Customer-Based Brand Equity

The CBBE model approaches brand equity from the perspective of the consumer – whether the consumer is an individual or an organisation. Understanding the needs and wants of consumers and organization and devising products and programs to satisfy them are at the heart of successful marketing.

Customer-based brand equity can be defined as the differential effect that brand knowledge has on consumer response to the marketing of that brand. 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. Thus, customers might be more accepting of a new brand extension for a brand with positive customer-based brand equity, less sensitive to price increases and withdrawal of advertising support, or more willing to seek the brand in a new distribution channel. On the other hand, a brand has negative customer-based brand equity if consumers react less favourably to marketing activity for the brand compared with an unnamed or fictitiously named version of the product.

Let us study in detail the key ingredients to this definition: (1) “Differential effect”, (2) “brand knowledge” and (3) “consumer response to marketing”.

First, brand equity arises from differences in consumer response. If no differences occur, then the brand-name of the product can be essentially classified as a commodity. Competition, most likely would then just be based on price.

Second, these differences in response are a result of consumers’ knowledge about the brand, that is, what they have learned, felt, seen, and heard about the brand as a result of their experiences over time. Although, strongly influences by the marketing activity of a firm, brand equity ultimately depends on what resides in the minds of consumers.

Third, customers’ differential responses, which make up brand equity, are reflected in perceptions, preferences and behaviour related to all aspects of brand marketing, including their choice of a brand, recall of copy points from an ad, response to a sales promotion, and evaluations of a proposed brand extension.