Branding and Brand Equity

What is a Brand?

Let’s start this section with a video about Coca-Cola, which is perhaps one of the most iconic brands of all time. As you watch this video, look for all the different elements that contribute to the thing we call a brand.  ^[1]

A brand is a unique design, sign, symbol, words, or a combination of these, employed in creating an image that identifies a product and differentiates it from its competitors. Over time, this image becomes associated with a level of credibility, quality, and satisfaction in the consumer’s mind. Brands are not just limited to products and services; they can also represent individuals, companies, and organizations.

A brand encompasses the entire experience a consumer has with a product or company, including visual elements like logos and color schemes, communications, and the perceived value and reputation of the product or company. Effective branding creates a memorable impression on consumers, allowing them to expect a certain quality level when buying a company’s products or services. It helps in building customer loyalty, provides a way for companies to differentiate themselves from competitors, and can establish an emotional connection with consumers. Essentially, a brand is the way a company, product, or service is perceived by those who experience it.

Watch the video below which discusses 10,000 years of brand ^[2]:

Consider the branding strategies used in hotels to allow chains (Marriott, Hyatt, Hilton) to offer hotel brands that meet various customers’ travel needs while still maintaining their loyalty to the chain. The same customer who would choose an Extended Stay hotel with a full kitchen when on a long-term assignment might stay at a convention hotel when attending a trade show and then stay in a resort property when traveling with their family. By segmenting different types of hotel locations, amenities, room sizes, and décor, hotel chains can meet the needs of a wide variety of travelers. In the past decade, “soft” branding has become common to allow unique hotels to take advantage of being part of a chain reservation system and loyalty program. For example, Marriott has over 100 affiliated independent hotels in its Autograph Collection ^[3].

Figure 6.7: Major Hotel Chains and Their Hotels

Loyalty programs are heavily used in the hospitality industry, especially airlines and hotels, as part of their Customer Relationship Management programs.  Some examples of popular Canadian Loyalty programs include Air Miles, Canadian Tire Rewards, Aeroplan, HBC Rewards, and PC Optimum. Airline loyalty programs such as Air Canada Loyalty, are often targeted to high-value business travelers with less price sensitivity. They achieve loyalty status and perks while traveling as well as earning points to use for personal travel rewards. Once a loyalty program member obtains elite status with significant associated perks such as guaranteed room availability, airport club lounge access, etc., the customer is much less likely to use other brands.

Brands Create Market Perceptions

A successful brand is much more than just a name or logo. As suggested in one of the definitions above, a brand is the sum of perceptions about a company or product in the minds of consumers. Effective brand building can create and sustain a strong, positive, and lasting impression that is difficult to displace. Brands provide external cues to taste, design, performance, quality, value, or other desired attributes if they are developed and managed properly. Brands convey positive or negative messages about a company, product, or service. Brand perceptions are a direct result of past advertising, promotion, product reputation, and customer experience.

Brands Create an Experience

Effective branding encompasses everything that shapes the perception of a company or product in the minds of customers. Names, logos, brand marks, trade characters, and trademarks are commonly associated with the brand, but these are just part of the picture. Branding also addresses virtually every aspect of a customer’s experience with a company or product: visual design, quality, distinctiveness, purchasing experience, customer service, and so forth. Branding requires a deep knowledge of customers and how they experience the company or product. Brand-building requires a long-term investment in communicating about and delivering the unique value embodied in a company’s “brand,” but this effort can bring long-term rewards.

In consumer and business-to-business markets, branding can influence whether consumers will buy the product and how much they are willing to pay. Branding can also help in new product introduction by creating meaning, market perceptions, and differentiation where nothing existed previously. When companies introduce a new product using an existing brand name (a brand extension or a branded product line), they can build on consumers’ positive perceptions of the established brand to create greater receptivity for the new offering.

Brands Create Value

Value of Branding for the Consumer

Brands help simplify consumer choices. Brands help create trust so that a person knows what to expect from a branded company, product, or service. Effective branding enables the consumer to easily identify a desirable company or product because the features and benefits have been communicated effectively. Positive, well-established brand associations increase the likelihood that consumers will select, purchase, and consume the product. Tim Horton’s, for example, has an established logo and imagery familiar to many Canadian consumers. The vivid red colour and the cup design are easily recognized and distinguished from competitors, and many associates this brand with tasty donuts, good coffee, and great prices.
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Value of Branding for Product and Service Providers

For companies and other organizations that produce goods, branding helps create loyalty. It decreases the risk of losing market share to the competition by establishing a competitive advantage customers can count on. Strong brands often command premium pricing from consumers who are willing to pay more for a product they know,  trust, and perceive as offering good value. Branding can be a great vehicle for effectively reaching target audiences and positioning a company relative to the competition. Working in conjunction with positioning, the brand is the ultimate touchstone to guide choices around messaging, visual design, packaging, marketing, communications, and product strategy.
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For example, Starbucks’ loyal fan base values and pays premium prices for its coffee. Starbucks’ choices about beverage products, neighborhood shops, the buying experience, and corporate social responsibility all help build the Starbucks brand and communicate its value to a global customer base.

Building Brands Equity

Brand equity refers to the value and strength of a brand that it adds to a product or service. This value is based on the perceptions and experiences of consumers, which influence their choices and preferences. Brand equity is built over time through consistent positive experiences and perceptions of the brand’s quality, reliability, and distinctiveness. It encompasses several key components, including brand awareness (how familiar consumers are with the brand), brand associations (what consumers think about when they see or hear about the brand), perceived quality (how consumers evaluate the brand’s quality compared to its competitors), brand loyalty (the degree to which consumers are committed to the brand and make repeat purchases), and other proprietary brand assets (such as trademarks and patents).

Positive brand equity can lead to numerous benefits for a company, including the ability to charge premium prices, lower marketing costs due to the brand’s established presence, increased customer loyalty, and a competitive advantage in the market. Essentially, brand equity represents the tangible and intangible value that a brand adds to a product, influencing consumer choice and enabling the brand to outperform competitors who offer similar products or services.

To get a better idea of how valuable brand equity is, think for a moment about the effect of the name Dell on a product. When you have a positive experience with a Dell product—say, a laptop or a printer—you come away with a positive opinion of the entire Dell product line and will probably buy more Dell products. Over time, you may even develop brand loyalty: you may prefer—or even insist on—Dell products. Not surprisingly, brand loyalty can be extremely valuable to a company. Because of customer loyalty, Apple’s brand tops Interbrand’s Best Global Brands 2022 ranking with a value of over $184 billion. Google’s brand is valued at $142 billion, Microsoft is estimated at $80 billion, and Coca-Cola and Amazon round out the top five, with brands valued at $70 and $65 billion respectively.