NEWS & UPDATES

November 6, 2007 In Archives By Advent

The Equity of a Brand

Equity holds extra­or­di­nary value.  We con­sider equity in our home to be the value over and above the debt, and we can bor­row against that equity. Brands have equity, too. It comes in two forms: cus­tomer (exter­nal) and owner (internal).

Cus­tomer equity in a brand allows cus­tomers to pur­chase with con­fi­dence.  We don’t have to know the intri­ca­cies and tech­ni­cal spec­i­fi­ca­tions of an HDTV.  We trust Sony has fig­ured all that out for us and is offer­ing the best choices within the cat­e­gory.  In this case, Sony nav­i­gated us through the myr­iad of choices we were offered. It inter­jected itself into our minds and cre­ated an asso­ci­a­tion with this prod­uct, qual­ity and rel­e­vance.  Sony’s brand reg­u­larly rep­re­sents a promise or rep­u­ta­tion of con­sis­tent deliv­ery of qual­ity and per­for­mance. 

How­ever, we often for­get about the value a brand holds for the com­pany who owns it.  It’s esti­mated that over 70% of McDonald’s cor­po­rate value comes from its brand. And, though Kraft’s Post cereal port­fo­lio shows declin­ing mar­ket share, the Wall Street Jour­nal announced today (http://www.cnbc.com/id/21636495/for/cnbc/) that Kraft is near a deal to sell these brands {Shred­ded Wheat, Grape Nuts and Honey Bunches of Oats (a per­sonal favorite)} for $2.8 Bil­lion!  This sale cov­ers some machin­ery and other assets, but the real rea­son for that price tag is from the value of the brands. 

What are you doing to grow the value of your brand?

Authored By Advent

Advent partners with organizations to help them visually express differentiation.