Critically evaluate the three brand equity approaches discussed in the case
The case study describes three different brand equity approaches that could be used to analyze the brand value of Evergood Coffee: the conversion model, indirect value assessment, and the royalty method. All three approaches use different aspects of brand equity to evaluate the cost of the brand.
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The conversion model evaluates the customers’ attitudes towards the brand. Current customers are seen either as ‘secure’ or as ‘vulnerable,’ if they are not entirely happy with the brand. Potential customers are viewed in terms of their availability for conversion. This approach is useful as it is focused on the customers, who are the main contributors to the brand equity.
Indirect value assessment uses a different method. It aims to dissect the profits made by the business to estimate the contribution of the brand equity to sales results. However, this approach has been criticized for its complexity (Budac & Baltador, 2013, p. 446).
Finally, the royalty method is based on the amount of benefits that would be achieved if the brand was leased to a third party for a given period of time. The value is estimated based on the cash flow gained and on the final price of the brand at the end of the lease. The main limitation of this approach is the “difficulty […] to find relevant rates, especially where there is a no history and a critical amount of transactions” (Budac & Baltador, 2013, p. 446).
How could Evergood capitalize on its brand equity in order to plan its future brand strategy?
Evergood Coffee is a well-established Norwegian brand that has been using a stable strategy to achieve brand equity over the years. Seo and Jang (2013) note the benefits of a high brand equity for business strategies: “The traditional view on brand equity focuses on the advantageous side of strong brand equity, which is the so-called “buffering” perspective. This theory asserts that strongly built brand equity increases future cash flow […] and enhances marketing efficiency” (p. 192).
The main aspect of the brand equity that Evergood Coffee could utilize is its high level of brand awareness. For example, brand awareness is one of the determining factors for the use of corporate branding strategy. It is centered on “a firm using a single name that is connected to the parent company” (Seo & Jang, 2013, p. 192-193). This promotes brand recognition and remembrance, which ensures a higher number of returning customers as well as of those who would express a preference for the brand’s well-recognized name. The single brand name is associated with stability and high quality, and the marketing strategy of Evergood Coffee is partly based on that association. For instance, the company’s website does not have a lot of information, as the customers are expected to know the brand. Such awareness is partly due to the TV advertising that uses well-known public figures such as Madonna, Sophia Loren, and Audrey Hepburn. Through the structure of the adverts, the brand name is given the same value as a famous face, which promotes brand recognition.
Overall, Horst and Duboff (2015) agree that branding strategy “is necessary to sustain the healthy margins that allow a business to keep fulfilling its brand promise in the long run” (sec. 2). In the case with Evergood Coffee, the reliance on the existing brand equity allows developing successful branding and marketing strategies.
Budac, C., & Baltador, L. (2013). The value of brand equity. Procedia Economics and Finance, 6: 444 – 448. Web.
Horst, P., & Duboff, R. (2015). Don’t let big data bury your brand. Harvard Business Review. Web.
Seo, S., & Jang, S. S. (2013). The roles of brand equity and branding strategy: A study of restaurant food crises. International Journal of Hospitality Management, 34: 192–201. Web.