What is Brand Equity? How to Build & Measure Brand Equity?

What is Brand Equity? How to Build & Measure Brand Equity?

Brand equity is a critical part of building your business. If your company has successfully created one, you will see how essential it is to get your brand to compete with others of the same sector or industry. However, to build possible brand equity requires a whole development process and enduring effort. And as a business owner, one of your objectives is to evaluate your brand to a competitive position.

In this article, we’ll get you through the basic concept of brand equity and its importance, and give you guidelines on how you can build and measure your brand equity. Let’s get started.

Table of content

What is brand equity? - Brand equity definition

Brand equity can be defined as the total value generated by a company’s product with a memorable name compared to other common equivalents. Brand equity can be created by making your products recognizable with great quality and authenticity via advertising or marketing. It also reflects how customers perceive and behave towards your brand and products. Moreover, this value can be used to assess and record market prices, profitability, shares, demand.

Brand equity components

Brand equity components
Brand equity components

There are three main components of brand equity: brand perception, positive and negative effects, and value.

Brand-perceiving consumer catalysts

Consumers and not companies themselves conduct brand perception. Brand perception is how consumers see a product, experience it, and examine its value. In other words, the consumer segment is powerful enough to impact a company’s overall image. Positive brand equity will benefit the company both organizationally and financially, while negative brand equity holds the opposite effect.

Positive and negative effects

As mentioned above, these positive and negative effects result from consumers’ perception of the brand’s products and services.

Positive brand equity benefits companies in several ways, with the most visible one being the financial benefit that companies can sell at a premium price. Great brand equity can also set a solid premise for future company extensions and expansions, as customer loyalty and retention are acquired to guarantee the “repetitive consuming behavior” no matter what product is introduced. Therefore, it results in a sales increase and cost decrease, for example, there will be no need for awareness promotions, and marketing budgets will be more wisely invested.

Take Apple as an example. Although Apple’s products are similar in attributes and features than other brands, the company still comes the highest in the tech industry in terms of demand, customer loyalty and retention, and price premium.

For instance, many of those who own an iPhone also bought an iPad, iPod, or Apple Watch not just for synchronization but for the trust in the product quality. And for Apple, the marketing effort on new product launches is minimized as the audience always remains curious about whatever Apple products are introduced, indicating the brand equity being undefeatable in the game.

On the contrary, one misstep can leave a detrimental impact on the brand’s development and the company’s finance, which will conclusively result in negative brand equity. One of the most unforgettable cases was the unfortunate incident of United Airlines in 2017 when they decided to force one passenger off a plane because the plane was overbooked.

Overbooking happens daily - the thing that matters is how the authorities delicately handle the situation to please the passengers while guaranteeing the safety and promised outcome. However, the CEO decided to send his employees the wrong signal, which aggravated the whole situation. Instead of taking the blame and making apologies to the victim, United Airlines insisted that they acted correctly and even blamed the victim. And as a result, the incident got United Airlines’ stocks to decrease 1 billion dollars.

Value

What the brand provides to its organization or products and services, whether positive or negative, is tangible or intangible. The tangible value generated from good brand equity can be an increase in revenues or price premiums, while the intangible value can be consumer awareness or goodwill.

The effects of brand equity on profit margins

When consumers qualify your products, they will perceive your products as more valuable than those of your competitors, which will increase their level of willingness to pay. Companies can take advantage of this buying behavior to charge a higher price than competitors for a specific product. Positive brand equity can increase a higher profit margin per consumer.

Consumers tend to place themselves in brands with great reputations. As most of the product-selling costs are fixed, higher sales volumes will generate higher profit margins. In other words, positive brand equity guarantees a high level of consumer loyalty and retention for a potential increase in sales and profits.

How to build your brand equity

How to build brand equity
How to build brand equity

Brand equity is the value of your brand for your company, based on the premise that a well-known brand is more popular than a generic counterpart. It focuses on the customer’s experience: consumers may continue to buy what they know and trust. If a brand is known and respected to the extent where the consumer knows it and feels a deep psychological connection with it, your brand equity is just as important. The following are some steps to build your brand equity.

Build greater brand awareness

When customers shop for products or services, you must ensure that your customers know your brand name and perceive it as your guidance. Traditional, proven methodologies can increase your value for consumers and local affiliates using your brand building on a national scale. Brand awareness can be engaged in several methods. The most strategic approaches are to enhance your brand position, tell your brand story, improve branding consistency, and utilize feedback to deliver your brand message more effectively.

Identify your brand’s meaning and value

The subtle rule to keep your brand alive is to identify and maintain the benefits your brand can bring to the market. That means to estimate how well your products can satisfy the market’s needs and what they can contribute to your customers emotionally. Customers who hold those values and who are enthusiastic supporters will be drawn to a business that produces valuable goods and contributes to social or environmental responsibility.

Keep customer positive

When consumers feel connected to your product, they will become more loyal customers and spread the word. It is necessary to preserve the integrity of all of these things, assessing the reputation, ability, consistency, relevance to necessities, and supremacy of the brand. Positive feelings can be arousal, pleasure, gratitude, comfort, self-confidence.

The real winner brand is the one that can keep these feelings alive for the longest period. Take the iPad as an example. Who would imagine it would become an indispensable part of the modern lifestyle if not knowing about its convenience and excellent capabilities? It has now integrated many services into one device and has replaced our computer, TV, mobile banking, or game console.

Engage strong customer loyalty

This is the toughest aspect of brand equity to achieve, but once succeeded, your brand will be evaluated to a whole new level. When customers have developed a psychological connection with your brand, they will feel the urge for retention and purchase again. They will feel like being a part of your brand’s community and willing to promote your products in conversations on Twitter, Facebook and Instagram, forums, and even activities as your brand ambassadors. Brand equity relationships that restrict the evangelism of customers are worthwhile.

How to measure brand equity

How to measure brand equity
How to measure brand equity

Brand awareness metrics

Getting your customers to know about your brand is one step toward achieving brand equity. But it’s even better that your customers can’t stop brooding about your products in their daily conversion decision, with the conversion share being the leading indicator. There are several methodologies to measure brand awareness among your target groups, but the most popular in use are surveys, web traffic, the search volume of the brand, and mentions or reviews on social media platforms.

Preference Metrics

Consumer preference is one of the essential elements deciding the final purchase behavior - whether a consumer spends extra money on more services. It can be measured through specific groups’ behavior, sales data, or surveys. The measurements must indicate how your customers respond to your specific values, how you can provide products and services to your target market, how your brand forms emotional connections with customers, and how willing your customers are to pay for your services.

Strength metrics

The strength of your brand is presented in how it can adapt to the changing market and customers. Measuring brand strength should be done regularly or periodically and tracked through accessibility, brand awareness, retention, or licensing potential.

The social network has created a great place for businesses to track and quantify brand awareness through interaction, reach, and influence. Using such measures to show the brand’s strength to endorse positive financial measures or convey that positive financial metrics will come in time based on the increasing strength of the brand.

Financial Metrics

The financial metrics relating to brand equity are directly related to sales efficiency. Increasing these metrics is likely to move your revenue and financial value as well. Brand equity is measured through relevant financial aspects, including the price premium on competition, price of average transaction volume, customer’s lifetime value, and level of sustainability.

Output Metrics

The output is a measure of marketing operation that calculates the marketing assets published to the public. Outputs explore how often marketing materials are published, and the form of commodity provided to the marketplace. It can also be measured by the effect of your branded products on local markets.

Brand equity is influenced by local action because assets that a local store owner does not use cannot impact sales. Similarly, low-quality production can have significant negative effects on your brand stock. There are four ways in which you can translate your assets into an actual output that shows your support to the local marketer, utilizes assets, lower prices for promoted products, and engages customers with loyalty programs.

Local Perception Metrics

There is value in thinking of locals as consumers for distributed brand management teams. All your local officials impact your brand equity measure in which local ads and consumer service form perception, public preference, and financial practices. Those factors influence the quality of your product brand and your reputation among local customers. Distributors who aren’t fond enough of your products portray a lower probability of successfully selling your products to final customers.

Your local channels directly influence the way your consumers view your brand. You will also understand how the brand value increases or decreases and improve the consistency of your help to locals by monitoring local marketers’ sentiments. There are some information and statistics you can take as a reference to your local perception, such as survey analytics, focused group data, software adoption rates, or campaign formation rates.

Competitive Metrics

The brand equity of your rivals has a direct effect on the trends in your brand equity. If competition launches a price-adjustment campaign, you can choose to do it for reasons that have no relation to your work and all that has to do with your competitor’s brand.

Competitive metrics will uncover places where the competition does not give consumers value, such as lack of goods, bad customer service, or pricing. This can also demonstrate tactics and strategies that resonated with the customer base. Competitive metrics are not limited, but there are a few to mainly focus on, such as customer satisfaction rate, market share, sales increase rate, or ROI of distribution channels.

Final Words

Now that you understand the concept of brand equity and its importance in building and executing your brand strategy. Remember that building brand equity takes a process that requires your maximum effort and measuring your brand equity can be executed through various metrics. Therefore, as a business owner, you must understand your brand’s core value and proposition to build the right strategy to grow your brand equity and choose the most appropriate metrics to measure it. Good luck!

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