As a brand owner, PR professional or marketer, you've likely heard the term "brand equity" before. But what exactly does it mean? While you may not be able to define it off the bat, chances are you know more about brand equity than you realize. For example, are there some products where only one name comes to mind? If asked what your favorite soft drink is, what is the first name you think of? The brand that popped into your brain is the one that holds the most brand equity with you. In short, brand equity is the level of sway a brand name has in the minds of its consumers and the value of having a brand that is identifiable and well thought of.
Of course, there is more to it than that. This article will walk you through the basics of brand equity, its four key elements, and how to measure it effectively. You will also get tips for improving your brand's equity, so you can establish a strong reputation and boost your business's value in the market.
Understanding What is Brand Equity
We touched on it briefly before, but brand equity is defined as the added value a brand name gives a product or service over and above its functional attributes. In other words, brand equity is how consumers think and feel about the brand.
Brands with high equity have a positive reputation and a loyal customer base, which can lead to increased sales and profitability—especially when there are similar products in the marketplace. The higher your brand equity, the more likely consumers are going to pick your product over the competition.
Let's dive into the four key elements of brand equity.
- Brand Awareness: This is how well-known and recognizable a brand is among consumers. Brands with high awareness are more likely to attract and retain new customers.
- Brand Loyalty: This refers to the extent to which customers are committed to a particular brand and are willing to make repeat purchases. Brands with high loyalty are likely to have a positive reputation.
- Perceived Quality: This refers to how much your brand is worth in the minds of consumers. Brands with high perceived quality are more likely to have a positive reputation and customers willing to pay more for your product over similar ones.
- Brand Associations: These are the feelings or memories that consumers have with a particular brand, such as its values, personality and symbolism. Brands with strong associations tend to have a loyal customer base and positive feelings associated with their products.
Why is Brand Equity Important?
Brand equity is important for several reasons. First, it helps to differentiate your company from the competition and stand out in a crowded market, leading to increased sales and greater customer loyalty.
Second, a strong brand equity can also help protect your company from price competition. Customers are often willing to pay a premium for products or services from well-known brands. Plus, strong equity helps shield you from economic downturns and survive negative press, such as product recalls. According to Harvard Business Review, the stock prices of companies with strong brands, such as Colgate-Palmolive and Johnson & Johnson, have held up better in recessions than those of large consumer product companies with less well-known brands.
Finally, brand equity can help increase a company's value and brand performance. Brands with high equity are often considered more valuable to investors, as they have a proven track record of success and a loyal customer base. This can result in a higher valuation for the company and improved access to capital. Brand performance is often defined as the measure of a brand's results against the business and marketing goals. Good brand performance over the long term leads to better brand equity.
Brand Equity vs. Brand Value
It’s important to understand that brand equity is not the same as brand value. Brand value is the financial significance the brand carries, while brand equity refers to the importance of a brand in the customer's eyes; however, the two are often related. Having a strong brand equity can undoubtedly increase your brand's value. According to a 2023 report by Statista, the most valuable brands (in billions) worldwide are:
- Amazon: 299.28
- Apple: 297.51
- Google: 281.53
- Microsoft: 191.57
- Walmart: 113.78
- Samsung Group: 99.66
- ICBC: 69.55
- Tesla: 66.21
- TikTok: 65.67
Chances are that if we asked you to name a computer company, e-commerce site, retailer, electric vehicle and social media app, these brands would have been on the tip of your tongue because they all have such substantial brand equity.
How to Measure Brand Equity
So, how do you measure brand equity? It's a complex concept, but there are a few methods you can use. Let's explore some of the ways you can measure your brand equity.
- Brand Awareness: This metric indicates how familiar consumers are with your brand. The higher the brand awareness, the more likely consumers will consider purchasing from your brand. A brand awareness survey can help you measure this metric.
- Customer Loyalty: Customer loyalty indicates how satisfied customers are with your brand. Measuring customer retention and repeat purchase rates can help you assess customer loyalty.
- Perceived Quality: As mentioned before, this refers to what consumers think and believe about your brand's quality. This metric can be measured through surveys that ask customers to rate the quality of your brand's products or services.
- Market Share: You've probably heard that people vote with their wallets, which is what market share refers to. Market share is the percentage of the total market your brand occupies. A higher market share indicates that your brand is more dominant in the market and can help you measure the strength of your brand.
- Financial Metrics: Metrics, such as revenue and profitability, can help measure brand equity. Brands with high equity often generate higher revenue and profitability than their competitors.
Now that you know what brand equity is and how to measure it, let's talk about how you can improve it.
How to Improve Brand Equity: 5 Best Practices
We know increasing your brand equity can lead to an increase in sales, customer loyalty and the overall success of your brand. Unfortunately, there are no quick fixes to improving your brand equity, but there are some brand management best practices you should follow to make your product or service the first one that comes to people's minds. Let's dive into how you can accomplish this.
Focus on quality
Providing high-quality products or services can help improve brand equity by creating a positive reputation for your brand. Have you ever bought a pair of jeans and had them fall apart in a couple of months when you thought they would last for years? Chances are you aren't going to buy from that brand again.
Build brand awareness
Increasing brand awareness can help improve brand equity by making yours more recognizable to consumers. You can do this by utilizing marketing, advertising and public relations efforts, such as social media campaigns, influencer marketing and content marketing, to build brand awareness. The more familiar people are with your brand, the more likely they will grab yours over your competitors.
Provide exceptional customer service
How many times have you read a product review or scrolled through Yelp and seen people complain about the company's poor return policy or didn't stand by their product? It doesn't take too many negative reviews to tarnish your brand equity, so going above and beyond can pay dividends. Providing excellent customer service can increase customer loyalty and positive word of mouth, which can help improve your brand equity.
Build strong relationships
You know the old adage, "Birds of a feather flock together." Building strong relationships with customers, suppliers and partners can help improve brand equity by creating a positive reputation and a loyal customer base. If you don't have strong brand equity, partnering up with a company that does can help associate your brand with theirs, leading to an increase in your brand equity.
Protect your brand
If you've ever taken a trip through New York's Time Square, you've seen dozens of people selling luxury goods at a fraction of the retail price. And chances are they are cheap knockoffs that aren't near the same quality or craftsmanship as the actual brand's products.
Protecting your brand through trademarks and intellectual property and monitoring the market can help maintain and improve your brand's equity. If you don't, that can affect your brand's perceived quality.
So, what now? Tools to help you raise your brand equity
As we've discussed, brand equity is essential to any successful business, and measuring it is crucial to ensure its growth and success. Cision's media monitoring solutions can help companies stay on top of their brand perception and reputation by providing insights and analytics on brand mentions, sentiment and reach across different media channels—all in real-time.
Whether you're a marketer, communications or PR professional, or business owner, Cision's industry-leading media monitoring solutions can help you stay on top of your brand equity and take your business to the next level. Contact us today to learn more and speak to an expert today.