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What Is Brand Equity Or Brand Value?

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Has it ever happened to you that you needed to buy a product and in your mind, you already had a possible brand? Or that you have been anxiously waiting for the launch of a new product of your favourite brand without having tried it before? This is where brand equity or brand value comes into play.

When people have a perception, doesn’t matter if it’s positive or negative, about a brand, this is called brand equity or brand value. Here we tell you a little more about what it is and why it is important.

Summary

  • It is understood that the combination of several factors, including brand visibility and customer loyalty, will add or subtract value to a product or brand. This is how brand equity is created.
  • It is a key construction for your company, not only in terms of marketing but also strategically, since it can bring you several advantages in the market.
  • Building brand equity is not an easy task, and you need to research and analyze the values and needs of your target audience.

7 things you should know about brand equity

Working on the brand equity of your company or business can bring multiple positive results, as it can achieve customer loyalty and build customer loyalty. Here are some key questions about brand equity, so you can better understand it and apply it successfully.

1. What is brand equity or brand value?

Brand equity is the combination of customer perception, experience and opinion about your company. It directly impacts the sales and reputation of your business.

Has it ever happened to you that there is a product that you have no problem paying a little more for? This is because you know you will be satisfied with your purchase. In your opinion, that business has a positive brand value. On the other hand, when there is poor customer service, lack of transparency or inadequate pricing, this can result in negative brand equity.

Brand equity will define the value of your company, because if it is positive, it can justify higher prices.

2. Importance of brand equity

Why should brand equity be taken into account? If you have a business, you should know that brand equity is related to customer loyalty (1). This means that you will have more loyal customers as long as you take brand equity into account. You can even guide your marketing efforts to strengthen this aspect.

Furthermore, developing your brand equity can help you increase your margins by increasing the perceived value of your customers. In this way, the customer chooses your product, even though there may be cheaper options in the market (2).

In turn, brand equity helps increase brand awareness. As it is something that is not built out of nothing, companies and brands have to invest a lot of money to make customers aware of them. What this does is that they decide to buy something from a brand they are familiar with. As a result, value is added to the brand by the simple fact of being known, increasing customer loyalty.

Building customer loyalty, then, is a factor that all marketers need to keep in mind. After all, people are more willing to buy from a brand to which they are already loyal. These loyal customers will not only buy what they need from the brand, but they will also buy what they may not have needed but now want.

3. How is brand equity built?

Establishing brand equity has several benefits. But to build it, you have to analyze what makes your brand unique. For this, you have to identify the values and needs of your target audience.

The first thing to do is to research the brand perception people have about your brand. You should not only focus on loyal customers, but on the audience in general. You have to understand how people see your brand to understand why they are buying or not buying your products.

On the other hand, it is important that you communicate your brand beliefs in your brand marketing strategy. Use your marketing campaigns to emphasize your brand. Every image or video you use should talk about your brand in some way.

It is essential that you talk about what is important to your brand and audience.

Also, if you’ve been gathering information about what your customers think about your brand, use it to increase your brand equity. Put the data you’ve collected into action. Not only does it increase your brand equity, but it makes the customer feel heard, thus increasing customer loyalty.

Another thing that helps in building brand equity is to emphasize the things that differentiate you from the competition. Use your campaigns to make explicit why your product is ideal for the customer. Keep in mind not to attack your competition.

Finally, it is important to put a lot of emphasis on customer service, both face-to-face and virtual. In addition to having good communication with them. This can make the difference between a customer choosing you or another brand.

Brand equity has many benefits for your brand (Source: Katerinne Winkelman/ Gitnux)

4. Difference between brand equity and brand value

At first glance, both terms seem to mean the same thing. But it must be understood that brand value or brand valuation refers to the financial value of the brand. This means how much the brand is worth in the market.

Brand equity, on the other hand, is the valuation of the brand in the eyes of customers (3). In other words, it is the customer’s perception and how positive it is. It can be considered that brand equity is a factor that influences brand value. If customer loyalty, brand recognition and good customer service are built up, brand equity increases, thus increasing the financial value of the brand (4).

5. How is brand equity measured?

Brand equity is quite difficult to measure since several factors must be taken into account. This measurement involves customer knowledge, public perception and finances. Customer loyalty is the number one, but not the only source of brand equity.

Brand visibility

We said that for there to be brand equity, customers are important. But it all starts with visibility and brand awareness. When a person is looking to buy something, several brand options will come to mind. That’s when they see that the brand is visible and relevant. This is where marketing comes into play.

Finance

What does this mean? That you should observe and analyze the metrics, both sales and interaction in social networks. This data will guide you in which direction you should focus your marketing and where to adjust some details.

Brand associations

We also have brand associations as a factor to take into account when measuring brand equity. These are the things that generate feelings, positive or negative, towards the brand. You have to be attentive to what customers say about your brand, to know what things to improve and what things work perfectly.

Customer loyalty

Customer loyalty is another factor. It is this loyalty that makes the customer choose you again and again. But at the same time, it makes you reach potential customers through word of mouth. A customer who is loyal to the brand will recommend it to someone he knows, who may not waste time evaluating other options.

To measure brand equity you need to take into account brand visibility, your financials, brand associations and customer loyalty. (Source: Katerinne Winkelman/ Gitnux)

6. Benefits of brand equity

There are lots of benefits of brand equity. Among them are (5):

  • Higher profit margins: when you have positive brand equity, this allows you to charge more for your product. This is because people will pay the price because it’s your brand, they trust it and what it’s worth.
  • Customer loyalty: we have already mentioned this several times, but it is another benefit. These customers will pay the price you set and will remain loyal to your company for years. They will always buy your products and will recommend you, thus increasing your profits.
  • Expansion opportunities: when your brand equity is positive, there will be long-term growth for your company. You can launch new products, and expand to other markets and locations.
  • Negotiating power: if you have good brand equity, you will have an advantage when negotiating with vendors, manufacturers and distributors. This is because the public, your customers, are enthusiastic about your products and brand, so suppliers will want to work with you
  • Competitive advantage: the fact that your brand has customers who are willing to pay for your products, even if they are more expensive, just because it is your brand, puts your competitors at a disadvantage.

7. What are the components of brand equity?

Brand equity or brand value is made up of seven key elements. Each one will add value to your brand, and evaluating them will help you know where to strengthen your marketing strategy (6). These elements are:

  • Awareness: as already mentioned, this is when people recognize your brand, but also know what you offer.
  • Reputation: once you have brand awareness, you need to analyze whether people’s perception of your brand is positive or negative. It is necessary to know what people think of your brand, to know what reputation you have in the market.
  • Differentiation: part of the value of your brand is the ability to be different from your competitors.
  • Energy: you have to make people believe that you are innovative because this is perceived as energy and drive. If it is noticed that you are always doing new things, you will have new things to tell your customers.
  • Relevance: it is important that what you want to sell is useful and important to customers, because otherwise, it will not bring any benefit to you. Always look for the audience for which your product is created.
  • Loyalty: you have to analyze why your customers are loyal to you, and from this think about what things you can do to make your customers fall in love with you. But it also helps you to know why they would leave your brand.
  • Flexibility: you have to take into account how flexible and defined your brand is. This allows you to analyze what new products or associations you can make without damaging your brand.
Brand equity is composed of awareness, reputation, differentiation, energy, relevance, loyalty and flexibility (Source: Katerinne Winkelman/ Gitnux)

Conclusion

To conclude, brand equity or brand value is a very important factor when creating your brand and selling a product. This is because it can have a positive or negative impact on your company and your finances. That is why you have to take it into account and work on it, so you can create loyal customers.

In this article, we have told you a little more about what brand equity is, how to build it, how to measure it and how it benefits you. We hope this will help you take the steps you need to put it into practice with your brand.

References

1. Taylor SA, Celuch K, Goodwin S. The importance of brand equity to customer loyalty. -journal of Product & Brand Management; 2004.
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2. Thimothy S. Council post: Brand equity: Why it matters and how to build it [Internet]. Forbes. Forbes Magazine; 2022 [cited 2022Sep27].
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3. Maceira J. Brand equity and brand value: Differences and how does it contribute to business? [Internet]. Mauna Media. Mauna Media; 2019 [cited 2022Sep27].
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4. Qualtrics -. Brand value 101: What is it & how can you measure it? [Internet]. Qualtrics. 2022 [cited 2022Sep27].
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5. The Hartford -. Advantages of creating a strong brand equity [Internet]. The Hartford. The Hartford; n.d. [cited 2022Sep28].
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6. Bouvíer K. The 7 Fundamentals of Brand Equity [Internet]. Bouvier Kelly. Bouvier Kelly; 2020 [cited 2022Sep27].
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7. Carmicheal K. The plain-English guide to brand equity [Internet]. HubSpot Blog. HubSpot; 2020 [cited 2022Sep27].
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