Do you know what makes customers want to pay more for some brands than others? What motivates them to choose luxury or well-known brands over similar products? How do some brands become part of our everyday lexicon or synonymous with categories in the market? The answer hides in the well-thought-out branding and marketing strategy that develops strong, impressive, long-standing brand equity.
Being generally overlooked and underestimated by startups, brand equity is an intangible asset that stands behind huge profits, a strong reputation, high conversion rates and an extended company life. This dark horse of brand development sets the company on a successful trajectory and helps avoid off-beaten tracks.
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So, what is brand equity?
The concept of brand equity was first introduced in the 1980s by David Aaker, a marketing professor at the University of California, Berkeley. It refers to the value consumer derive from a brand. It is based on consumer perceptions and experiences with the brand. In other words, we can say brand equity refers to a value premium that a company generates from a product with a recognizable name when compared to a generic equivalent.
Elements and Importance of Brand Equity
Brand equity has a few basic components: consumer perception, negative or positive effects, and the resulting value. Foremost, consumer perception, which includes both knowledge and experience with a brand and its products, builds brand equity. The perception that a consumer segment holds about a brand directly results in either positive or negative effects.
Finally, these effects can turn into either tangible or intangible value. If the effect is positive, tangible value is realized as increases in revenue or profits. Intangible value is realized in marketing as awareness or goodwill. If the effects are negative, the tangible or intangible value is also negative. For example, if consumers are willing to pay more for a generic product than for a branded one, the brand is said to have negative brand equity. This might happen if a company has a major product recall or is called out for some ethical misdeeds.
Why Is Brand Equity Important?
Brand equity is important for a number of reasons. One reason is increased customer loyalty. A strong master brand equity can lead to increased customer loyalty, as consumers are more likely to choose a brand they know and trust. This can lead to repeat purchases and a more stable customer base. Another reason is higher perceived value. Brands with strong equity are often able to command higher prices for their products or services, as consumers perceive them as having greater value. A strong brand can also give a company a competitive advantage in the market, as consumers are more likely to choose a familiar brand over a lesser-known one. This can help the company gain a greater market share, as consumers are more likely to choose a trusted brand over competitors. Additionally, brands with strong equity often have a positive reputation and are able to provide high-quality products or services, which can lead to greater customer satisfaction.
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What Are the Elements of Brand Equity?
The elements of brand equity include:
• Brand awareness: This refers to the extent to which consumers are familiar with and recognize a brand.
• Brand loyalty: This refers to the degree to which consumers consistently choose a specific brand over others.
• Brand image: This refers to the perception that consumers have of a brand and its associated attributes, such as quality, reliability, and uniqueness.
• Brand associations: This refers to the emotional or psychological associations that consumers have with a brand, such as feelings of trust, reliability, or nostalgia.
• Brand value: This refers to the perceived benefits and overall value that consumers attribute to a brand, which can influence their purchasing decisions.
What Factors Affect Brand Equity?
There are several factors that can affect brand equity. One factor is the quality of products or services. Consumers are more likely to have a positive perception of a brand if they consistently provide high-quality products or services. Marketing and branding efforts are also important. Consistent and effective marketing and branding efforts can help build and maintain a positive brand image. Customer experiences also play a role in brand equity. Positive customer experiences can lead to increased loyalty and positive brand associations. The brand’s reputation is also important, as consumers are more likely to choose a brand they perceive as trustworthy and reliable. Competition can also impact a brand’s equity, as consumers may have multiple options to choose from. Finally, changes in consumer preferences or trends can affect a brand’s equity, as consumers may shift towards different brands or products.
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Last Line
Brand equity refers to the value that a specific brand adds to a product or service. It is the positive perception or emotional attachment that consumers have towards a brand, which can influence their purchasing decisions and overall loyalty to the brand. It is created through consistent marketing efforts, positive customer experiences, and the overall reputation of the brand. Companies with strong brand equity often have a competitive advantage in the market and can command higher prices for their products or services.
