Conceptualizing, Measuring, and Managing Customer-Based ...

1 Conceptualizing, Measuring, and < strong >Managingstrong > < strong >Customer-Basedstrong > < strong >brandstrong > EquityAuthor(s): Kevin Lane KellerSource: Journal of Marketing, Vol. 57, No. 1 (Jan., 1993), pp. 1-22 Published by: American Marketing AssociationStable URL: .Accessed: 30/09/2013 12:03 Your use of the JSTOR archive indicates your acceptance of the Terms & Conditions of Use, available at ..JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range ofcontent in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new formsof scholarship.

2 For more information about JSTOR, please contact .American Marketing Association is collaborating with JSTOR to digitize, preserve and extend access toJournal of This content downloaded from on Mon, 30 Sep 2013 12:03:07 PMAll use subject to JSTOR Terms and ConditionsKevin Lane Keller Conceptualizing, Measuring, and < strong >Managingstrong > < strong >Customer-Basedstrong > < strong >brandstrong > Equity The author presents a conceptual model of < strong >brandstrong > equity from the perspective of the individual consumer. < strong >Customer-Basedstrong > < strong >brandstrong > equity is defined as the differential effect of < strong >brandstrong > knowledge on consumer re- sponse to the marketing of the < strong >brandstrong > .

3 A < strong >brandstrong > is said to have positive (negative) < strong >Customer-Basedstrong > < strong >brandstrong > equity when consumers react more (less) favorably to an element of the marketing mix for the < strong >brandstrong > than they do to the same marketing mix element when it is attributed to a fictitiously named or unnamed version of the product or service. < strong >brandstrong > knowledge is conceptualized according to an associative network memory model in terms of two components, < strong >brandstrong > awareness and < strong >brandstrong > image ( , a set of < strong >brandstrong > associations). < strong >Customer-Basedstrong > < strong >brandstrong > equity occurs when the consumer is familiar with the < strong >brandstrong > and holds some favorable, strong , and unique < strong >brandstrong > associations in memory.

4 Issues in < strong >buildingstrong > , measuring, and < strong >Managingstrong > < strong >Customer-Basedstrong > < strong >brandstrong > equity are discussed, as well as areas for future research. M UCH attention has been devoted recently to the concept of < strong >brandstrong > equity (Aaker and Biel 1992; Leuthesser 1988; Maltz 1991). < strong >brandstrong > equity has been viewed from a variety of perspectives (Aaker 1991; Farquhar 1989; Srivastava and Shocker 1991; Tauber 1988). In a general sense, < strong >brandstrong > equity is defined in terms of the marketing effects uniquely attributable to the < strong >brandstrong > -for example, when certain outcomes re- sult from the marketing of a product or service be- cause of its < strong >brandstrong > name that would not occur if the same product or service did not have that name.

5 There have been two general motivations for studying < strong >brandstrong > equity. One is a financially based mo- tivation to estimate the value of a < strong >brandstrong > more pre- cisely for accounting purposes (in terms of asset val- uation for the balance sheet) or for merger, acquisition, Kevin Lane Keller is Associate Professor of Marketing and Fletcher Jones Faculty Scholar for 1992-1993, Graduate School of Business, Stanford Univerity. This article was written while the author was Visiting Profes- sor at the Australian Graduate School of Management, University of New South Wales, Sydney, Australia.

6 He thanks David Aaker, Sheri Bridges, Deborah Macinnis, John Roberts, John Rossiter, Richard Stae- lin, Jennifer Aaker, and the anonymous JM reviewers for detailed, con- structive comments. Journal of Marketing Vol. 57 (January 1993), 1-22 or divestiture purposes. Several different methods of < strong >brandstrong > valuation have been suggested (Barwise et al. 1989; Wentz 1989). For example, Interbrand Group has used a subjective multiplier of < strong >brandstrong > profits based on the < strong >brandstrong > 's performance along seven dimensions (leadership, stability, market stability, interational- ity, trend, support, and protection); Grand Metropol- itan has valued newly acquired brands by determining the difference between the acquisition price and fixed assets.

7 Simon and Sullivan (1990) define < strong >brandstrong > equity in terms of the incremental discounted future cash flows that would result from a product having its < strong >brandstrong > name in comparison with the proceeds that would accrue if the same product did not have that < strong >brandstrong > name. Based on the financial market value of the company, their estimation technique extracts the value of < strong >brandstrong > eq- uity from the value of a firm's other assets. A second reason for studying < strong >brandstrong > equity arises from a strategy-based motivation to improve market- ing productivity. Given higher costs, greater compe- tition, and flattening demand in many markets, firms seek to increase the efficiency of their marketing ex- penses.

8 As a consequence, marketers need a more thorough understanding of consumer behavior as a ba- < strong >Customer-Basedstrong > < strong >brandstrong > Equity / 1 This content downloaded from on Mon, 30 Sep 2013 12:03:07 PMAll use subject to JSTOR Terms and Conditionssis for making better strategic decisions about target market definition and product positioning, as well as better tactical decisions about specific marketing mix actions. Perhaps a firm's most valuable asset for im- proving marketing productivity is the knowledge that has been created about the < strong >brandstrong > in consumers' minds from the firm's investment in previous marketing pro- grams.

9 Financial valuation issues have little relevance if no underlying value for the < strong >brandstrong > has been created or if managers do not know how to exploit that value by developing profitable < strong >brandstrong > strategies. The goal of this article is to assist managers and researchers who are interested in the strategic aspects of < strong >brandstrong > equity. Specifically, < strong >brandstrong > equity is concep- tualized from the perspective of the individual con- sumer and a conceptual framework is provided of what consumers know about brands and what such knowl- edge implies for marketing strategies. < strong >Customer-Basedstrong > < strong >brandstrong > equity is defined as the differential effect of < strong >brandstrong > knowledge on consumer response to the marketing of the < strong >brandstrong > .

10 That is, < strong >Customer-Basedstrong > < strong >brandstrong > equity in- volves consumers' reactions to an element of the mar- keting mix for the < strong >brandstrong > in comparison with their re- actions to the same marketing mix element attributed to a fictitiously named or unnamed version of the product or service. < strong >Customer-Basedstrong > < strong >brandstrong > equity oc- curs when the consumer is familiar with the < strong >brandstrong > and holds some favorable, strong , and unique < strong >brandstrong > as- sociations in memory. Conceptualizing < strong >brandstrong > equity from this perspec- tive is useful because it suggests both specific guide- lines for marketing strategies and tactics and areas where research can be useful in assisting managerial decision making.