How to Build & Measure Brand Equity
The purpose of a brand leader is to create a strong brand—and that means building Brand Equity. Brand Equity is the value of the brand in the marketplace and is defined as the assets linked to a brand’s name and symbol that add (or subtract from) a product or service.
Coca-Cola’s brand is worth nearly $70 Billion, accounting for more than 60% of its market capitalization. Brand Equity is an intangible asset, but a common characteristic of high performing brands. Having Brand Equity means that individuals would be willing to pay a premium price for your brand’s offering.
What is Brand Equity?
The dimensions of Brand Equity can be organized into four sections: Brand Awareness, Perceived Quality, Brand Associations and Brand Loyalty.
1. Brand Awareness
Often an undervalued asset, Brand Awareness affects perceptions and purchase decisions. People like familiarity, and familiar positive perceptions can lead to market superiority.
2. Perceived Quality
Perceived quality influences brand associations in many contexts and in part because it has been empirically shown to affect profitability with ROI and stock return.
3. Brand Associations
Brand Associations can be anything connecting the customer to the brand. Often including imagery, brand attributes, use situations, brand personality and icons or symbols. Intrinsic to Brand Management is determining what associations to develop and then creating programs to link these associations to the brand.
4. Brand Loyalty
Brand Loyalty is at the core of Brand Equity. The concept is to strengthen the size and intensity of each loyalty segment. A Brand which has a small, but intense customer base can have significant equity, despite its competition.
How can Brand Equity Create Business Growth?
When companies want to grow their business they often overlook Brand Equity, and instead begin offering new products, services and experiences. These efforts often fail because the brand is not strong enough for consumers to trust or follow.
EquiTrend states that the key Brand Equity Measure is perceived quality, which has been found by Total Research to be highly associated with brand-liking, trust, pride and willingness to recommend. This is essentially the average rating of consumer opinions about the brand.
EquiTrend measured Brand Equity by exploring data from 33 companies of whom had substantial sales and profits driven from the corporate brand. The results showed that firms experiencing the largest gains in Brand Equity saw their stock return average 30 percent; conversely, those firms with the largest losses in Brand Equity saw stock return average a negative 10 percent.
The relationship between Brand Equity and stock return could be caused by the fact that Brand Equity supports price premium which contributes to profitability. Thus, premium brands such as Apple, BMW, Starbucks and Whole Foods have substantial perceived quality advantages over the competition. This works both ways, where the price premium becomes a quality cue.
How to build Brand Equity?
Creating Brand Equity begins with focusing on building assets that will result in long-term profitability.
The process requires consistent reinforcement and long-term vision. This can often be a challenge for CEO’s who desire immediate growth and short-term payoff. For this reason, there must be total buy-in and trust from key stakeholders that Brand Building will result in the long-term payoff and competitive advantage.
Brilliant brand execution is the key to a strong brand; and the stronger the brand is, the higher the probability that the brand will continue generating equity and demand in the future. The challenge is to be noticed and remembered, to influence perceptions and reinforce attitudes. By measuring brand strength, it can determine how well you’re building brand equity.
Internal Brand Strength Factors
- Understanding of the Brand Purpose, values, positioning and proposition.
- Understanding of target audiences, customer insights and drivers.
- Internal commitment to brand and belief in the brand.
- Support for the brand, including; time, influence, investment.
- The ability to respond to market changes, challenges, hiccups and opportunities.
- Internal leadership and a desire to constantly evolve and renew.
- Securing the brand across a number of dimensions, including legal protection, proprietary technology, design or geographical area.
External Brand Strength Factors
The fit with customer/consumer needs, desires and decision criteria.
The brand is soundly based on the promise and capability. It has a defined heritage and a well grounded value set. It can deliver against the high customer expectations.
The brands “onliness factor” and degree of radical differentiation vs. the competition.
The ability to communicate without detracting or wandering from the core brand purpose and strategy.
The brand is recognized by customers, and there is an emotional attachment and understanding of its distinctive qualities and characteristics.