What is the marketing and financial value associated with a brands position in the marketplace?

See Also:
Company Life Cycle
Pricing Strategies
Marking to Market
Benchmarking
Capitalization

Market Positioning Definition

What is market position? In marketing and business strategy, market position refers to the consumer’s perception of a brand or product in relation to competing brands or products. Market positioning refers to the process of establishing the image or identity of a brand or product so that consumers perceive it in a certain way.
For example, a car maker may position itself as a luxury status symbol. Whereas a battery maker may position its batteries as the most reliable and long-lasting. And a fast-food restaurant chain may position itself as a provider of cheap and quick standardized meals. A coffee company may position itself as a source of premium upscale coffee beverages. Then a retailer might position itself as a place to buy household necessities at low prices. And a computer company may position itself as offering hip, innovative, and use-friendly technology products.

Positioning of a Brand

The positioning of a brand or product is a strategic process that involves marketing the brand or product in a certain way to create and establish an image or identity within the minds of the consumers in the target market. Market positioning of a brand or product must be maintained over the life of the brand or product. Doing this requires ongoing marketing initiatives intended to reinforce the target market’s perceptions of the product or brand.

Repositioning Definition

Repositioning a brand or product means altering its place in the minds of the consumer, or essentially changing the brand’s or product’s image or identity. When you are repositioning, or trying to change the consumers’ perception of a brand or product after it has already been solidified, may confuse or alienate consumers in the target market.
For example, if a premium luxury car maker suddenly slashed the prices of its vehicles and began selling them at the same prices as cheaper brand-name vehicles, consumers would no longer perceive the vehicles made by the luxury car maker as prestigious status symbols, even though the car features may remain unchanged.

Cost Leadership and Differentiation

There are two broad categories of market position: cost leadership and differentiation. Cost leadership and differentiation market positioning strategies are applicable to any business and any industry. A business can choose to position itself using a cost leader strategy or a differentiation business strategy.
Cost Leader Strategy
A company using a cost leader strategy attempts to position itself in the minds of the consumers as a company that provides products the consumers want at a price that is lower than competing products available in the marketplace. Consumers expect basic products with no bells and whistles from a company using a cost leader strategy. Instead, consumers just expect the products to meet their needs and nothing more or less.

Differentiation Business Strategy

A company using a differentiation business strategy attempts to position itself in the minds of the consumers as a company that provides unique products that consumers will pay more for because they cannot find comparable products or product features anywhere else in the marketplace. Consumers expect more from a differentiated product and therefore are willing to pay a premium for a differentiated product. This is true as long as the unique features of the product add some value to the product that makes it more valuable to the consumer, whether a functional feature or an aspect of image or prestige that enhances the perception of the product.
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• Brand equity refers to the importance of a brand in the customer’s eyes, while brand value is the financial significance the brand carries. Both brand equity and brand value are educated estimates of how much a brand is worth.

What’s the Difference Between Brand Equity & Brand Value?

Brand equity and brand value are similar, but not the same. Oftentimes, there is confusion around how each differs so let’s look at exactly what each means:

Brand Equity

Brand equity is a set of assets or liabilities in the form of brand visibility, brand associations and customer loyalty that add or subtract from the value of a current or potential product or service driven by the brand. It is a key construct in the management of not only marketing but also business strategy.

In the late 1980s, brand equity helped create and support the explosive idea that brands are assets that drive business performance over time. That idea altered perceptions of what marketing does, who does it, and what role it plays in business strategy.

Brand equity also altered the perception of brand value by demonstrating that a brand is not only a tactical aid to generate short-term sales, but also strategic support to a business strategy that will add long-term value to the organization.

Brand Value

Brand value, on the other hand, is the financial worth of the brand. To determine brand value, businesses need to estimate how much the brand is worth in the market – in other words, how much would someone purchasing the brand pay?

It is important to note that a positive brand value does not automatically equal positive brand equity.

How Should Brand Equity & Brand Value Be Measured?

While measuring brand value is fairly straightforward, the process for brand equity is not quite so simple. Brand equity is a set of assets or liabilities in the form of brand visibility, brand associations and customer loyalty that add or subtract from the value of a current or potential product or service driven by the brand. Here we’ll dive into each.

Brand Visibility

This means that the brand has awareness and credibility with respect to a particular customer need—it is relevant. If a customer is searching for a buying option and the brand does not come to mind, or if there is some reason that the brand is perceived to be unable to deliver adequately, the brand will not be relevant and not be considered.

Brand Associations

Brand associations involve anything that created a positive or negative relationship with or feelings toward the brand. It can be based on functional benefits but also a brand personality, organizational values, self-expressive benefits, emotional benefits or social benefits.

Customer Loyalty

Customer loyalty provides a flow of business for current and potential products from customers that believe in the value of the brand’s offerings and will not spend time evaluating options with lower prices. The inclusion of loyalty in the conceptualization of brand equity allows marketers to justify giving loyalty priority in the brand-building budget.

Driving Brand Value in the Short Term

The value of a brand represents its impact on the short-run and long-run flow of profits that it can generate. With respect to short-term profitability, the problem is that programs that are very good at driving short-run products – like price promotions – can damage brands.

Looking at the ways a brand can help drive short-term financial performance can help mitigate this tendency:

Brand Loyalty

• Reduced Marketing Costs
• Trade Leverage
• Attracting New Customers via Awareness & Reassurance
• Time to Respond to Competitive Threats

Brand Visibility

• Anchor to Which Other Associations Can Be Attached
• Familiarity Which Leads to Liking
• Visibility That Helps Gain Consideration
• Signal of Substance/Commitment

Brand Associations

• Helps Communicate Information
• Differentiate/Position
• Reason-to-Buy
• Create Positive Attitude/Feelings
• Basis for Extensions

Improving Brand Value in the Long-Run

One of the ongoing challenges of brand equity proponents is to demonstrate that there is long-term value in creating brand equity. The basic problems are that brand is only one driver of profits, completive actions intervene, and strategic decisions cannot wait for years.

There are, however, some perspectives that can be employed to understand and measure the long-term value of brand equity:

Brand Value Approach #1: Estimate the Brand’s Role in Business

One approach is to estimate the brand’s role in a business. The value of a business in a product market such as the Ford Fiesta in the UK market is estimated based on discounting future earnings. The tangible and intangible assets are identified and the relative role of the brand is subjectively estimated by a group of knowledgeable people, taking into account the business model and any information about the brand in terms of its relative visibility, associations and customer loyalty.

The value of the brand is then aggregated over products and markets countries to determine a value for the brand.  It can range from 10 percent for B2B brands to over 60 percent for brands like Jack Daniel’s or Coca-Cola.

Brand Value Approach #2: Observe Investments in Brand Equity

A second approach is to observe that, on average, investments in brand equity increase stock return, the ultimate measure of a long-term return on assets. Evidence comes from a series of studies I conducted with Professor Robert Jacobson of the University of Washington, using time series data which included information on accounting-based return-on-investment (ROI) and models that sorted out the direction of causation.

The consistent finding was that the impact of increasing brand equity on stock return was nearly as great as that of an ROI change, about 70 percent as much. In contrast, advertising, also tested, had no impact on stock return except that which was captured by brand equity.

Brand Value Approach #3: Reflect on Other Valuable Brands

A third approach is to look at case studies of brands that have created enormous value. Consider, for example, the power of the Apple personality and innovation reputation, BMW’s self-expressive benefits connected to the “ultimate driving machine,” and the ability of the Whole Foods Market brand to define an entire subcategory.

Or, the fact that from 1989 to 1997 two cars were made in the same plant using the same design and materials and marketing under two brand names, Toyota Corolla and Chevrolet (GEO) Prism. The Corolla brand was priced 10% higher, had less depreciation over time, and had sales many times more than the Prizm. And consumers and experts both gave it higher ratings. The same car! Only the brand was different.

Brand Value Approach #4: Consider the Conceptual Model

It’s important to consider the conceptual model surrounding a business strategy. What is the business strategy? What is the strategic role of the brand in supporting that strategy? How critical is it? Is price competition the alternative to creating and leveraging brand equity? What impact will that have on profit streams going forward? Management guru Tom Peters said it well:

“In an increasingly crowded marketplace, fools will compete on price. Winners will find a way to create lasting value in the customer’s mind.”

What is the marketing and financial value associated with a brand's position in the marketplace?

What is the value that the brand contributes to a product in the marketplace?

What is the marketing term for the value of a brand?

What refers to the financial value of the brand?