Recently there has been a topic that has been all the rage in business, but in the end not everyone understands what it is: Branding. Companies invest a lot of time and resources into developing their brand identities, recognizing that a strong brand can yield immense value. But how do we measure this intangible (but powerful) asset? This is where brand equity comes in. In this short but concise article I will explain you what brand equity means, how it can be measured, and why it is a vital consideration for marketing teams.
Brand equity includes the value and strength of a brand in the eyes of consumers. It reflects the intangible assets a brand possesses, including brand awareness, reputation, customer loyalty, and perceived quality. It may be difficult to quantify, but brand equity directly impacts a company's financial performance and market position.
In the words of the business journalist, Stephen B. Shepard: "A great brand is a promise, a compact with a customer about quality, reliability, innovation, and even community. And while the concept of brand is intangible, brand equity is far from it."
One of the many ways to measure brand equity is through brand awareness. Strong brands are recognizable and top-of-mind for consumers within their target market. Companies normally invest in marketing initiatives to increase brand awareness, such as advertising campaigns, sponsorships, and in the last 10 years: social media presence. By conducting surveys and analyzing market data, companies can assess their brand awareness levels and compare them to competitors.
Coca-Cola has become a huge part of Mexican culture. Rebecca Blackwell / AP Images
I will go with an almost obvious example, Coca-Cola, (that I won't even try to describe who it is) has achieved unparalleled brand awareness. Its iconic logo and red color scheme are instantly recognizable worldwide. To such an extent, that in some communities in Mexico, Coca-Cola is already a "sacred drink" (sad, but true, read the story here). The brand's success can be attributed, in part, to its long-standing marketing efforts, including memorable advertisements and sponsorships of major events. Coca-Cola's brand equity is evidenced by its ability to maintain a strong market presence that is counted in decades and command a premium price for its products.
Another key part of brand equity is: loyalty. Strong brands cultivate a loyal customer base that consistently chooses their products or services over competitors. Loyal customers not only make repeat purchases but also act as brand ambassadors, spreading positive word-of-mouth and contributing to brand growth.
Dheeraj Palliyil (centre) flew to Dubai from India just to buy the new iPhone
Another obvious example of this is Apple, who exemplifies this point perfectly. Apple's brand equity is built on a history of innovative products, sleek design, and (though not so much lately) exceptional customer experience. The company has cultivated a fiercely loyal customer base, commonly known as "Apple enthusiasts," who eagerly await each product launch and willingly pay a premium for the brand's offerings. And me personally being part of this group, the famous "ecosystem" also has a lot to do with it. This level of customer loyalty contributes to Apple's market dominance and sustained success.
But well, how can we measure all this? It can be done through customer satisfaction surveys, Net Promoter Score (NPS) measurements, and social media sentiment analysis. These methods provide insights into customer perceptions, their likelihood to recommend the brand, and their willingness to repurchase.
Brand equity plays a crucial role in shaping marketing strategies. A strong brand with high equity provides several advantages. First, it enables companies to charge premium prices for their products or services. Consumers are often willing to pay more for brands they perceive as valuable, trustworthy, and superior in quality. But in doing so, the consumer expects an equally premium service, so the moment this premium service is not achieved, the consumer may feel betrayed.
And as I already mentioned, brand equity fosters customer loyalty and repeat purchases. Loyal customers are less likely to be swayed by competitors and are more forgiving of occasional missteps. This organic growth reduces customer acquisition costs and drives long-term success.
And a benefit that is rarely mentioned, brand equity opens doors to strategic partnerships and collaborations. Strong brands are viewed as trustworthy and credible by other businesses, making them attractive partners for joint ventures or co-branded initiatives. Like Nike and the almost endless list of collaborations that it has. These alliances can expand brand reach, tap into new markets, and unlock mutually beneficial opportunities for growth and innovation.
So, in conclusion, brand equity is a vital piece of the puzzle for marketing teams. It represents the value, strength, and perception of a brand in the eyes of consumers. While challenging to measure, brand equity can be assessed through brand awareness, customer loyalty, and perceived quality. By understanding and leveraging brand equity, companies can differentiate themselves in the market, strategically define their prices, and cultivate a loyal customer base. Branding goes beyond aesthetics; it is the strategic cultivation of brand equity that propels businesses toward sustained success in today's competitive landscape.