Brand equity evolution: a system dynamics model.
| Autor | Crescitelli, Edson |
| Cargo | Report |
Introduction
A broad consensus exists among scholars and professionals about the importance of brand in the current competition scenario. Brand has increasingly become the primary battleground in determining a firm's success, regardless of its size or industry. The current marketplace is characterized by strong competition, globalization, ongoing technological advances, fast access to new technologies and consumer demand (Ries & Ries, 2004).
Having strong brands-i.e., ones that are well-known, have market recognition and add value to a product-is a paramount success factor for most firms (Shimp, 1999). Hence there arises the question of how to build strong brands-in other words, how to generate brand value, or, as referred to herein, brand equity. Though the topic of brand equity (Montgomery & Lieberman, 2005) can be focused on from several perspectives, this study will address the brand equity building process, excluding the issue of the financial measurement of a brand's value.
There is a series of propositions of brand equity building, which include Keller's model of brand resonance (2001), Millward Brown/WPP's Brandz, and Young and Rubican's BAV (brand asset valuator). This study has opted to follow the model proposed by Aaker and Joachimsthaler (2000), due to its simplicity and general acceptance, despite the fact that it indicates only the factors that form brand equity without mentioning the possible interrelations among these constituent elements or their evolution over time. This study aims to present a simulation model able to represent brand equity development over time, taking into consideration the interaction of its elements.
The research has two basic objectives: (1) to develop a systemic model of the factors determining brand value over time, and (2) to simulate this model. The expected outcome of the research is to provide a differentiated approach to the brand equity building process, thereby contributing to the body of knowledge about this topic.
Given the nature of the proposition, this study should be seen as an exploratory essay, as it only entails a literature review of the topics approached, making no use of empirical research (Severino, 2000). The paper is structured in two sections. The first part presents the foundations of brand equity and system dynamics. The second part looks at the proposed model, discussing each of its components and their interrelations. Finally, the results of the simulations are presented.
Literature Review
Brand Value
The importance of brand value is emphasized by Schultz (2001, p. 8) when he says, "The brand promise or value proposition is not a slogan, an icon, a color or a graphic element, even though all those aspects may contribute. On the contrary, it is the heart and soul of the brand". Brand can be currently understood as a set of attributes such as personality, values, associations and quality, which influence the consumer buying process: "Ultimately, a brand is something that resides in the mind of the consumer. It is a perceptive entity rooted in reality, but also more than that, insofar as it reflects consumers' perceptions and idiosyncrasies" (Keller & Machado, 2006, p. 10).
Brand equity can be discussed from the point of view of investors, manufacturers, resellers and consumers. Each of these groups has a different view about what brand equity means to them. Brands add value to each of these groups in a different way. Investors are driven by financial motivation. Manufacturers and resellers, on the other hand, are more driven by strategic implications (Keller, 2003; Kotler & Keller, 2006). For the former, brand equity creates a differential advantage that allows the firm to generate greater volume and margins. Brand equity provides a platform for introducing new products or to expand an existing product line. For retailers, brand equity contributes to improving the overall image of retail. However, none of these features is relevant if the brand is meaningless to consumers (Crimmins, 1992; Farquhar, 1989). Therefore, it is important to understand how the brand's value is created and sustained in the minds of consumers and how it translates into purchase and consumption behavior.
The concepts of brand are branding and brand equity. Brand is defined by the American Marketing Association [AMA] as "a name, term, design, symbol, a combination of these, or any other feature that identifies one seller's good or service as distinct from those of other sellers" (Pinho, 1996, p. 14). In other words, brand is the final object that concentrates and materializes the other efforts of the brand management process. Branding can be considered as the act of generating brand equity, i.e., as the process of managing (creating and sustaining) brand value (Martins, 2000; Sampaio, 2002). Brand equity has to do with brand value, the brand's strength in its broadest sense, beyond its financial interpretation. Aaker and Joachimsthaler (2000, p. 31) define brand equity as "a set of brand assets and liabilities linked to a brand, its name and symbol, which adds to or subtracts from the value provided by a product or service to a firm". Thus, it is possible to consider branding as the brand management process that will generate brand equity, which will, in turn, make the brand more valuable, maximizing its effect in the market competition process. In fact, these three concepts complement one another (Figure 1) and are not synonymous, as often assumed. According to Aaker and Joachimsthaler (2000, p. 31), "this asset (brand equity) can be understood as the result of four dimensions, namely: brand awareness, perceived quality, brand associations and brand loyalty", as seen in Figure 2.
[FIGURE 1 OMITTED]
[FIGURE 2 OMITTED]
In the proposed model, brand awareness refers to the presence of a brand in the minds of consumers. The relevance of the memory of the brand is reinforced by Kapferer (2003, p. 45), who states that: "a brand only manifests itself through its actions (models, products, communication, network, etc.). The perceived quality is in the essence of what consumers are buying. For this reason, it is directly correlated with a brand's identity. Nevertheless, the perceived quality can differ from the real quality. Therefore, the creation of a quality product or service is still only a partial victory since it is still necessary to create perceptions of this quality with the market. On the other hand, brand association represents that which a firm wants the brand to represent in the minds of consumers. It is possible to refer to this as brand positioning.
It is worth noting that this same model sometimes appears with a fifth dimension, identified as "other assets of the firm", which includes factors such as patents, trademarks, the relationship with distribution channels, etc. (Aaker, 1998, p. 16). However, this study has opted for the four-dimensional model...
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