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Brand Equity Definition
Brand equity is the value attached to a product based on quality of its products and services, its popularity compared to direct competitors.[1] The consumer’s perception usually determines this product value. If the company has positive brand equity, consumers will be willing to pay higher price.
The willingness to pay is notwithstanding availability of the same products from a competitor at much fairer prices. Companies strive to create positive brand equity. Companies build brand equity by creating positive experiences to attract and maintain customers. Attracting and maintaining customers is through creating awareness via advertisements. These campaigns target consumer values and promises to deliver value for money.
Building the value of brand equity may, however, be a little challenging. It is mainly because advertising and distribution costs have risen over the past few decades. In addition, the number of brands introduced each year is increasing. Therefore, the competition increases yearly in the distribution channels and in the consumers’ mind.
Elements
The five key elements of brand equity are:
1. Brand awareness
Brand awareness is the recognition of a brand name relative to competitors’ recognition. A company with high brand awareness has high negative or positive brand equity.
A brand recognized for its high-quality products enjoys positive brand equity. On the other hand, a popular brand avoided by customers for its known poor quality has negative brand equity.
2. Brand association
Brand association is customers’ positive or negative mental connection with a brand. It is that mental image that customers have about a brand. The image can be influenced by price, customer care services, the perceived value of substitutes, and quality, among others.
A positive brand association supports a compelling reason to buy hence higher brand equity. Negative brand association reminds a customer reason(s) not to buy, resulting in poor brand equity.
3. Perceived quality
It is the presumed utility of a brand relative to its price. Price is a sensitive attribute of the presumed quality of a product. Two brands whose products/services have equivalent features and functionality will have different perceived qualities.
A brand that charges more for products/services equivalent to substitutes has lower perceived quality. On the contrary, a brand that sells its product cheaper at an equivalent level of quality to substitutes has a high perceived value. The interplay of price relative to the level of usefulness determines the perceived quality of a brand.
4. Brand loyalty
Brand loyalty is the repeated product/service choice despite the availability of subtitles from competitors. Loyalty develops with time as customer enjoys positive brand association. Whenever customers interact with a brand and their expectations are met, it creates value for their money. Customers choose a product repeatedly due to assurance of their perceived quality and utility being met.
Brand loyalty is the main element in brand equity. It translates into sales, unlike the other elements, which may not directly translate into sales. It allows the organization to maintain and build a significant market share
5. Proprietary brand assets
These proprietary assets protect a brand from replications and imitations that could confuse and mislead customers. They include but are not limited to copyrights, patents, and domains (where applicable), among others. Proprietary assets protect a brand from competing with itself through imitation and replications done by competitors.
How to Create Brand Equity
Brand equity is built upon the five elements of brand equity.
Create awareness of brand existence: It starts by creating awareness about the existence of a brand. Awareness is created through strategic marketing and advertising. Potential customers are targeted based on their demographics, and geographical locations, among other targeting variables.
Build a positive brand association: Make sure customers have a positive first impression of their brand interaction. Fair pricing, high-quality products/services, and good customer care are a few among many builders of a positive brand association.
Emphasize on quality: Use marketing to explain why and how a product is of superior quality. Align pricing with industry rates and offer higher quality than existing brands. Customers will be sampling on quality whenever they try the products/services from a new brand.
If quality is as alluded to in the marketing campaigns, those who try a product and find its quality compellingly good will come for a repeat purchase. Repeat purchases from increasing customer results to a higher brand choice.
Leverage brand loyalty: With time, brand choice results in customer loyalty. It is these loyal customers who bring in referral customers. The higher the number of loyal customers, the better it is for brand equity.
Why Is Strong Brand Equity Important?
1. It helps increase brand awareness
With effective marketing, an organization will gain recognition and increase brand awareness among many potential consumers. It will cause an increase in the value, leading to more purchases from the consumers.
2. It creates brand associations and grows perceived value
Once a company’s values are ingrained in a consumer’s mind, the company has successfully associated the brand with the consumer. It is, therefore, easier to instil positive attributes concerning the company in the consumer’s mind. Such positive attributes are excellent quality, higher class, and luxury associates, among others. It will add to the reason and boost potential consumers to buy the product.
3. It promotes brand loyalty with clients
Once the organization has acquired its new set of consumers, the next challenging step is to maintain them. Its equally challenging to make customers loyal to the brand. With high brand equity, companies can effectively maintain these customers and build genuine relationships with them.
4. Increases the return on investment (ROI)
Well-established positive brand equity greatly benefits the return on investments (ROI). A company with a good branding set-up can leverage the brand, earn more and cut some operational costs.
5. Order per value customer
Consumers are willing to spend more on products with positive brand equity. It benefits the company by getting them higher profit margins leading to more growth for the organization.
6. Good reputation and less ad expenditure
Positive brand equity promotes a good reputation. A good reputation of the organization will earn them more new consumers for their products. With brand equity, a company’s expenditure on marketing converts more. A brand gets a lot of recognition among clients and potential clients.
What Is an Example of Brand Equity?
1. Apple Inc.
Apple Inc. is considered the most valuable brand of 2022. It acquired its brand equity from its production of Mac computers before proceeding to iPhones. The company offers exceptional and unique product and services, gaining new consumers and maintaining the ones they have had.
2. Fenty Beauty
This is a beauty company with a positive reputation by producing makeup that suits every skin colour and texture. The company has expanded worldwide, where its most recent outlets opened in Africa.
What Is Difference Between Brand Equity and Brand Loyalty?
Brand equity is the value attached to a brand in the industry, whereas brand loyalty is the value attached to a brand by its consumers because they assume it gives them the best value for money.
What is the Relationship Between Brand Equity and Brand Loyalty?
Relationship is the probability for consumers to continue buying the same brand over time regardless of price or quality depending on the value of money they get from such products.
An organization can capture this complex relationship in a brand equity model. The model illustrates the degree to which a brand’s relationships with its customers are based on its brand equity. The brand equity model provides a framework to understand the relationships between brand equity and other customer-acquisition strategies.
References
1. Aaker, D. A., Biel, A. L., & Biel, A. (2013). Brand equity & advertising: advertising’s role in building strong brands. Psychology Press.
