Does Excessive Sales Promotion Result in Dilution of Brand Equity

Topics: Brand, Brand management, Marketing Pages: 6 (1833 words) Published: August 7, 2012
Does excessive sales promotion result in dilution of brand equity What is Brand?

A brand is a product, service, or concept that is publicly distinguished from other products, services, or concepts so that it can be easily communicated and usually marketed. A brand name is the name of the distinctive product, service, or concept. Branding is the process of creating and disseminating the brand name.

“The value of a brand establishes the positive differentiation that the name of the brand has over the clients reactions with the product and service in discussion”  -Philip Kotler

Brand Equity

The Brand can add significant value when it is well recognised and has positive associations in mind of customers. This concept refers to brand Equity.

The brand equity represents the value of a brand; which is established following the next criteria: * the level of loyalty towards the brand
* the perceived quality
* strong associations with the respective brand
* other possession of the brand: patents, registered marks, relations in the distribution channels Strong Brand Equity provides following benefits:
* Facilitates a more predictable income inflow.
* Increases cash flow by increasing share, reducing promotional costs and allowing premium. * Brand Equity is an asset which can be sold also.

Brand Loyalty

Brands that consumers generally buy from the same manufacturer repeatedly over time rather than buying from multiple suppliers within the category. It also refers to the degree to which a consumer consistently purchases the same brand within a product class. Generally, loyalty that can be loosely defined as a customer’s willingness to choose a brand more often over a period than its rivals, is dependent on the price of the product, the level of involvement, the level of competitive marketing activity (including but not limited to advertising), and the number of brands available with similar perception of value delivery.

Customers into four groups on Brand Loyalty
* True loyals (with high attitudinal and behavioral loyalty) * Latent loyals (high attitudinal but low behavioral loyalty) * Spurious loyals (low attitudinal but high behavioral loyalty) * Non-loyals (both low attitudinal and behavioral loyalty) Sales Promotions Effect on the brand

True loyals being high on brand attitude, would have stronger and well structured organization of brand knowledge in their minds. Also, as they buy the product more often, this knowledge structure would become stronger. This strong memory structure would prevent brand equity erosion during promotions, despite the forms in which they are offered. Hence, brand equity for true loyal customers would not be affected by the nature of promotions.

Since spurious loyals do not have a high attitude towards the brand, they would find value in promotional activities that pose as value enhancers in the purchase transaction. Value of a promotional offer would more evident promotions that are targeted for very short time just to generate immediate sales or shorten the buying decision than in promotions which are long terms to re-enforcement Brand equity and therefore spurious loyals would have higher brand equity when former promotions are offered.

Promotional offers are generally irrelevant to latent loyals and non-loyals, as they do not buy the brands as the other customer categories. Hence brand equity would not be affected by promotions in both these categories.

Consumer Promotions Vs Brand Equity (A Research Study)
It was a questionnaire based interview, administered to a sample size of 60 in 3 age groups - <15, 15-30, & >30 that is 180 in all. This questionnaire was intended to measure: The relative importance of attributes affecting buying decision, the difference in perception about one time and frequent promotion, the difference in perception about...
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