Key Difference – Brand Equity vs Brand Value
The difference between brand equity and brand value seems nonexistent at first sight. This is because most of the times, both are referred to the same ideologies. But, on a deeper level both have significant variation between them and have contrasting differences. Before delving into the differences, we will look at what Brand is and what exactly brand equity and brand value refer to.
The brand is an important part of marketing in the present business environment. A brand can be a name, term, design, symbol or any other feature that differentiates one seller’s product from those of others. It can be termed as a promise of benefits to the customer also. Brands are highly utilized in areas of business, marketing, and advertising. The brand is considered to be intangible as its purpose is to give a meaning and perception to the product or service. The brand has an economical value due to the perceived meanings by customers. The brand creation and brand awareness rest with the seller. The seller’s consistency on quality (product quality, after-sales services, promotions, etc.) leads to a brand being good or bad from the customer viewpoint. The key difference is that while brand equity begins with the customer, brand value begins with the organization.
What is Brand Equity?
Brand equity can be classified as the “Perception or desire about a brand in meeting the promised benefits”. When the brand equity is more, the customers pull the brand for success. The impact of marketing activities on consumer’s action that lead to the creation of unique customer perception related to the product or service. Brand equity has a customer based focus. In simpler terms, it is what the brand means to the customer. As we have already mentioned brand is a promise of benefits for the customer. So, the customer will view it on the beneficial function the goods or service provides them.
The seller decides on the brand building activities such as advertising, PR, etc. This could be related to the functional, emotional, social or other benefits related to the product or service. But, at the receiving end of the brand is the customer. Further, the extra benefit that may not have also been advertised is absorbed by them. Strong brands can contribute to reducing marketing costs for the organization.
Further, the brand equity varies from person to person as it is an individual construct. The actual ownership of brand equity rests with none. So, brand managers should always attempt to maximize the benefits to the customers who will be positive for brand equity. As brand equity leads to the creation of brand value, the higher the equity, the higher the value.
What is Brand Value?
Brand value can be defined as “The sale or replacement value of a brand”. Brand value is a company based perspective. It’s what means to the organization. The equity of a brand has its unique impact on the brand value. The impact will be to the extent where it contributes to a positive financial outcome towards brand value.
Brand Value varies in accordance to the ownership of the brand. As different owners will utilize the brand in different ways to capture the marker potential this tendency occurs. The resources and capabilities of a firm affect the brand value. Brand value equates to the net present value of all future brand profit. Brand value can be segmented into two; one is current value and the other is appropriable value.
To recognize the brand value of a firm or product at a particular point in time, the firm needs to maintain all other things consistently stable. Then, the variation that is being indicated can be termed as brand value. The current value is based on projected profits that can be earned with present strategy, capabilities, and resources. Appropriable value is based on projected profits that can be earned by a firm if it perfectly leverages the existing brand equity.
What is the difference between Brand Equity and Brand Value?
Definition:
Brand equity: Perception or desire about a brand in meeting the promised benefits
Brand Value: The sale or replacement value of a brand
Source:
Brand equity originates from customers.
Brand value comprises of all value adding activities such patents, trademarks, channel relationships, superior management, creative talent, etc. All brand assets are accounted in calculating brand value.
Profit:
Brand equity numerical value is attributable from direct and indirect customer related factors.
Brand value profits from all sources and not only limited to customers.
Comprehensive Value:
Brand equity only indicates customer side of value towards a firm and does not provide the complete picture of a firm’s original value.
Brand value provides a comprehensive value as it encompasses all values that include revenues and cost savings. Further, appropriable value and current value are its two brand value calculations that provide comparative value with a future orientation.
Variations:
Brand equity differs customer to customer and difficult quantify.
Brand value can only differ with ownership change or restructuring of a firm. Further, it’s easy to quantify based on the contexts of appropriate value and current value.
References:
Raggio, R. D. and Leone, R. P. (2007).The theoretical separation of brand equity and brand value: Managerial implications for strategic planning. Brand Management. Vol. 14 (5), pg. 380 – 395.
Image Courtesy:
1. Villach Atrio Shopping Center 11082007 11 By Johann Jaritz (Own work) [GFDL, CC-BY-SA-3.0, CC BY-SA 2.5-2.0-1.0], via Wikimedia Commons
