What is Brand Equity? Definition, Importance and Guide

When it comes to running a successful business, brand equity is paramount. Brand equity has to do with how customers view a brand, and what they feel about a brand or a brand’s image. This usually forms the basis for which they purchase a particular brand product even in the face of many competitors.

Whether we like it or not, most customers have their perception about each brand of product they know in the market. This perception thought or feeling could determine if a business would make good sales and generate revenues.

Whether you are a new start-up business or an already existing one, understanding the concept of brand equity, its importance, how to build it etc. is essential to your business growth.

What is Brand Equity?

Brand equity refers to the value, or worth attached to a brand by consumers. It is simply how customers view a brand and it most times determines the purchasing power of consumers from such a brand.

So if a brand consistently produces quality products, stays consistent, keeps up with marketing and so on, they tend to remain in the minds of people and so customers are more likely to buy more from them and also give referrals. With that, we could say the brand has a positive and high equity. On the other hand, if a company produces low-quality products, doesn’t stay up to date with trends, and customers are consistently not willing to buy from the brand, we could say the brand has a negative or low equity.

So ensuring positive brand equity includes producing quality products, staying relevant in the market, building a strong brand name, strategizing marketing and more so ensuring that your brand remains in the minds of the consumers. With brand equity, there are many benefits to be enjoyed.

Research has shown that consumers are more likely to buy a product with high brand equity compared to a similar cheap product with low brand equity. When customers love your brand, maybe due to quality product, reputation or any other factor, they are more likely to purchase your brand than buy cheaper from a similar brand.

Importance of Brand Equity

Positive brand equity is crucial to all businesses. Here are some of the importance of brand equity you should know.

1. Increases the Brand's Financial Standing

Brand equity comes with good sales and with that, you can generate a lot of profit. Customers most times love to buy from a brand that they are familiar with. Once your company has been able to attain better brand equity, selling to customers consistently becomes quite easy. With marketing, you would find new customers and even when you slow down marketing for a while, you can rest assured that past customers would come back to buy and even make referrals for the brand. In essence, your brand will most likely achieve a great financial standing with brand equity.

2. Paves the Way to Extend to Other Products

As a brand with high equity, it will be quite easier for your company to extend its product line than a company with low brand equity. When your brand remains in the minds of the people or when they attach a high value to your brand, they are most likely to purchase any new product created by your brand. For example, if your brand is widely known for wine production and has high brand equity, you are most likely going to have a good return if you begin the production of soda drinks or fruit juice in the future. In essence, consumers remain loyal to a brand with high equity and as such they will be willing to try any new product that you create.

3. Ability to Give a Relatively Good Charge

If your brand has a high equity, you can give a premium price for your products. Once customers attach a high value to your brand, they will most likely buy from you even when you charge above average. Customers most times are of the opinion that average pricing is for average products, while premium prices are for great products.

They are therefore most times not interested in compromising the price for the quality. However, as a brand, it is important to take into consideration the quality of your product as against other competitors before charging a premium price.

4. Create a Highly Competitive Edge for the Brand

With brand equity, your brand stays relevant to the consumers. As such, even when there are many other competitors in your niche, your brand stays in the minds of the people and with that people will be willing to buy from your brand even if you sell at a higher price.

5. Increases Brand Advocacy

We’ve seen many consumers willingly advocate for the brands they love. With brand equity, end users will easily recommend your product to their families and friends. They will be proud to tell the world the brand they use and encourage others to do the same. This alone indirectly serves as marketing for the company and could help generate more sales.

6. Promotes Sustainable Business Growth

Brand equity helps build trust, loyalty and credibility among brands and customers. When you build a healthy and good relationship with customers, it becomes easier to retain them every year. With that, it becomes easier to sustain the business and thrive within the economy over time.

7. Improves Brand Resilience

As a business, you would experience adverse changes or fluctuations once in a while. This could be in the form of negative reviews or publicity, economic instability, market changes and so on. While some of these conditions might not be avoidable, brand equity would help customers stay resilient to the brand. It would help them maintain the trust they’ve built for the brand over the years even when there are difficulties.

How to Build Brand Equity as a Company

Attaining brand equity as a company should be an intentional and gradual process. So many popular brands today who have gained brand equity within their city, country and the world at large took a consistent, mindful and strategic process before they reached that stage. The following points would help you achieve brand equity.

1. Set your Brand Equity Goals

The first step in building brand equity is to identify the specific business goals and how they relate to your brand equity objectives. Write out a detailed summary of what positive brand equity looks like and what it means to the company. Are you aiming to increase your audience via social media handles, Are you also willing to evaluate what customers feel about your brand in general? What are the steps to take in ensuring that customers and the public in general develop a positive brand equity with your company, what marketing strategies will be most suitable for your brand equity? Are there specific wants, needs, ideas or opinions from the consumers about your brand? All of these questions and many more would be vital in setting your brand equity goals.

2. Design an Attractive Brand

Whether you are a new start-up or you are an already existing brand looking forward to improving brand equity, then you must work on your brand design. For your brand to stand out, and remain attractive to customers, then it must possess some unique features different from those of the other brand. Deliberate on how your brand products should look like, what message should your brand pass across, what you want to be known for, what style and tone sets you apart from others and so on.

3. Evaluate How Your Brand Performs in the Market

Once you can design a winning brand, then you should go ahead to see how it will perform in the market. If your brand sells goods, then you can offer it to a small audience to gauge what they feel about your product. From this, you would be able to gather some data and identify what adjustments need to be made.

When making the evaluations at this stage, be sure to focus on the audience your brand wishes to serve and more so the specific population in which you will be offering the products.

4. Grow Your Audience

Now that you’ve made adjustments where needed, it’s time to create more awareness and visibility. Brand equity won’t be possible without proper visibility and as such you need to get more people to know your brand. So you would need to run many marketing campaigns at this stage.

Your product design and quality would help fast-track this stage once you’ve gotten them right from the start. As you continue to market your product, more people will get to know about your brand and buy from you if your offer is good. Once they purchase your brand, they will make referrals if they are satisfied with your product.

As you continue to grow your audience, be sure to assess what they feel about your brand and make improvements as necessary. Once you can achieve visibility, getting through with brand equity would be much easier in as much as your offer is great.

5. Be Consistent in the Market

With the right marketing strategies and a great offer, you will get the visibility that is required. However for your brand to remain relevant, it must stay consistent within the market. Customers most times are willing to stay with a brand for a long time if they are satisfied with your product. But if they don’t find your product in the market at a particular moment, they will be forced to go for another competitive brand. With that, it could be difficult for customers to remain loyal to your brand if they feel your brand isn’t consistent.

Apart from that, your brand must also maintain its product quality, marketing, content creation and every other strategy that keeps it memorable in the minds of its audience. Every step taken should be one that would help the brand progress and not one that could inhibit its equity.

6. Measure Your Brand Equity

Once you can achieve the steps above, you should gradually work on measuring your brand equity. Usually, attaining a positive brand equity could take time. There are many ways in which you can evaluate your brand equity. The revenue made by your company, your company's market share, the average price a customer is willing to pay for your product, and your company’s reputation are some of the metrics you could check to ascertain your brand equity.

How to Measure Brand Equity

The following are some of the metrics you could use to measure your brand equity.

1. Study Customer's Purchasing Behaviour

Customers purchasing behaviour could reveal a lot when it comes to brand equity. When they consistently buy products from your brand, this could mean that the product is attractive to them and satisfies their needs or wants. This in return means your brand has a positive or high brand equity. If on the other hand, your product aren’t being purchased by customers consistently, then you could deduce that your brand has a low equity.

2. Asses Your Brand Awareness

Brand awareness is also key when ascertaining equity. Customers are most likely to buy from a brand they are most familiar with. They are also more likely to attach a value or worth or develop a perception to a brand that they know well than the ones they don’t. In essence, customers must be aware of your brand before you can achieve brand equity. So to determine if your business is making progress in attaining positive brand equity, it could measure the level of brand awareness it has.

3. Keep a Track Record of Revenue

Revenue or income generated by your brand over time could help you measure your brand equity. If your company is a new start-up, you might not expect high revenue from the early years, but as time goes on when you make a huge revenue, you could deduce the brand equity is improving. So when customers are attracted to your goods or service and they consistently patronize your brand, then you should generate more income which could also imply positive brand equity.

4. Observe overall public perception

While measuring other metrics discussed above, gathering data about your audience's perception of your brand is important. This would help you get firsthand information about what they feel about your brand. You can do this by carrying out surveys, using a questionnaire or checklist so they can share their thoughts about your brand.

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Conclusion

As a business owner, brand equity should be a key target your business must meet. Brand equity has the power to dictate who customer buys from and as such could determine the amount of revenue generated. In today’s world, people are more willing to buy from familiar, trusted and reputable brands, so achieving brand equity should be one of your crucial business goals. Do you have any questions about brand equity? Kindly contact one of our experts here for help.