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Brand equity
From Wikipedia, the free encyclopedia
Brand equity is the value built-up in a brand. It is measured based on how much a customer is aware of the brand. The value of a company's brand equity can be calculated by comparing the expected future revenue from the branded product with the expected future revenue from an equivalent non-branded product. This calculation is at best an approximation. This value can comprise both tangible, functional attributes (e.g. TWICE the cleaning power or HALF the fat) and intangible, emotional attributes (e.g. The brand for people with style and good taste).
It can be positive or negative. Positive brand equity is created by effective promotion and consistently meeting or exceeding customer thoughts. Negative brand equity is usually the result of bad management.
The greater a company's brand equity, the greater the probability that the company will use a family branding strategy rather than an individual branding strategy. This is because family branding allows them to leverage off the equity accumulated in the core brand. This makes new product introductions less risky and less expensive.
In the early 2000s, the Ford Motor Company made a strategic decision to brand all new or redesigned cars with names starting with "F". This aligned with the previous tradition of naming all sport utility vehicles since the Ford Explorer with the letter "E". The Toronto Star quoted an analyst who warned that changing the name of the well known Windstar to the Freestar would cause confusion and discard brand equity built up, while a marketing manager believed that a name change would highlight the new redesign. The aging Taurus, which became one of the most significant cars in American auto history would be abandoned in favor of three entirely new names, all starting with "F", the Five Hundred, Freestar and Fusion. By 2007, the Freestar was discontinued without a replacement, and Ford announced record losses. In a surprise announcement, the discarded Taurus nameplate would be re-used on an improved Five Hundred which had dissapointing sales and whose nameplate was recognized by less than half of most people, but an overwhelming majority was familiar with the Taurus.