Customer-Based Brand Equity

Customer-based brand equity is the differential effect brand knowledge has on consumer response to the marketing of that brand.

A brand has positive customer-based brand equity when consumers react more favorably to a product and the way it is marketed when the brand is identified than when it is not identified.
A brand has negative customer-based brand equity if consumers react less favorably to marketing activity for the brand under the same circumstances.

There are three key ingredients of customer-based brand equity.

  1. brand equity arises from differences in consumer response. If no differences occur, the brand-name product is essentially a commodity, and competition will probably be based on price.
  2. differences in response are a result of consumers’ brand knowledge, all the thoughts, feelings, images, experiences, and beliefs associated with the brand. Brands must create strong, favorable, and unique brand associations with customers.
  3. brand equity is reflected in perceptions, preferences, and behavior related to all aspects of the brand’s marketing.

Stronger brands earn greater revenue. Table 8.1 summarizes some key benefits of brand equity.

Customers’ brand knowledge dictates appropriate future directions for the brand. Consumers will decide, based on what they think and feel about the brand, where (and how) they believe the brand should go and grant permission (or not) to any marketing action. New-product ventures such as Cracker Jack cereal failed because consumers found them inappropriate brand extensions.

A brand promise is the marketer’s vision of what the brand must be and do for consumers

Case: Cracker Jack

Cracker Jack is an American brand of snack food consisting of molasses-flavored, caramel-coated popcorn, and peanuts, well known for being packaged with a prize of trivial value inside. The Cracker Jack name and slogan, “The More You Eat The More You Want”.
They extended their product line with Cracker Jack Cereal. Within two years the cereal product line was cancelled due to low sales volumes. The cereal didn’t match the taste and byte expectation of the existing Cracker Jack buyers.