Leveraging Brand Equity: A Life Cycle Approach To Sharing Economic Rents

Abstract

Traditionally the owner of an asset collects the economic rents generated by that asset. However, in this paper we recognize that there are situations where it is optimal for the owner of the asset to share the rents with others. Specifically we consider brands and identify situations where it is optimal for brand owners to share rents with the distribution channel (intermediaries). The basic notion is that the intermediaries frequently can take action that enhance or maintain brand equity or sales, and consequently increase the rent generated. Sharing rents can be used to influence intermediaries behavior, and as such rents subsidize promotional strategies. In this paper we use a brand life cycle perspective to examine when the use of rents is useful to enact the optimal mix and intensity of 'pull' (manufacturer) and 'push' (distribution channel) promotional strategies.