple of them in the US: Y&R’s (Young & Rubicam of WPP) Brand Asset Valuator and Total Research’s EquiTrends Poll. In the latter, around 40,000 consumers in the US are asked to rate brands in an online poll each year on a set of parameters, so one arrives at a brand’s equity, relative to its peers.

To my mind, even a brand valuation exercise ought to have a strong consumer survey component to it, because brands are relationships with consumers. And, as I have written previously, stock-market capitalization as well as corporate profits ought to play a less significant role in arriving at a brand’s valuation since it is more consumption than investment that decides the fate of brands.

As we all know, brands provide companies with higher, long-term returns as well as protect them during crises. As a corollary, it should also be true that during times of adversity, brands go out of their way to connect with customers and be relevant to them. The Covid pandemic ought to have helped many brands connect with their customers in newer ways, devising better ways of serving them. Of course, it is always a fine line between opportunistic marketing or what is called woke-washing, and being truly relevant to customers. I had shared some of my thoughts and ideas on how a few brands, including Vodafone, could have engaged better with customers during the peak of the Covid pandemic last year.

While brand equity tells us how consumers think of brands and brand valuations represent brands’ monetary value to companies – with the latter dependent on the former – the real promise of brands and what they represent is always a better future. A better life, a more rewarding investment, a closer circle of friends, a memorable vacation, more celebrations, greater peace of mind, and such like.

Which brings us back to brand positioning and the benefit to the customer. The starting point of most brand journeys. Never underestimate the importance of these, as they help you build and grow your brand with consumers.

2 thoughts on “Between Equity and Valuations, What Brands Represent”

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s