Question

Brand equity metrics calculations can be conducted by many methods. Compare and contrast any three methods discussed in this subject and illustrate your answer with suitable examples

Answer 1

Brand equity means the marketable value that stems from consumer perception of the brand name of a particular product or service, rather than from the product or service itself. Brands like Starbucks, Coca-Cola, and Nike grow upon the positive perception of consumers. Brand equity is important. Brand equity is important for any organisation because it is an asset for the organisation, it helps gain trust from consumers and increase market share as their products are easily accepted by consumers. It helps organisations increase market share and ease their product line extensions.

Methods of brand equity metrics calculation:

Historical Cost Method: This method of brand equity measurement is the simplest. It takes into account the total amount spent on building a brand from the start till date. It is the total of the discrete costs incurred for creating a brand such as the advertising cost, campaign cost, promotion cost, registration costs, and licensing costs. The total value is at which a brand can be sold. This method of assessing brand equity will entail us to put a value to the cost of the brand and establish the actual expenses incurred in the current cost. For example: The band equity of Starbucks according to historical cost method is the total amount spent of expenses incurred for establishing it as a brand.

Replacement Cost Method: In the replacement cost method of brand equity measurement, the value of the brand is assessed after considering the total expenses and investment that will be required to replace the brand with a new brand of identical value. It is different from historical costs method as historical cost method takes into account all historical costs of brand from inception. For example: We assess the brand equity of Nike by assessing the expenses we would have to incur in case we want to create a brand that could replace Nike.

Recreation Cost Method: Here the current cost of recreating a brand is considered using the current prices. It is in contrast to the historical cost method where it takes into account all the preceding expenses at current rates for the brand. This method is tries to eradicate the glitches faced in the historical cost method. For example : If we want to create a brand like Coca –cola today how much would we spend in current prices