New media platforms, digitization and competition has eventually changed the consumer’s buying habits and decision-making process. The purchasing decisions of today’s customers have put more weight on the brand than on any other product feature.
Your brand is the core of all your marketing efforts. When your customers buy from you, they’re purchasing the promise of a great experience; from your website, social media, to the way your staff interacts with them. Your brand is how you interact with the world and is essentially shorthand for who you are.
The best brands will always outperform the competition in terms of sales, profits and influence. Brand equity is the concept separating strong brands from the rest of the pack. It’s how brands build credibility and value in their industry.
What Is Brand Equity?
Brand equity determines the value of your brand by looking at things like customer loyalty, awareness, perceived quality, and associations. Unlike brand value, which measures a company’s financial worth, brand equity looks at the more intangible worth of your company.
Strong brands have positive brand equity. Coca-Cola has a good brand equity because the overall sentiment towards the company is positive. This makes the business more appealing to clients, investors, and collaborators. Brand equity affects the economic value of a brand because strong brands can charge more for their products and services.
If people have a positive opinion of your company, they’ll be willing to spend more to access your products or services. One study found that strong brands often earn around 3x the sales volumes of weaker brands.
Can You Learn How To Measure Brand Equity?
Learning how to measure brand equity means looking at specific areas of company growth. Each of these areas relate to the three metrics of brand equity:
- Knowledge metrics: Which measure the popularity and awareness of your brand
- Preference metrics: Measuring the chance of your customer choosing you over a competitor
- Financial consideration: Examining the financial value attributed to your brand by customers.
1. Brand Loyalty
Brand loyalty is one of the most important components of brand equity. Studies show that customer loyalty and retention are in decline. The sheer volume of competing brands in the market means that customers are happier to shop around for options.
If you have brand loyalty, you’ll have a community of dedicated customers who keep coming back to your company. You can measure this by looking at:
- Reduced marketing costs: You don’t need to spend as much on finding new customers if you can retain your existing clients.
- Increased trade strength: Loyal customers will offer a steady source of income.
- Word of mouth: Loyal customers talk positively about your brand and generate new opportunities.
- Competitive impact: Loyal customers stay with your company for longer, and ignore deals from the competition, even when they’re cheaper.
- Repeat customers: The presence of repeat customers who keep coming back to your organization or buying additional products is an excellent sign of loyalty.
2. Brand Awareness
Brand awareness is another core element of brand equity. Awareness comes from clients recognizing and understanding your brand. These clients also keep your company top of mind when making purchasing decisions. Brand awareness isn’t about potential customers becoming aware of your brand through promotion and marketing, it’s also about positioning your brand as the best option.
Brand awareness is visible in:
- Brand anchors: Your brand name, logo, and colors all serve as anchors for associations. Positive associations with your brand anchors mean more awareness.
- Word of mouth: Customers familiar with your brand will talk about it more often.
- Consideration: The extent to which customers instantly think of you when looking for solutions to potential problems.
3. Perceived Quality
When learning how to build brand equity, understanding how you can increase your perceived quality is crucial. Perceived quality refers to how much customers perceive your brand to be worth. Customers are more likely to pay extra for products and services from a brand they consider to be superior.
To determine your perceived quality, you’ll need to research your target customer. Qualitative research with surveys, interviews, and focus groups will help you understand how customers define your brand, and how much they’re willing to pay for your products or services. Perceived quality also helps to differentiate your brand from competitors and attract channel partner interest.
Metrics determining perceived quality can include:
- Reason to buy: The reason customers give for buying your products
- Positioning: The extent to which your brand is positioned as better than competitors
- Price: The value you place on your brand. Higher price is associated with higher quality
- Channel availability: The more you can sell your products and solutions through multiple channels, the more established and credible your business seems.
- Brand extensions: More brand extensions can be associated with higher quality. Brand extensions can include new sub-brands as your company evolves.
CSAT (Customer Satisfaction) surveys and NPS scores are excellent at determining how your customers feel about your brand and its value.
4. Brand Association
Brand associations refer to the mental connections audiences make between certain concepts and your brand. Apple is associated with creativity, quality, and innovation. Coca-Cola is associated with fun and refreshment. Brand associations can be based on functional, emotional, or social benefits. Ben and Jerry’s is associated with indulgence (emotional), while Dell is associated with reliability (functional), and Gucci is linked to wealth (social).
Companies can examine brand associations by looking at:
- Customer surveys: Surveys can ask customers what they often think about when presented with your brand logo or a company product.
- Positioning and differentiation: How your company is differentiated from competitors.
- Reason to buy: Do customers want to purchase your product because it will make them feel good, improve their reputation, or something similar?
- Positive attitude: The extent to which your company generates positive emotional reactions from customers.
5. Proprietary Assets
An often-overlooked part of brand leadership, proprietary assets are things like intellectual property rights, patents, and trademarks which give your brand a strong advantage over the competition. Your proprietary assets establish the professionalism and credibility of your company through:
- Trademarks: Tools for protecting brand equity by ensuring competitors don’t dilute or replicate your image with similar names and logos.
- Patents and IP rights: Offering exclusive access to information or technology central to brand positioning and differentiation.
- Channel relationships: Partnerships with channels who help you to expand your brand’s availability to customers worldwide.
How Does Brand Leadership Impact The Bottom Line?
Learning how to build brand equity has a direct impact on revenue generation and opportunities. Organizations leveraging the potential of branding strategies earn more money than competitors, while spending less on production, advertising, and more.
Just some of the ways brand leadership enhances the bottom line include:
- Increased brand reach leads to more sales leads: The more you can get people talking positively about your company, and the more recognizable your business becomes, the more potential customers you’ll attract.
- The ability to charge premium prices: A strong brand equity identifies you as a market leader delivering valuable products. This increases your ability to charge higher fees for your products and services.
- Increased purchasing volume: Customers often buy more products, more regularly from brands with a strong brand. Loyalty to a brand developed through equity convinces customers to keep coming back for more.
- Access to new revenue avenues: If a company decides to pursue new revenue streams with different products, services, or market targeting strategies, they can use their existing equity to attract the attention of existing customers.
- New channel sales opportunities: Good brand equity attracts partners and resellers who want to assist in boosting your brand. This opens the doors to collaborations and strategies to get your product or service into new markets.
- Reduced ad spend: A strong reputation generates word of mouth marketing which requires no initial investment from your company. You can generate more potential sales, without having to increase your marketing budget.
Strong brand equity also generates a higher customer lifetime value because your customers are more likely to keep purchasing each new product and service you introduce. Existing customers are 9 times more likely to try new products from brands they already enjoy. You may even be able to avoid lost revenue caused by common business mistakes, because customers are 7 times more likely to forgive brands for mistakes. Strong brand equity even increases your stock price and makes you more appealing to investors who want to work with your company.
Can Companies Learn How To Build Brand Equity?
Brand equity is something companies need to work to build on a consistent basis. Your process starts with a lot of research into things like target audience and brand values. As your company evolves, you’ll evaluate your changing position in the market to determine how you can improve and preserve positive brand equity. To build your brand leadership:
1. Build A Strong Brand Story And Personality
First, to ensure your customers can see the image you want to present, you need to develop a brand story, personality, and a set of strong brand guidelines. Start by examining your business and determining what your values and mission are as a company. What do you want to accomplish in your industry, (Aside from making money), and why should people care about your goals?
Use your knowledge of your value and vision to build a set of brand guidelines for how you’re going to showcase your brand. This starts by creating a strong visual image, through things like brand logo design, the font you use on your packaging and labels, and even the colors on your website.
Once you’ve got your visual image in place, think about how your messaging and tone of voice can convey your unique personality. What kinds of words and language can you use to connect with your target audience? How will you deliver your messages to your audience?
2. Examine Your Target Audience
Positive brand equity comes from your audience’s ability to understand and connect with your company. If you’re going to build an affinity with your target audience, you need to understand their preferences, pain points, and what matters most to them.
Examine your target market and build user personas with plenty of information about your client’s preferences, hobbies, requirements, demographics, and behavioral information. The more you know about your customer, the easier it will be to build a brand leadership strategy that they can relate to.
Surveys and questionnaires with existing customers will give you an insight into some of the key characteristics of your target audience. This research can also help you to audit your existing brand presence and determine how you need to change the perception towards your company. You will need to continue updating your audience information over time.
3. Build Brand Awareness
For customers to feel positively about your brand, they first need to know it exists. Building brand awareness means finding places to positively promote your company and what it stands for. A good plan for brand awareness will use your brand guidelines (logo, colors, and personality), to create a familiar image for customers to connect with.
Crucially, strong brand awareness doesn’t just mean making sure people can recognize your logo, but also ensuring that your customers know what your company is trying to accomplish. You can improve brand awareness through:
- Content production: Creating blogs, articles, eBooks, and podcasts about your business, industry, and marketplace will demonstrate your thought leadership. Content production is also an excellent way to share your voice with your audience and reach new potential customers through things like guest blogs and social media shares.
- Digital marketing: Online marketing efforts are crucial to strong brand awareness. Aside from creating content, you’ll also need to look into showcasing your company through social media marketing campaigns, email strategies, influencer efforts, and even paid ads on Google.
- Networking: Networking can be an excellent way to build brand awareness, particularly for B2B brand. Appearing at local events and global conferences is an excellent start. You can also join a variety of online forums, groups, and social media communities.
Wherever you develop brand awareness, ensure your image and identity remain consistent across every channel. Working with a branding expert to create a set of consistent brand assets will help to build familiarity with your brand.
4. Build Relationships With Your Community
Brand equity thrives when companies develop strong relationships with their community. Your community or “tribe” are all the people who can bring value into your company, including potential future employees, investors, collaborators, shareholders, and clients. To develop relationships, you’ll need:
- Regular communication: Communicate with your tribe through newsletters, announcements, press releases, and content publications. Make sure you have multiple avenues to reach out to different groups.
- Feedback loops: Feedback loops help you to ensure you’re developing the right brand equity. Surveys, reviews, testimonials, and questionnaires allow companies to keep their finger on the pulse of customer and employee sentiment.
- Measurement tools: Online tools like social media marketing and email marketing software will allow you to track metrics like shares, engagement levels, and even conversions. Tracking the metrics that matter most to your company will help you to determine when you need to make changes to your strategy.
Companies building relationships with their community will need to experiment with different methods. Today’s digital environment makes it easier to reach your audience in authentic ways, through things like live video Q&A sessions, or posting competitions on social media.
5. Be Ready To Adapt
Crucially, as your industry and business develop, the techniques that generate positive brand equity for your company may change. Over time, customers adapt to new trends, and look for different forms of evidence that they should trust or believe in a certain company.
Ten years ago, customers may have assumed that a business was trustworthy if it had 9-5 call centers ready to answer their questions. Today, companies expect the same businesses to have self-service tools on their websites, live chatbots, and multiple ways to communicate with service teams if a problem arises.
Keeping your eye on your competitors, your customer’s changing behaviors, and the marketplace you’re selling in will ensure you’re ready to adapt to preserve and improve your brand equity. Ensure you have the right tools and data strategies in place to collect the information you need for a strong, consistent brand presence.
In some cases, updating your brand equity strategy will even include refreshing your brand image.
Maintaining Brand Leadership
Brand equity is how companies of all sizes prove their value to customers, shareholders, and potential future employees. The more equity you can build in your company, the more your company will rise above the competition. Today’s studies show that around 75% of an average company’s value is now intangible, and related to brand equity.
Taking steps to consistently measure and improve brand equity gives you more revenue, prestige, and potential as a leader in your industry.