- Brand equity is the value created when customers see your offering as unique among competitors.
- Low emotional equity poses existential brand risks including loss of attention, decreased marketing ROI, tarnished reputation, and lost revenue.
- Building brand equity is a monumental challenge for companies, but a holistic, asset-driven approach is the key to success.
What is brand equity?
Brand equity is the increased brand value that results from having positive brand recognition in the minds of consumers. It can also be called a value premium or addition and usually represents a relationship between a stand-out brand and its more generic competitors.
Brand equity is a brand strategy that assists in influencing a purchase decision, often at a higher price despite similar competing products. Brands that consumers identify with, share values with, and have positive engagement with achieve better brand equity.
Brand recognition and brand equity are different things. Through brand recognition, consumers reach awareness of a particular brand, but equity is not guaranteed. Through brand equity, consumers see the brand as reliable, established, and superior to the alternatives.
Brand equity can be measured from consumer engagement and the customer’s assessment of the brand. If consumers identify your brand as more valuable than competitors, equity is achieved.
Components of brand equity
Several components make up brand equity, including:
- Brand recognition (customers know us) — Brand equity starts with awareness. Brands seek to stand out in the marketplace with a combination of branding, positioning, marketing, and distinct offerings. Brand recognition is simply when consumers understand that your brand is one of many options. Your unique value has not yet been communicated, but customers are familiar with your brand name.
- Brand reputation (customers trust us) — A further step towards brand equity is the establishment of a strong reputation in the marketplace. Brand reputation is a measurement of customer trust in your brand’s promise, offerings, as well as the extent of your market leadership.
Brands with strong reputations offer more value, often for a longer time than generic brands, to their customers. Brand affinity (customers “like” us), or the formation of an emotional connection with a brand, occurs here and moves customers from trusting to depending on the brand’s offering.
- Customer value (customers depend on us) — The final piece of brand equity is customer value, or the extent to which customers depend on your offerings. Customer value is achieved when a brand successfully delivers on the promises it has made to consumers.
When your customer makes a purchase decision that aligns with or exceeds their expectation, you’ve created a mutually beneficial relationship. That particular customer is more likely to become an advocate for your brand, leave positive online reviews, and return to buy more.
These cumulative positive experiences lead to stronger brand loyalty and customer loyalty, retention, and improved profit margins.
Why is brand equity so important right now?
In the face of increased competition, customer expectations, and economic uncertainty achieving strong brand equity should be a marketing priority. Cultivating and managing brand equity and building strong relationships with your customers BEFORE they make a purchase will make them more likely to turn to you when they are ready to buy, even in a down market.
Positive customer perception of your brand is the ultimate defense against risk, from changing market forecasts to the challenge of winning customer attention away from competitors, publishers, and affiliates online.
Building positive perception means offering great products, delivering on your promises, and providing a great customer experience that will win lifelong fans who will choose you above the rest. It also requires thoughtful alignment across all of your digital assets.
The risks of poor brand equity
Unestablished or poor brand equity is dangerous to a brand’s bottom line. If your brand doesn’t stand out from competitors and hasn’t built strong relationships with customers, you’re more exposed to risks, like:
Loss of consumer awareness
Brands with low or no equity fall through the cracks of consumer awareness. The few standouts capture most of the awareness while low-equity brands disappear into the mass of undifferentiated companies. How can you gain attention if your brand is indistinguishable from everyone else?
Diminished marketing ROI
If you aren’t focusing on brand equity you won’t get the same ROI from your marketing efforts, and short-term fixes like expensive advertising and quick-hit marketing campaigns won’t fix the underlying problem. When you invest in brand equity, it raises the value and ROI of all your marketing strategy efforts.
Companies with no brand equity have a harder time reaching consumers because there is no value differential. In other words, they simply don’t stand out from the crowd. Expensive advertising campaigns and short-term marketing plays won’t impact the perception that you aren’t unique (nor uniquely valuable).
If your marketing pushes attention to lackluster solutions and brand positioning, those eyes won’t readily turn into sales. But addressing your brand equity can raise the value and overall ROI of all your marketing efforts.
More sales funnel gaps
Building brand equity involves creating an aligned network of assets that reach your audience when and where they seek solutions. You need content that targets queries from top to bottom of the funnel to capture awareness early on and ultimately provide solutions and value to your customers.
Maximizing your reach across the funnel is one way to garner brand equity. The more audience members you help, the more of a stand-out you become, and this translates into higher perceived value.
Loss of market share
Because, more than ever, brands must compete for attention (and not just sales), the companies that have high brand equity automatically win the majority of the attention. The rest fight over the remainder. Low-equity brands lock themselves in this fight and miss out on market share.
Low brand equity means less reach. Consumers at all levels of the funnel won’t be drawn to you when they seek solutions. This lack of awareness prevents customer acquisition, nurture, and overall growth.
Loss of revenue
At the end of the day, negative brand equity risks speak to one conclusion — revenue loss.
Low equity keeps you fighting among other undifferentiated, low-trust brands for a diminishing piece of the pie. You’re starting out with less potential revenue while being more vulnerable to economic downturns, market saturation, and other challenges that can shrink revenue.
Benefits of brand equity
We’ve seen what the risks look like, now let’s jump into the benefits of making brand equity a top priority. It’s obvious that exceptional customer experiences lead to positive consumer perception of your brand which is extremely valuable. But what are the specifics?
Stronger brand recognition
Brand recognition comes before achieving brand equity. Once brand equity is achieved, it creates a feedback loop of increasing recognition for new and existing customers. By being perceived as more valuable than the competition, more opportunity for positive customer engagement occurs.
With more engagement comes better reviews and reputation. Then, when new customers become aware of your brand, you’ve built the infrastructure to turn them into loyal customers and brand advocates.
Differentiation from competitors
You may think you’re competing for sales, but ultimately, you’re competing for attention. Instead of blending in with a dozen alternatives vying for attention scraps, be the stand-out that’s actually differentiated.
Brand equity is a comparative metric that expresses just how much better consumers think you are than the competitors. This includes your brand identity (what you stand for) as well as product quality. Thus, positive brand equity relies on being different but also providing real and unique value to your customers before, during, and after the transaction.
Healthier margins through premium prices
This one is common sense, but what happens when consumers think your brand is the best option? That’s right — you can demand a premium for your offering when you have high-perceived quality.
Think of Apple. Because Apple has brand equity, its products appear like luxury items and command higher prices as a result.
Deeper emotional connections with customers
Awareness is the key that many brands miss. You can’t just focus on transactions and expect to build relationships and positive associations with your customers.
Brand equity sways consumers toward a winning company or product. It works because that brand has fostered emotional connections — ties strong enough for building long-term relationships built on trust.
Brand resilience (during crises or economic headwinds)
Given the volatile economic landscape and the seeming ubiquity of brand crises, it’s important to have a proactive defense to address problems when they arise.
Brands that are beloved by and connected to their customers are better able to avoid, handle, compartmentalize, and recover from reputation-damaging events and economic headwinds. Customers are less likely to abandon brands that speak their language and share their values.
Measuring brand equity
There are several approaches to measuring brand equity. While there isn’t a one-size-fits-all metric, here are some of the most common:
- Brand valuation — This metric attempts to sum the total value of the brand itself and how it connects to company success. It considers the value to cost of creating the brand, the market value compared to competitors, and the income the brand generated.
- Brand strength — This metric is used to understand a brand’s power in terms of consumer demand. One common example is the use of customer surveys to assess how much a brand is preferred over others.
- Brand awareness — Using focus groups, research panels, brand perception surveys, reviews, and sales data, this metric measures how known a brand is among its target audience.
- Brand relevance — A measure of how relevant a brand offering is to the target market and the perception of its uniqueness. Net promoter score and customer satisfaction surveys help evaluate this.
- Financial data — Utilizing financial performance data like revenue, growth rate, and CAC, help assess brand performance. Increases in customer lifetime value and your price premium compared to competitors are two indicators of the strength of your brand equity.
The keys to achieving brand equity
Achieving brand equity is a long-term strategy and there are a number of best practices you can leverage to start on the journey. All of them are connected to how you communicate with your audience to deliver the best brand experiences possible.
Be true to your brand purpose
Clarify and strengthen your brand mission or purpose, then invest in making sure your offerings live up to that expectation. No amount of branding and marketing can sway the minds of an audience if you aren’t delivering on your promises.
Put customers first
Customer-centricity, or customer-centric marketing, is another vital aspect of achieving brand equity. Brands that consistently place the customer first and at the heart of decision-making tend to stand out from the crowd.
This means really listening to your audience so you can better understand their pain points and build solutions to their problems. Using search intent data is a great place to start understanding your customer base and building better user experiences.
Be authentic and consistent
This connects back to your overall mission, which sets out your values and goals. Being authentic in your pursuit of your brand purpose and doing it in a consistent way is a minimum requirement.
All customer-facing communications and content should be created from one “source of truth” to maintain consistency across your messaging. Being authentic and consistent is the foundation of creating emotional ties with your audience.
Asset-driven approach to building brand equity
Brands need a solution that addresses building all aspects of brand equity, including brand recognition, brand image and reputation, and customer value.
Leveraging a fully optimized digital network of online assets can help brands recapture customer attention and create real connections by providing actual value that builds trust with consumers.
Creating, optimizing, and aligning your brand’s digital footprint helps authentically and consistently build emotional connections with your audience throughout their customer journey.
An asset-driven strategy:
- Identifies competition online and helps you expand your digital footprint
- Leverages real-time customer search intent data to inform customer connection strategies
- Creates a gap-free customer acquisition infrastructure
- Creates consistent, authentic opportunities for customer engagement
- Strengthens and solidifies your brand’s reputation
- Empowers all of your other marketing efforts to deliver higher ROI
A brand equity cautionary tale
Everyone remembers the Volkswagen emissions scandal — the one that decimated the world’s largest automaker’s reputation resulting in a loss of over $17 billion, not to mention fines.
This is an example of a brand that painted a sunny picture but was actively undermining its own equity. By not delivering on its promises and dishonestly pursuing its mission, Volkswagen sustained a fundamental blow to all aspects of its brand equity.
Looking back at the aspects of brand equity, Volkswagen’s behavior:
- Damaged its brand recognition — Customers now know us as a dishonest brand
- Damaged its brand reputation — Customers don’t trust us
- Damaged its customer value — Customers are less likely to depend on us
All of the goodwill, positive brand associations, and emotional connections Volkswagen built over years were squandered. When the crisis hit, the brand wasn’t prepared for the blowback.
So, even brands with once-strong equity are subject to major damage. It was the extent to which Volkswagen committed to rebuilding equity after the crisis that enabled its survival.
Regardless of the size of your brand and the goodwill you’ve garnered, it can be lost. Marketers must be alert to their brand equity at all times and should be actively improving and maintaining the positive brand identity that customers believe in and trust.
Brand equity is an elusive achievement for most brands. When we look at the competitive landscape, it’s clear that the standouts — the top 20% — are snatching the majority of customer attention. Low-equity brands fall in line with the undifferentiated masses and without the proper strategy, they tend to get stuck there.
Building brand equity is the way out. Building equity is hard, and “betraying” the trust of your customers is a surefire way to destroy any equity you’ve built. Starting with an asset-driven approach and focusing on clear, consistent messaging that connects with your customers offers a logical, holistic way to stand out in increasingly competitive markets.
Brand Equity FAQs
Brand equity is the value increase brands can achieve when consumers have an established, positive perception of the brand. It’s a brand strategy used to influence transactions based on trust and shared values between a brand and its customers. Brand equity is made up of brand recognition, brand reputation, and customer value.
Brand equity refers to the overall value premium customers attribute to a brand versus its competitors, but brand recognition is just one smaller part of brand equity. Brand recognition is the awareness that happens when consumers understand that your brand is one of many options or are familiar with your brand name.