One of the definitions of Brand equity is "Brand Equity is the value built up in a brand". Brand equity is measured on how much a customer is aware of a particular brand. In general the value of a specific company's brand is calculated by comparing the future revenue from an equivalent non-branded product. Brand equity strongly depends on two aspects, the first being brand knowledge (awareness), and the second one is brand image (this is the emotional attachment of consumers with a particular brand).
A broad definition of Customer Equity is the "total of the discounted lifetime value of all of its customers". The concept of Customer Equity tries to combine Customer Value Management, Brand Management and Retention (relationship) management. The core idea behind Customer Equity is to build more powerful, customer-centered marketing programs that are financially accountable and quantifiable.
Rust, Zenithal and Lemon state that customer equity has three drivers:
Value equity, "the customer's objective assessment of the utility of a brand, based on the perceptions of what is given up for what is received"
Brand equity, "the customer's subjective and intangible assessment of the brand, above and beyond its objectively-perceived value"
Retention equity, "the tendency of the customer to stick with the brand, above and beyond the customer's objective and subjective assessments of the brand."
So, it is evident that Brand Equity alone is not an efficient approach when a Company is trying to meet customer needs and wants and to create the maximum possible customer loyalty and customer retention and in turn financial benefit to the company (Return of Investment, ROI).
Most of the companies understand that customer centrism and growing the lifetime value of their customers are essential for the business to thrive, as companies understand that customers are keeping companies in business. But ironically, not many companies are practicing what they are preaching. Companies should do a reality check and evaluate how they are using Customer Equity or Customer centered Branding.
"Brand may come and go, but customer should stay", this statement is pretty much the mantra of Customer centric Brand Management. Ford Taurus, manufactured by Ford Motor, was phased out on October 27,
2006 after a long production run (7 million), with 2007 being the last model year. The Taurus was ultimately replaced by three cars, each aimed at better covering the markets that the Taurus had competed in. The Ford Five Hundred, a large car; its
crossover SUV version, the
Ford Freestyle to replace the Taurus Wagon; and the
Ford Fusion a midsize car closer in size to the Taurus. This strategy by Ford is to better serve the growing market demand and to effectively compete with Toyota Camry (which replaced Taurus in 1997 as best seller of the year status).
"The customer wants what he/she wants and there should be something for everyone". GM typically uses differentiated marketing strategy for segmenting the target market; two or more segments are serviced each requiring a different marketing mix. GM uses this strategy to make different cars (brands) for different segments. For all of us there should be a niche that takes into account our personality, income and lifestyle, which is the key aspect in reaching each individual consumer and his/her perception. The race to strike into the slimmest of target markets is running at full throttle. The increasingly competitive auto industry is getting "personal" with their ‘clientele', and the main strategy behind this is Customer centered Branding. Whether consumers desire a hybrid-powered SUV, a hot little roadster or a station wagon masquerading as a truck, manufacturers must be ready, willing and able to deliver.
The success of GM's Chevrolet Equinox SUV is one example of how brand extension based on customer needs & wants [which results from adept sub-segmentation strategy (buyers who want a smaller, more car-like SUV than the TrailBlazer)] is the key in success of the Car/brand.
Now I feel that GM is doing the same mistake (blind spot phenomenon) as it did with Oldsmobile in 1990s that is GM's overwhelming focus on growing brand equity is inconsistent with the goal of growing customer equity. This time I see this happening with GM Buick. Buick (average age buyer is over 60 years) is trying to reposition itself and wants to convince young consumers that your product is no longer locked in the past and it has replaced the car and its name too (Buick - LaCrosse, Lucerne). Currently Buick promotions do not include any emotion, which makes it difficult to reach out its target consumers effectively. Buick should give its best effort in bringing back the emotion that it once existed "sense of belonging, recognition as valued customers and comfort". It should give all the salespeople extensive training on new behavior and language designed to give customers a sense of recognition and belonging. Buick is trying to directly appeal to the amygdale of all customers, and should devote more effort on this, as this is a key aspect to attract and retain the old customers. Like Cadillac, Buick should not try to lure two generations. Cadillac could reposition successfully (through its new look and new ad campaigns ‘welcome gentlemen'). But the success of Cadillac does not mean the success of Buick. Buick should continue to attract and market to the older generation, and it is a sizable market.
The cliché' "The only thing constant in life is change" holds good for branding strategy. The above example shows how with time consumer's taste changes, fashions come and go and lifestyle also change. So, companies, which are ready for this change with a correct plan of action, survive.
Few of the recommendations for Managers that will put brands in the service of growing customer equity are:
Replacing traditional brand managers with a new position-the customer segment manager (Bringing Customers to Brand Management Process)
Targeting brands to as narrow an audience as possible (proper segmentation strategy and building brand based on customer segments, the finer the segment, more effective will be the branding strategy)
"Co-creation" (designing goods and services and as well brands with input from consumers) should be encouraged to have a strong customer-brand relationship. This can be achieved by collaborating with customers rather than manipulating with customers.
Developing the capability and the mind-set to hand off customers from one brand to another within the company
Changing the way brand equity is measured by basing calculations on individual, rather than average, customer data.
Do not persist with a brand which lost its punch
Creating a strong brand image is helpful and helps "brand dilution" from occurring when a brand extension fails
Brands should never be scrapped frivolously (retain brands which have excessively desirous customers or aggressive brand managers)
Top Management should revisit their business model to evaluate whether their business model is customer-centric business model or profit-centric business model (replacing shareholder capitalism with stakeholder capitalism)
Usage of Customer Relationship Management (CRM) in Corporate Marketing Strategy to focus on:
Factors important to Customers
Promote a Customer Oriented philosophy
Adopt customer-based measures
The Customer Equity model (comprising of three parameters; Values, Brand, Customer Retention) enables Marketing Managers to determine which of the above three drives/parameters are most critical in driving customer equity in their company. This rational approach enables marketers to quantify the financial benefits (ROI) by increasing one or more of these driving factors. This overall customer centered brand management creates and cultivates long term relationship with customers.
Marketing Manager/Brand Manger should evaluate the degree to which a particular brand provides brand equity or value to the consumer. There are many sources of value a brand can provide to its consumers. For example, how much a brand name (1) stands for attributes that are difficult to evaluate (2) reduces risk of acquiring and using a product (3) reduces the decision process of consumers (4) indicates that the particular product is fully backed should it fail (warranty).
I would appreciate any feedback...
Thanks
Sam
