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Elements Of Brand Collateral Marketing Essay

"Brand Equity - The term has been argued in both marketing and accounting Literatures; both offering a different point of view to the same theory. Feldwick (1996) simplified the dilemma by providing a couple of definitions for the term. The definitions are as adopted -

The total value of the brand is treated as another asset when it is included in the balance sheet.

A measure of durability of consumer's attachment to the brand.

A information of the perceptions and relationship that a customer has about the brand. "

Mergers and Acquisitions (M & A) - This term refers to corporate finance, strategy and management of shopping for, selling and merging different companies with an try to fund or help a growing company in a given industry grow quickly and never have to create another business entity.

The main issue that follows any kind of Mergers and Acquisitions is the Brand problem, beginning with the naming of the new entity to the positioning it available on the market after the purchase. Here the Brand Equity plays a essential role. Brand collateral can be an amalgamation of brand value, brand durability and brand commitment. The purchaser or the merger companies should assess analytical that which brand has the perfect balance of all these three elements. The proper brand choice causes better top quality also the future of a specific M & A depends on a smart brand choice. Keeping in mind all the factors a company can deal with the naming concern in the following ways -

Keeping the name of one brand and falling the other. The strongest brand with better brand collateral survives. The best example for this is the merger of Vodafone (67%) and Essar (33%), although company is called Vodafone Essar its products are simply brand name as Vodafone.

Keep the name of the better and demote the other name to other product or divisional brand. It is most effective when there is certainly little overlap in the merchandise lines. When Mars bought Wrigley's Jr. Company it didn't tamper with Wrigley's name. Wrigley's still is still the nicotine gum huge whereas Mars remains as the delicious chocolate bars.

In some mergers and acquisitions the companies try to please everyone by guarding the identification of both brands this brings about the titles where both the brands live. The best example to the is Kotak Mahindra bank or investment company.

The last option is discarding both names and adopting a completely new one. Companies do this to make a new image in the consumer's head. In 1995 Birla - Tata with &T started out a telecom firm called Batata. Later in 2004 the corporation was rechristened as Idea Cellular.

Hence we can easily see that how Brand equity plays a major role in your choice of Mergers and Acquisition. Without studying brand collateral it is impossible to mane the new entities thus produced after M & A.

Elements of Brand Equity

For any business to understand its' position in the market place also to make decisions for M & A, knowing the perfect balance of the components of brand equity is very important. On a whole brand equity comprises of three interrelated elements as is seen below -

Though in the amount it is shown that the outcome of brand durability is Brand Value but in the practical scenario there may be several end result of brand power. Another major outcome is market electricity.

Brand description

The Brand Information means the brand image i. e. what sort of brand is presented to the buyer in order to set-up a graphic of the Brand in consumers' head. The brand description is tailored keeping in mind the marketing combination- product, price, place and promotion. The chief factor that influences the brand explanation is the wishes and the needs of the prospective market. It isn't essential to have an individual brand image; there can be several but only one or two are predominant. The brand image should be strong and powerful enough to leave a direct effect on consumers' brain so that they can easily recall the brand. A consumer doesn't only buy a brand but also the quality, sophistication, wealth and power associated with it. It really is noticeable from various studies conducted that emotions and images from the brands are powerful purchase influencer. An excellent brand image gives the company an advantage over its competitors. Brand image is strengthened by the various areas of brand experience like advertising, presentation, customer support etc. Hence brand description or brand image is like the base on which the Brand Collateral is made. If the company has a bad brand image then it can never have a good Brand Equity. The success of the brand image or the in any other case leads to the amount of the brand strength.

Brand Strength

A synonym for brand commitment, it constitutes of an customer's guarantee to continue with or repurchasing of the same brand. Also it can be identified as the positive behavior such as person to person publicity of the product. Only purchasing doesn't lead to brand loyalty as a person may buy a brand due to some constraints such as insufficient alternatives or stock away, such situation brings about "spurious loyalty". You see, the loyalty is described when the customer holds an extremely positive image about the brand and doesn't decide for any other alternatives; at the same time influences others to choose the brand thus increasing the client base. Brand loyalty is an advantage to the firm as acquiring a new customer is 4 times as costly as retaining an old faithful customer as a loyal customer not only is eager to pay an increased price for the brand but also brings in new customers.

Usage rate is considered most important in defining Brand Commitment, where Pareto's 80-20 rule applies. 20 % of users account for 80% of consumption and hence revenue to the firm. Apart from that customer satisfaction, brand trust and customer's recognized value are the key factors which strengthen the brand devotion.

Brand Strength decides the future cash flow thus resulting in the brand value.

Apple iPhone is a classic exemplory case of brand loyalty as despite having no commitment programs and comparatively high prices it's been ranked No. 1 in Customer Commitment leaders by Brand key 2010.

Brand Value

Brand Equity is seen from both marketing and accounting perspective. Brand Value symbolizes majorly the accounting part from it. Like Brand Power, Brand Value is also customer based mostly. It can be defined as the total amount a brand is worth of in terms of reputation, market value, income, prestige and potential income. The Brands with high value are treated as priced possession of a firm, when such a brand is merged or obtained then its brand value is worth more than any other concern. A straightforward formula that defines the brand value can be given as

Brand value = what you get/ what you pay= Quality/ Price

As is seen in the above equation brand value instructs us the product quality we get when we pay a specific price. It again depends on the customer in the sense that different customers have different goals from different products against the purchase price they are really paying. Loyalty is the travelling push of Brand value, for example Starbucks may charge $ 1. 60 for medium sized coffee whereas a standard cafe can charge 99 cents for the same caffeine. It is the loyalty of the customers towards Starbucks which heightens its Brand Value. More the brand value on the market better is the market share of a company. It is the high Brand value of Cadbury PLC which includes maintained its name even after it's been purchased by Kraft foods.

The Brand Equity Pyramid

3. Response

What about you?

2. Meaning

What are you?

Identity

Who are you?

4. Relationships

What about me and you?Keller gave a person based brand equity pyramid as is seen below -

The above pyramid gives a branding ladder matching to which a person builds a romance with the brand. You will find four levels of questions which a person generally asks, each one of these questions are reliant on the achieving the previous one. The questions constitute six building blocks shown in the pyramid. The pyramid begins when the customer starts knowing the brand and the end represents the point where customer has generated up a brand association. Thus it signifies the process where a brand image contributes to the brand commitment. The description of every step is as followed -

Step 1- In this step the customer has just started getting familiar with the brand hence asks the question who you are? The response gives the correct identification of the brand. The building block because of this level is salience i. e. a distinguished feature.

Step 2 - After the initial identification is done the customer tends to know more about the product and therefore asks what are you? The answer aims in building a 'brand interpretation' in customers brain. The image that the customer retains about the brand and the performance shown by the brand varieties the building block of the level.

Step 3 - Now the client responses resistant to the brand meaning so formed in his mind's eye. And asks the question How about you? As of this step customer's thoughts come into picture and he starts making view about the brand and its own feature.

Step 4- In the client based brand collateral this is the ultimate step where in fact the customer builds a relationship with the brand and thus starts off associating himself with the brand. Resonance is the foundation of this level i. e. a connection of trust between the brand and the customer. Thus this step achieves the ultimate goal - Brand Loyalty.

Measuring Brand Equity

Many studies and studies have been conducted in this field. There is absolutely no definitive model or methodology to gauge the Brand Collateral. Some organizations may develop their own methods where as some may use the models given by scholars and researchers. The dimension can be quantitative as well as qualitative depending after the parameters. Generally dimension of Brand Explanation is qualitative and this of Brand Power and Value is quantitative.

If we generalize then Brand equity can be assessed in three different levels. All these measurement give the best approximate value. These levels are as adopted -

Firm Level - The firm level measurement is based on the accounting methodology. Here the brand is recognized as a financial asset i. e. the price of the brand when it's considered as an intangible advantage. Brands can't be seen, touched or physically measured but are created with more work than any tangible property. The Brand Equity of a company backs up the tangible resources owned by that company. For example if we identify the value of the company depending upon the market capitalization and then subtract the tangible and measurable tangible property from it we could kept with Brand Collateral which is a non- measurable tangible asset. Imagine we take the market capitalization of Coca - Cola and subtract all the tangible and measurable intangible investments then were still left with the BRAND Coca- Cola which by itself has a high brand value, brand power and brand association. One advanced strategy is by affecting consulting company Interbrand. Interbrand runs on the numerical model where in the forecasted income are reduced to a present value. The discount rate is defined by Wall Streets and Interbrand equity specialists which requires into consideration the global reach, risk profile and market management of the brand.

Product Level - It is much like benchmarking where the price of a lesser known brand is in comparison to that of a known famous similar Branded product. The assumption is that the difference in price is only due to the Brand name. For example Sony is considered as a benchmarking company in electronic digital products if now similar products from the brands like Videocon, Aiwa, Panasonic etc. are weighed against Sony then that will lead to something level measurement.

Consumer Level - At this level Brand connection maps are being used where in your brain of the clients are mapped in line with the various factors of association like trust, brand image recognition etc. The brands credit scoring high on the above factors have high Brand collateral. Many research organizations like AC Nielsen provides Brand Connection maps.

Only after measuring the brand collateral of the brands the decisions regarding Mergers and Acquisitions are used. Hence Brand collateral plays a vital role in Mergers and Acquisitions.

Role of Brand Collateral in Mergers and Organizations (M & A)

In todays' world mergers and acquisitions happen regularly with an try to increase in the given industry.

Brand is not only a name or tagline, as discussed earlier it is an intangible asset that have a set of associations and anticipations related to the business in the mind of the clients. The EquiTrend's research of the impact of the brand collateral on the Profits on return (ROI) demonstrates the companies having high Brand Equity noticed their ROI average of 30%. The main one with decreasing brand equity observed negative 10% average on the ROI.

An example of how brand collateral plays a major role is seen in the next example-

In 1999 the acquisition of Orange a leading telecom brand in UK by Mannesmann was completed in twice the value per customer as paid by Deutsche Telekom for acquiring One 2 One mobile business. Both Orange and One 2 one acquired similar features in terms of growth rate, customer bottom part and technology, then why performed Mannesmann paid such a higher value. The answer to this is the immeasurable intangible property Brand Equity. One to one had used Porters first idea i. e. overall cost control and used to provide cheap services to its customers. Whereas Orange placed its strategies on the next game plan i. e. differentiation based on quality, it focused on high quality network and customer support. It created high customer loyalty thus increasing the brand value of the Brand Orange. This shown in the increase margins and market share of Orange. Also their post-acquisition strategies were better. Deutsche Telekom known the problem and also to overcome the situation quickly rebranded One 2 one to T- Mobile. Later in 2000 Vodafone attained Mannesmann and France Telecom had taken over Orange mobile. Orange possessed such high Brand Equity that even following the second acquisition its name was preserved and was employed by France Telecom because of its home mobile services and global businesses.

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