Brand Equity has become a popular buzzword in recent years as companies endeavor to balance short-term marketing objectives with a long-term brand strategy. It captures the strength of the link between a brand and its customers or potential customers. Brand equity is created when a business consistently delivers its brand promise and outperforms competitors by providing the experience customers expect.
What is Brand Equity?
Brand equity is the value that a brand brings to an organization. It's the sum of all the ways your brand differentiates from your competitors, and it's built up over time as customers recognize your brand as unique and valuable. It's created by how well the company has managed its image and reputation over time. The stronger your brand equity, the more likely you are to attract new customers, retain old ones, and command higher prices for your products or services.
The Benefits of Brand Equity
How do you know if your brand has substantial brand equity? The more a customer feels connected with your product or service, the more likely they will keep returning for more and recommending it to others.
There are three major benefits to why brand equity is important:
1) Increased Sales
Since customers tend to purchase products and services from brands with a good reputation, this can directly impact sales.
2) Higher Profit Margins
Having a recognizable brand and loyal customers will create goodwill that can help you stand out from your competitors. This type of recognition will also allow you to charge higher prices for your products or services, as customers are willing to pay more for a product they trust and feel connected with. For example, luxury brands such as Gucci or Chanel have high profit margins because customers are willing to pay more for them than for competitors' products.
3) Customer Retention
When a brand has a solid reputation, customers are more likely to remain loyal to the brand and recommend it to others. Furthermore, they will not only be willing to pay more for your product but also want and anticipate more products.
The Four Components of Brand Equity
The four components of branding equity are customer awareness, perceived quality, customer loyalty, and customer associations. To understand your brand's equity, you'll need to look at each individually and collectively.
1) Customer Awareness
Customer awareness is the first step in building brand equity, as it's not possible to have any loyalty or association with your product or service if no one knows who you are. This includes looking at things like the recognition of your logo or slogans and measuring the reach of your marketing campaigns. You should also track customers' recognition of key aspects associated with your brand, such as characteristics and values.
2) Perceived Quality
Customers are often willing to pay more for a product or service from a company with a good reputation. There are many ways to sway public opinion in your favor: advertising campaigns, social media outreach, and community outreach all help a brand gain positive attention. However, the most effective way to ensure that your products are perceived as high quality is to offer high-quality services and improve them further based on customer feedback.
3) Brand Loyalty
Your customers already have a good experience with your services. They trust you and are loyal to your brand. This means they will choose your services instead of similar ones by competitor brands and recommend you to others. You can safely introduce them to new products and services they would gladly try at this stage.
4) Brand Associations
The last brand equity dimension refers to the qualities that communicate specific information about your brand to customers. Brand associations exist thanks to your brand marketing activity. Their purpose is to differentiate your brand from the competition and give customers a reason to choose your services over those of another company. More specifically, the brand association helps customers remember your brand and its unique solutions to a specific problem.
How to Build Brand Equity
After learning how brand equity works, we can consider the five best strategies for building high equity for your brand.
1) Make your brand recognizable
Building brand awareness is a challenging but worthwhile task. There are several elements you can incorporate to introduce your customers to your brand and become recognized.
- Consistency: A brand identity should be consistent in its name, logo, design, symbolic elements, and color scheme. This will give the brand a distinctive identity.
- Storytelling: What is your brand story? Why do you exist? What is your passion? Make people care about what you do.
- Value: Provide ongoing value to your customers.
- Presence: Leverage social media platforms to share quality content that draws interest and keep in touch with customers and prospects through email and newsletters.
2) Find your target audience
It's important to understand that not all customers are the same. Customers have different needs, preferences, and behaviors. Therefore, it's essential to divide your target customers based on specific criteria such as demographics, psychographics, and behavior. This will enable you to create tailored marketing campaigns that resonate with particular groups of customers. Doing this will give you valuable insights into your target market and how to communicate your message effectively.
Moreover, identifying your target audience is crucial for building brand equity. Brand equity is the value that a brand adds to a product or service. It differentiates your brand from competitors and makes customers choose your product or service over others. By understanding your target audience, you can create a brand that speaks directly to their needs and preferences. This will help you build brand equity over time by creating a loyal customer base that recognizes the value of your brand. Finding your target audience is crucial for creating effective marketing campaigns and building strong brand equity.
3) Create a bond with your customers
Creating a customer bond is crucial for building brand equity and gaining loyalty. To achieve this, creating an emotional connection with them is important. This means going beyond simply providing a product or service and instead focusing on delivering the best possible experience when they interact with your brand.
This could involve offering personalized recommendations, responding to feedback promptly, or providing exceptional customer service. By doing so, you can create a positive association with your brand in the minds of your customers, leading to increased brand equity and repeat business.
4) Let people know what you stand for
In today's competitive market, offering high-quality products or services is not enough. Customers increasingly seek brands that align with their values and contribute positively to society. This is where brand equity comes into play. By clearly communicating what your brand stands for and the impact it makes, you can build strong brand equity that resonates with your target audience.
It is imperative to identify the values and mission that your brand represents to achieve this. Whether supporting sustainability, social justice, or community engagement, ensure these values are authentic and consistently demonstrated through your actions. Doing so can create a loyal customer base that supports and advocates for your brand.
Furthermore, highlighting the positive impact that your brand has on the world can also attract new customers who share these values. By communicating your brand's contribution to society, you can differentiate yourself from competitors and create a unique selling proposition that resonates with customers.
5) Leverage your data
Knowing your data is essential for any business to succeed. You can better tailor your marketing efforts and improve your brand equity by understanding who your customers are, when they use your services, where they come from, and why they choose you.
One way to gather this information is by linking your website to Google Analytics. This tool provides valuable insights into your website traffic, including demographics, behavior, and conversion rates. By using this data to target your Google and Facebook ads more precisely, you can improve your marketing campaign's effectiveness and increase your ROI.
Additionally, you can build more substantial brand equity and create a more engaging online presence by custom-tailoring your social media posts for your specific audience and their purchase patterns. Knowing your data is critical to success in today's competitive business landscape.
How to Measure Brand Equity
Although it may seem subjective, six metrics help measure the strength of a brand.
- Sentiment analysis, also called opinion mining, analyzes customer feedback to determine whether the comments are positive, neutral, or negative.
- Brand awareness can be measured by launching surveys and questionnaires to your target group, checking your social media following and engagement, using Google trends data, brand tracking software, and checking mentions and extra publicity on third-party websites.
- Preference metrics measure your brand's competitive position and reveal customers' preference patterns.
- Financial metrics are a company's monetary value, market share, company value, and revenue potential.
- Competitive metrics refer to the areas where your competitors fail to meet customer needs. You will learn precisely which areas to focus on by measuring your customer acquisition rate, ROI of distribution channels, and sales lift.
- A brand audit can help you determine how well your brand is performing in the marketplace. You should look for inconsistencies in your market strategies and potential opportunities and threats.
Brand equity is an important measure of success in today's business world. It encompasses both financial and competitive metrics to help reveal customers' preferences, gauge the overall performance of your brand in the marketplace, and identify areas for improvement. By taking a proactive approach to building and measuring brand equity, you can create long-term value for your company.
Utilizing a brand audit is one way to assess and improve your brand's performance, allowing you to identify any issues or potential opportunities. Ultimately, successfully implementing strategies that build and measure brand equity can lead to greater business profitability and market share.
