Brand Equity

You go to a Gucci store and find that the price of t-shirt averages $500. However, at H&M, you can find t-shirts averaging $15. Why does Gucci charge higher prices than H&M? Is there any difference in products? Or is it because they have different brand equity?

You'll find out the answers to these questions and much more by reading through this explanation!

Brand Equity Definition

Brand equity is significant for businesses as it is one of the main factors that can help companies drive sales and expand their profit margins.

Anything from a simple logo to the brand name is considered brand equity as long as it has value for the business. Businesses usually find out how much their branding is worth when they try to sell their company.

Apple Logo, Wikimedia Commons

The concept of customer loyalty lies at the heart of brand equity.

Higher customer loyalty would also increase a brand's equity. The reason is that whenever a company launches a new product, it knows customers will buy its product. This helps drive sales and increase profits.

Nowadays, businesses are becoming more aware of the importance of brand equity. As a result, they are making more efforts to evaluate the potential earnings of influential brand names.

When a specific product category is mentioned, a person's level of brand awareness indicates how readily or effortlessly a particular brand name is brought to mind. Public awareness of a brand may be significantly increased by advertising.

There are two main types of brand recall: aided brand recall and unaided brand recall. An aided brand recall occurs when an individual can remember a brand when exposed to a symbol or logo of the brand. On the other hand, unaided brand recall happens when the individual does not need the logo or character of the brand to recall it.

Brand awareness is one of the key metrics that companies can use to measure brand equity. Substantial brand equity means that a lot of consumers recognise the brand. Think of Coca-Cola; there are probably only a few consumers around the world unaware of Coca-Cola.

Brand Equity Examples

A typical example of brand equity can be observed when a business wishes to expand its product line or mix. Under such circumstances, a company greatly benefits from having positive brand equity.

Suppose the equity of the brand is positive. The firm may want to extend one of its brands by linking the new product with an established brand that has been successful in the past. This is known as brand extension.

It is not always that brands have positive brand equity. Brands can also have negative brand equity; in such a case, the brand loses customers' trust, which decreases brand value.

Importance of Brand Equity in Marketing

The importance of brand equity in marketing is as follows; when consumers associate a certain degree of quality or prestige with a brand, they see the items produced by that brand as having more value than those produced by rivals. As a result, they are prepared to pay a higher price for them. This makes brand equity very important in marketing.

Consumers are willing to pay a premium for products with significant brand equity when it comes down to it.

A company that builds positive brand equity can charge a higher price for a product than its rivals, even if costs are the same. This increases the profit margin per customer.

Because customers are drawn to purchase products with solid reputations, the level of a company's brand equity directly impacts the number of its sales.

Brand Equity Model

Kevin Lane Keller, a professor of marketing, established the brand equity model. Keller's Brand Equity Model is also known as the Customer-Based Brand Equity (CBBE) Model.

The reasoning that Keller used to develop this model is straightforward: to have a powerful brand, one has to generate the appropriate brand image. A positive brand image can be achieved by engineering perfect brand encounters or experiences for customers or potential customers.

Customers and potential customers should walk away from their interactions with the brand having had bright ideas, feelings, and attitudes. Constructing the appropriate kinds of experiences around the brand is necessary to elicit favourable emotions, beliefs, attitudes, and perceptions of the brand.

According to the Brand Equity model, when you have demonstrated that your brand is capable of providing value, you will have successfully developed brand equity, and the convictions of your customers will be shared with others.

To build a successful brand, Keller's Brand Equity Model consists of four steps: brand identity, brand meaning, brand response, and brand resonance. These four combined form the Brand Equity Pyramid.

There is also Aaker's Model of Brand Equity. According to David Aaker's definition, brand equity is a collection of assets and liabilities associated with a brand that either increases or decreases the value of the product or service sold under that brand.

Brand Equity Pyramid

Brand equity: Brand identity

Each company's primary goal in building valuable brand equity is to build brand awareness. Companies must ensure that the target segment is familiar with their brand.

During this phase, companies pursue brand identification and awareness. Additionally, they work on guaranteeing that positive impressions of the brand characterise the crucial phases of the purchasing process.

A company must clearly define and convey its brand values and identity. This helps the target market understand and recall the brand.

Having a clear brand identity also works towards increasing the brand salience of a company. Brand salience shows how much a brand is noticed or thought of. Companies with strong brands have a higher brand salience than others. Having a high brand salience contributes to being chosen over competitors.

Brand equity: brand meaning

This step involves identifying what the brand stands for and what it means to customers.

Brand meaning consists of two critical things: performance and imagery.

There are five different elements of performance include:

• the essential qualities and features;

• the product's dependability, durability, and serviceability;

• the service's efficacy, efficiency, and empathy;

• the style and design; and

• the cost.

All these features help shape positive brand equity.

Brand equity: brand response

Brand response concerns consumers' reactions to a brand, including their judgements and feelings.

The criteria that customers use to evaluate a brand (judgement) may be broken down into the following four categories:

• Quality - refers to the appearance and the actual quality of a product.

• Credibility - refers to a brand's trustworthiness, likability, and competence (innovation).

• Consideration - is the ability of a product or service to meet the requirements of a consumer.

• Superiority - refers to where the brand stands compared to other brands (from the customer's point of view).

Brand equity: brand resonance

In its most basic form, brand resonance refers to consumers' emotional connection with a specific brand. Brand resonance is a company's ultimate goal. Brand resonance refers to building deep relationships with customers.

It is perhaps the most challenging element to achieve, as it indicates that the consumer has developed a profound relationship with the brand.

Customers show brand resonance through repeat purchases, an emotional connection to the brand or product, active participation as brand ambassadors, event attendance, or frequent social media engagement with the brand.