Brand equity

Brand Equity is a marketing concept that considers a brand as value adding asset to a product. Though different authors define it differently, most marketing scholars and practitioners agree on the importance of brand equity. High brand equity can enable firms to charge premium prices (Pope, 1993), inhibit entry, extend into other products successfully, and insulate against competitors' promotion efforts (Farquhar, 1989). Traditionally, Brand equity has been divided up in two types: Financial (e.g. Simon and Sullivan, 1990) and customer-based (e.g., Keller, 1993). Financial-based brand equity values a brand for accounting purposes. And one way to do so is to determine future cash flows generated solely due to brand's presence (Simon and Sullivan, 1990). On the other hand, customer- based brand equity focuses on how customer brand knowledge impacts marketing strategies (Keller, 1993). Since it is the customer who determines the existence of a business, what it produces, and whether it will prosper or not (Drucker, 1954), then from marketing point of view customer-based brand equity appears to be much more sensible perspective. As such, our analysis of the role of brand equity in influencing consumer response to CSR-linked products will base on consumer-based brand equity perspective.

Two most frequently used definitions of customer-based brand equity are those of Keller (1993) and Aaker (1991). Keller (1993) defines customer-based brand equity as “the differential effect of brand knowledge on consumer response to the marketing of the brand” while Aaker (1991) defines it as “a set of brand assets and liabilities linked to a brand, its name and symbol, that add to or subtract from the value provided by a product or service to a firm and/or to that firm's customers”. Keller's definition upholds that a brand with high brand equity should receive more favorable consumer response than an unknown brand even if the marketing mix is identical (Keller, 1993). He further advocates that brand it is awareness and brand image are the underlying concepts that create this difference. Aaker (1991) upholds that both brand awareness and brand image are important; however, he suggests that customer loyalty, perceived quality and other assets also contribute to the value of a brand. Namkung and Jang (2013) state that the four most recognized dimensions of brand equity are (1) brand awareness, (2) brand image, (3) perceived quality and (4) customer loyalty.

3.3.1 An example of leveraging Brand equity: Brand extensions

Brand extension is a strategy where brand equity from an established brand is leveraged in order to (1) reduce the chance of a new product to fail and (2) Move a valuable brand from a category with a low growth rate to a new category where additional revenues can be earned (Hem & Olsen, 2004). A brand extension can take the form of a (1) line extension where a new market segment is approached through the use of an established brand occupying the same category, or (2) as a category extension where an established brand is employed to enter a new category (Aaker & Keller, 1990). The amount of new products that leverage brand equity exemplifies how widespread the tactic of brand extension is. Studies suggest that 80-95% of all new products are in the form of brand extensions (Hem & Olsen, 2004; Ourusoff et al., 1992). However, it is not given that leveraging brand equity guarantees success. For instance, Hem and Olsen (2004) advocate that brand extensions appear in three-forms: Good, bad and ugly. A brand extension is said to be good when the original brand aids the extension's success and when the extension creates favourable associations for the parent brand. An extension is bad when the parent brand is not able to improve the success of an extension or when the parent brand hinders the success of the extension. Finally, an extension is ugly when unfavorable associations or affect are transferred back to the original brand.

3.3.1.1 How does brand equity facilitate brand extension?

Presented with a new product consumers face risk (Hem & Olsen, 2004); They neither possess information of quality nor other favorable associations. Cox (1967) advocates that consumers turn to information when faced with risk. If the new product is leveraging brand equity from an established brand then consumers can turn to the existing schemas that known brands carry (Hem & Olsen, 2004). That way, a brand extension can reduce consumers perceived risk and facilitate purchase intentions. Furthermore, Aaker and Keller (1990) advocate that parent brand's associations can be favourable for the extension. That is, associations are transferred to the extension and these associations are drivers of choice in the new extension category. However, an important variable that determines an extension's success is fit (e.g., Aaker & Keller, 1990; Volckner & Sattler, 2006). Aaker and Keller (1990) advocate that fit works as a transfer mechanism. That is, when fit is high brand associations and brand affect is transferred from the parent brand to the extension. In that way, fit is a necessary prerequisite for brand extension success.

CONCEPTUAL FRAMEWORK AND HYPOTHESES

3.3.1.2 When does brand extension fail?

Hem and Olsen (2004) states that lack of fit can attribute to why extensions fail. Low fit can impede brand affect and brand associations to be transferred to the extension (Aaker & Keller, 1990). In addition, when fit is low consumers can find it difficult to make sense of the extension and negative affect is generated (e.g., Mandler, 1982; Aaker & Keller, 1990; Simmons and Becker-Olsen, 2006) potentially creating negative evaluation of the extension. Moreover, a parent brand can fail to aid an extension if the associations it carries are irrelevant or damaging to the extension (Aaker & Keller, 1990). For instance, BIC extended into cosmetics. Here, BIC's associations of being affordable and cheap impeded the success of their cosmetic extension (Hem, 2001).