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The Value of Brand
Equity
David A. Aaker

T

hrough the 1960s and early 1970s,
Schlitz beer was a strong numbertwo beer brand supported by the well regarded gusto campaigns, such as the
"You only go around once in life—so grab all the gusto you can." In the mid-1970s,
Schlitz converted to a fermentation process that took four days instead of 12 and substituted corn syrup for barley malt to gain a strategic cost advantage. The result was a beer that became flat or cloudy after time on the store shelf; Schlitz developed an image of being a "green" beer with "cheap" ingredients.
The image problem was compounded when Schlitz began promoting heavily and a competitor, Anheuser-Busch, announced that it would retain premium ingredients. A series of advertising campaigns, including five live taste tests in 1980, could not undo the damage even after company executives decided to return to the original product formula.
The destruction of the perceived quality of Schlitz resulted in sales falling steadily from over 17.8 million barrels in 1974 to 1.8 million in 1984 and a decrease in stock value
(linked to the Schlitz beer business) of $1 billion from 1975 to 1980.
WordPerfect Corp., which entered the word processing arena in 1983, became the industry leader in part by building brand loyalty in two ways. First, it offered customers

an unlimited access, toll-free phone-in user support service, which became one of their points of differentiation. Second, it featured regular product improvements that were always backward compatible.
In contrast, WordStar Corp.—the industry pioneer that dominated word processing as late as 1984—lost its position by turning its back on a loyal customer base. As late as
1987, WordStar was deservedly known as being indifferent to its customers. Clients who called WordStar at their own expense often could not get through or were placed on hold. Perhaps worse, a key follow-on product, WordStar 2000, shipped in late
1984, was incompatible with the original program. Users who were comfortable with
WordStar had to learn a new program, and they could as easily switch to WordPerfect.
While WordStar stock was worth under $10 million in 1990, WordPerfect was estimated to be worth well over $1 billion.

Many companies jealously guard the equity in their brands and continually burnish their brand images.
Yet an equal number virtually ignore the power in their brands.
The author maintains that brand equity generates considerable value for a company and suggests

an

approach to determine this value.

In the late 1970s, the H.J. Heinz Co. bought the Weight Watchers program and the Weight Watchers frozen dinner business for approximately $120 million. In 1989,
Weight Watchers had revenues of $1.3 billion and its operating income was over $100 million. The key was the Weight Watchers name—its associations with professional weight control.
Heinz first improved the quality in its frozen food entree area, upgraded its packag-

DAVID A. AAKER is professor of marketing strategy at the Haas School of Business, University of California

at Berkeley. He is the author of Managing Brand Equity (New York: The Free Press, 1991) and Developing
Business Strategy (New York: John Wiley & Sons, Inc., 1992).

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Why didn't Schlitz managersrealizethatdecisionstoaltertheproduct's ingredients would destroy the equity in the name; why didn't someone step in and protect the brand? ing, and generated new advertising complete with a spokesperson (Lynn Redgrave) and a slogan ("This is living, not dieting"). It then drew upon the power of the brand name to become the market leader in frozen foods and extended the name to over 200 items.
These examples illustrate the potential value of brand equity. Why didn't Schlitz managers realize that the decision to alter their product's ingredients would affect the equity in the name; why didn't someone…