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Definition

Customer-based brand equity

Customer-based brand equity is thus the differential effect brand knowledge has on consumer response to the marketing of that brand. A brand has positive customer-based brand equity when consumers react more favorably to a product and the way it is marketed when the brand is identified, than when it is not identified. A brand has negative customer-based brand equity if consumers react less favorably to marketing activity for the brand under the same circumstances. There are three key ingredients of customer-based brand equity.

  1. Brand equity arises from differences in consumer response. If no differences occur, the brand-name product is essentially a commodity, and competition will probably be based on price.
  2. Differences in response are a result of consumers’ brand knowledge, all the thoughts, feelings, images, experiences, and beliefs associated with brand name. Brands must create strong, favorable, and unique brand associations with customers, as have Toyota (reliability), Hallmark (caring), and Amazon.com (convenience).
  3. Brand equity is reflected in perceptions, preferences, and behavior related to all aspects of the marketing of a brand.
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