Brand Equity: The Essential Guide for Business Owners

Customer perception plays a role in how profitable your business is. Growing a profitable business goes beyond building a sleek product (or service) offering. You need to pay attention to your brand equity — and that involves how you treat your customers.

Let’s say you run a male clothing business, and a customer becomes frustrated with how you treat him and goes somewhere else. That may seem like a small loss — after all, it’s just a single customer. But that’s losing out on the lifetime value the customer brings to the table — and that’s not a small thing. And that’s where brand equity comes in.

But what is brand equity? Well, the scenario above describes what brand equity is to a large extent. In the next section, you will discover what brand equity is, and why it is important.

1. What is Brand Equity?
2. Why is Brand Equity Important?
3. How is Brand Equity Created?
4. Components of Brand Equity
5. How to Measure Your Brand Equity?
6. Wrap Up

What is Brand Equity?

Brand equity typically refers to the brand’s value. It’s usually measured by the perception and experience of the customer with the brand. Brands with positive brand equity are brands that the customers think highly of. However, brands that consistently disappoint and under-deliver on their promises are said to have negative brand equity.

Everything all boils down to the brand perception and how highly the brand is thought of by its customers.

Here are some things that show that a company has positive brand equity:

• Brands with positive brand equity tend to command higher prices for their product (or service) offering
• Brands with positive brand equity will most likely have a boost in their company’s stock price
• Brand equity typically affects the line extensions. This will, in turn, enable the company to make more money. Line extensions are usually similar products that have the brand name on them.

Why is Brand Equity Important?

One of the key benefits of having a positive brand equity is that it boosts your returns on investment (ROI). Companies that have good branding will most likely earn more than their competitors. Interestingly, these companies will likely spend less money whilst earning more money than their competitors.

For instance, companies with positive brand equity can easily charge more premium prices than their counterparts. Customers who see a brand to be valuable, and believe that the products are of good quality, will likely spend more money on the brand products.

Furthermore, if the company adds new product lines to its existing line of products, it becomes easy to market the new products. After all, they must have established trust in the minds of their audience.

And if trust has been established, marketing a product to the audience will be an easy task. As a business person, you will agree that trust is arguably a currency in the marketplace. Customers who do not trust a brand will most likely not buy from the brand.

How is Brand Equity Created?

Creating a positive brand equity is of utmost importance. It’s one of the investments that will pay off in the long run. However, to create a long-lasting positive brand equity requires a lot of work — and lots of research must have been invested into it upfront.

The first is probably figuring out what the needs and values of your target audience are. Aside from that, you need to understand what makes your brand different from other competing brands in the market. After establishing all these things, you need to keep growing your brand awareness. Growing your brand awareness helps you earn more business in the long run. It’s also a sure step that helps you build an evergreen brand equity. All these will help build a community of loyal customers.

Here are simple steps to help you create a positive brand equity.

• Understand Your Why

Understanding your why is one of the best ways to build positive brand equity. Many marketers focus on how their products will make the consumer’s day easier. Well, that’s not entirely bad — but you can take it a step further by focusing on why your company does what it does.

Companies like Apple have a good grasp of what their why is — and that’s why they’ve stretched their brand offering and entered new markets. A close look at Apple’s marketing will show that the company focuses its advertising efforts on the brand — and not on the products (computers). Using this strategy, they were able to create new product lines and dive into new markets like music and smartphones. Apple is a clear case of positive brand equity that has a good grasp of its “Why”.

• Test Your Brand Messaging

Before coming up with your brand messaging, you need to figure out how your customers react, and what they respond to. What are your audience’s pain points, and are your brand messages addressing their needs?

Insights drawn from market and customer research should be a key ingredient to developing a brand message. Your brand message should be tailored to meet what your target audience is drawn to.

• Grow Awareness

After coming up with a brand message, you have to grow your brand awareness in the marketplace. And that involves focusing on your brand values and putting more effort into building an emotional connection with your audience. For emphasis, emotional connections with your audience should be prioritized over conversions.

Furthermore, you need to run your brand campaign for a long time. Having your campaign run for a long time will help your customers register your brand messages, and possibly increase your brand recognition in the marketplace. Consistently growing your brand awareness will help you generate more sales in the long run.

• Maintain Consistency

After establishing your brand, you’ll have to be consistent with it. And that includes being consistent with branding elements like the style guides and typefaces. View your brand like a piece of written content where a character has to be consistent. Regardless of how good an advertising idea is, if it doesn’t fit your brand’s personality, drop it!

• Customer Experience

Nowadays, customers’ voices are somewhat louder than what’s being said during adverts. Your brand’s perceived value, to a large extent, is tied to what your customers are saying about your business. As a business person, you should pay close attention to your customers and know what they’re saying about your business. One way of doing that is by having a review system where you encourage your customers to leave feedback about your brand experience. Furthermore, you can leverage social media as an avenue to make your customers speak up.

Components of Brand Equity

Here are the four important components of brand equity.

• Brand Awareness: You should be consistent with the messaging and imagery of your brand. These are the pieces that help customers easily identify your brand — and they also help you sell out newly launched products. What values are associated with your brand? Do your customers see your brand as a sustainable, high-quality, or family-friendly brand? Can customers easily identify your brand in the marketplace?
• Brand Attributes: How has your brand performed in the market? What is the experience previous customers have had with your support team been like? And the loyalty program you designed, have you been producing your desired result? Answers to these all count as your brand attribute.
• Perceived Quality: Boosting your perceived quality will help you generate sales in the long run. Customers typically judge a product’s quality from their overall experience with the brand. And that counts as the perceived quality. If a customer buys a good product but has had a not-so-good experience with the brand, the customer may judge both the product and the brand as bad.
• Brand Loyalty: Building brand loyalty is largely dependent on the kind of treatment your customers get from your brand. If all the right pieces about your brand awareness, brand attributes, and perceived quality are in place, then you’ll most likely build a loyal community of customers.

How to Measure Your Brand Equity?

Brand equity may seem like an abstract metric that is challenging to measure. However, here are some things to help you measure brand equity.

• Financial Metrics

Here are some things to consider when measuring the financial metrics of a brand.

• Market Share: Industry leaders tend to have positive brand equity
• Profit Margins: How much is the cost of production compared to the price of goods? And compare your results with that of your competitors. Are your results relatively higher or lower than that of your competitors?
• Purchasing Frequency: What’s the rate of your repeat customers? Do you always retain your customers and bring them back on a repeat basis or do you typically record one-time​ experiences with your customers?
• Growth Rate: How fast is your business growing? Are you experiencing a fast, steady, or slow growth rate?​

• Product Value

One sure way to ascertain a product’s value is to compare branded products with unbranded products. If your branding is done correctly, then you will most likely command higher prices for your products in the market.

• Brand Audit

Regular audits of your brand will help you ascertain how your business is performing. Some of the ways to audit your brand is by going through comparison sites, web analytics, or social channels.

FAQs

What are the 4 Elements of Brand Equity?

Here are the four elements of brand equity.

• Brand awareness
• Brand attributes
• Perceived quality​
• Brand loyalty.​

What Does Brand Equity Generally Mean?

Brand equity is your brand value. It is typically determined by how consumers perceive your brand.

How Do You Identify Brand Equity?

Identifying brand equity involves taking a look at the:

• Brand relevance
• Financial data
• Brand strength
• Brand awareness.​

What are the Key Drivers of Brand Equity?

Brand equity is driven by the thoughts and feelings of the customers. It’s the feelings your brand evokes in the mind of the audience.

Wrap Up

Nowadays, customers tend to wield as much power as the brand. The way your audience perceives your brand can either make or mar your overall product sales. As a business person, you must know the kind of image you’re creating for your brand. You should also know that each action (and inaction) contributes to how prospects perceive your brand in the market.

As a marketer, you need to stay informed of the current happenings in the marketplace. One way of doing that is by using state-of-art solutions to monitor what people are saying about your brand.

Furthermore, a close look at what people are saying about your brand will help you identify the right brand messages that resonate with your audience. All these will help you make data-driven decisions and also figure out how to optimize your campaigns in the future.

Now you know what brand equity is, how will you build a positive brand equity for your business?