What Is Brand Equity?
Brand equity is a business term referring to the value of an identifiable and well-known brand. Factors driving the brand value include consumer perception, satisfaction, and positive experience about its goods or services. By earning a reputation for superior offerings, brands experience sales and revenue growth.
Businesses work out a set of detailed and specific strategies to promote brand value. These strategies comprise creating marketing campaigns, delivering quality products, and focusing on customer loyalty and retention. Various brand equity models suggest that well-established, prominent, and reputable brands are more successful than generic competitors. Based on how consumers think highly of a brand, it can be positive or negative.
- Brand equity meaning defines qualitative levels of brand recognition among consumers. Based on the effects it brings to a brand, it could be its tangible and intangible value.
- Brands can charge premium prices for their quality products and services. It helps achieve customer loyalty, retention, and acquisition, thereby increasing the market share.
- Its main components include consumer perception, negative and positive effects, and resulting value.
- The positive equity depends on widespread consumer recognition of the brand and results in increased revenues. A negative effect occurs if consumers are attracted to generic products than branded ones. It negatively impacts the brand.
Understanding Brand Equity
Brand equity represents the worth of a brand compared to its generic alternatives. It could be its name, logo, slogan, and consumer perceptions about its products and services. Multiple efforts, including marketing, advertising, and packaging, can help a brand establish a long-term relationship with customers and earn loyalty. As a result of brand recognition, businesses make profits through a boost in sales.
It also enables companies to differentiate products and determine price premiums accordingly. Consumers prefer products and services with superior quality, performance, and reliability, even if they have to pay more for them. Hence, a brand must fulfill promises made to consumers, as it will help them outperform their competitors and gain more market share. Furthermore, it gives businesses leverage to introduce new lines of products or enter new segments and markets.
For these reasons, the brand value becomes an integral part of marketing and business strategies to get an advantage in a competitive marketplace. On the other hand, it develops confidence among consumers about a particular product and assists them in making a purchase decision. Therefore, businesses must implement various measures to monitor brand performance.
Components Of Brand Equity
The brand equity components include consumer perception, negative or positive effects, and the resulting value.
#1 – Consumer Perception
Mapping the consumer perception to a specific brand is an essential aspect of understanding brand value. It ultimately leads to positive or negative consumer sentiments, affecting the brand performance and its value. Important steps include:
- Assessing consumer knowledge and experience with a brand
- Recalling the brand with unaided or aided awareness to address any market gaps
- Analyzing negative emotions associated with the brand that will cause the consumer to switch to its competitors
#2 – Positive Effects
Providing quality products and services enable a reputed brand to charge more for them. People pay a premium price to make a purchase based on the brand value, which, in turn, boosts its profit marginsProfit MarginsProfit Margin is a metric that the management, financial analysts, & investors use to measure the profitability of a business relative to its sales. It is determined as the ratio of Generated Profit Amount to the Generated Revenue Amount. . For example, the Honey Nut Cheerios breakfast cereal tastes better than other versions, and hence, it charges more than generic brands.
#3 – Negative Effects
It occurs if consumers shift towards generic products than branded ones, which impacts the brand value. It happens when a brand offers something no better than a lesser-known company or fails on its promises. For example, Tata Nano automobile users reported fire incidents with their cars, which led to negative equity for the brand.
#4 – Resulting Value
Brands build long-term relationships with customers by offering superior value. It helps them retain existing customers. As distributors and retailers prefer brands with value, brands can charge price premiums, boost profit margins, broaden distribution networks, and promote sales.
Models Of Brand Equity
#1 – David Aaker Model
Marketing professor David Aaker defined brand value as “a set of assets or liabilities in the form of brand visibility, brand associations and customer loyalty that add or subtract from the value of a current or potential product or service driven by the brand.” He recommends brands focusing on these assets or liabilities individually to assess their strength and increase brand value. These 10 assets of a brand, according to Aaker, vary among brands and include:
- Brand Awareness
- Brand Personality
- Leadership or Popularity
- Market Price and Distribution Coverage
- Market Share
- Organizational Associations
- Perceived Quality
- Perceived Value
- Satisfaction or Loyalty
#2 – Keller Brand Equity Model
Also known as the Customer-Based Brand Equity (CBBE) model, marketing professor Kevin Lane Keller defined brand value as “the differential effect of brand knowledge on consumer response to the marketing of the brand.” As per this model, a brand must create positive experiences and associations with its products to understand consumer perception of it. It comprises four crucial factors, such as:
- Brand Identity (defining the brand)
- Brand Meaning (communicating brand performance and image)
- Consumer Response (assessing consumer experiences, opinions, and perceptions about the brand)
- Relationship with Customers (strengthening the connection or resonance between brand and customer)
Brand Equity Practical Examples
Proctor & Gamble launched Athletes for Good Fund, the Olympic Games Tokyo 2020 brand-building campaign, to recognize athletes for making a positive impact in their communities. When the 2020 Olympics were postponed, many Olympic and Paralympic athletes stepped forward to help others and make a difference by doing good.
It also released two short films and a documentary – “Love Leads to Good,” “Your Goodness Is Greatness,” and “Good is Gold” to celebrate athletic greatness. These films are built on the 2012 Olympic Games campaign ad “Thank You, Mom” that thanked moms of athletes and others for making their child’s life the best.
As a result, Proctor & Gamble achieved a positive insight among consumers by creating a powerful message associated with the brand. This campaign gained historical success for Proctor & Gamble’s brand value, yielding millions of dollars in revenue.
The best example of brand resonance is loyalty cards provided by retail stores. A loyalty card keeps track of customer purchases and offers gifts and rewards for the amount spent. It encourages consumers to return to the same store. The Plenti rewards program launched by American Express in 2015 allowed customers to earn and redeem loyalty points.
Plenti added value to its partner brands across several industrial units starting from gas stations to grocery stores. The program tracked consumers using loyalty cards across various retailers and brands. Those loyalty points were later merged, helping the customer redeem points earned at one retailer at another outlet.
Elements Of Brand Equity
- Brand Awareness: It involves creating innovative marketing and advertising campaigns highlighting product values. A brand can use integrated marketing communications (IMC) channels like social media to become known or recognizable. This way, it can tell consumers how promising and qualified it is in terms of quality and utility. It also focuses on customer loyalty and retention.
- Brand Consistency: It is about maintaining the marketing support and communications and changing strategies accordingly. The marketing programs should convey brand value to consumers based on economic and social factors.
- Brand Association: It necessitates creative ads that showcase the brand’s functional and emotional aspects and benefits, ethical corporate policies and practices, social responsibility, and celebrity brand endorsement.
- Brand Loyalty: It measures the tendency of a consumer to make a repeated purchase from a specific brand and purchase other products released by the same brand.
- Brand Recall: It refers to how long a consumer remembers the brand. Improved brand exposure and positive customer experience will develop trust in a brand and build brand recall.
- Brand Experience: Features, utilities, and benefits of a brand can lead to positive or negative experiences in consumers. These emotional experiences regarding the brand are deeply seated in the minds of consumers.
- Brand Tracking: It is the method of brand equity measurement involving elements like brand warmth, brand momentum, brand usage, brand audit. Using this, a brand can evaluate its efforts and performance compared to competitors.
Why Is Brand Equity Important?
Brand value or equity gains significance through its brand value. It helps businesses attract investors and generate additional revenue compared to competitors. Also, a brand can get a competitive advantage and become profitable by managing equityEquityEquity refers to investor’s ownership of a company representing the amount they would receive after liquidating assets and paying off the liabilities and debts. It is the difference between the assets and liabilities shown on a company's balance sheet..
- Enables the brand to negotiate with investors and thereby brings more money into the business
- Helps in achieving longevity in the business
- Acts as an intangible assetIntangible AssetIntangible Assets are the identifiable assets which do not have a physical existence, i.e., you can't touch them, like goodwill, patents, copyrights, & franchise etc. They are considered as long-term or long-living assets as the Company utilizes them for over a year. to the company and can be sold, licensed, or leased to others
- Protects against changing market conditions, complex consumer needs, and increasing competition
- Imposes price premiums attributable to benefits and value offered by the product
- Increases the market share through customer loyalty, retention, and acquisitionAcquisitionAn acquisition is defined as the act of taking over or gaining control of all or most of another entity's stocks by purchasing at least fifty percent of the target company's stock and other corporate assets.
- Allows the brand to launch new product lines boosting sales and revenues. For example, it was easier for Apple, Inc. (introduced MacBook computers) to launch iPhones successfully.
Frequently Asked Questions (FAQS)
The term brand equity in marketing and business refers to a brand’s value. Factors like consumer perceptions, experiences, and relationships with the brand determine brand value. A positive effect happens when the brand has vast consumer recognition. Negative equity occurs when the brand fails to impress consumers in terms of quality and utility.
Brand value or equity models provide insights into the brand value and can be used to analyze its strength. They also assist in developing marketing strategies at multiple levels. The two popular equity models are the David Aaker model and the Kelvin Lane Keller model.
Brand resonance measures the extent of relationships of consumers and targets customers with a specific brand. It is also about perceiving the values and goals of the brand. A brand resonance pyramid refers to the graphical representation of the brand relationship, aiming at the customer experience. It is linked with the objectives of brand resonance.
This has been a guide to What is Brand Equity and its Meaning. Here we discuss the elements of brand equity, models, and components along with benefits and examples. You may also have a look at the following articles to learn more –