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What is brand equity and why it matters
By Kristina Mišić access_time 5 min read

When shopping, do you every so often find yourself returning to specific brands? Running shoes? Adidas. A stylish handbag? Louis Vuitton. A new perfume? Givenchy. You probably have your favorites, those you turn to without even considering other brands that might be less expensive or offer you a better price/value advantage. Why is that? Why do we hold certain brands and products in such high regard? The answer is Brand Equity.

What is Brand Equity?

Brand equity is the associated value your brand or product has in the commercial market. This value comes from the perception of consumers, and it can be either positive or negative. An immaterial asset, the importance of brand equity is crucial for any company aiming for financial success.

The most important assets of any business are intangible: its company name, brands, symbols and slogans, and their underlying associations, perceived quality, name awareness, customer base, and proprietary resources such as patents, trademarks, and channel relationships. These assets, which comprise brand equity, are a primary source of competitive advantage and future earnings.

David Aaker, Father of Modern Branding

Sounds good? It is. More importantly, how do we create positive brand equity for our brand or product? Let’s explore the Brand Equity Model developed by Dartmouth’s marketing professor Kevin Lane Keller.

Keller’s Brand Equity Model

To create a successful brand, Keller establishes a four-step model to build a brand equity pyramid:

Step 1 – Identity 

The first level of the pyramid refers to your brand identity, the characteristics that define what your brand is about, its benefits, and most importantly, ensuring that your customers perceive you correctly.

Step 2 – Meaning

This level goes deep into creating true meaning and relevance for your brand, and it’s composed of two building blocks: Imagery and performance. Imagery refers to the visual elements that make your brand recognizable to its audience, while performance is the ability your brand has to deliver its promise to the customers.

Step 3 – Response

When you put your brand out in the market, people will react and respond differently to it. Their emotions and judgments will play a part in how they feel about your brand. If you succeed in meeting their expectations, these judgments and feelings will create a positive emotional response, while failing to do so will hurt your brand’s reputation. So make sure your brand fulfills the promises made to your customers.

Step 4 – Relationships

The last level of the pyramid is also the most difficult to achieve because it depends on how a brand can grow and maintain a successful relationship with its customers’ base. When you get there, your customers have already formed a strong and deep bond with your brand. They feel completely identified with your brand, are loyal to you, and keep coming back to get more products. At this level, it is possible to see customers evolving into communities where they can share their experiences with your brand. You could also see them becoming brand ambassadors, interacting, and engaging with you in social channels, even participating in events and conversations to support your brand.

Why brand equity is important

Why is brand equity important

Any company aiming for financial success will work hard to build and attain positive brand equity, because of the impact and profound value it brings to the business:

  • Strong brand equity will allow your company to charge a premium for the products and services compared to the price considered “the standard” in their category (iPhone, anyone?). When a customer associates a brand with unparalleled quality, their perception of the brand’s value is heightened, and this makes them more willing to pay more for its products.
  • By association, positive brand equity for a particular product will benefit other product lines, increasing sales and revenues. Strong brand equity usually implies a high customer retention level.
  • Having a renowned brand with positive brand equity will increase the market share of the business.
  • Brand equity also brings value to customers. It improves their confidence when making a purchasing decision, and incidentally, their customer satisfaction.
  • For marketers, brand equity means you can get more efficiency in your marketing programs. Brand equity also impacts customer loyalty and preference, and it makes it easier to have better access to the distribution chain.
  • For your company, positive brand equity becomes a great opportunity to conduct better recruitment processes. A company with an outstanding brand reputation will attract more hiring talents.

Some examples of brand equity

Apple. While it might be the obvious choice, Apple is a perfect example of how to build and maintain brand equity. It has a diverse line of highly-regarded products, from the iPhone to computers. It also has a loyal customer base, a large community of involved customers who participate in their product launches, events, interacts in social media channels, and willingly act as brand ambassadors.

Coca-Cola. Another big brand with formidable brand equity. Coca-Cola is a brand that embodies not only a line of products, but positive experiences, feelings, and a big and loyal customer base.

Nike. Another brand with strong brand equity that continues to build on its brand loyalty and awareness, thanks to highly creative marketing campaigns that combine quality products, powerful brand associations, and inspiring ideas to push customers to improve their lives. Indeed, just do it.   

We hope the above information will help you in making informed decisions about your brand. If you want to say hi or have any questions about naming, branding, and domain names get in touch, we’re always happy to hear from you.

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