Brand Equity: What It Is & Why It Matters to Your Business

Today, many companies are shifting their focus from product features to the holistic customer experience. Studies show that 62% of business leaders believe that more customer’s purchase decisions are based on customer experience than they were in 2018. To cope with this shift, you must align their marketing efforts with brand equity, ensuring initiatives enhance brand image and drive KPIs like revenue and customer loyalty. Let’s discuss how you can effectively leverage strategies to improve your brand equity.

Table of Contents

• Understanding Brand Equity
• The Importance of Brand Equity
• How to Build Brand Equity
• How to Measure Brand Equity
• Conclusion

Understanding Brand Equity

Brand equity is an element of brand management that refers to the value that a company generates from a product with an identifiable name compared to a generic one. Companies should invest in building their brand equity to make products memorable, easily recognizable, and of superior quality. A company may implement a comprehensive marketing strategy to strengthen brand equity. 

Once a company builds positive brand equity, customers are willing to pay a high price for its products even though they could get identical products from a competitor at a more affordable price. In short, customers pay a premium to connect with a company or brand they believe in and admire. 

The Importance of Brand Equity

The key benefit of establishing positive brand equity is its effect on ROI. Typically, businesses that utilize the power of branding experience higher revenue than competitors while minimizing spending on key areas like production and advertising. When consumers perceive a brand positively, associating it with high quality and shared values, they are more likely to accept higher prices.

Brand equity also increases customer trust and loyalty. Because of this, an organization can add new products and market them under the same umbrella brand. The new product takes off faster since trust has already been established. 

So, how does brand equity impact return on investment (ROI)? Let’s explore how efforts to build positive brand equity matter to your business:

• Increases order value per customer. Consumers will spend more money on those products when your brand has positive brand equity. Companies with solid brand equity can command higher prices despite comparable production costs. For instance, a designer bag may be worth more to consumers than a generic brand. 
• Reduces ad spend. If your products or services have a good reputation, people will instantly look for them on the market. This reduces advertising expenses and increases sales when introducing a new product due to established trust.  
• Fosters customer loyalty. Loyal customers are significantly more forgiving, with a 7x higher likelihood of overlooking brand mistakes. Moreover, they are 9x more likely to explore new product offerings.
• Increases profit margin. Positive brand equity empowers brands to command premium pricing. A customer’s willingness to pay a price premium for the brand translates directly to increased profit margins.
• Increases sales. Similar to the case of brand equity, which helps increase profit margin, it can also drive increases in sales. Regardless of the specific attribute – price, efficiency, durability, or innovation – consumers consistently seek the “best” product or service. This drive to improve sales because buyers flock to buy the company’s famous offerings, regardless of the competition. 

How to Build Brand Equity

Now that you’ve learned the benefits of brand equity, here are four management techniques to help boost your brand equity. 

Build greater brand awareness

First, ensure your customers recognize your brand identity when searching for goods or services and perceive it how you intend. Here are the several ways you can do to build greater brand awareness: 

• Be consistent in using logo or image
• Provide great customer service
• Tell a heart-warming story behind the brand 
• Keep in touch via email or newsletters
• Leverage the power of social media  

Communicate brand meaning clearly

Clearly stating your brand meaning contributes to building substantial brand equity. Consider how well your product meets customers’ needs—not just their physical ones but also their social and psychological ones. A company that produces a valuable product and commits to social responsibility will attract customers who share the same values.

Cultivate positive customer sentiment

When customers think of your goods or services positively, they are more likely to become loyal customers. Satisfied customers can become brand advocates, driving positive word-of-mouth marketing and organic growth. So, it is crucial to maintain the integrity of all these things. Positive customer sentiment can be excitement, peer approval, fun, trust, security, self-respect, and more.  

Build enduring customer relationships

Brand loyalty is a powerful yet challenging aspect of brand equity to attain. Loyal customers are customers who have formed a psychological bond with your brand. They make repeat purchases and may feel part of a community of fellow consumers.

How to Measure Brand Equity

Let’s look at the core brand equity drivers you need to track, such as financial, strength, and consumer metrics:

Financial metrics

To gain C-suite support, quantify your brand’s impact on key financial metrics. Analyze data on market share, profitability, revenue, pricing, growth, customer acquisition and retention costs, and branding investment. This data-driven evidence will justify increased marketing budgets and drive strategic business decisions.

Strength metrics

Strong brands are more likely to survive and deliver more brand equity despite change. You’ll need to gauge and track brand awareness, accessibility, customer loyalty, and retention. You must also track licensing potential and brand buzz. Moreover, utilize social media and public surveys to see how your brand is known (or not).

Consumer metrics

You must also track consumer purchasing behavior and sentiment toward your brand. Again, through social media monitoring and surveys, you can measure how relevant and valuable your brand is. There is text analytics software that can interpret open-text comments, which is useful for gathering sentiments and suggestions.  

Measuring brand equity is a regular endeavor. This is being done to make realistic adjustments that fuel positive impressions for your customers. It also calculates changes, and the process can be repeated if necessary.

Conclusion

In conclusion, building substantial brand equity requires a consistent and customer-centric approach. By prioritizing customer experience and cultivating meaningful connections with the targeted audience, you can ensure your brand’s presence in today’s highly competitive environment. In addition, you must align your marketing efforts with brand equity to enhance your brand image and improve KPIs. 

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