05/30/2022

How Brand Equity Works for Beginners

Insights

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As companies shift their focus from the product to the customer, the perception of a brand is more important than ever.

What’s Brand Equity?

Marketing is all about the brand’s influence on consumers. It’s the influence a brand has on consumers’ minds.

Loyalty rewards, such as points redeemable for discounts or birthday gifts, will increase customers’ willingness to purchase from your brand over a competitor. 

  • Brand Awareness. Can customers identify your brand easily? Perhaps they associate sustainability, quality, or family-friendly attributes. 
  • Your Brand Experience: How have you experienced your brand firsthand? These could be signs that the product performed as expected, that brand representatives were accommodating and helpful, and that loyalty programs can be a worthwhile investment.

Brand Equity: Why Is It Important?

A positive brand equity can lead to a higher ROI. It can lead to a higher ROI. Trust is a key benefit. This is especially important as 80% of consumers won’t do business with brands they don’t trust. Nearly 90% of consumers are willing to abandon a brand they do not trust.

How brand equity affects return on investment (ROI).

Here are some ways that brand equity can positively affect the bottom line:

Order Value per Customer

A positive brand equity is a higher likelihood that people will buy your products. Designer shoes may be more expensive than ones made by lesser-known brands.

Reputation & Less Ad Spend

People will trust you if you have a good reputation for your products. This trust allows you to lower advertising costs and increase sales when you launch new products.

  • Customer lifetime value. Customers who are loyal to your company will spend more. 
  • Loyalty to Customers – Customers are 7x more likely than others to forgive brands for their mistakes. Customers are 9x as likely to try new products by brands they trust.
  • Stock price

How do you build brand equity

Building brand equity is not an easy task. This includes identifying the uniqueness of your brand and how to keep them loyal.

Understanding Your Why

Simon Sineck’s book Start With Why suggests that compelling organizations should have a purpose behind their brand. This allowed Apple to expand their product line into areas such as music and phones that were unimaginable for other computer manufacturers.

Check out your Messaging

When creating messaging, it is crucial to validate your message with consumers.

Drive Awareness

Once you have developed a compelling message, it’s important to increase awareness for your company and brand.

Keep Consistent

Once your brand is established, be consistent. Stop pursuing an idea that isn’t in your brand’s “personality”.

Customer Experience

The rise of social media and individual consumer voices has made it possible for brands and advertisers to transcend advertising’s limitations.

You can also use social media to get to know your customers. These insights can help you optimize your brand.

How can brand equity improve profits?

Brand equity is directly linked to profitability. Customers will choose your brand over other brands if they recognize it.

People suffering from seasonal allergies will search for Claritin, but not Loratadine, because they don’t know the difference. Claritin has invested heavily in brand equity.

Customers will be loyal to you once they have built their brand equity. This will ensure that your business is profitable over many years.

How do you measure and understand brand equity

It can be hard to quantify and measure brand equity.

These are some ways to measure your branding goals.

Financial

For those who wish to assign a numerical value for a brand, here’s what you need to know:

  • Company Value: This measure of brand equity is used to determine the company’s value. Consider the company an asset. Brand equity can be calculated by subtracting tangible assets and total firm value.
  • Market Share – How large is your company’s market share? Market leaders tend to have greater brand equity.
  • Revenue potential. How does your product’s potential revenue compare to other products? This is compared to your company’s current revenue.

Product Value

Comparing generic products to branded products is a great way to establish product value. It’s also possible to consider user preferences, such as Coca Cola or Pepsi.

Brand Audit

Conducting a brand audit can help you get a better idea of how your brand is performing. These data can be used for determining how consumers talk about your brand and whether it aligns with your brand’s vision.

Keller’s Brand Equity Model–Brand Association

This brand equity model was created by Dartmouth professor Kevin Lane Keller. This brand equity model was created by Dartmouth professor Kevin Lane Keller. It emphasizes how important it is to create positive associations with brand products. The process begins with brands establishing their identity. When the brand has established its identity and differentiation, it becomes fully realized. 

  • Brand Awareness
  • The Idea Behind a Brand
  • Understanding Customer Response
  • Resonance/Connection Brand

Understanding Consumer Perception

Although brand equity is not quantifiable, it’s important to map consumers’ perceptions.

  • Recognition and Recall: Are people able to recall your brand name without prompting (unaided branding recognition) Or do they need assistance? It’s a great way for you to see gaps in the market. 
  • Negative emotions that are associated with the brand. It can be expensive to not address these emotions. Customers will switch regardless of whether there is a mature competitor.

These are some examples of companies that have high brand equity 

There are a few brands that stand out from the rest. These brands have a consistent design and unaided consumer awareness that has led to unwavering customer preference.

Apple Computer

John Sculley, an ex Pepsi executive, moved to Apple in 1997. He stated to the Guardian, “This business should have died 10 years ago but people said they’d support it.” “This business should have been closed 10 years ago but people still support it.” Steve Jobs was able to build on the foundation of loyalty built by Apple product owners when he returned home to Apple.

Simon Sinek said that people don’t buy what you do. Gateway was qualified to make flat-screen TVs, for instance. Their new products were not popular. Apple on the other hand was more focused on its brand and the relationship with its customers. Apple encouraged people to challenge the status quo. The result was that consumers were excited about the new products, such as the iPhone and iPod.

Coca-Cola

Pepsi and Coca-Cola are always in a fierce brand battle.

We continue to see cases in which brand is more important that product.

These brands and others have proven that positive brand equity can have a significant impact upon your bottom line. Organizations should consider investing in these campaigns while keeping customer experience in mind.

Last Thoughts

Companies must be aware of their brand image and how it affects brand perception and awareness. Kobe Digital can help you make data-driven strategic decisions to improve your future strategy, build brand equity and drive ROI.

About the author

Kobe Digital is a unified team of performance marketing, design, and video production experts. Our mastery of these disciplines is what makes us effective. Our ability to integrate them seamlessly is what makes us unique.