[MUSIC] Hi, welcome back. In the last lecture after I presented the concept of brand architecture. The focus of this lecture, is to introduce you to another concept, which we'll be using throughout the module, and that is brand equity. So, what is brand equity? Dave Acker, that brand guru, defined it as a set of assets and liabilities linked to a brand's name and symbol. That adds or subtracts from the value provided by a product or service to a firm and or the customers. In other words, it is a intangible valuation of the brand. I like to think of it from the consumer's perspective, that it is a value that a company or a product generates with it's recognized name, versus if it had a generic name. For example brand equity can be explained as the additional money consumers are willing to pay for a coke versus a no brand cola from the super market. But in terms of companies, it is the additional money that an organization is willing to pay for the Coca Cola company versus another one. Let's call it the drinks company, for owning that goodwill created with all of its stakeholders. Acker in his book, Managing Brand Equity, describes that brand equity generates value to the customers by helping them process information. Generating confidence in the purchase decision, and in the used satisfaction. For the company, brand equity generates value by enhancing the efficiency of their marketing programs, brand loyalty, prices and margins, brand extensions, trade leverage, and ultimately, by providing a competitive advantage. So how do organizations generate brand equity? With a clear, relevant, and differentiated identity. That is aligned with their strategic intent. That they can actually implement in a compelling customer experience. By the way, there also exists negative brand equity. For example, BP with the Mexican Gulf oil spill, or when a product gets recalled, or the Volkswagen emission scandal. Most likely, if you try to sell your Volkswagen after that scandal, you would've gotten a lower sales price than before the scandal, because of the negative brand and equity built around it. So why do we need to talk about this? Because our goal is to generate positive, measurable brand equity, that we can tag along to build our offering. For example, a critical situation for brand equity, is when the organization wants to expand into new markets and businesses. If it has a positive brand equity in that specific field, it is more likely that consumers will want to try the products, because of the association with a known brand. Another important topic with brand equity, is that for some organizations, the interrelationship between brands in a portfolio, is so dynamic that it's advisable to track the overall brand equity flow. This includes understanding how much of the corporate, or master brand, is reflected in your product's brand. Whether or not your stakeholders know that brands are in the corporate portfolio, and determine the equity flow, the direction, the volume between brands. Equity flow means the brand share and or transfer equities between them. For example, between GE and each of its business units just like GE turbines. Or volume and direction. How much equity is being shared or transferred? And which brand received the balance of the share of transferred equity? For example, between the Coca-Cola Company and each of its commercial brands, such as Coke, Minute Maid or Fresca, etcetera. The polarity. This one brand send or upshore more than negative or positive equity. For example, between the Heavenly Bed and the Westin Hotels. In our next lesson, we will discuss more in detail, the different module are brand architecture that you can follow for your organization. To decide, you will use the brand equity concept. It will allow you to understand the implications of what to do every time you launch a new product or brand. See you there. [MUSIC]