LABREPORT | JUL. 2008
What Is Branding? The Four Pillars of Brand Equity
This is the 2nd article of a 6 part series on branding. In the first article “Brands at Labbrand” the concept of what a brand actually is was illuminated and a holistic brand model which defines the dimensions brands interact on with different stakeholders was introduced.
These dimensions are:
- Markets and consumers
- Products and services
- Communications and visual identity
- Culture and behavior.
In this first article we concluded that “successful branding depends on the ability of the brand manager to understand how their brand is performing in each of these dimensions in relation to its consumers, employees and stakeholders”.
The objective of this article is to explain what Labbrand understands in regard to “successful branding”, to make the goal of branding clear.
At this point one might feel compelled to ask what the goal of branding actually is. A simple answer to this question, which gets used quite often is “to build brand equity” - and what is that one might ask? The value of a brand is defined by its ability to stand apart from other brands. The four pillars of brand equity are depicted below. These pillars represent the different dimensions a brand needs to excel in, in order to stand apart from other brands. The 4 pillars are defined as followed:
DIFFERENTIATION is a brand’s ability to stand apart from others. It is the degree to which the public finds a brand unique and different through a distinctive personality or features.
RELEVANCE is a measure of appropriateness. Awareness is a prerequisite to this pillar which focuses on the brand's fit with consumer's personal needs.
ESTEEM measures how highly the brand is regarded and respected – in short, the brand's ability to be forgiven.
INFLUENCE is the brand's ability to change and impact the behavior, actions, and lifestyles of its consumers – how much consumers embody the brand's inner workings.
BRAND STRENGTH is the sum of Differentiation and Relevance. It shows the brand's propensity to stay current and forward-thinking even in the midst of heavy competition and a demanding consumer base. Brand Strength can measure the likelihood of the brand to succeed in the future.
BRAND STATURE is the sum of Esteem and Influence. It shows the brand's prestige and clout among a time-honored group of consumers and competition, and implies the degree to which the brand is respected, established, and loyally followed. Brand Stature can measure the brands authority from past brand building actions.
Thus, the goal of branding is to properly analyze and understand the current situation a brand finds itself in and then to apply relevant branding solutions which target the problems the brand is currently facing in order to increase the brand’s equity.
Properly analyzing a brand’s current situation is accomplished by applying the holistic brand model to each pillar for the different stakeholders. The importance of the different dimensions to each pillar will vary. The following 4 articles of this series will each handle one of the dimensions in more depth.
The remainder of this article will examine the relationship between the 4 dimensions in the 4 pillars of brand equity model. Examples of 4 typical pillar patterns are shown bellow.
1. Lower left quadrant
Brands usually begin their life in this quadrant, where appropriate differentiation strategies must first be developed in order to establish their reason for being in the eye of the consumer.
Lifan, in mainland China, could be pointed out as an example of undefined brand. Still a small player in China’s auto industry, Lifan has produced up to now only look alike cars. In fact its latest model, the Lifan 320 is very similar to the Mini cooper. The only reason for being of Lifan is dictated by the cheap price attached to their cars. As for differentiation and meaningful brand strategy, Lifan still has a long way to go.
2. Top left quadrant
Growing brands will initially focus on building brand strength by differentiating themselves from their competitors and becoming more relevant. For brands targeting a mass market this stage represents the brand’s emerging potential. Niche brands can also be found in this quadrant and usually tend to stay here.
Lining, for instance, is certainly focusing on building brand strength by capitalizing on its Chinese identity to win brand recognition among Chinese consumers. With the coming Olympics, the brand is going to open up more than 800 new stores and steadily keep investing in brand building. Results show in its sales growth rate: 4 times that of Nike!
Chinese niche brand OmniaLuo is also steadily growing and strongly positioning itself in the upper luxury market targeted to the urban wealthy female professionals. Starting in the mid nineties, today more than 200 OmniaLuo brand shops can be found around China and more are to be opened by the end of the year.
3. Upper right quadrant
Leadership brands are characterized by both high levels of brand strength and high levels of brand stature. Brands which find themselves in this position are very interested in applying brand management strategies to maintain their competitive edge.
In this quadrant we can definitely cite China Mobile – the most valuable Chinese brand and the fifth most valuable brand in the whole world, ahead of Apple, McDonalds and Nokia to name a few. Strong on all dimensions, China Mobile is trying to rise in global ranking and protect its domestic position by capitalizing on brand stature to increase its brand strength globally.
4. Lower right quadrant
Declining brands are characterized by brands which fail to maintain their brand strength. In this stage brands become vulnerable to both emerging leadership brands and discount brands, losing both loyal customers and potential customers
An example among Chinese domestic brands can be found in the unfortunate situation Ningbo birds find itself in at the moment. Once regarded as a premier domestic brand in the Chinese handset market, the Chinese brand has been falling out of its market position for the last two years and it is now reporting a loss of 34 million yuan for the first quarter of this year. Squeezed between leading foreign players who dominate 70% of the market and small local manufacturers willing to compete on shrinking profit margins Ningbo Birds is sadly the perfect example of a declining brand that is loosing both loyal and potential customers.