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Brand Equity: How to Build, Measure and Keep it

Brand Equity: How to Build, Measure and Keep it

You’ve almost certainly heard the term “brand equity” tossed around in marketing circles. But what does it mean? At its core, brand equity refers to the value and power that a brand name holds in the minds of consumers. It’s the intangible asset that companies possess based on their brand’s reputation, recognition, perceived quality, loyalty, and associations.

A brand with high equity essentially has more leverage and can command higher prices, attract better talent, and expand into new markets more easily. It’s like a superpower in the business world! Imagine Coca-Cola suddenly lost all its brand equity overnight – no one recognized the name or had positive feelings about it anymore. They’d return to square one as another fizzy drink, trying to make it big. Wild, right?

Building Brand Equity Step-by-Step

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So, how do companies attain this coveted brand equity? It’s a multi-faceted process that takes thoughtful, long-term strategy. Here’s a step-by-step look at cultivating substantial brand equity:

  1. Differentiate Your Brand In a sea of choices, and your brand needs a clear, unique selling proposition to stand out. What makes your product or service genuinely different and better than the alternatives? Identify and emphasize that key differentiator.
  2. Stay Consistent Once you’ve defined your brand’s personality, look, feel, and messaging – stick to it relentlessly across all channels. Consistency builds familiarity and trust with consumers over time.
  3. Deliver on Your Promise Your brand’s equity will quickly erode if you fail to deliver on the expectations you’ve set. Make sure your product or service lives up to the value proposition you’re promoting. Under-promise and over-deliver.
  4. Create Emotional Connections The strongest brands foster deep emotional bonds with their customers beyond just transactions. Tell compelling brand stories, support meaningful causes, and focus on creating memorable experiences.
  5. Nurture Brand Loyalty It costs far less to keep an existing customer than to acquire a new one. Implement loyalty programs, prioritize excellent customer service, and innovate to keep your biggest fans returning.

Measuring Brand Equity

“Ok, got it – build a differentiated, consistent brand that delivers on its promises while making emotional connections and fostering loyalty. But how can I quantify the equity we’re building?”

Excellent question! Brand equity is somewhat nebulous, but there are established methodologies for measuring and tracking it over time:

Customer-Based Brand Equity Models

These models essentially probe how strongly your brand is positioned in customers’ minds through metrics like:

  • Brand awareness
  • Brand associations
  • Perceived quality
  • Brand loyalty

For example, you could survey a sample of customers to see whether they recognize your brand, what words/imagery they associate with it, how they rate its quality vs competitors, the likelihood of purchasing again, etc.

Financial-Based Brand Equity Models

These models examine brand equity from more of an accounting perspective, attempting to isolate the value contributed by the brand itself through measures like:

  • Price premiums commanded
  • Revenue premiums over nameless versions
  • Company’s market capitalization vs tangible assets
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For instance, if consumers are consistently willing to pay 20% more for your brand’s product over identical non-branded alternatives, that pricing power represents significant monetary brand equity.

Combined Approaches

Many experts advocate blending aspects of customer-based and financial-based brand equity models. This provides a more comprehensive view of the brand’s strength from both a consumer perception and monetary valuation lens.

The Impact of Brand Equity

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Why obsess over brand equity? Because cultivating a solid brand pays massive dividends! Let’s look at the significant impacts and benefits:

Premium Pricing Power

As mentioned, charging premium prices is one of the most tangible advantages of high brand equity. If customers perceive your brand as superior and are willing to pay more for it, you can maximize profits.

Resilient Customer Loyalty

Brands with devoted followings have a bulwark against competition. Their customers are far stickier and less likely to switch to cheaper alternatives. This customer loyalty is a huge competitive edge.

Easier Brand Extensions

Substantial brand equity makes leveraging your brand’s positive associations easier by introducing new product lines and expanding into adjacent categories. Customers’ trust in the brand gives new offerings an automatic halo effect.

A Real-World Example: Red Bull

Remember when the beverage Red Bull exploded onto the scene? Thanks to savvy brand building, they were able to easily stretch their brand equity from energy drinks into other product categories like:

  • Red Bull Racing
  • Red Bull Records
  • Red Bull TV
  • Red Bull Media House
  • Even events like the Red Bull Air Race and Flugtag!

Increased Marketing Effectiveness

Your marketing efforts are exponentially more efficient and impactful with a solidified brand identity and audience. You already have credibility and recognition, amplifying every message.

Corporate Asset Value

From an investor’s perspective, the brand is a hugely valuable intangible asset on the company’s books. Some estimate over 1/3 of the value of companies like Apple, Amazon, and Google comes from brand equity alone.

Reinforcing Brand Equity

“Sounds amazing – who wouldn’t want stronger brand equity? But how can my company reinforce and amplify our brand equity over time?”

Targeted Marketing Campaigns

Regularly refresh consumers’ minds with creative, emotionally resonant marketing campaigns that promote your brand’s key differentiators and personality. Storytelling and cause marketing resonate particularly well.

Remarkable Customer Experiences

Consumers crave outstanding customer experiences even more than quality products or services. Design and optimize every touchpoint – from your website to customer support to product packaging – to create memorable, meaningful engagements.

Corporate Social Responsibility

Increasingly, consumers want to buy from brands that align with their values and make positive societal impacts. Strategically supporting relevant causes, promoting sustainability, and giving back to communities bolsters brand reputations.

Smart Brand Extensions

Keep your brand equity intact by slapping your name on ill-fitting product extensions for growth. New offerings must authentically embrace your brand’s core identity and appeal to reinforce (rather than detract from) existing equity.

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Influencer and Ambassador Partnerships

Identify authoritative voices and personalities that embody your brand’s spirit. Partner with relevant influencers, ambassadors, advocates, and affiliates to extend your brand’s reach and credibility.

A Cautionary Tale: Outdated Cultural Associations

Conversely, reputations and cultural associations that were once assets can become hindrances if left unchecked over time. For instance, the Aunt Jemima brand’s identity rooted in racist stereotypes eventually eroded so much brand equity that it had to be retired. Continuously reassess whether your brand associations are still additive or detractive.

Common Brand Equity Pitfalls

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Even the biggest, most established brands must be vigilant about preserving their reputation and equity. Here are some common pitfalls to avoid:

Overextending Into Unrelated Areas

Earlier, we praised smart, strategic extensions reinforcing a brand’s core identity and equity. The opposite – stretching into completely unrelated and unfitting areas – is a recipe for brand dilution. Bic pens extending into women’s underwear or Virgin’s foray into bridal wear immediately emerge as examples of brand overextension failures.

Inconsistent Brand Experiences

Remember, remaining fiercely consistent in every customer touchpoint is essential to cultivating brand equity. A brand experience that deviates jarringly from the brand identity and expectations can quickly undo years of equity building. Always strive for omnichannel integration.

Quality or Innovation Lapses

Nothing erodes brand equity faster than a public perception that a brand has grown complacent and allowed its products or services to fall behind the times in quality or innovation. Just look at brands like Kodak, Blockbuster, and BlackBerry, who failed to evolve and lost virtually all the brand power they’d amassed.

Reputation-Damaging Crises

A crisis moment severely mishandled – through insufficient response, lack of accountability, or worse, doubling down on missteps – can instantaneously decimate brand equity built up over decades. Effective crisis management is crucial for protecting brand reputations.

The Future of Brand Equity

As marketing and brand-building strategies evolve, so will the factors impacting brand equity and the methodologies for measuring it.

The Shifting Media Landscape

The proliferation of digital, social, and influencer marketing channels presents opportunities and challenges. On the one hand, brands have more avenues for creating awareness and connections. However, brand narratives are also more susceptible to misinformation and co-option online.

First-Party Data Leveraging

With mounting data privacy restrictions around third-party tracking, brands must lean heavily on first-party customer data from surveys, loyalty programs, CRMs, etc., to quantify equity and nurture audience segments.

Authenticity and Purpose

Today’s consumers, especially younger demographics, are hyper-aware of inauthenticity and greenwashing from brands. Having a defined brand purpose that’s backed up by accurate, measurable social and environmental accountability will be table stakes.

Real-Time Measurement

As always-on data streams become more sophisticated, brand equity measurement will become more dynamic and real-time rather than periodic snapshots. Advanced AI and machine learning will help synthesize disparate data sources into holistic brand equity scores and recommendations.

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Renewed Offline Emphasis

While digital channels accelerated, physical experiences and activations were deprioritized during the pandemic. But as the world reopens, brands may need to double down on creative immersive experiences, pop-ups, and events to forge genuine human-to-human connections that boost equity.

Brand Equity in the Metaverse?

Future forays into virtual and augmented reality realms, often called the “metaverse”, will present new frontiers for extending brand experiences and communities. Companies must thoughtfully navigate issues like digital goods/NFTs, virtual sponsorships, and integrating physical digital spaces.

Conclusion

Whether you’re an individual influencer, upstart brand, or multinational conglomerate, building and cultivating brand equity must be paramount in today’s oversaturated attention economy. Establishing a differentiated, authentic, and emotionally resonant brand that consistently exceeds customer expectations is the path to long-term value, loyalty, and pricing power.

While brand equity was once seen as a “nice-to-have” intangible, its financial impacts are now undeniable parts of most companies’ market valuations. A respected, trusted, beloved brand gives you a force-multiplier effect for growth, resilience, and efficiency in all marketing and business operations areas.

So invest strategically in brand-building for the long haul, measure your equity progress rigorously, and remain ever-vigilant about consistently reinforcing those invaluable emotional connections and associations with your customers. The dividends in reputation, resilience, and bottom line will make it all worthwhile.

FAQs

How long does it typically take to build substantial brand equity?

There’s no set timeline, as cultivating robust brand equity takes sustained effort over many years if not decades. It requires detailed consistency in delivering your brand promise across all customer touchpoints. However, even young brands can start accumulating equity and trust through intelligent positioning and quality products/services from day one.

What’s more critical – customer-based or financial brand equity metrics?

The healthiest approach is a combined model that considers customer-based measures like awareness, associations and perceived quality, and bottom-line financial impacts like premium pricing power and revenue premiums attributed to the brand. Together, these provide a comprehensive view of brand equity.

How much should brands invest in building equity?

There’s no universal percentage, but brand-building costs like marketing, R&D, customer experience, etc., should be treated as investments rather than expenses. Even increasing those investments by a few percentage points can yield exponential long-term returns if executed strategically to expand brand equity.

Can small businesses and startups realistically build meaningful brand equity?

Absolutely! Any company, even bootstrapped small enterprises or individual influencers/creators, can cultivate brand equity through consistent branding, quality offerings, and genuine community connections. Nimble underdogs often need help establishing differentiated identities before legacy brands.

What key risk brands should watch for as they extend into new products/services?

Brand overextension – stretching into categories or offerings that seem disjointed from the core brand identity and associations. This tends to confuse customers and dilute carefully built brand equity. Any new extension should be a thoughtful, complementary fit with the parent brand.

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