Marketing assets: Relating brand equity and customer equity

Abstract

Purpose: Brand equity and customer equity are inextricably linked. Some authors propose that marketing activities build these intangible assets simultaneously. In contrast, others suggest that brand equity is an antecedent of customer equity. In this research, we aim to shed light about the relationship between brand equity and customer equity, by empirically testing these two alternative explanations. Design/methodology/approach: We propose four research models that reflect these two alternatives explanations regarding the link between brand equity and customer equity. In order to estimate these models we employ Structural Equations Modelling. We measure model variables using data collected through a survey to marketing managers of services companies that operate in Spain. We compare these four research models in terms of explanatory power and goodness of fit. Findings: Our results indicate that the models that correspond to the simultaneity approach have a higher explanatory power and goodness of fit than the models that suggest that brand equity is an antecedent of customer equity, thus supporting that these intangible assets are built by marketing activities at the same time. Research limitations/implications: Our results recommend caution when interpreting previous research about the effects of brand (customer) equity, as they might indeed correspond to customer (brand) management. Similarly, future research focusing on customer and brand management need to take into account both managerial areas in their studies. Practical implications: From a practitioners’ point of view, our findings suggest adopting a brand-customer portfolio approach to enhance company profitability. Similarly, we derive implications for firm valuation processes, which incorporate brand equity and customer equity in their calculations. Originality/value: We empirically study the relationship between brand equity and customer equity, while previous research has analyzed this topic only at a theoretical level. Clarifying this link enriches our comprehension about how companies build these marketing intangible assets and increases the accuracy of firm valuation processes.