What is Brand Equity? Why is it Important?

 

Brand Equity speaks about the additional value that a consumer connects to the brand that is different from all the other brands present in the market. Said differently, Brand Equity means the perception, awareness, and loyalty of a customer towards the brand.

In marketing, brand equity cites the value of a brand and is determined by customers’ perception of the brand. Brand equity can be positive or negative. If customers believe highly of a brand, it has positive brand equity. If not, it’s negative brand equity.

Example: The additional value a customer is willing to pay for Lays against any local brand of chips available with the shopkeeper.

Brand Equity is the goodwill that a brand or a company has built or gained over time.

Brand Equity can be observed in the way a customer feels, thinks, and perceives along with the price of the product and market position, and also the way brand generates profit and market share for the company as a whole.

Customer Brand Equity can be understood in 3 different ways:

1. The Various Responses of a customer towards the service or the product helps in defining the brand equity. The way the customer feels about the brand and acknowledges it to be different from the other brands will create a positive response for that brand and will contribute to its goodwill.
   Example: Customers have a positive response towards Macbook because of its anti-virus software.
2. The responses can be formed only if customers have enough knowledge about the brand and the company; thus, Brand Knowledge is crucial to ascertain the brand equity. Brand knowledge involves thoughts, feelings, experiences, information, etc. that build an association with the company or the brand.
   Example: Brand Association reflects the information about the product such as Redchief is recognized for its rough and tough styling.
3. The different customer’s response that adds to the brand value confides solely on the Marketing of a Brand. The strong brand results in generous revenues for the company and a better understanding of the product among the customers.

Thus, the marketers inherently study the Customer-Based Approach wherein they study and understand the response of a customer towards the brand that can be imitated in their frequency of purchase. It focuses on customer’s perception i.e. what they have felt, thought, read, seen about the brand, and how it has supported them to satisfy their urge of need.

The Importance of Brand Equity

Marketing researchers say that brands are the crown jewels of a company. Brand equity contributes meaningful value to corporations:

Companies can charge a premium price for products with huge positive brand equity (think of designer brands).

Positive brand equity can be transmitted to a different product line, which in turn results in an increase in sales and profits for the company.

Positive brand equity results in an increase in market share as the brand is widely known, acknowledged, and preferred by consumers.

Example of Brand Equity

An example of a company with high brand equity is Apple. Although Apple’s products are very identical in terms of features to other brands, the market demand, customer loyalty, and the company’s premium price are among the highest in the consumer tech industry. Apple ranks steadily as one of the most valuable brands in the world. Apple’s brand equity is valued at more than US$250 billion.