The Dynamic Model And Growth Mechanics Of Brand Equity

Ancient Greece philosopher Heracoly once said"only change is constant". Nowadays, the environment faced by brand operations has become increasingly intensive, making it a critical problem to study the dynamics of brand equity.The thesis used available theoretical tools in the field of business administration. An approach which combined theoretical analysis and empirical study methods with comparative analysis and systematic analysis methods was employed. The main task was to construct a dynamic model of brand equity. And a unique brand analysis tool–analysis matrix of brand equity value growing factors was been proposed. The elements and evolution mechanics of the model was systematically interpreted to analyze the dynamic management policy. In the end, a case study was conducted to validate the theory proposed by this thesis.First, the thesis focused on studying the components and evolution mechanics of brand equity dynamic model. The components of brand equity dynamic model are brand environment, recessive brand equity, explicit brand equity, brand policies and brand resources.The logic premise of the model is the changing of environment, the process of which is characterized by short-term equilibrium and break of the environment. Environment includes political and economic environment, technical environment, human environment and industry competition environment. Different brands of a certain industry co-exist in one common brand operation environment, in which they interact intensively with environment and compete fiercely for existence. Their evolution and development follow the basic principle of"winners live and losers die".The essence of recessive brand equity is its dynamic core capacity which includes four factors such as innovation, learning, control and culture. It is the comprehensive effects of these factors that determine the evolution direction of brand equity. Different brands response differently to the changes of environment. The brand whose core competition is above average will employ its innovation ability to predict the change and come up with innovative brand policies to take the lead; use learning ability to detect existing changes, summarize more suitable brand policies and find unsuitable ones; take advantage of control ability to enhance the execution power of eliminating bad policy and implementing good policy, and to coordinate the resource foundation of brand and the change of environment in order to choose appropriate policy; make use of culture factor to synthesize the effects of other three factors and to increase the sensitivity of brand to environmental changes. Through these actions, brands become more adaptive to the environment, acquire competition edges, accumulate explicit brand equity and resources and step into positive circulation. On the opposite, brand whose core competition is below average is weaker in innovation, learning, control and culture ability. Slow and rigid responses to environmental changes and disability in planning and implementing new brand policies result in the decrease of explicit brand equity and resources. The brand will step into negative circulation. It is worth pointing out that a set of different brand policies should be regarded as reference when comparing different brands.Dynamic development of brand equity was constrained by preset conditions of resource, such as a company's entity assets, financial assets, patent, human resource reservation and channel etc. brand operators predicted the developing trend of environment by inspecting its significant changes, and developed most currently suitable brand policy on the basis of resource analysis. The essence of recessive brand equity referred to the decision ability to develop proper policy and the execution ability to implement the policy. Explicit brand equity took its shape by developing and implementing brand policy. This model adopted Keller's definition of explicit brand equity which included three main factors– brand perception, brand attitude and brand image. In this thesis, explicit brand equity were considered as the static reflection of brand to consumers which was the outcome of implementing brand policy. Explicit brand equity would finally be recognized from revenue, profit rate and the loyalty of employees and channels, and further accumulate available resource.The dynamic model of brand equity which was driven by the circulation of environment was impersonal process. It meant that this process was subject to all substantive principles but not the will of human beings. The basic principle was"winners live, and losers die". Like the evolution process of living creatures, the origin and evolution of brand was subject to various objective principles. This was a premise for us to understand the evolution process.However, once these principles were mastered, brand operators would be able to promote the sound development of brand. Special attention should be paid to the facts that the dynamic model of brand equity was an infinite one, which could be either positive or negative to a specific company. The environment was constantly changing and the resource was accumulating. If brand operators could understand this principle and take proper action, they would contribute to the positive circulation of band assets. During each circulation, the enterprise's resource was further accumulated and the explicit and recessive brand equity were increased. On the other hand, if an enterprise could neither adjust to the changing environment nor understand its resource limits, a negative circulation would appear, decreasing its brand equity each time. Meanwhile, brand operating practice could also influence and even change environment. The practice and environment interact to construct a complicated dynamic evolution system.Secondly, a unique brand analysis tool–analysis matrix of brand equity value growing factors was been proposed. And the analysis matrix was employed to analyze the growth mechanics of brand equity as well as the developing routine of a brand.This thesis proposed a unique brand life circle analysis tool–analysis matrix of brand equity value growing factors. The vertical coordination of the matrix was recessive brand equity whose value increased as the axis extended. The horizontal axis of the matrix was explicit brand equity whose value increased as the axis extended. Based on the value, the matrix could be divided into four parts—budding brand domain, potential brand domain, risky brand domain and successful brand domain. This tool could be used to analyze the classic developing routine of different brand and to further interpret the growth mechanics of brand equity. Moreover, the thesis used the basic principles of brand equity dynamic model to study the dynamic management policy of brand equity.The key point of brand equity dynamic management was to understand and master the basis of brand equity. According to the brand equity dynamic model in the third chapter, brand equity were constructed by recessive brand equity and explicit brand equity, and the latter included three main factors-- brand perception, brand attitude and brand image. Based on this theory, this thesis proposed that all brand management decisions, such as advertisement, promotion and price, took effect through the three main factors of explicit brand equity to build and sustain a long-term successful brand. After a brand was introduced to a market, if the changes of environment were not so significant to shake the company's resources, the emphasis of brand management should be placed on strengthening original brand perception, brand attitude and brand image and implementing brand re-enhancing policy to consolidate its development. On the other hand, if the changes of environment were significant enough to influence the basis of brand equity, it was urgent to re-build brand perception, brand attitude and brand image and to implement brand flexible policy to reconstruct the basis of brand equity. In addition, brand extension was an important approach to carry out brand equity management.Finally, this thesis provided four cases Wahaha, Aiduo, Mengniu and Hengshi. Each of their representative brand developing routine was analyzed to validate the dynamic model of brand equity. Main contributions were listed as following:First, systematically studied dynamic mechanics issues of brand equity and creatively proposed brand equity dynamic model. Under fast changing circumstance, there were some urgent problems concerning brand managers, such as the components constructed the dynamic development of brand equity, the interaction mechanics of these components and how to utilize and master the components and their interaction to bring brand to positive circulation. Available study on brand equity mainly focused on the static components, and little had systematically studied on dynamic attributes of brand equity.Secondly, creatively defined brand equity and found deeper meaning of brand equity. Current researches on brand equity were mostly very literal without comprehensive thinking and dynamic insights. For example, Aaker proposed a brand equity model in light of consumer. Although it had an insight into the relationship between brand and consumers, the model had not comprehensively interpreted the dynamic evolution mechanics of brand equity. This thesis held the standpoint that the meaning of brand equity should not only been described by the market value from the light of consumers, but also been described by dynamic core capacity of brand management. The brand of high value equity should have the capacity of managing the competitive advancement at a along time, and adapting to the changing of the environment during the stage. Thus it was important to put focus on the sustained growth of brand equity. This thesis developed two decisive factors of brand equity value growth-- recessive brand equity and explicit brand equity.Thirdly, this thesis proposed a unique brand analysis tool–analysis matrix of brand equity value growing factors. And the analysis matrix was employed to analyze the growth mechanics of brand equity as well as the developing routine of a brand.