What is Brand Equity

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The value of a company is not only derived from the sales, fixed assets, the potential of human resource base and patents but also from the non-material value of the brand (or brands).

The trademarks can be associated with the positive connotations among consumers, and it is possible for companies to get more money for its own product than is possible for some generic brands.

Any calculation of brand value, is at best only an approximation of the actual value. Nevertheless, some consultancies that specialize in identifying brand values through various methods of valuation are in a position to conduct sound evaluation of the cost side of trademarks.

The definition of brand equity is complex and can have different objectives. First, the brand value is calculated on the purchase and sale of brands, or alternatively companies determine a realistic price. Also in the licensing of trademarks, a brand license analysis is useful to have a basis for price negotiations.

The first of the methods of valuation looks particularly at the cost side of trademarks. And usually having a brand brings a cost advantage with it since there’s a starting position on which to build.

The historical cost method assumes that a brand is worth as much as the costs incurred for the brand. These include spending on advertising, consumer campaigns and more.

A brand equity constitutes the positive impact of the brand as regards the disparities between the prices carried by the consumer in view of the value of the benefit obtained from the brand. The more prominent a firm’s brand equity, the higher the chance that the entity will employ a syndicate branding strategy instead of an mono-centric one.

Family branding as it is known enables the firm to leverage the equity accrued by the leading brand. Facets of brand equity incorporate brand association, loyalty, awareness, and perception of quality. Brand cost models are considered vital because they work exclusively with historical data.

The brand value calculation models have the problem of complexity due to the extensive number of applicable models, since the results they indicate also show variations. The various models are complex, or may not meet the necessary requirements of objectivity, reliability and validity.

Premium pricing models estimate the brand value based on the assumption that consumers are willing to pay for the additional benefits associated with a particular mark. The brand can then be easily determined by examining what a customer for both a marked and unlabelled product is willing to pay.

 

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