What is brand equity and how to measure it?

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Brand equity is an important concept for businesses to understand and measure. It essentially refers to the value of a brand, and can be used to help inform marketing and strategic decisions. There are also a number of ways to measure it, which we will explore in this article, as well as:

 

1. What is brand equity

2. What factors affect brand equity?

3. What’s the difference between brand equity and brand value?

4. How to measure brand equity?

5. What are the benefits of having strong brand equity?

6. Examples of companies with strong brand equity

7. How can businesses build brand equity?

 

But first, let’s define the concept in more detail.

1. What is brand equity?

Brand equity is the value of a brand. It is the difference between what a customer is willing to pay for a product with that brand name versus a generic version of the same product. In other words, brand equity represents the strength of the relationship between a customer and a brand. This relationship is built over time and is based on factors such as quality, reputation, and customer service.

A high level of equity can result in increased sales and market share, as well as higher prices. Because of this, it’s an important consideration for any business that relies on branding to generate sales.

Ultimately, brand equity represents the brand’s ability to bring value to a business. Increasing the equity of your brand can be a challenge, but it is essential for businesses that want to build long-term relationships and encourage repeat purchases with their existing customers.

Building positive brand equity

positive-brand-equity

Positive brand equity can come from a variety of factors, including a positive reputation, a strong emotional connection to the brand, and/or a long history of positive customer experiences. 

Regardless of the specific reason, brands with positive equity are able to charge a price premium, increase sales and build a loyal customer base.

Avoiding negative brand equity

negative-brand-equity

This occurs when a company’s branding actually turns off potential customers. In some cases, negative brand equity can be the result of poor customer service or a series of PR blunders.

In other cases, it may simply be due to the fact that a company’s products are perceived to be inferior to those of its competitors. Whatever the cause, this can be very costly for a company, and it is something that all businesses should strive to avoid.

2. What factors affect brand equity?

brand-awareness
Brand Awareness:

How easily customers can recognize and remember the brand. If consumers are not aware of a brand, then it will have little to no value.

Brand Image:

The positive associations that customers have with the brand, such as feeling that the brand is trustworthy or high quality. If a brand is associated with positive attributes, then it will have higher brand equity.

Perceived Quality:

How customers perceive the brand in terms of its value, desirability and whether it is a reputable brand. Also, if a brand is associated with other high-quality brands, then it will also have greater perceived quality and higher equity.

Brand Loyalty:

The strength of the customer’s commitment to the brand, and it’s what keeps customers coming back time and again.

All of these factors play a role in determining the value of a brand.

brand-loyalty

3. What is the difference between brand equity and brand value?

what's-the-difference

Brand equity and brand value are often used interchangeably, but they are two distinct concepts.

Brand equity is the value of a brand, while brand value is the financial worth of a brand. In other words, brand equity represents the strength of the relationship between a customer and a brand, while brand value represents the actual monetary worth of that brand.

While brand values can be measured objectively (by looking at factors such as sales, market share, and profitability), brand equity is more subjective and can be harder to quantify. Nevertheless, both concepts are important for businesses to understand as they strive to build strong relationships with their customers.

4. How to measure brand equity?

There are a number of ways to determine the equity of your brand.

financial-metrics
Financial metrics:

Financial metrics such as brand value or market share, can provide a snapshot of a brand’s overall worth. Another way to measure the equity of your brand is to look at sales data. This can include looking at market share, revenue growth, and profitability. Sales data can give businesses a good idea of how well their brand is performing in the marketplace.

Brand tracking surveys:

But brand equity is about more than just money – it’s also about consumer perception and emotions. So, brand tracking surveys are another useful way to measure it.

These surveys track how customers feel about a brand, and can provide valuable insights into how to improve the brand. Surveys can ask customers about their brand awareness, brand image, brand loyalty, and other factors that affect brand equity.

Additionally, these surveys can be used to track changes in equity over time. This information is valuable for making strategic decisions about marketing and branding initiatives.

By regularly conducting brand tracking surveys, companies can stay on top of their brand equity and make sure that their brand remains strong and competitive.

brand-tracking-surveys
Focus groups:
financial-metrics

Focus groups are a popular research method used to measure brand equity. In a focus group, a moderator leads a discussion with a small group of people about a particular topic.

A brand’s equity is often measured by asking participants about their thoughts and feelings towards a brand, and whether they would recommend it to others.

Groups can be an effective way to measure the equity of a brand, as they allow for in-depth discussions and provide insight into consumer perception of a brand.

However, groups are also subject to biases, such as social desirability bias, and may not be representative of the general population. As such, they should be used in conjunction with other research methods to provide a more comprehensive picture of your equity.

Social media monitoring:

Social media monitoring can also be a useful tool. By tracking how often a brand is mentioned online and what kinds of things are said about it, companies can get an idea of how strong the equity of their brand is.

Social media monitoring can also help to identify negative sentiment and potential crises before they cause serious damage to the brand. As such, it is an important tool for any company looking to protect and improve its brand equity.

Measuring equity is important for businesses because it can help inform marketing and strategic decisions. By understanding the value of their brand, businesses can make decisions about how to allocate resources in order to maximise the return on investment.

social-media-monitoring

5. What are the benefits of having strong brand equity?

Strong brand equity provide a number of benefits to your business.

 

Increase Brand Salience:

When customers have a positive association with a brand, they are more likely to think of that brand when they need a product or service that the brand offers. This can lead to increased sales and market share for the brand.

 

Improve Customer Loyalty:

If your equity is high, it can lead to increased customer loyalty. Customers who have a strong emotional connection to a brand are less likely to switch to a competitor, even if that competitor offers lower prices or better quality products. This loyalty can translate into long-term customer relationships and repeat business.

 

Weathering the Storm:

Brand equity can help businesses weather difficult times. For example, if there is an economic downturn, customers with strong brand loyalty are more likely to continue to purchase from the brand, even if they have to make cutbacks in other areas of their lives. This can help businesses to maintain revenue and profitability during difficult periods.

 

Attract New Customers:

Having a high level of brand equity can also help businesses to attract new customers. Customers are more likely to try a brand that they have heard good things about and that they think will meet their needs. Therefore, having high brand equity can lead to increased sales and market share for a business.

6. Examples of companies with strong brand equity

There are many companies with strong brand equity. Three notable examples are Apple, Nike, and Mercedes-Benz.

Apple

Apple-logo

Apple has built up high brand equity over the years. Its brand is synonymous with quality and innovation, and it has a loyal following of customers who are willing to pay a premium for its products.

This has been built up through a combination of factors, including strong product design, effective marketing, and a consistent brand image.

As a result, Apple enjoys a high level of brand awareness and brand loyalty, which gives it a significant competitive advantage.

Nike is one of the most valuable brands in the world. In 2022, it was ranked as the most valuable apparel brand in the world by Brand Finance.

Nike has high brand equity, which means that it has a high degree of customer loyalty and name recognition. Consumers are willing to pay more for Nike products because they trust the brand and believe that its products are of high quality.

Nike’s equity has been built up over many years through its investment in marketing and sponsorship. This has allowed Nike to create strong brand associations with positive values such as fitness, sports, and success. As a result, Nike is able to charge more money for its products and command a large share of the market.

Nike

Mercedes-Benz

Mercedes-Benz is a brand with high brand equity. It enjoys high levels of brand awareness and brand loyalty, and is consistently ranked as one of the most valuable brands in the world.

Part of the reason for Mercedes-Benz’s success is its focus on quality and luxury. The brand is synonymous with quality engineering and design, and its cars are some of the most coveted in the world.

Mercedes-Benz also has a long history of innovation, being the first to market with technologies like ABS brakes and airbags. This commitment to innovation has helped to keep the brand at the forefront of the automotive industry, and ensures that it will continue to be one of the world’s most successful brands for years to come.

7. How can businesses build brand equity?

customer-service
a. Excellent Customer service:

Great customer service is essential for building the equity of your brand. When customers have a positive experience with a brand, they are more likely to become loyal fans and evangelists. On the other hand, poor customer service can damage equity and cost a company dearly in terms of lost business and reputation.

There are a number of ways to deliver excellent customer service. First and foremost, it is important to be responsive to customer inquiries and complaints. This means having a dedicated customer service team that is available to help customers 24/7. It is also important to go above and beyond for customers whenever possible. This could involve offering valuable bonuses or discounts, or simply going out of your way to solve a problem.

By delivering great customer service, businesses can improve equity and build lasting relationships with their customers.

b. Focus on quality:

A brand that consistently delivers high-quality products or services will soon develop a reputation for excellence.

When consumers see that you are constantly improving the quality of your products or services, they will be more likely to remain loyal to your brand. Improving quality can also allow the company to charge a premium price.

In addition, customers who are satisfied with the quality of your products or services are more likely to recommend your brand to others.

c. Invest in marketing and advertising:

Marketing helps to create awareness of the brand and build positive perceptions. Advertising helps to reinforce the brand message and increase brand recall.

Additionally, companies can use marketing and advertising to differentiate their brand from competitors. This can also lead to higher brand equity, as consumers are more likely to remember and prefer brands that are distinct.

By investing in these activities, companies can improve their equity and charge a higher price for their products or services.

d. Maintain a consistent brand identity:

This is essential for ensuring that consumers have a positive association with your brand and continue to purchase your products or services. A consistent brand identity includes using the same logo, colors, fonts, and overall design aesthetic across all marketing materials, both online and offline. It also means using the same tone of voice and messaging across all channels. By doing this, you will create brand equity by building a strong and recognizable brand that customers can trust.

 
e. Stay relevant to consumers:

In a world where consumers have more choice than ever before, brand relevance is more important than ever. A brand that is relevant to its customers is one that resonates with them on a personal level, offering products or services that meet their needs and desires. Relevant brands are also those that are able to keep up with the latest trends and changes in the marketplace, ensuring that they remain relevant to their target customers.

There are many ways in which a brand can become irrelevant to consumers. For example, if a brand fails to keep up with the latest trends, it risks becoming out-of-touch and dated. Similarly, if a brand neglects to constantly evolve and innovate, it runs the risk of becoming stagnant and losing the attention of its target market. Brand irrelevance can also be caused by a failure to connect with consumers on an emotional level, resulting in a disconnect between the brand and its customer base.

 

Ultimately, brand relevance is essential for any brand that wants to remain competitive in today’s marketplace. Consumers are increasingly looking for brands that they can relate to on a personal level, and those that fail to meet this need will quickly find themselves being left behind.

Final thoughts...

Many businesses invest time and money into brand equity without really understanding what it is or how to measure it. Yet it is essential in today’s competitive marketplace and ensuring your company’s success. So where should you start?

A great place to begin assessing your brand equity is by measuring your brand awareness and brand loyalty. Both of these metrics can be measured through consumer research and surveys. You can also look at the equity of your brand from a financial perspective. This can be done by looking at things like market share or profitability.

No matter which approach you take, measuring the equity of your brand is essential for any business that wants to stay competitive in today’s marketplace. By taking the time to understand your brand’s equity, you can make sure that your marketing efforts are focused on the right things and that your business is positioned for success.

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