Have you ever tried a certain product that is not well-known, but it was so good that you kept wondering why this product is not more famous? The answer is brand equity.
Most people will choose brands that they are familiar with when it comes to picking any type of product.
For example, if you want to buy really good sneakers, you’ll probably go for Nike, Adidas, Jordan, Puma, and not choose some of the new shoe brands like Koio, Vessi, Suavs, and other brands that started in the past few years.
The point is, they might offer the same or even better quality and functionality, but their brand is unknown to the customers and hence they have no trust in it.
I have always found this to be quite an interesting topic.
If a friend tells you that they have a pleasant experience with a famous brand, you’re more likely to believe them than if they say the same thing about a brand you’re just hearing of.
And this is not illogical; we think that because those brands are so successful and everybody knows them, they must be doing something right, no?
And they definitely are. These brands spent years and years in building their brand equities so now people would have high trust and loyalty to those brands.
So, in short, brand equity is the extra value that the brand brings in the eyes of the customers.
For a more thorough explanation, let’s dive deeper.
Brand Equity Meaning
Brand equity refers to the value that a company can get from a customer’s positive associations with its brand, rather than from the product or service itself.
The idea is that the owner of the company behind the brand can earn more money (i.e. charge premium rates) based on the fact that the brand is positively perceived and recognized.
In this case, consumers believe that a certain product from a recognized brand is better than those with not so well-known names.
Beliefs like that increase the value of the said brand. And of course, this is a very positive thing for any company.
For the past 12 years until last year, Google and Apple held the first place interchangeably on the list of the world’s most valuable brands.
However in 2019, Amazon overtook the first place on the list, and just the Amazon brand is valued at $315.5 billion dollars with an increase of 52% from the previous year.
Apple took second place with a brand value of $309.5 billion and Google came in third place with $309 billion.
Related: How did Google/Alphabet monetize that brand equity?
This rise in the brand equity of Amazon happened because Amazon is selling a lot of different services.
They included investments in some pretty interesting areas like the self-driving car start-up Aurora, the Rivian company for electric trucks, their airplane business Amazon Air, PillPack online pharmacy, Deliveroo food delivery company, and other investments.
This rapid growth in brand equity is also due to the fact that in today’s society brands are less belonging to one category or industry, and the boundaries are getting blurry.
Offering a range of services and dipping the toe in many industries is what is characteristically about these brand equity giants.
If you’re wondering why they are able to do this so successfully, the answer is pretty simple.
If a company that has an already strong brand equity value wants to start selling something else entirely and uses the same brand name, chances of success are much higher.
Consumers will attribute the positive perceptions of the brand to the new product even though they have never been in touch with it, simply because they have been in touch with other products by that same brand.
This is why many companies are feeling keener on taking the risk and broadening their product or service varieties.
Even though brand equity is a simple concept to comprehend, building the actual brand equity can be a very difficult task that takes many years of hard work, top-notch marketing, and patience.
Main elements of brand equity
There are five main elements of brand equity:
1. Brand Awareness
— you can’t build equity if people are not aware of the products that you’re offering and a unique brand personality. Brand awareness means that the customers know that your brand exists and they know what type of brand it is.
There are four levels of awareness among the customers and those are reminding the customers that the brand exists and the category in which it does, then aided recall when the customer can recognize the brand in a list of same category brands, and unaided recall is when the customer knows the brand by himself.
Beyond these, the highest form of awareness is when your brand is the first brand that pops into the mind of the consumer when the category is mentioned or top-of-mind recall.
2. Brand Associations
A brand association simply means anything that the customer has in their memory about the particular brand.
The way these associations are formed is by the quality of the products or services, the way the organization and the employees interact, the marketing of the brand, the prices of the products or services, the categories in which the brands’ products or services are into, and many more things.
Even things like the way the products are displayed in the stores, which celebrities are attributed to the brand, what the publicity is, what does the competition offer, what people hear about the brand from word-of-mouth, etc. can impact these associations with the brand.
There are many other things that can have an impact on the customers and it can go into very little detail.
The associations of the consumers are evolving and increasing with every single time they come in touch with the brand.
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3. Perceived quality
One of the brand associations that I mentioned in Brand Associations is perceived quality. If you’re wondering why I am talking about it again, it is because of its great importance. It deserves to be distinguished as a separate element of brand equity.
Perceived quality means the perception about the quality of the brand in general that the customer has in their mind. In order to construct these perceptions, customers take into consideration parameters about the brand performance that are important to them personally.
In this case, quality is a perception and it depends on individual experiences and judgments. And we all know that those can vary a lot.
One of the most important things where perceived quality is taken into consideration is the price of the brand.
Those perceptions can influence the prices of the products or services to a great extent. The higher the quality, the higher the prices people are ready to pay.
This is something we aimed to do when we launched my ecommerce site Flux Chargers.
4. Brand Loyalty
is one of the things that are extremely important when it comes to brand equity. It means a customer that has a long-term relationship in picking this particular brand over and over again when he has many alternatives. We can say that it means repetitive buying behavior, however, this is more in a traditional sense.
For example, if you buy Converse and you like them, you can buy them for the rest of your life and they can be a part of your style.
But when it comes to very high-price goods like a car or a home, the repetition is more unlikely to happen. In this case, brand loyalty is about the recommendations of those loyal customers to everybody they know.
This can be very important since the best advertising is word-of-mouth. Brand loyalty is usually considered to be the most important element of brand equity because it has the power to span over long periods of time and spread onto other people.
Another advantage here is that there is almost no need for advertising to this group of people, and there is a chance of introducing more products that will be aimed towards the loyal consumers successfully.
5. Proprietary Brand Assets
This element is often not included in the brand equity elements, but it can be an important one regardless.
What this means is that all the patents, trademarks or channel relationships are very valuable especially when it comes to preventing competition from stealing competitive advantages and stealing for your company.
With that, they are prohibited from stealing your loyal customers as well.
Sometimes slapping a SUPREME logo one anything is all you need.
4 steps to build your brand equity
By now, building your brand equity is probably something that you’re thinking about doing.
But as I previously mentioned, it is not an easy task. It takes a lot of defining, organizing, and persisting in order to move from a dead point.
1. Build brand awareness
Brand awareness was the first main element of the main equity. That is why it is crucial that you start there when it comes to building your own brand equity.
The idea is that you have to make your brand recognizable by your target customers.
This can be a difficult task for small and medium businesses since they are generally a lot less recognizable among the customers.
However, there are some things that you can do to get the ball rolling:
- Pick a logo that is easily remembered and use it consistently without changes
- Make sure that you provide excellent customer service so your customers have positive attributes to your brand
- Add some emotional story behind your brand or a company that will touch human emotions
- Make sure your brand represents products or services that are ahead of your industries’ competitors
- Keep providing value through your products and services
There are many strategies that you can use for spreading awareness of your brand.
Using e-mails, newsletters, SEO, social media marketing, is a good tactic to engage your target customers and to get them familiarized with the brand and its story.
Also, it is a good way to re-remind them of the brand, making the attributes stronger and the awareness more spread out.
The types of tactics that you will use have to be tailored to your target audience and their behaviors.
Just make sure to use consistent and identical messaging on all channels as to not confuse the customers with the messaging.
2. Pay attention to the purpose behind your brand
You can have a very good product that meets the needs of the customers, but if you fail to communicate that properly then you’re not going to succeed in building brand equity.
When you are working on the meaning, you also have to think about the social and psychological aspects of it.
This means that having a useful product is amazing, but in order to take it to another level, you have to genuinely commit to some social and environmental aspects.
These types of things are what speak to customers and what makes them choose one product or service over another one that is just as functional.
People who share values such as sustainably, or helping others, or gender equality, or helping impoverished regions, will genuinely connect to your brand and move closer to loyalty.
And those types of people are the ones that will be your advocates and spread the good word about your brand.
If we take Amazon, for example, 33% of their customers see the brand as environmentally responsible.
They have a thoroughly dedicated hub where they explain all the ways in which the company is sustainable.
This means that Amazon is in touch with what’s happening with the world, and the consumers respect that.
After all, 88% of business school students put environmental issues in the first place of their priority list when it comes to learning, and 67% are planning to work in environmentally sustainable companies in their future.
3. Take notice of the response
Your customers will respond to your brand through their own judgments and feelings.
The judgments are in connection to quality, capability, relevancy, need satisfaction, brand superiority, etc.
Feelings include excitement, social approval, security, peer approval, trust, fun, warmth, etc.
The goal is to maintain both of these as much as you can. Take notice of how your customers respond to your brand in terms of judgment and feelings, and try to reshape the image if it’s the wrong one.
4. Build a good relationship with your customers
This level is what it’s all about. Achieving a strong relationship with your customers where they trust your brand and are loyal to it can be very powerful.
However, I don’t need to stress how difficult it is to achieve and maintain.
You have to build a bond with the customers that are psychological. When they are here on this level, they are going to make repeated purchases and have a feeling of attachment with your brand.
They can feel like they are a part of a special community and they can be very engaged with your brand spreading the good word because they believe in the brand.
This is the most valuable weapon that any brand can possess.
Measuring the brand equity
Once you obtained all the previous levels of building your brand equity model, you want to have a way of measuring your success.
Measuring brand awareness
- Focus groups, surveys, interviews
- Web traffic stats
- Social media mentions and reviews
- Search volume for the brand or products/services
Measuring brand preference
- Through brand relevance (how relevant your brand is compared to competitors and offers unique solutions)
- Through accessibility (how accessible your products/services are)
- Through forming emotional connections
- Through measuring brand value (what prices are your customers willing to pay for your products/services)
Measuring financial metrics
- Price premium over the competition
- Rate of sustained growth
- Average transaction value
- Customer lifetime value
Conclusion
Brand equity is among the most valuable moats a company can have, as it’s not easily replicable.
For instance, even if there’s an exact iPhone clone with better features, most of us will probably still prefer to purchase the Apple iPhone.
The way to build your brand equity is 1) defining what you stand for 2) delivering on that promise 3) reminding your customers about your brand over time 4) build an experience so that customers refer you to others.
If you liked this post and want to get started on implementing some of the strategies for building brand awareness, then check these:
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- 6 ways to combine email and social media marketing
- The best SEO tools on the market
Leave a comment letting me know what you’d like me to cover next.
Hi this is so useful