Brand equity is your company's value based on how consumers perceive and recognize your brand. The idea is that more well-known brands can outperform all others simply because buyers know and trust them.
But what is brand equity exactly? This article will define the term, discuss its moving elements and value, and look into ways of measuring it. We’ll also share some tips on how to create brand equity and examples of the most popular brand equity.
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What Is Brand Equity?
In simple terms, brand equity is the value of your brand. It refers to assets and liabilities associated with your brand and how your consumers perceive your products or services, which can increase or decrease. Hence, we have positive and negative brand equity.
Positive vs. Negative Brand Equity
Positive brand equity simply means that customers are willing to pay more for your product even though there are cheaper alternatives. Having positive brand equity allows you to position your services higher and make your enterprise stand out in a crowd of competitors. This is the premium value your business gains through having a recognizable name.
Positive brand equity is built on trust. The Institute of Consumer Service found that 81% of consumers believe trust is an important factor in their buying decisions, while 95% are more likely to stick with a brand they trust. Hence, a brand’s cultural value varies over time according to public opinion and information. This can build up or die down depending on how you communicate with your target audiences.
However, if that communication is damaging, it results in negative brand equity. This happens when a brand constantly betrays the trust of its customers, which is why they stop buying and recommending it.
Benefits of Developing Brand Equity
Brand equity is a valuable step for your business to grow and stand out from the competition. Aside from these benefits, it also:
- Increases your market share
- Improves your brand value in the industry
- Builds trust and gains loyal customers
- Lowers price sensitivity, letting you charge more for your products and services than the average market price
- Allows you to launch and market a new product line more easily
- Helps attain sustained revenue and longer tenure for your employees
- Builds resilience toward market fluctuations
- Attracts new clients
- Convinces people to switch to your brand from another
- Inspires positive feedback from consumers
- Sets you up for long-term success
- Builds greater brand recognition
- Helps advance your bottom line and profit margin
Most importantly, strong brand equity is an asset that can be leased, sold, or licensed, helping you root into the industry. It is a solid indicator of your enterprise’s strength and performance, especially compared with competitors.
Elements of Brand Equity
Brand equity is made up of 5 key elements:
- Brand Awareness
- Brand Association
- Brand Perception
- Brand Loyalty
- Proprietary Assets
1. Brand Awareness
Brand awareness is how widespread your brand is and who knows it. Together with brand affinity, it helps marketing specialists find the right audiences through advertising campaigns and increase brand visibility.
The higher the brand awareness, the more positive brand equity you have, as awareness also reflects people’s familiarity with your business. A common example of effective brand awareness is a logo, icon, or tagline being associated easily with a company. For instance, what comes first to mind when we say, “Just do it”?
2. Brand Association
Brand association refers to the mental image customers get when they think about your brand. It helps them identify and set you apart from the competition. A good brand association results in repeat purchases and supports your company through word-of-mouth marketing.
3. Brand Perception
Brand perception pertains to how consumers think of your brand. For buyers, it’s usually associated with quality and price. However, for businesses and marketers, these two are connected.
Quality perception impacts the company’s pricing decision. If you manufacture and provide exceptional quality products, you have the luxury to put a premium price tag on your offers. A recent study pointed out that people are more likely to purchase a product if they believe the quality is better.
4. Brand Loyalty
When customers keep coming back to your brand instead of choosing other market alternatives, you’ve achieved brand loyalty. This leads to repeat sales and helps you cut down on advertising costs, as your customers become your brand ambassadors.
Customer loyalty also makes it easier for your business to introduce new product offers targeting the same consumer base. Moreover, loyalty decreases the likelihood of customers switching to a competitor brand, adding more value to your brand name.
5. Proprietary Assets
Proprietary assets are the aspects that set your brand apart. It can be a logo, trademark, patent, collaboration, etc. The more you build on them, the more recognition your brand gets i.e. the higher your brand equity.
How To Build Brand Equity?
Building a positive and persuasive brand equity helps you reach wider audiences and increases sales and profits, among other things we discussed above. So how do you do it?
Here are four proven strategies to develop a long-term brand equity model:
- Build Brand Awareness
- Communicate Brand Meaning to Your Customers
- Create a Positive Brand Response
- Foster Meaningful Relationships With Your Customers
1. Build Brand Awareness
The first step in developing brand equity is building brand awareness and a strong brand identity. This will:
- Make your brand more visible to customers and search engines
- Help improve your brand perception
- Build trust and credibility
- Facilitate lead generation
- Drive traffic to your website
- Increase sales
- Boost word-of-mouth marketing
To improve brand awareness, develop and consistently use a brand name, logo, slogan, and other visual and textual elements that distinguish it from the competition. Your brand identity should be unique, memorable, and reflective of your company's values, personality, and mission.
2. Communicate Brand Meaning to Your Customers
The second step of building brand equity is to develop a strong brand meaning. This is how your consumers perceive and feel about your brand and what they associate with it.
One way to build a strong brand is to consider how well your product meets customers' needs. For example, making eco-friendly products committed to environmental sustainability will attract customers who share the same values. Since buyers connect more with companies that align with their personal beliefs, they’re more likely to understand your brand values without you outright saying it.
3. Create a Positive Brand Response
The third step is to create a positive brand response from your target audience. To achieve this, make sure you provide a satisfying user experience across all digital and physical touchpoints, such as your website, social media channels, customer service, product packaging, and other brand interactions.
You need to create a consistent and positive brand experience that builds customer trust and loyalty, thus creating a positive response. After all, satisfied customers will spread the word and thus become the best advocates of your brand.
4. Foster Meaningful Relationships With Your Customers
The final step is to establish brand resonance — the ultimate goal when building brand equity. Brand resonance is the relationship consumers have with your brand, such as a strong attachment, loyalty, or advocacy.
To achieve brand resonance, create a deep emotional connection with your customers and consistently deliver on your brand promise. This can lead to brand loyalty, positive word-of-mouth, and ultimately, increased sales and profit.
How To Measure Brand Equity?
Measuring brand equity is essential to gain insight into your brand's reputation, market presence, and progress over time. There are two types of approaches to brand equity data measurement:
Operational Data (Economical Measurements)
The economic approach to brand equity measurement is based on numerical values, such as financial and human resources data. Since these values fluctuate over time, they should be measured repeatedly. This approach provides reliable information about brand performance and predictions based on past recurring patterns.
Qualitative metrics offering operational data are:
- Website and social media traction: This is derived from and monitored via built-in or third-party analytics and insights on how many people visit your business page and social sites. It also covers how many online users talk about your brand.
- Surveys and focus evaluation groups: This involves openly asking people’s opinions to regularly track changes to your overall brand health.
- Product value: This determines the strength of your brand equity based on buyers’ preference for your brand despite factors such as a higher price and potentially low availability.
- Brand audit: This is a comprehensive assessment of your positioning in the market. Auditing also allows you to look into your business strengths and weaknesses.
In summary, the economical method offers relevant and accurate insights into your brand’s past results and is easier to measure than sentiment toward the brand. However, it cannot predict future events. This is where emotional measurements take over.
Experience Data (Emotional Measurements)
The emotional approach explains decisions made based on people's sentiments toward your brand. Brands that invest in customers' emotional attachment gain an advantage over their competition — customers are willing to buy their products even if they are more expensive.
This is because the customer identifies with the brand and ties their self-image to the values it promotes. For example, people who purchase high-end brands might consider themselves elite and thus, help their self-esteem.
The quantitative metrics that provide experience data are:
- Brand visibility and recognition: How easily your brand comes to a customer’s mind when a need arises.
- Brand value associations: The positive or negative feelings evoked when a customer is reminded of your brand name.
- Brand differentiation: How customers distinguish your brand from the rest and describe your offers relative to similar products of another company.
- Customer loyalty: Consumers’ commitment to your brand based on availability and pricing.
- Purchasing frequency: The number of times a customer buys from you within a specified period, for example, in a month.
To correctly measure brand equity, consider both operational and experience data metrics. This gives you a complete picture of your brand's equity and performance.
5 Brand Equity Examples
Now that you know what brand equity is, how to build brand equity, and what its benefits are, let’s view this term in a more practical way. Below we listed 5 brand equity examples of some of the most popular companies worldwide:
1. Apple
Apple is an excellent example of positive brand equity. Currently, it is one of the most valuable brands that have all the elements of brand equity — customer loyalty, awareness, association by logo with an everyday object, quality perception, and assets only they provide (in terms of quality and closed ecosystem).
It started with Mac computers but soon spread out to other digital products, such as iPhones, iPads, and AirPods. Thanks to its quality, it kept customer trust and loyalty, resulting in higher prices — that the public is still willing to pay.
Today, Apple is considered a premium, luxury, and avant-garde label because of its unparalleled technology that never fails to deliver and amaze.
2. Starbucks
Do you know anyone who doesn’t know Starbucks? With its presence in nearly every country worldwide, this coffee giant has become synonymous with relaxation and quality coffee. Its reputation for consumer trust and outstanding client service has empowered Starbucks to sell coffee at a premium price.
This success has also enabled the brand to expand into retail spaces and collaborate with other companies across the globe. Today, Starbucks is one of the largest distributors of Arabica coffee beans and specialty coffees.
3. Tylenol
This list wouldn’t be complete without mentioning Tylenol. Although many similar products are on the market, Tylenol is the leading pain relief medicine consumers trust the most.
Manufactured since 1955, Tylenol has built its brand equity for decades. It went above and beyond the basic version, and now offers many other related products for different health issues and age groups, such as Children’s and Infant Tylenol, Headache and Muscle Pain, Arthritis Pain, Sleeplessness, and more.
4. Porsche
Porsche is another excellent example of brand equity. The luxury car brand is known for its superior quality, use of unique materials, and superb vehicle design.
According to US News and World Report, Porche ranked as the 3rd best luxury car brand for 2023. For decades, the company’s goal has been to instill a feeling of desire and exclusivity among consumers. Now, owning a Porsche means having luxury and a high status.
5. Tesla
Another great example is Tesla. What’s interesting about this automaker is that it also managed to create negative brand equity in 2020 due to reports that the company mistreated its factory workers and had poor working conditions. To add to this, there have been several failed recalls of Tesla vehicles due to glitches.
And yet, Tesla remains one of the pioneers in self-driving car technology, even attracting a devoted following. This is thanks to the many years Tesla spent building a brand, spreading awareness, and increasing loyalty.
What Is Brand Equity Takeaways
Brand equity represents the overall value of your enterprise. It consists of these elements:
- Consumer awareness of your products and services (brand awareness)
- How people associate their needs with your offers (brand association)
- The way they see your brand, whether positively or negatively (brand perception)
- Customers’ conscious decision to buy from you or employ your services (brand loyalty)
- Things that set you apart (proprietary assets)
Brand equity helps shape your marketing projects and influences your long-term competitive advantage. You can track your brand equity through quantitative and qualitative metrics to strengthen your business in the face of changing economic trends.
Brand Equity FAQs
What drives brand equity?
Brand equity is driven by consumer factors such as strong brand awareness, positive associations, perceived quality, consumer loyalty, and unique brand differentiation. Simply put, these are all the things that make a brand stand out and memorable to buyers, so they return to it.
What factors affect brand equity?
Brand equity has 5 elements that affect it:
- Brand awareness – how many people know the company
- Customer loyalty – how many people continuously return
- Brand association – what people associate the brand with, whether good or bad
- Brand perception – how people perceive the brand (is it trustworthy; is it offering quality services?)
- Proprietary assets – what sets your brand apart
Of course, there can be other factors that affect brand equity such as marketing efforts, which can help spread awareness about the brand, and competitive positioning.
Can brand equity increase profits?
Yes, brand equity can increase profits. By fostering trust and offering quality services, businesses can gain more customer loyalty, allowing them to, in time, increase prices. This inevitably leads to more profit and even new customers.