The theoretical separation of brand equity and brand value:
Brand equity is a priority topic for both practitioners and academics. This article presents a new conceptual framework that establishes brand equity and brand value as two distinct constructs. Brand equity moderates the impact of marketing activities on consumer’s actions, implies a consumer based focus, and represents one of many factors that contribute to brand value, which we define the sale or replacement value of the brand, and which implies a company-based perspective. It is possible for a pioneering brand that has established a new category to build brand equity during the time when competitors do not yet exist. Consider Apple’s iPod. iPod continued leadership more than five years after introduction due to the positive equity built during the time before it faced competition. We can say that brand equity represents what the brand means to consumers, whereas brand value represents what brand means to company. Consider the Rolex brand. I think everyone agrees that Rolex has brand equity. But maybe now we don’t plan to purchase one. And that fact that a person decides to not purchase is not proof that brand equity does not exist. Figure 1 presents a simplified version of the process a firm might follow to value a brand. Basically, the valuation process is approached from the perspective of the firm and involves “following the money” as it flows from marketplace into the firm and then tracking how this activity impacts shareholder value. Starting with marketplace activity, Individual-level outcomes (purchase) are aggregated up to a brand-level outcomes directly impact the value of the brand. What Figure 1 lacks is an explanation for where the individual-level outcomes come from. Figure 2 shows how the environment, with all its information contributes to brand...