Brand equity means an additional value a company receives from a product with a recognizable name compared to a generic equivalent. That’s why we pay more for those brands with brand equity than a supermarket-owned brand. They are identical products; the only distinction is being you spend extra for the branding. The extra money goes into the brand margin and brand equity.
Companies give their products brand equity through advertising and messaging, making them exciting and immediately recognizable and keeping the reliability and excellence expected by their loyal customer base who understand and trust the brand. Although it seems simple, it takes persistence, time, and hard work to develop brand positive equity.
The three elements of brand equity
- Brand perception: Brand perception is what customers think a product or service signifies, not what the brand says it does. The consumer has brand perception, not the company.
- Positive or negative effects: When consumers respond positively to a brand, their reputation, products, and bottom line will benefit, whereas an unfavourable consumer reaction will negatively affect.
- Value: Positive effects deliver tangible and intangible value – tangibles include profit or revenue increase; intangibles are brand awareness and goodwill. Adverse effects can diminish both tangibles and intangibles.
- Product expansion Outstanding brand equity indicates that a company can add to its product range within the brand, safe in the knowledge that customers will trust the brand enough to try the new products. Heinz, for example, a brand leader in the canned foods market, decided to bring out a new range of world foods based on beans and pulses.
Customer loyalty and retention
It’s widespread in the marketing industry that it’s more affordable to retain an existing customer than draw a new one. When a brand can encourage loyalty and repeat business, this is excellent for brand equity. Apple is the perfect example of this – people who own an iPad also have an iPhone, iPod Touch, and an Apple Watch. Apple’s customer loyalty can be a little short of religious – its temple-like stores and team whipping up energy like charismatic preachers whenever a new product launches brand equity at the top of its game.
How to build your brand equity
Brand equity is the worth of your brand for your company. It’s based on the belief that a recognized brand that’s firmly established and reliable is more prosperous than a generic equivalent. It’s based on customer insight: customers will tend to purchase a product they appreciate and trust. When a brand is known and trusted to the point that the customer recognizes it and holds a deep psychological bond with it, your brand equity is valuable.
Here are four steps towards building your brand equity.
Build greater awareness.
You have to ensure that your customers remember your brand identity when looking for goods or services and recognize it in the way you intend. There are numerous ways you can do this:
- Applying the same logo or image to make sure that your branding is consistent.
- Great customer service
- An inspirational story behind the brand
- Putting the brand in front of your market
- Providing continuous value
- Keeping in touch via email or newsletters
- Tap into social media and share – blogs, tweets, Facebook groups, Instagram photos
Word of mouth, positive customer experience, and targeted marketing all help you develop greater brand awareness.
- Communicate brand meaning and what it stands for
You should keep in mind two things: how well your product matches customers’ requirements and social and psychological perspectives. A company that provides a valuable product and genuinely commits to social or environmental responsibility will attract new customers and workers who share those values. And who will be adequately connected and passionate about being advocates? For example, IKEA has invested in sustainability during its entire business operation: 50% of its wood is from sustainable sources, 100% of its cotton as a Better Cotton standard, and 700,000 solar panels power its stores. With feel-good eco-credentials like these, using a Sunday afternoon assembling an IKEA flat pack looks more a pleasure than a chore when the product comes from such a popular brand.
- Foster positive consumer opinions and judgments
When consumers feel friendly towards your product, they’re more likely to become loyal customers and pass the word on. Judgments are made about a brand’s reliability, ability, quality, relevance to need, and superiority over the competition, so it’s necessary to keep all of this integrity. Positive feelings can be excitement, fun, peer support, security, trust, self-respect.
A brand that can have favourable judgments and feelings is onto a winner. For example, the Apple iPad: did you imagine you needed one before you saw one and acknowledged its capabilities? Now, for many of us, it’s our computer, games console, TV, radio, alarm clock, mobile bank, messaging service.
- Create a strong bond of loyalty with your customers
It is powerful, yet the most complicated phase of brand equity to accomplish and maintain. Consumers have formed a psychological bond and feel connected to your brand and make repeat purchases. They may feel part of a community with fellow customers and serve as your brand ambassadors by engaging in social media chats on Twitter, Facebook, and Instagram, online forums, and even events. Brand equity connection that borders on customer evangelism is valuable.
How to measure brand equity
You need to pursue three core brand equity drivers: financial, strength, and consumer metrics:
- Financial metrics
The C-suite will always want to view a positive balance sheet to validate that it is profitable and viable. You should be able to extrapolate from the data market share, profitability, revenue, price, growth rate, cost to retain customers, get new customers, and brand investment. You can use robust financial metrics data to show how important your brand is to the business and obtain higher marketing budgets to continue growing.
- Strength metrics
Strong brands are more likely to endure despite change and give more brand equity, so you must measure its power. You’ll be required to trace awareness of the brand, accessibility, customer loyalty, and retention, licensing potential, and brand’ buzz.’ As well as studies that use open text questions, social media monitoring will give you a picture of how your brand is known and loved (or not).
3. Consumer metrics
Businesses don’t build brands, customers do, so you must track consumer buying behaviour and sentiment towards your brand. Track and measure brand relevance, emotional connection, value, and brand perception through surveys and social media monitoring. The right text analytics software that can explain open text comments is particularly useful here to gather sentiment and suggestions.
Within seven seconds a consumer decides between brands, it’s more important than ever that your brand and brand values are instant.