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The Executive's Guide to Strong Brand Equity

Learn how brand equity allows companies to profit from their name and design aesthetics in a way that connects deeper with their audience.

Written By: 

Erick Leon

Updated: 

December 27, 2021

Guide Prerequisites

What is branding in marketing?

Brands are important. They are the backbone of our society. They are the reason why we are able to get food, clothing, and shelter. They are the reason why we are able to experience life. Brands are the reason why we are able to live.

An Executive Summary of Brand Equity

Brand equity is the difference between the market value of a product or service and the cost of producing it. It is also referred to as the brand's intangible value. Brand equity and branding are some of the most important assets a company can invest in due to its ability to help any sized businesses weather tough economic times with the help of their customer's brand loyalty. If you're an executive in charge of a company, you need to know about brand equity. Brand equity includes the perceived value that a brand elicits for its customers. It's in direct correlation to how much people are willing to pay extra for your branding. In other words, it has everything to do with profits and increasing the bottom line. 

What does brand equity mean?

Brand equity is the value of a brand name that accumulates over time and is based on the sum of the brand's tangible and intangible assets combined with its reputation and brand recognition. Some would call it brand loyalty, but that doesn't quite capture the whole story. Brand equity is a term that refers to the value of a brand. The more equity a brand has, the more valuable it is to the company. 

What is brand equity and why is it important?

Brand equity, or brand value, is the sum of all the positive and negative associations that consumers have with a company. The more positive associations, the more positive brand equity. It's important because it allows a company to charge more for its products or services without necessarily changing the internal process and procedures. It has everything to do with framing, presentation, and brand image. The end result of having a beautifully crafted brand equity growth strategy is generating brand awareness, attaining loyal customers, and building a base of early adopters. Early adopters are consumers that are willing to take risks on newer products and services due to their fascination with the "new", and the trust they have developed with their favorite brands. 

How to Build positive Brand Equity.

A brand identity is a representation of a product or service. It is a promise of quality and consistency. It is a brand promise to the customer that they will be satisfied with the purchase they make. Building equity is the process of establishing a brand and building trust with the customer. There are a number of ways to build high brand equity, including targeting a specific demographic, focusing on a specific product, and creating a strong social media presence.

Target Demographic

The key to building brand equity with your target market is to make sure that you are delivering on the promises you make. This is not always easy to do, but it is worth the market research. Hyper focusing on a target market also allows a brand to be a champion for their audience sharing the same values and tastes. A great way to build brand equity with your target market is to get them to engage with your brand and really focus on the customer experience. This can be done through a variety of ways such as contests, promotions, and giveaways. This will help to create a sense of loyalty and belonging to your brand.

Create Tiered Products or services

A multi-tiered product or service has more than one level of features or benefits. For example, a gym membership might have a basic membership, a premium membership, and a VIP membership. Gyms do this usually by restricting access to more luxury equipment like massage chairs and by providing "perks" like free guests. This can help a business expand its product category and even build a different brand extension.

Master packaging & presentation

The best way to build brand equity with your products is to make sure that they are high quality and that they stand out from the competition. This is a good way to make sure that you are always a step ahead of your competition and that you are able to provide a great product that consumers will enjoy using and eventually promote. It's an overall brand experience that people appreciate. It's why unboxing videos are a big trend on Youtube and why most luxury establishments require their employees to look their best every shift.

Create a strong social presence

Social media is a powerful marketing tool that can be used to solidify brand strength and reach. Brands can use social media to promote themselves and their products by interacting with customers and building a dialogue. The more involved the brand is in the social media space, the more likely they are to build customer loyalty. It never hurts to collaborate with another brand personality like an influencer that can help you reach a broader audience.

Train great customer service employees

You need to train your employees to be excellent customer service representatives. You need to teach them how to be caring, compassionate, and understanding. You need to teach them how to be helpful and how to listen and care for the customer. You need to teach them how to be professional and anticipate the needs of your customers. People love recommending and going to places that make them feel special and valued. On the opposite end, rude employees that never give a customer attention could generate negative brand equity.

How to determine Brand equity.

Perceived Quality

In marketing, quality is the degree of excellence of a product or service. It's the tangible value they see from the actual purchase of a product. In the past, quality was a defining characteristic of a brand. Now the quality of a product or service is just one aspect that is always on the mind of a consumer. This is where great content, photography, and videos come into play. This allows you to showcase the quality of your product or services in a way that outshines your competitors. 

Perceived Value

Perceived Value is a term that is used to describe the worth of a product, service, or company in the future. It's why people are more confident in buying a Tesla hoping that they will keep getting software updates down the line. It's why people invest in a certain gaming console hoping for great exclusives down the line. Consumer perception biases mixed with a little strategic brand management sprinkled with a little PR can drastically improve the odds of consumers betting on your company over others for the long run.

Brand Association

The world of marketing is a world of associations. Brands and products are associated with certain traits and qualities.  A brand's associations can be positive or negative. For a brand equity example on associations, Nike is associated with athleticism and healthy living, while McDonald's is associated with fast food and unhealthy eating habits. Other companies are associated with saving the planet, while some corporations are associated with being anti-privacy. Understanding what associations a company has built throughout the years can help brand managers reinforce the good ones and try to snuff out the toxic ones. It's all about brand preference for the consumer because they ultimately have the power to vote with their purchases.

Brand Awareness

A lot of people think that brand awareness is just a matter of advertising. But, let's be honest, not everyone is going to pay attention to billboards or commercials. If you want brand visibility, you need to go where your target market is and create the particular brand they want to experience. When awareness goes up, so does brand equity. 

How do you measure brand equity?

There are many ways to measure brand equity, but the most common ways are to look at the brand's market share, stock price, or competitor price difference. The process of measuring brand equity is a complicated one. It's like trying to measure your brand meaning. There are many factors that go into your brand perception and it's really tough to put a solid statistic with it. Luckily, there are a few ways to tell how effective a brand's efforts are. Combining all the ways to test brand equity will give you the most accurate estimate.

(Reliable) Generic brand pricing difference

The price difference in brands can be seen in the price of the products. A lot of people are willing to pay more for the name brand than for the generic brand. This can be seen when people buy clothes, electronics, and food. Comparing a product to its more generic competitor is a good way to estimate how significant your brand equity really is. 

(Reliable) Market Share

Market share is the percentage of the market that a company occupies. Market share is calculated by dividing the company's net sales by the total net sales of the market. Market share is important to companies because it can be used to measure the company's dominance, brand equity, and ultimately success. 

(Not reliable) Stock price

The stock price of a company is a representation of how much people think the company is worth. The price can be affected by many factors such as the company's earnings, the company's debt, and the company's competition. Seeing a general consensus about what the public thinks of your brand can be a good and short-term indication of your brand equity. 

Conclusion | Make brand equity important.

All business executives need to know about brand equity and brand building. This is because it is the foundation of every successful corporation, which remember, started as a small business or startup at some point. Brand equity, simply put, is the emotional connection a consumer has with a company. Executives who are able to build memorable brands have mastered the art of customer perception. Brand equity is what separates strong brands from the rest.

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What is Brand Equity?

Brand equity refers to a value premium that a company generates from a product with a recognizable name when compared to a generic equivalent. Companies can create brand equity for their products by making them memorable, easily recognizable, and superior in quality and reliability. Mass marketing campaigns also help to create brand equity.

When a company has positive brand equity, customers willingly pay a high price for its products, even though they could get the same thing from a competitor for less. Customers, in effect, pay a price premium to do business with a firm they know and admire. Because the company with brand equity does not incur a higher expense than its competitors to produce the product and bring it to market, the difference in price goes to their margin. The firm’s brand equity enables it to make a bigger profit on each sale.
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