Page 291 - Marketing Management

268 PART 4 BUILDING STRONG BRANDS

Finally, we can relate brand equity to one other important marketing concept, customer equity.
The aim of customer relationship management (CRM) is to produce high customer equity. 94
Although we can calculate it in different ways, one definition is “the sum of lifetime values of all
95
customers.” As Chapter 5 reviewed, customer lifetime value is affected by revenue and by the costs
of customer acquisition, retention, and cross-selling. 96
• Acquisition depends on the number of prospects, the acquisition probability of a prospect,
and acquisition spending per prospect.
• Retention is influenced by the retention rate and retention spending level.
• Add-on spending is a function of the efficiency of add-on selling, the number of add-on selling
offers given to existing customers, and the response rate to new offers.

The brand equity and customer equity perspectives certainly share many common themes. 97
Both emphasize the importance of customer loyalty and the notion that we create value by having
as many customers as possible pay as high a price as possible.
In practice, however, the two perspectives emphasize different things. The customer equity
perspective focuses on bottom-line financial value. Its clear benefit is its quantifiable measures of
financial performance. But it offers limited guidance for go-to-market strategies. It largely ignores
some of the important advantages of creating a strong brand, such as the ability to attract higher-
quality employees, elicit stronger support from channel and supply chain partners, and create
growth opportunities through line and category extensions and licensing. The customer equity
approach can overlook the “option value” of brands and their potential to affect future revenues
and costs. It does not always fully account for competitive moves and countermoves, or for social
network effects, word of mouth, and customer-to-customer recommendations.
Brand equity, on the other hand, tends to emphasize strategic issues in managing brands and
creating and leveraging brand awareness and image with customers. It provides much practical
guidance for specific marketing activities. With a focus on brands, however, managers don’t always
develop detailed customer analyses in terms of the brand equity they achieve or the resulting long-
98
term profitability they create. Brand equity approaches could benefit from sharper segmentation
schemes afforded by customer-level analyses and more consideration of how to develop personal-
ized, customized marketing programs for individual customers—whether individuals or organiza-
tions such as retailers. There are generally fewer financial considerations put into play with brand
equity than with customer equity.
Nevertheless, both brand equity and customer equity matter. There are no brands without
customers and no customers without brands. Brands serve as the “bait” that retailers and other
channel intermediaries use to attract customers from whom they extract value. Customers are
the tangible profit engine for brands to monetize their brand value.

Summary

1. A brand is a name, term, sign, symbol, design, or outcomes result in the marketing of a product or service
some combination of these elements, intended to because of its brand, compared to the results if that
identify the goods and services of one seller or group same product or service was not identified by that brand.
of sellers and to differentiate them from those of com- 4. Building brand equity depends on three main factors:
petitors. The different components of a brand—brand (1) The initial choices for the brand elements or identi-
names, logos, symbols, package designs, and so ties making up the brand; (2) the way the brand is in-
on—are brand elements. tegrated into the supporting marketing program; and
2. Brands are valuable intangible assets that offer a (3) the associations indirectly transferred to the brand
number of benefits to customers and firms and need by links to some other entity (the company, country of
to be managed carefully. The key to branding is that origin, channel of distribution, or another brand).
consumers perceive differences among brands in a 5. Brand audits measure “where the brand has been,”
product category. and tracking studies measure “where the brand is
3. Brand equity should be defined in terms of marketing ef- now” and whether marketing programs are having the
fects uniquely attributable to a brand. That is, different intended effects.