Separation of Brand Equity and Brand Value

Abstract

Brand value and brand equity represent two different, yet intricately linked, concepts. Brand value is the net present value of future cash flows from a branded product minus the net present value of future cash flows from a similar unbranded product—or, in simpler terms, what the brand is worth to management and shareholders. Brand equity is a set of perceptions, knowledge and behaviour on the part of customers that creates demand and/or a price premium for a branded product—in other words, what the brand is worth to a customer. Brand equity may also be defined as a set of elements such as brand associations, market fundamentals and marketing assets that help distinguish one brand from another. While measuring brand value has its usefulness, the act of measurement by itself will not make a brand more valuable or less risky. Quantifying and managing brand equity, however, using a customized measurement model, is critical to transferring value to the corporation’s shareholders.

During the past 15 years, brand equity has been a priority topic for both practitioners and academics. In this article, I propose a new framework for conceptualizing brand equity that distinguishes between brand equity, conceived of as an intrapersonal construct that moderates the impact of marketing activities, and brand value, which is the sale or replacement value of a brand. Such a distinction is important because, from a managerial perspective, the ultimate goal of brand management and brand equity research should be to understand how to leverage equity to create value.