The issue of brand equity has emerged as one of the most critical areas for marketing management in the 1990s. Despite strong interest in. the subject, however, there is little empirical evidence of how brand value is created and what its precise effects are. This study explores some of the consequences of brand equity. In particular, the authors examine the effect of brand equity on consumer preferences and purchase intentions. For comparative purposes, two sets of brands are tested, one from a service category characterized by fairly high financial and functional risk (hotels), and one from a generally lower risk product category (household cleansers). Each set includes two brands that are objectively similar (based on Consumer Reports ratings), but they have invested markedly different levels of advertising spending over the past decade. Across both categories, the brand with the higher advertising budget yielded substantially higher levels of brand equity. In turn, the brand with the higher equity in each category generated significantly greater preferences and purchase intentions.
