What is brand equity?

As firms shift their focus away from the product and toward the consumer, the whole perception of a brand is more crucial than ever. Furthermore, around 74% of today’s customers want more from businesses regarding how they treat customers, employees, and the environment. Organizations must analyze how their various marketing strategies contribute to brand awareness to stay ahead of this transition.

In marketing, brand equity is the amount of power a brand name has in the minds of consumers, as well as the benefit of having a brand that is easily recognizable and well remembered. Organizations build brand equity by generating great experiences that attract customers to continue purchasing from them over competitors who make similar products. It is accomplished through creating awareness through advertisements that relate to target-consumer values, the fulfillment of promises and qualifications when consumers use the product, and loyalty and retention initiatives.

By providing consumers with loyalty incentives such as points that can be redeemed for discounts or a free product on their birthday, you may increase the likelihood that they will continue to purchase from your brand rather than switch to a competitor.

Brand Recognition: Can customers quickly recognize your brand? Even for a new product, the messaging and graphics surrounding your brand should be consistent so that consumers can never forget it. What values do customers connect with the brand? Perhaps they consider sustainability, quality, or family-friendliness.

Brand Experience: How have your initial interactions with your brand going? It could imply that the product worked as expected and that interactions with brand representatives and customer service staff were accommodating and helpful.

Why is brand equity significant?

The benefits of establishing positive brand equity on ROI are crucial. Organizations that harness the power of branding frequently earn more money while spending less on production, advertising, or elsewhere. Positive brand equity, for example, allows brands to charge price premiums. When consumers believe in a brand’s values and the quality of its products, they will pay a premium price to buy from that brand. Furthermore, if a company wants to add new product offerings, marketing them under the same brand will help the new product take-off faster because trust has already been established.

People are more likely to spend more money on your products if your brand has substantial brand equity. As a result, profit margins increase. Making a product may cost corporations the same as it does competitors. On the other hand, customers are willing to pay for brand recognition. For example, a pair of designer shoes may be worth more to consumers than a lesser-known or generic brand. There are apparent benefits to developing brand equity, but it requires significant labor and research to build and sustain this status. It all starts with research into the values and needs of a target audience and determining what makes your brand unique.

Can brand equity increase profits?

Profitability is directly related to brand equity. Customers who recognize your brand are more likely to choose your goods over a competing brand – even if your product costs more.

People with seasonal allergies, for example, will hunt for Claritin and may not even know what “Loratadine” is. At the same time, even though the chemicals are almost equal, they may perceive Claritin to be more effective than the generic store brand. Claritin has made significant investments in brand equity.

Brand equity may appear to be an ethereal idea that is difficult to evaluate or quantify. There are several approaches for measuring equity through brand tracking initiatives, depending on the goals of your branding operations. Brand tracking offers insight into the ROI of a brand effort and may also aid in measuring awareness, association, and other factors. These studies concentrate on business impact measurements (retention, conversions, and price) or consumer impact metrics (consumer research, sentiment analysis, and so on).

Examples of companies with high brand equity

Coca-Cola

The continual argument between Pepsi and Coca-Cola highlights the importance of the brand. While Pepsi’s stock may be higher due to its diverse portfolio, Coke continues to outperform Pepsi in both firms’ primary product lines. In the 1980s, the Pepsi Challenge campaign caused the Coca-Cola company to reconsider its product range in its marketing initiatives (The Pepsi Challenge). Coke even sweetened its drink to fulfill market demand but received blowback. Coca-Cola began to prioritize its brand over its goods. They underline how Coca-Cola uses relationships and memories to bring families together (i.e., the Share a Coke campaign). The brand employs an instantly recognizable logo, typography, and color palette.

Apple computer

On the other hand,Apple concentrated on the brand and its relationship with customers. They dared consumers question the current quo alongside them, so people were excited rather than bewildered when breakthrough devices like the iPod or iPhone debuted. Focusing on brand builds client interactions while untying a corporation in one way.

To sum up

Because the focus has shifted to the consumer, firms must actively consider the brand image they are cultivating and how each activity and project contributes to overall brand awareness and perception. Organizations can obtain insight into what makes their brand resonate with clients by utilizing solutions such as Marketing Evolution’s brand optimization.

The consumer’s perception of a brand is called its image. These views are formed by recalling brand associations when presented with the brand category. Consumers’ associations and linkages can be image-based, performance-based, or impacted by other variables. Strategic marketing can assist shape the consumer’s perception of a brand.

Consumer-based brand equity refers to customers’ knowledge and experiences with a brand. Positive associations and connections form in their brains due to brand awareness and recognition

These brand linkages’ distinctness, favorability, and power all contribute to brand equity. Increased brand equity enhances the likelihood of positive consumer response.

In contrast, brand equity is the consumer’s knowledge and familiarity with the brand based on the originality, favorability, and strength of the associations in the consumer’s mind.

Solid brands commonly use in-depth brand audits and continuing brand-tracking studies. A brand audit is a process that evaluates the health of a particular brand. A tracking study, in general, will collect information on consumers’ perceptions, attitudes, and behaviors regularly throughout time; comprehensive research can give significant tactical insights into the short-term effectiveness of marketing programs and activities. Whereas brand audits look at where the brand has been, tracking studies look at where the brand is now and whether marketing strategies are having the desired impact.