Brand Equity and Consumer Perception
In economic theory, brand equity is the value of a brand in terms of its price per unit and the total volume of sales it receives over its life cycle.
You can calculate the value of brand equity by multiplying the product’s market price by the total amount that the public perceives the equity to be.
Thus, brand equity captures consumers’ value due to purchasing a particular product or service and the perceived benefit they derive from doing so.
The higher the product’s perceived value, the greater the sales volume and the more successful the owner of the brand equity.
How do you create brand equity?
By far, one of the most critical factors in building brand equity is to compete with other brands in the same category effectively.
Large multinational corporations spend millions on advertising to generate and maintain brand equity.
Doing so gives them an advantage over smaller companies and independent small businesses that lack the marketing budget that large corporations have.
However, even with the largest advertising budget, a company that lacks a recognizable brand face or strong marketing or PR campaigns, cannot maintain consistent and prolonged profitability solely by having many loyal customers.
Smaller companies rely on many different factors to build their brand.
One of these factors is marketing campaigns.
Companies that spend heavily on marketing campaigns to attract new customers and increase the perceived value of their product to existing customers are the ones that enjoy a consistent and long-term advantage in the consumer perception stakes.
To create positive brand equity, companies must make sure that their marketing campaigns reflect a consistent message across the board.
One good marketing strategy is to carefully analyze your competitors’ marketing campaigns, both in print and on television, and identify both positive and negative elements.
In addition to marketing campaigns, another critical element for building brand equity is the quality and consistency of the product or service that a company provides.
Consumers who are repeatedly satisfied with a product or service quality will remain loyal to that company.
Consistency in the quality of customer service extends beyond the product or service itself.
Acceptable practices in the way that a business operates can also help to establish good brand identity.
Companies that treat their customers well, offer them options when they need to make a purchase, and provide a wide variety of options can enjoy a consistent and long-term advantage over competitors.
Consistency and value are two important drivers of consumer perception.
Brand equity is also influenced by how consumers think about brands, and this concept is a complex one.
Many people view brands based on the reputation that a company enjoys in the marketplace, and these perceptions can significantly affect a consumer’s purchasing decision.
Consumers tend to emphasize an entity’s reputation that they perceive as a highly trusted and reliable corporation.
The presence or absence of negative publicity is also considered in the equation.
One aspect that is often overlooked in brand equity studies is the extent of consumers’ brand loyalty.
A consumer’s level of brand loyalty is influenced by many factors, including perceived quality of service, perceived value, and a history of successful purchases.
A brand equity analysis of the purchases made by a particular segment of the population can reveal important insights into consumer attitudes toward a brand.
This information is precious for organizations that target younger groups of consumers because a lack of brand loyalty can be as detrimental as a lack of exposure.
Finally, brand equity is also affected by consumers’ perceptions of competition.
Research has shown that brand equity is positively impacted by perceived competition.
Research on consumer attitudes toward established brands has found that consumers tend to overestimate the effect that competitors have on their brands’ quality and underestimate their impact on their products’ prices.
The results of these studies suggest that consumers have an inflated view of the level of competition in a market, and this perception is, therefore, reflected in the prices of rival brands.
These aspects of brand equity impact consumers’ perception of the brand and contribute to its success or failure.
However, it is the level of consumer awareness that is ultimately the most critical aspect of brand equity.
The research conducted on brand awareness has revealed that over 60% of consumers make purchasing decisions based on them by advertising agencies and marketing professionals.
With this kind of direct marketing, consumers are presented with a range of different options and their decisions are driven by what they believe will benefit them the most at a given time.