Effects of Brand Equity
In his conceptualization, Aaker (1991) proposes that brand equity creates value for the firm as well as for the customer. This proposition has been well supported. For example, brand equity affects merger and acquisition decision making (Mahajan, Rao, and Srivastava 1994) and stock
market responses (Lane and Jacobson 1995; Simon and Sullivan 1993) and determines the extendability of a brand name (Rangaswamy et al. 1993). It also increases the prob- ability of brand choice, willingness to pay premium prices, marketing communication effectiveness, and brand licensing opportunities, and decreases vulnerability to competitive marketing actions and elastic responses to price increases (Barwise 1993; Farquhar et al. 1991; Keller 1993; Simon and Sullivan 1993; Smith and Park 1992). In summary, from a managerial perspective, brand equity provides sustainable competitive advantages to the firm (Bharadwaj, Varadarajan, and Fahy 1993).