Brand Equity can be defined as the premium charged by the company for its particular product or service offered as it has a renowned and recognized name in the market as compared to the similar line of products or services having same features and utility. It is the commercial value that is derived as a result of the positive perception of the consumer about the brand and its offerings.
Companies can generate the positive and high level of Brand Equity for their specific line of products or services by making them memorable and recognized in the minds of the consumers creating an emotional connection through various marketing and promotional campaigns. But above all, the offerings have to be superior in quality and reliable to create a good Brand Equity and if it not so, no amount of marketing or promotions can help the company to attain this required objective. Even when the quality is superb, companies have to do a lot of marketing campaigns to build brand equity.
For example, if the consumers are opting for a generic product rather than a branded product, it is the result of negative brand equity towards the brand and its product and the reasons could vary from the usage of product harming the environment to its operational value and performance is not as per the brand’s promise.
Table of Contents
What is Brand Equity?
Brand Equity comprises three components namely, the perceptions of the consumers, the negative and positive effects, and the resulting value on the brand and the company as a whole.
To start with, the Brand Equity is built on the knowledge that the consumers have about the brand such as its values, strength, unique selling propositions, and competitive advantage along with the nature and features of the products and services offered to them that results in the perception about the brand in their minds.
The perception then results in the consumers holding a positive or negative effect on the product or service. If the result is positive, they will surely indulge in the purchase of the same that will be quite beneficial for the company in terms of higher sales, increased profits, and customer loyalty.
And if the effect is negative and consumers go for the generic product or a competitor’s products or services in the market, the company needs to work on its levels of quality and service along with the features and attributes of the offerings.
It is one of the most crucial assets of the brand and is evident in the financial books of the company such as share market prices, demand, and profitability.
It also symbolizes the relation that consumers share with the brand and the way they perceive, see, feel, and act towards the brand and its offerings. Today, the facet of Brand Equity holds the significant amount of value in the market as the brands compete against each other over the Brand Equity of the specific and similar line of products and services offered to the target market and audience.
Having a good and power Brand Equity gives tangible value to the company such as increased sales, profits, ease of introducing new line of products or services, and huge database of consumers along with intangible value such as increased awareness, farther reach, customer loyalty, and the elevated brand value in the market and in the consumers’ minds. This is why a brand always tries to build a solid brand personality.
Brand Equity is derived from six constituents namely, brand awareness, brand association, brand loyalty, brand experience, brand preference, and the perceived quality of the products and services offered to the consumers.
Effects of Brand Equity
There are positive as well as negative effects of Brand equity. If the effect is positive then most likely your revenue and sales will increase for the company or brand because the value of the company has increased. Whereas if the effect is negative then the sales and revenue will drop.
For this to happen, you need to know your market very well. Keeping a track of the market lets you know which products you need to launch. The management can also launch brands which will command the loyalty of the market. This will naturally give a boost to the equity of the brand. Remember that a few products can always become a few brands in the management portfolio. Hence thinking of branding from the start is necessary. Examples of this are all around us in home and kitchen appliances and consumer durable segments where the loyalty of the market shifts based on the new products launched by companies.
We have seen the rise of Zoom and how it became a brand. Subsequently, many people shifted to other video calling products because of privacy reasons and this affected the equity of zoom heavily. This is why you have to be careful of your brand during brand building efforts. A negative image can destroy equity of the brand.
Importance of good Brand Equity to Brands
1) Brand Equity is a crucial asset of the company
Brand Equity is one of the crucial assets of the company and it can be leased, sold or licensed to the other companies in the market as it has a strong foothold in the industry. It leads to increased goodwill for the company.
2) Premium price
The company can charge more prices for its products and services than their actual price as per the market standards. The company is in a position to command a premium from the consumers.
3) Good Brand equity results in increased market share
Having a good and strong Brand Equity increases the market share of the company owing to the factor of customer loyalty and their affinity towards the brand and its offerings.
4) Introduce new line of products or services
As the company enjoys a good Brand Equity for its existing line of products and services, it is easier to introduce the new line of offerings to the same target market and group plus to the untapped markets and consumers as well due to the strong legacy that has been formulated.
Brand Equity Examples
1) Apple
Apple, the technology giant enjoys a very positive and strong Brand Equity not only in the country of USA but all across the globe as its offerings of mobile phones, I-pads, watches, televisions, computer systems, and laptops amongst others are manufactured on the objectives of quality and operational excellence and the brand has caught the nerve of the market and consumer requirement. Even if their new line of mobile phones have more or less the same features as compared to the previous version but the brand is still able to command a premium and enjoy a huge loyal customer base. Since last seven years, it is one of the top brands in the mobile and technology industry.
2) Facebook
We all love Facebook to the core and our lives are literally incomplete without it and it is on our fingertips in regular intervals throughout the day for various reasons. There are many social networking sites that have got introduced and vanished from the market, but as Facebook has a strong and powerful Brand Equity, it is constant in the market with millions of users all over the world. Facebook must also be appreciated on increasing its Product line by adding Whatsapp and Instagram to its portfolio.
Brand Equity is just not built in a day but it requires a lot of effort and hard work on the part of promoters and the key members of the management to offer the products and services that are qualitative, value consumers by offering the finest levels of service and experience plus build the awareness about the brand by initiating the correct and optimum marketing and promotional techniques. It is a continuous process due to the volatile nature of the market and the evolving preferences of the consumers.
