What Is Brand Equity?
Brand equity is a term used to describe the influence a brand name has on consumers, measuring its relative impact on the marketplace. It is created by establishing strong associations for a brand, thus making it immediately recognizable and memorable in the minds of its target audience. A product or service can be said to have positive brand equity when consumers remain loyal to the brand, often being willing to pay a higher price for it.
Brand equity is based on the consumer’s perception of a brand, on whether the effects of its marketing are positive or negative, and on the value that can be derived from these considerations. If the brand equity is positive, there is a measurable financial benefit; if it is negative, the opposite effect occurs. Brand equity can be said to be an expansion of the more familiar concept of brand recognition, adding more intensive values to the equation.
According to best-selling author, Jason Hartman, “Your personal brand is a promise to your clients…a promise of quality, consistency, competency, and reliability,” (Creating Wealth podcast). This promise can be delivered by promoting increased brand-awareness, positive associations and even loyalty incentives and rewards. Brand equity is a tool that provides a means of measuring the relative success of such marketing techniques.
How to Build Brand Equity
There are a number of specific components that go into establishing brand equity. The first, and perhaps most important one is brand awareness, which is the introduction and subsequent repetition of a brand name in consumers’ minds, through marketing strategies and campaigns designed to increase visibility. This can then lead to an increased recognition and a recalled memory of the brand by consumers.
Once brand awareness is established, brand association can then occur, allowing consumers to form strong positive connections to their preferred brand. At this point, brand experience will hopefully result in the perception of quality, a distinct brand preference, and an ongoing sense of brand loyalty. This experience is enhanced when consumers feel that they are supporting not only the product in question, but the company’s ideals, as well. As Howard Schultz, CEO of Starbucks, once remarked, “If people believe they share values with a company, they will stay loyal to that brand.”
Brand equity describes how consumers react to a specific product or service, reflecting what they think about it, how they feel about it, and what their actions are toward it. Establishing brand equity requires concentrated effort, but that effort pays off in the end. Once a consumer audience’s needs are targeted, a company must then identify what it is that makes its brand different from others on the market and get the word out in an effective manner. When such a campaign is successful, the brand will continue to expand, reaching new customers, while cultivating and rewarding loyalty among longstanding ones. In the words of entrepreneur and best-selling author, Tim Ferriss, “Brand is the sum total of how someone perceives a particular organization. Branding is about shaping that perception.” Brand equity is a way to keep track of the effectiveness of that shaping.