Differentiation Strategy:

Brand Management

Brand Equity

Marketing Effects Uniquely Attributable to the Brand

Brand Equity Defined

"Brand equity relates to the fact that different outcomes result from the marketing of a product or service because of its brand name or some other brand element that if that same product or service did not have that brand identification."¹ It represents the marketing effects uniquely attributable to the brand and the added value endowed to a product or service as a result of past investments in the marketing activity for a brand. "Brand equity serves as the bridge between what happened to the brand  in the past and what should happen to the brand in the future."¹

Customer-Based Brand Equity

Customer-based brand equity (CBBE) model incorporate recent theoretical advances and managerial practices in understanding and influencing consumer behavior. It helps answer the two most frequently asked questions:

1. What makes a brand strong?

2. How do you build a strong brand?

CBBE model provides a unique point of view as to what brand equity is and how it should best be built, measured, and managed.

 Cases in Point  Selected Brand Acquisitions

Over the course of a short period of time in 1988, almost $50 billion changed hands in exchange for some well-known brands:⁴

• American food, tobacco, and drink manufacturer RJR Nabisco was the center of a vicious tug-of-war between its own management and various outsiders desiring to buy the company. Eventually, the brand was sold to leveraged buy-out specialists Kohlberg, Kravis, and Roberts for $30 billion.

• American food and tobacco manufacturer Philip Morris bought Kraft (home to Kraft cheese, Miracle Whip spread, Breyers ice cream, etc.) for $12.9 billion, or more than four times book value for tangible assets. An estimated $11.6 billion was for goodwill. After the acquisition, Philip Morris substantially increased its intangible asset base and commenced systematically amortizing its assets.

• Grand Metropolitan, a U.K. food and drinks company, acquired Pillsbury (home to Pillsbury baking products, Green Giant frozen and canned vegetables, Burger King, etc.) for $5.5 billion, a 50% premium on the American firm's pre-bid value and several times the value of its tangible assets.

• Nestle, a multinational powerhouse, acquired U.K.'s Rowntree (home to Kit Kat, After Eight, and Polo mints and other confectionaries) for $4.5 billion, more than five times its book value.¹