What is brand equity?

Consumers might not always be looking to buy. Still, brands that stay familiar and recognizable may be more likely to come to mind when people are ready to make a purchase. Brand equity can make that more likely.

Brand equity can be identified as the extra value a company carries thanks to how well its name is recognized and the qualities people associate with it. It can reflect customer confidence in a brand’s products and services, as well as in its identity and consistent work.

While the value tied to a brand name can result from accumulated consumer experience and perceived quality, mass marketing campaigns can also play a key role in building it.

Brand strength can carry significant weight as it may influence a company’s pricing strategy, and therefore, overall profitability.

In the ’80s, brand strategist and marketing professor David Aaker theorized how brand equity usually develops from the combination of five distinct elements:

This element can be considered the most foundational aspect of a brand’s value. It indicates the degree to which consumers are familiar with a brand. When clients are aware of a business, they tend to be more likely to choose it over its competitors.

Brand loyalty is typically a reflection of customer retention and the extent to which consumers repeatedly choose the same brand.

Brand image refers to people’s subjective perception of a company. It can influence a brand’s value because consumers often base value on how reliable and high-quality they believe the products to be.

Clients may associate a brand with both concrete and abstract qualities. Visible elements such as a logo, color or celebrity endorsement might help shape emotional responses such as trust, belonging and innovation.

Similar to brand image, brand value refers to the perceived benefits of a product or service.

Brand equity developed over time as part of brand research and marketing strategy. In the ’80s, marketing approaches focused mainly on providing product information and distinguishing one product from another.

As branding evolved, researchers began paying greater attention to consumer perception, brand image and the emotional meaning attached to brands.

That was the beginning of the era in which brands became viewed not only as identifiers but also as strategic assets capable of creating long-term value through consumer relationships and perception.

Consumer perception can influence how people choose a product among competing options, especially when several products offer similar features or pricing.

In many cases, companies with a stronger public image may receive more immediate consideration during the buying process simply because consumers might already be familiar with their names.

This added value, along with distinctive brand assets such as trademarks or patents, can be especially important in crowded industries. Marketing campaigns may also perform differently depending on how well established or recognizable a company already is in the eyes of consumers.

Consumers’ sentiment about a brand can take different forms and evolve over a brand’s life.

Customer experiences and expectations, as well as a company’s actions, may all affect the value consumers associate with a company’s identity.

Savvy brands strive to be associated with positive attributes. Customers who hold a positive view of a brand may:

• Trust in its products or services
• Be familiar with its product lines
• Feel excitement or curiosity on the occasion of a new release
• Support a particular cause affiliated with the brand

Companies also usually understand that their perceived value should be continuously cultivated in order to last.

Brands can associate themselves with concepts or actions that gain customers’ trust or admiration, but they can also do the opposite and push their clients away. Generally, this is unintentional. A brand’s reputation can quickly take a turn if it is connected with:

• Low-quality products or inconsistent support
• An unethical business model or corporate behavior
• A track record of negative customer interactions
• Public relations issues or damaging media attention

Once these perceptions are set, future advertising and messaging may lose effectiveness and potentially cause further losses.

Companies can course-correct and work to reverse those negative feelings. Brands that deliver the best results in these situations usually have a carefully planned approach that addresses the root causes and focuses on restoring credibility.

They can make improvements to products or services if customer satisfaction is the issue. They can also rethink their communication strategy and leverage digital marketing or social media campaigns to reconnect with their customers.

During recovery efforts especially, transparency can be very beneficial. People generally value honesty and taking responsibility. Brands that openly discuss future plans for improvement can, ideally, take more control of their narrative and also seem more believable to consumers in the long run.

Some companies may also attempt to rebuild stronger connections by emphasizing positive customer experiences and sharing testimonials or using storytelling to create a more personal image. Well-crafted PR campaigns involving celebrities, influencers or other personalities can play a role in restoring a business’s perceived value in clients’ eyes as well.

A strong brand can give companies greater pricing power because consumers may be willing to pay higher prices for products they already know and trust.

This alone can help increase a company’s profit margin.

Achieving strong brand loyalty and advocacy can be advantageous for any business, as they tend to decrease customer churn. Such brands can usually rely less on discounts and short-term promotions if its customer base is well-established.

Selling new products to existing customers can also help increase customer retention. Because acquiring a new client generally costs more in marketing efforts and expenses than keeping a current one, brands may then have greater overall pricing flexibility. On top of that, word-of-mouth recommendations, social media posts and reviews of new products by existing customers can all help attract more clients.

Over the long term, a company’s consistent recognition and perceived reliability can support steady revenue streams even if market conditions shift. As a matter of fact, it is not unusual for investors to consider a brand’s added value when deciding whether to put money in it or not.

Given its subjective nature, painting a clear picture of a brand’s public perception may be difficult, especially for those working for the business itself. However, companies can now rely on a combination of metrics to do so more reliably.

By using findings from both consumer research and performance data, organizations can help better understand how people respond to their brand over time.

Qualitative tools usually track clients’ emotions, opinions and experiences around a product or service.

They frequently involve directly asking customers specific questions about their purchasing history, the likelihood of their buying again, knowledge of the brand, and more. Common methods to obtain the answers to those questions include surveys, focus groups, and social media reviews or mentions.

Such approaches can help companies better understand why consumers feel connected to certain brands or why negative perceptions may begin developing.

Brand equity can be tracked through measurable performance indicators as well. These can be based on internal data, such as sales proceeds and marketing costs, or consumer data, including repeat purchases or brand impressions. Keeping track of competitor and the overall target market performance can also be beneficial.

Brands can choose from a variety of key performance indicators, also known as KPIs, to track their added value. Customer satisfaction and social media engagement are just two examples of these.

Organizations can achieve better results if they focus on monitoring the right ones for their needs.

An adjusted SMART framework is one way to define such metrics. Based on this model, the most appropriate indicators would be:

• Strategic: To align with the brand’s goals
• Market driven: To allow a comparison with competitors
• Actionable: To be able to course-correct if necessary
• Repeatable: To create tracking benchmarks
• Touchpoint inclusive: To meet the client in every interaction with the brand

Brand equity is just one of the concepts that students pursuing a marketing degree can become familiar with.

University of Phoenix offers several online business degrees as well as a Marketing Certificate (Undergraduate).To learn more, reach out to University of Phoenix.