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  Untangling Brand Equity, Value, Assets and Health
  By Chris Grannell

The notion of “brand equity” has been common currency amongst marketers for several years. And barely a day goes by without marketing, HR and other departments speaking about the “health” or “value” of their brand.

In this paper I aim to untangle a number of related concepts of use to brand owners and those working with brands. (I’m not entering into the business of financial brand valuation. For an example of this see Interbrand’s methodology.)

First up are two ways of conceptualising the importance or power of a brand; brand equity and brand value. These topics form the first half of this paper. Brand health is a kind of hybrid which we’ll come to later. In the second part of this paper we’ll also review the difference between brand equity and brand outcomes, and consider brand equity in the context of other market-based assets.

Brand Equity

A brand can be said to have brand equity (also called consumer or market equity) when consumers respond favourably to it. This depends upon a combination of recognition, associations and judgements made by the consumer. Brand equity can be regarded as an indicator of the success of a brand.

Keller (2008) defines brand equity thus: “A brand has positive customer-based brand equity when consumers react more favourably to a product and the way it is marketed when the brand is identified than when it is not”. This is a much simpler definition than that of Aaker (1996). Aaker’s definition (which preceded that of Keller) describes brand equity as “the set of assets and liabilities linked to a brand’s name and symbol that adds to or subtracts from the value provided by a product or service to a firm and/or that firm’s customers”. Note how Aaker’s definition includes extensional (ie physical) components of the brand that are unconnected to its audience, while Keller’s definition requires an audience for equity to exist. While I believe Aaker is right to highlight the important role of tangible assets such as “name and symbol” in creating strong brands, I prefer to see these as causes of rather than components within brand equity. For this reason we will adopt a position that is closer to Keller for the remainder of this article.

Strictly speaking it is not entirely clear whether Keller means “brand equity” to refer to consumers’ favourable reaction itself or to the cause of this reaction. In some instances, his definition reads as though brand equity is the observable behaviour, but this means that the cause is something else – as yet unnamed. Since this introduces another layer to our conception of how brands work, things quickly start to get very complicated. As Raggio & Leone (2009) have observed, “if brand equity is defined as the outcomes or results of some unnamed and unmeasured construct, what is that construct and why are researchers not concerned with it?”. To avoid confusion, we will assume that brand equity is the cause of the favourable phenomena; and use with this revised Keller position within this paper.

With this definition in mind then, the classic symptom of brand equity is reduced price sensitivity. For example, a consumer is willing to pay a higher price for a Coca-Cola than for a generic (or unknown) cola. It is the knowledge about the brand that consumers hold in their heads which determines this equity.

As noted in Keller’s definition, brand equity will also lead to increased effectiveness of marketing activity since the presence of the brand will ensure higher cutthrough. In this way, the concept of brand equity relates to the broader concept in business strategy of gaining competitive advantage from particular resources or assets (for example, see Peteraf (1993)). Asset-based advantage typically occurs when certain assets magnify the impact or attractiveness of other assets; and when these assets are difficult to imitate or substitute. We’ll come back to valuable assets when we consider the broader set of market-based assets later.

Key Question: Is there a single measure of brand equity?

No. Brand equity is a quality which is almost impossible to accurately measure, since different audiences will respond differently to a single brand. Even if it could be measured, there is no unit of brand equity: we can’t speak of a brand having ten ‘braequities’ versus another with only five. Brand equity is also relative to the category. In other words, it would be very difficult to accurately compare the brand equity of, say, Skoda, with that of Budvar. Writing in 1996 Aaker summed up this challenge: “[Measuring brand equity] can require dozens of measures. Although each potentially has diagnostic value, the use of so many measures in unwieldy. For reporting and tracking purposes it would be useful and convenient to have a single summary measure...”. He goes on to observe that there are difficulties not only in calibrating the various measures but in determining what weights to place on them. In the years since Aaker wrote these words, many academics and researchers have tried to answer this challenge but none have succeeded.

Frameworks such as that from BRANDZ and the Y&R Brand Asset Valuator measure and compare brands on a number of distinct equity-enhancing variables, but none does so with a single measure.

Key Question: Do niche brands automatically have less equity because they have lower overall awareness?

No. There are plenty of brands which have high equity amongst a tiny group of consumers. Many of these brands are – by definition – so obscure that you or I haven’t heard of them. In fact, this is another reason why measuring brand equity is so difficult: how much weight to you put on awareness and how much on relevance? Nevertheless, if you find yourself thinking that sales volume is important – somewhere – you’re right. Sales is a major driver of brand value and we’ll come back to this issue shortly.

If you really want to get difficult, consider the case of a new brand with no customers, but a strong inbuilt association with a set of attributes which customers are known to respond well to. Australia-based McLaren Vale Ale is a prime example. This newcomer to the crowded beer market aims to borrow from the gourmet associations of the well-known wine region. But because of its brief time in-market, its awareness levels (even amongst the target audience of style-conscious drinkers) are relatively low. So, does it have equity? The best way of handling a case like this is to talk in terms of potential equity. It seems reasonable to assume that this scope for equity to develop would be translated into brand value even if the business were to be sold early in its life.

Key Question: Do brand associations automatically translate into brand equity?

No. It is possible for a brand to have a particular well-defined image (a schema or set of associations) which does not translate into significant brand equity. This is the challenge of awareness and relevance.

A brand may have associations that in other circumstances would be regarded as positive (for instance: high quality, well-made etc), without consumers automatically responding favourably. For example in the category of cheap throwaway pens, a brand with expensive associations may not demonstrate brand equity. Similarly, a brand with great associations that few in its target market have heard of will have little brand equity in the market at large – even if (as per the example above) there is potential for it to develop over time.

Key Question: Is there are checklist of activities we can use that will definitively increase brand equity?

Not exactly. As a general rule, there are a number of characteristics which will generally improve brand equity. But as observed above, their impact on overall performance will vary from case to case. Aaker suggests five measures (they could also be considered drivers) of brand equity. These are brand loyalty, brand awareness, perceived quality, brand associations and other proprietary assets. As we will see later, Dexter Berg, Matthews & O’Hare have a checklist of very similar factors, but importantly they add customer satisfaction to the mix.

The Y&R BAV and BRANDZ scores mentioned earlier assume similar variables which drive equity (In the case of BAV: differentiation, relevance, esteem, knowledge; for BRANDZ: presence, relevance, performance, advantage, bonding). These can then be compared against averages within and across sectors to derive relative scores. In their raw form neither is a financial valuation of a brand, although data can then be used as a component within valuation.

Brand Value

Brand value is often confused with brand equity. Indeed, the two are frequently used as synonyms, but I believe it is helpful to keep the two terms separate. Brand value refers to the financial value of a brand. It results from many factors – and brand equity is just one of these.

Brand value can be considered in a variety of ways: the cost to the brand-owner of replacing the brand with an equivalent one; the price which other firms have paid by for similar brands; and the impact which the brand has on future earnings for the brand-owner. Most of these notions assume an intrinsic value; something that does not consider the circumstances external to the brand-owner.

When thinking about brand value, Raggio and Leone (2007) suggest that it helps to consider the perspective of a potential acquirer of the brand. This forces us to consider external factors which aren’t intrinsic to the brand owner. If you think about this for a moment, there are several factors which could influence how much a buyer might pay for your brand. As well as brand equity, these include sales volume and market size. But that’s not all. Brand value also depends upon the circumstances of the brand owner (or potential owner, in the case of an acquisition). As such, value is vulnerable to exogenous factors beyond the influence of the firm itself. In the case of an acquisition, as Raggio and Leone (2006) observe, “value is idiosyncratic to the bidding firm”. As an example, the Smart car brand is arguably worth more to owner Daimler than to its former co-owner, Swatch. This is because there is more that Daimler can do with Smart owners (such as trading them up to purchase Mercedes vehicles).

Key Question: Given that both brand equity and sales contribute to brand value, should brand managers always seek to increase both?

No. Brand equity and sales volume have a trade-off relationship. Rolls-Royce has a great deal of brand equity but very few sales. The Rolls-Royce brand without its factory was purchased for GBP40M in 1998. The brand was sold to BMW who, it seems reasonable to assume, would have be able to extract a high value from the marque. At the time many said that this was a bargan, but it’s clear that Rolls-Royce couldn’t have readily increased the sale price of its brand just by selling more cars. There is plenty of anecdotal evidence that increasing sales volumes decreases brand equity, which supports the intuition that if Rolls-Royce were sold in Opel or Ford proportions, it wouldn’t be Rolls-Royce. In very simple terms, it is the product of sales x equity x audience size x market potential which determines brand value.

Key Question: Can we say that a brand has value even if we can’t accurately measure it?

Yes. At this point it may be useful to highlight the difference between value and valuation. Marketing efforts can be valuable even when a precise value can’t be accurately identified. The old adage that that which can’t be measured doesn’t have value may hold true in many managerial situations, but it isn’t strictly correct.

While I advocate measurement as a component within any solid marketing function, the precise measurement of brands isn’t necessary to demonstrate their value. We can show that brands are valuable (ie deliver benefits to brand owners) even if we can’t determine exactly what they are worth. (For instance, as we saw in the Keller definition of brand equity, strong brands achieve greater return on marketing investment . And strong brands also improve loyalty which ‘smoothes out’ future cashflows and reduces customer acquisition costs as a proportion of total outgoings.) Furthermore, as we saw above, specific brand value depends upon factors which are exogenous (that is independent and unrelated to) the firm itself.

If you’re struggling with the whole notion of value without valuation, consider the term ‘brand health’ (below) instead.

Key Question: If brand equity depends upon the presence of customers, does this mean that in some way customers own our brand or its value?

No. Some commentators have gotten excited about companies’ lack of control over their brands and been tempted to conclude that customers own brands. This doesn’t really make sense, because companies can ultimately sell their brands while customers can’t. In fact, the issue of ownership is a rare area of clarity in the otherwise messy and organic world of brands. However, customers are critical for brand equity and brand value. Real live customers are essential for brands to have equity, while in the case of brand value the condition is relaxed to include potential customers. Customers also share in the ‘value’ of brands, since they gain benefits from them.

Brand Health

Because of the exogenous complexities of brand value, another term – brand health –may be used as an intrinsic quality. Like brand value (and, I suggest unlike brand equity), brand health captures the sense of longevity or existence over time. Conversely, equity could be seen as a measure of current performance.

Dexter Berg, Matthews & O’Hare (2007) define brand health as comprising five key elements: leadership, liabilities (consumer hesitation, negative associations), attractiveness, distinctiveness and customer satisfaction. Their research indicates strong associations between these elements and current sales – but also, importantly, with future growth. It’s not a great leap to infer that these five elements will also exert a positive influence on brand equity.

Although Dexter Berg, Matthews & O’Hare use a different definition of brand equity (in their case, this is closer to brand value since it is defined in economic value terms rather than consumer terms), their contribution is important. Citing empirical evidence, they observe that “customer satisfaction [is] the strongest determinant of brand health”. This is hugely significant; but apparently largely unheeded given the scant attention given to customer satisfaction in many marketing plans.

The future is an important aspect to capture for value and health. For example, Porsche is a brand with strong equity in the automotive sector, but its 2002 move into the SUV market has arguably damaged the long-term prospects for a brand formerly known for its sportscars.

Brand Outcomes

Raggio and Leone also point out that equity ≠ outcomes. It is relatively easy to conceive of occasions where a brand has substantial equity but just not enough to make a prospective customer choose it. Individuals may have threshold levels that must be passed before brand equity impacts behaviour. This is particularly true in markets where high switching costs exist, or when existing alternatives already do a good job at meeting consumer needs.

The reverse also holds: an outcome doesn’t imply the presence of equity. Consumers in the mood for trial may well experiment with an unusual or novel product. If they don’t form a strong opinion about the brand – as evidenced if they don’t return to it – then there’s little equity present.

Key Question: Is creating a novelty product a quick way of building brand equity?

No. As we’ve seen, behaviours don’t necessarily indicate the presence of brand equity. In uninteresting markets and quasi-monopolistic sectors with few alternatives, something different will immediately attract attention. In some cases, brand equity may ultimately result – but only when a consistent and relevant experience is delivered.

Brand vs Other Market-Based Assets

Finally, it is important to note that brands are not the only valuable assets that marketing can create or enhance. The term market-based asset, popularised by Srivastava, Fahey & Shervani (1998) helps shed some light on the issue. Market-based assets include customer relationships (both in terms of absolute number and quality); partner relationships (such as those with complementors or channels to market) as well as brand.

People often other measure market-based assets when they think they are measuring brands. For instance, assets may include installed user base, quasi-monopoly status etc. These types of asset famously helped Microsoft (encouraging Windows users to adopt Internet Explorer) and are now paying dividends for firms like Google (which leverages its search engine) and Apple (which migrates iPod customers to other hardware and software). As Srivastava, Fahey & Shervani remind us, “Best products do not necessarily win. The best-networked firms usually do”.

Key Question: Should marketers seek to develop market-based assets or brands?

In fact, brands are a subset of market-based assets, so building the latter can be viewed as the catch-all option. As we saw earlier, asset-based advantage typically occurs when certain assets magnify the impact or attractiveness of other assets; and when these assets are difficult to imitate or substitute. As such, it is easy to see that Keller’s definition of brand equity fits perfectly with this thinking, since it defines brand equity as the impact that the brand has on exposure to the product versus an unbranded alternative.

Key Question: If brands are assets, how come I can’t put them on my balance sheet?

Make no mistake. Brands are assets; big ones. It is not unusual for less than 50% of a firm’s market value to be explained by the value of its tangible assets. The remaining intangible assets include market-based assets, and these, in turn, include brands. Interbrand has suggested that “brands account for more than one-third of shareholder value”. Unfortunately, accounting standards do not generally permit the inclusion of brands on the balance sheet unless they have acquired a formal valuation as a result of being bought or sold.

If the notion that a large proportion of your businesses’ value cannot be put on the balance sheet irks you, I suggest you take this up with your local accounting standards body.


As we’ve seen, brand equity and brand value are two closely-related concepts which share some common causes. But they don’t necessarily move in lockstep, since increasing sales may – in some circumstances – increase value while damaging equity. Brand equity has some explanatory power with regard to customer behaviour; although it doesn’t completely predict it. And finally, when taken together, brand equity and brand value help us understand the role of brand as an important market-based asset.


Aaker, D., 1996. Building Strong Brands, Free Press

Dexter Berg, J., Matthews, J. & O’Hare, C., 2007. ‘Measuring brand health to Improve Top-Line Growth’. MIT Sloan Management Review, Fall 2007

Keller, K.L., 2008. Strategic Brand Management. Pearson Press

Peteraf, M., 1993. ‘The Cornerstones of Competitive Advantage: A Resource-Based View’, Strategic Management Journal, Vol 14, 1993

Raggio, R. & Leone, B., 2006. ‘The Theoretical Separation of Brand Equity and Brand Value’, Presentation at Fisher College of Business, February 2006

Raggio, R. & Leone, B., 2007. ‘The Theoretical Separation of Brand Equity and Brand Value’. Journal of Brand Management, March 2007

Raggio, R. & Leone, B., 2009. ‘Chasing brand value’. Journal of Brand Management, January-February 2009

Srivastava, R., Shervani, T., & Fahey, L., 1998. ‘Market-Based Assets and Shareholder Value: A Framework for Analysis’. Journal of Marketing, January 1998. (A summary of the main arguments of this paper is provided by its lead author at

Chris Grannell is Consulting Director of Ellis Foster McVeigh, a market-based strategy firm based in Australia. Contact him on

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