Performance consequences of brand equity management: evidence from organizations in the value chain

DOIhttps://doi.org/10.1108/10610420310485032
Date01 July 2003
Published date01 July 2003
Pages220-236
AuthorArtur Baldauf,Karen S. Cravens,Gudrun Binder
Subject MatterMarketing
Performance consequences of
brand equity management:
evidence from organizations in
the value chain
Artur Baldauf
Department of Strategic Management, University of Bern, Bern,
Switzerland
Karen S. Cravens
The University of Tulsa, Tulsa, Oklahoma, USA
Gudrun Binder
Department of Marketing, University of Vienna, Vienna, Austria
Keywords Brand equity, Intangible assets, Value chain, Financial performance,
Customers
Abstract Evaluating the consequences of brand equity management is one of the most
important measurement issues for intangible assets in the new economy. Studies have
validated the effect of brand equity on the value of the firm and addressed the capital
market effects of intangible associations such as brand value. Yet, there is not sufficient
evidence on which dimensions of brand equity should be measured and monitored to
support financial performance. Using regression analysis on a sample of managers in
Austrian organizations, this study investigates the effect of perceived brand equity on
brand profitability, brand sales volume, and perceived customer value. Results indicate
strong support for measures of perceived quality, brand loyalty, and brand awareness as
antecedents of firm performance, customer value and willingness to buy.
In recent years, management accounting has been criticized for not providing
information to management that is useful in decision making (Kaplan and
Johnson, 1987). Most performance indicators focused on aggregate, financial
accounting-based measures that were at best, very much lagging indicators
of performance. At worst these indicators often had little information content
for managers in terms of the effect of their actions on firm performance.
Brands are not capitalized on the balance sheet in most countries, which
counteracts a long-term management focus on the value of any internally-
developed brands. Therefore, cash flow and short-term profits are more often
used as important performance parameters. Strategically, strong brands
represent a key component of competitive advantage and function as the
main source of a company's future earnings. For firms with strong brands,
performance indicators should incorporate brand-based performance
measures instead of concentrating on cash flow and short-term profits. Brand
equity research has a more established conceptual logic than other areas of
intangibles, making it a viable segment for considering performance
measurement implications. Brand equity is defined as ``a set of brand assets
and liabilities linked to a brand, its name, and symbol, that add to or subtract
from the value provided by a product or service to a firm and/or to that firm's
customers'' (Aaker, 1991, p. 15). Information about measurement issues
relating to brand equity can yield ancillary benefits by contributing to the
research foundation on measurement issues for other types of intangibles. If
The Emerald Research Register for this journal is available at
http://www.emeraldinsight.com/researchregister
The current issue and full text archive of this journal is available at
http://www.emeraldinsight.com/1061-0421.htm
Balance sheet
220 JOURNAL OF PRODUCT & BRAND MANAGEMENT, VOL. 12 NO. 4 2003, pp. 220-236, #MCB UP LIMITED, 1061-0421, DOI 10.1108/10610420310485032
An executive summary for
managers and executive
readers can be found at the
end of this article
management is knowledgeable about brand equity strength it can use this
information together with financial databases to develop appropriate
incentive plans and brand management programs (Aaker, 1996b).
We examine one particular intangible asset ± the equity of the organization's
brands ± since for a significant number of firms, the brand is the central asset of
the company (Aaker, 1996a; Barwise, 1993; Shocker et al., 1994). Our research
is intended to provide evidence as to the efficacy of using specific brand equity
measures to evaluate financial performance. Specifically, the research objective
is to consider whether dimensions of brand equity are important antecedents of
firm performance such as sales and profitability. Moreover, as customers
ultimately decide about a firm's success or failure we also examine the linkage
between brand equity dimensions and value to customers.
We begin our investigation by examining the conceptual foundations for
brand equity and performance and develop the specific directional
hypotheses tested. The methodology section contains the sampling plan, the
construct measures used in our study of Austrian managers, and analytical
issues. We present the results of the empirical study and conclude with
implications and suggestions for future research.
Conceptual foundations and research hypotheses
Our research considers a segment of Aaker's (1991) original framework of
brand equity, which proposes that various organizational efforts contribute to
developing the dimensions of brand equity. These dimensions of brand
equity then have a positive impact on providing value to the firm as well as
to the customer. For example, a brand with strong equity can be leveraged to
launch new products and serves as a cue in repeat purchases. In this research
we test the portion of the model that focuses on the effect of the dimensions
of brand equity in providing value. The underlying conceptual logic of a
strong brand equity is that it is an asset which is expected to enhance
customer value, increase customers' purchase intentions, and increase the
organization's market performance. Brand equity reflects the price premium
of a strong brand in combination with the sales it attracts compared to an
average brand (Aaker, 1996a; Barwise et al., 1989).
Figure 1 shows potential antecedents and consequences of brand equity
(Aaker, 1991, p. 17). Aaker (1991, p. 17) notes that specific antecedents of
Figure 1. Antecedents and consequences of brand equity
Intangible asset
Brand equity
JOURNAL OF PRODUCT & BRAND MANAGEMENT, VOL. 12 NO. 4 2003 221

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