What is brand equity and why does it matter? This is a question that many business owners ask themselves. Brand equity is the value of a brand name and the goodwill associated with it. It is what allows businesses to charge more for their products and services than they would if they were selling an identical product under a different name. In this blog post, we will discuss the benefits of building up your company’s brand equity and how you can go about doing so!
Defining brand equity
In business, the term “brand equity” refers to the value of a brand. This value can be calculated in various ways, but it essentially boils down to how much customers are willing to pay for a product or service due to its brand name.
For example, a customer might be willing to pay more for a product with a well-known and trusted brand name than they would for a generic product. Brand equity can thus be seen as a measure of customer loyalty and willingness to invest in a brand.
There are several ways to build brand equity
One is through advertising and marketing, which can create awareness of and interest in a brand.
Another is through providing high-quality products and services that exceed customer expectations.
Finally, strong customer service and support can also help to build brand equity by creating an emotional connection with customers.
By definition, then, brand equity is something that must be earned over time through a consistent commitment to excellence.
What is a brand?
A brand is a name, term, design, symbol, or other feature that distinguishes one seller’s product or service from those of others.
How is a brand created and developed?
Consistency
A brand is created and developed through a variety of methods, but the most important factor is consistency. A business must be committed to excellence in all aspects of its operation in order to build a strong brand. This includes providing high-quality products and services, developing effective advertising and marketing campaigns, and delivering excellent customer service.
Visibility
Another important factor is visibility. A brand must be visible to consumers in order to make an impression. This can be accomplished through a comprehensive marketing strategy that targets the right audience. It’s also important to keep in mind that a brand is more than just a logo or name; it’s the sum total of all the impressions that a customer has about a company.
Authentic
Finally, brands must be authentic. Customers can see through phony marketing ploys and empty promises, so businesses need to be genuine in their approach if they want to build lasting trust with their customers.
The different factors that contribute to brand equity
Anyone who has ever shopped for a car or a pair of jeans knows that not all brands are created equal. Some brands have a loyal following of customers who are willing to pay premium prices, while other brands struggle to find buyers even at heavy discounts. This difference in customer loyalty is known as brand equity.
History, reputation, and loyal customer base
There are many factors that contribute to brand equity, but three of the most important are history, reputation, and customer base.
- A brand with a long history is often seen as more trustworthy than a new brand,
- a brand with a strong reputation can command a premium price.
- Finally, a brand with a large and loyal customer base is much more likely to weather economic downturns and remain successful over the long term.
By understanding the factors that contribute to brand equity, businesses can create strategies for building strong and successful brands.
Components of brand equity
There are four key components to brand equity:
1. Name recognition
The more customers are aware of your brand, the more likely they are to buy from you.
2. Brand image
The image a brand projects is important in shaping customer perceptions.
3. Brand loyalty
Customers who are loyal to a brand are more likely to buy its products than those who are not.
4. Brand equity value
The value of a brand is based on the amount customers are willing to pay for its products and services.
The different types of brand equity
There are three types of brand equity:
1. Passive brand equity
This type of brand equity is based on name recognition and the strength of the brand image.
2. Active brand equity
This type of brand equity is based on customer loyalty and engagement.
3. Strategic brand equity
This type of brand equity is based on the unique strengths of a brand that can be leveraged in the market.
The benefits of strong and positive brand equity
There are many benefits to having a strong brand equity. Some of the most important are as follows:
1. Increased revenue
A well-known and respected brand can charge more for its products and services than a lesser-known brand.
2. Greater market share
A strong brand allows businesses to capture a larger share of the market.
3. Reduced marketing costs and better ROI
Strong brands enjoy lower marketing costs and good return-on-investments (ROI) due to their high levels of name recognition.
4. Enhanced reputation
A strong brand enhances a company’s reputation, which can lead to increased business opportunities.
5. Increased customer loyalty
Loyal clients are more likely to stick with a brand during tough times.
6. Reduced risk
When a company invests in its brand, it reduces the risk of product failure or marketplace turbulence.
How to increase your brand equity
There are many things businesses can do to increase their brand equity, including but not limited to:
- Investing in advertising and marketing that creates awareness and interest in the brand
- Focusing on quality products and services that exceed customer expectations
- Providing excellent customer service and support that creates an emotional connection with customers
- Creating a consistent corporate identity across all channels
- Monitoring consumer feedback and acting on it swiftly
Measuring and managing brand equity
In business, equity is the value of an asset after liabilities are accounted for. For example, a company’s assets might include cash, buildings, and equipment. Its liabilities might include loans, leases, and bonds. The equity would be the value of the assets minus the liabilities.
In other words, it’s what the company is worth if you sold everything and paid off all its debts.
Brand equity is the portion of a company’s equity that can be attributed to its brand name. In other words, it’s the value that a customer assigns to a product or service based on their perceptions of the brand.
Measuring and managing brand equity is essential for any business that wants to create and maintain a strong brand.
There are many ways to measure brand equity, but some common methods include customer surveys, focus groups, and brand tracking studies.
Once you’ve measured your brand equity, you can start working on strategies to improve it.
Some ways to do this include investing in advertising and marketing, developing strong relationships with customers, and creating a unique and memorable brand identity.
By carefully measuring and managing brand equity, you can ensure that your brand is strong now and will continue to succeed.
How to create a strong brand equity for your business
A brand is much more than a logo or a name. It’s the promise you make to your customers about the quality of your products or services.
It’s the emotional connection that people feel with your company.
And it’s the distinguishing factor that sets you apart from your competitors.
So how do you create a strong brand equity for your business?
There are many factors that contribute to brand equity, but some of the most important include clarity, consistency, and commitment.
First, you need to be clear about what your brand stands for. What are your core values? What is your unique selling proposition?
Once you have a clear understanding of your brand, you need to be consistent in everything you do. Your branding should be evident in every aspect of your business, from the way you answer the phone to the design of your website.
Finally, you need to be committed to delivering on your brand promise. If you make a promise to customers that you can’t keep, you will quickly lose their trust – and their business.
Creating strong brand equity requires effort and dedication, but it is well worth it. A strong brand can help you attract and retain customers, differentiate yourself from your competitors, and increase profitability. So if you’re ready to take your business to the next level, start building a strong brand equity today.
Positive or negative effects
Positive effects of a strong brand equity include:
- Increased customer loyalty
- Greater brand awareness
- More sales and profits
Negative effects of a weak brand equity can include:
- Lower prices to compete with rivals
- Difficulty differentiating from competitors
- Poor customer service
The difference between brand equity, brand awareness and brand loyalty
Brand equity is the value of a brand name, while brand awareness is the level of recognition that a brand has.
Brand equity is created through positive associations and perceptions that customers have about a brand. This can be due to the quality of the products or services, the advertising and marketing campaigns, the customer service, or any other factor.
Brand awareness is simply how well a customer knows a brand. It can be measured through surveys or focus groups that ask questions such as “What brands come to mind when you think of ____?” or “What is the name of the company that makes your favorite ___?”
Brand loyalty is when a customer continues to buy a particular brand even if there are cheaper or better alternatives available. It’s often based on emotional connections that customers have with a brand.
The three concepts are related, but they are not the same. Brand equity is what contributes to a company’s overall value, while brand awareness and brand loyalty are parts of creating that equity.
How does Brand Equity Increase Profits?
There are a number of ways in which brand equity can lead to increased profits for a company.
First, a strong brand can help a company attract and retain customers. This leads to increased sales and higher profits.
Second, a strong brand can help a company stand out from its competitors. This can lead to increased market share and higher profits.
Third, a strong brand can help a company charge higher prices for its products or services. This leads to increased profits.
Fourth, a strong brand can increase the value of the company’s equity. This leads to increased profits for shareholders.
Finally, a strong brand provides valuable marketing ammunition that can be used to sell products or services. This leads to increased profits.
How can you measure brand equity?
There are a number of ways to measure brand equity, including surveys, focus groups, and consumer research.
One common way to measure brand equity is to look at the amount of money that a company could earn by selling its brand name.
Another way to measure it is by looking at how much customers are willing to pay for products or services from a particular brand.
How does Customer Experience affect Brand Equity?
Customer experience is one of the most important factors that contribute to brand equity. A positive customer experience leads to positive associations and perceptions of a brand, while a negative customer experience leads to negative associations and perceptions. This can have a significant impact on a company’s profits.
Companies that focus on delivering a great customer experience are more likely to create strong brand equity. They will be able to attract and retain more customers, stand out from their competitors, and charge higher prices. In addition, they will be more likely to increase the value of their equity. This makes customer experience a key factor in creating and maintaining brand equity.
Keller’s customer-based brand equity model
The customer-based brand equity (CBBE) model was developed by Professor Kevin Lane Keller of Dartmouth College. The CBBE model is a way of measuring the strength of a brand. It is based on the idea that a strong brand is one that has a positive relationship with its customers.
The CBBE model consists of three components
- Brand awareness
- Brand association
- Brand loyalty
Brand awareness in the CBBE model
Brand awareness is simply how well a customer knows a brand. It can be measured through surveys or focus groups.
Brand associations in the CBBE model
Brand association is the set of positive and negative associations that customers have with a brand. It includes things such as the quality of the products or services, the advertising and marketing campaigns, the customer service, and any other factor.
Brand loyalty in the CBBE model
Brand loyalty is the degree to which customers are loyal to a brand. It can be measured through surveys or focus groups that ask questions such as “How likely are you to buy another product from this company?” or “Would you recommend this brand to your friends and family?”
Future prediction for profit margins
The CBBE model has been shown to be predictive of a company’s future profit margin. Companies that have high levels of brand awareness, positive associations, and loyalty are more likely to have higher profits than companies that do not.
The CBBE model is a way of thinking about how customers form relationships with brands. It identifies four steps, or questions, that customers go through when engaging with a brand.
These steps are known as the brand building blocks, and each one has a number of sub-dimensions.
The goal is to reach the pinnacle of the pyramid, where customers have a harmonious relationship with the brand. By understanding the CBBE model, businesses can create strong brands that customers will love.
The first step – Who are you?
The first step of the CBBE model is to ensure the correct ‘brand identity’. Answering the first question customers ask about brands – Who are you? – the purpose is to create an identification of the brand, and an association with a specific product class or need (Keller, 2003). The initial step consists of the brand building block, ‘salience’. Salience includes brand awareness and brand image.
It is important to note that brand identity is not only the logo or slogan; it is the sum of all customer touchpoints with a brand.
This means that everything from customer service to packaging to advertising must be aligned with the desired brand identity.
Once the proper brand identity has been established, it can be used to guide all subsequent decisions regarding marketing mix elements such as product, price, place, and promotion.
By taking a strategic and holistic approach to branding, companies can build long-term equity and loyalty among their customer base.
The second step – What are you?
When a customer thinks about a brand, they are essentially trying to answer the question, “What are you?”
In order to establish ‘brand meaning’ in the mind of the customer, businesses need to focus on two brand building blocks – performance and imagery.
Brand performance refers to the actual product or service being delivered – does it meet or exceed customer expectations? Imagery, on the other hand, is all about the emotions evoked by the brand. Do customers feel positive when they think about your brand? How does it make them feel?
By focusing on these two key areas, businesses can start to build a strong and positive association with their brand in the minds of their target customers. And that’s what step two is all about.
The third step – What about you?
After a customer has been exposed to a brand and begins to develop some initial thoughts and feelings about it, the next step is ‘brand response.’
This is when a company tries to elicit the proper customer responses to the brand identification and meaning that has been presented.
This step is achieved with the ‘judgments’ and ‘feelings’ building blocks, and answers the question – What about you?
For example, if a customer sees an ad for a new car and starts to feel excitement and happiness about it, the company’s goal would be to get that customer to take the next step and visit a dealership to test drive the car. If they are successful, then the customer has had a positive brand response.
Keller (2003) outlines this process as essential for companies in today’s competitive marketplace. By understanding how customers interact with brands, companies can ensure that they are meeting customer needs and creating positive brand experiences.
The fourth step – What about you and me?
‘Brand relationships’ constitutes the final step in the CBBE pyramid where brand response is converted to an intense, active loyalty relationship between customers and the brand. Addressing the customer question of – What about you and me? – the final brand building block and the pinnacle of the pyramid is ‘resonance’.
Company examples with positive brand equity
When most people think of brand equity, they think of big-name companies with huge advertising budgets.
However, there are many other brands that have high equity, even if they don’t have the same household name recognition. For example, small businesses often have high levels of brand equity because their customers feel a personal connection to the company.
Similarly, luxury brands also have high brand equity because they are associated with quality and exclusivity. Even though these brands may not have the same widespread name recognition as some of the bigger companies, they still have a strong emotional connection with their customers.
Some well-known brands that have high levels of brand equity include Apple, Coca-Cola, Nike, and Mercedes-Benz. All of these brands have built up a tremendous amount of trust and goodwill among their customers, which has resulted in strong loyalty and high profits.
- Apple is a prime example of a company that has successfully created a strong brand identity and meaning. The company’s focus on design, innovation, and customer service has resulted in a loyal fan base that is willing to pay a premium for its products.
- Coca-Cola is another iconic brand that has built up a massive following around the world. The company’s secret recipe and unique branding has resulted in billions of dollars in sales each year.
- Nike is known for its innovative marketing and sports products. The company’s focus on quality and durability has earned it a reputation as one of the leading brands in the world.
- Mercedes-Benz is a luxury car manufacturer that has been around for over 100 years. The company’s commitment to quality and innovation has made it one of the most respected brands in the automotive industry.
Company examples with negative brand equity
Examples of companies with negative brand equity include Sears, Kodak, and BlackBerry. All of these brands have seen their fortunes decline in recent years as they have failed to keep up with the competition.
- Sears is a retail chain that has been in business for over 100 years. However, the company has been struggling in recent years as it has failed to keep up with online retailers like Amazon.
- Kodak was once the leading manufacturer of cameras and film. However, the company was unable to adapt to the digital age and filed for bankruptcy in 2012.
- BlackBerry was once a leading player in the smartphone market, but its market share has dwindled in recent years as competitors like Apple and Samsung have taken over.
The future of brand equity
The future of brand equity is uncertain, but it is clear that companies that can create strong relationships with their customers will be more successful in the long run. Brands that are able to build up a strong emotional connection with their customers will be more resilient to competition and recessionary environments.
Conclusion
Brand equity is an important consideration for any business. By understanding what contributes to brand equity, businesses can measure and manage their brands more effectively. Creating a strong brand equity takes time and effort, but the payoff can be significant. There are many examples of businesses with high equity, thanks to a combination of factors such as a clear vision, consistent messaging, and effective marketing. If you’re looking to increase brand awareness and create a powerful brand identity for your business, read How to Increase Brand Awareness: Full Guide & Strategy on how to do just that. Thanks for reading!