What is brand equity?


Definition of Brand Equity

For a business, one of its most valuable assets is its reputation and goodwill associated with its brand. It’s important to remember that brand equity isn’t only about the product or service. A company’s brand awareness and how customers perceive its operations are the primary factors that contribute to this value.

 

The value of a brand improves when people have a favorable view of it. Having a bad reputation or reducing trust and favor may negatively affect the brand’s equity. A company’s brand equity can affect its associated partners and enterprises, whether that equity is favorable or harmful.

 

Why is Brand Equity Important?

Developing good brand equity can significantly impact a company’s bottom line. Branded companies often earn more money than their competitors despite spending less money on production, advertising, or any other aspect of their business. Positive brand equity, for example, allows companies to charge higher prices for their products. Consumers are willing to pay more for a product if they believe in the brand’s ideals and the quality of its items. Marketing new products under the same umbrella brand provides an extra benefit: buyers already have some knowledge and trust. About 80% of consumers now refuse to do business with or buy from brands they don’t trust, and nearly 90% say they will stop doing business with a company if it violates their trust.

 

Strategies To Increase Your Brand Equity

In addition, a company’s ability to charge higher prices for its product or service is bolstered by solid brand equity, which raises the company’s stock and bond market value.

Building positive brand equity should be a fundamental strategic goal for any firm, new or established.

 

While this does not happen overnight, it is possible. First and foremost, you need to know what your brand stands for and what it means to your customers to market it effectively. This message must then be promoted through design and marketing while also offering a consistently high-quality experience for your customers.

 

Effect of Brand Equity on Return on Investment (ROI)

The following are some ways that a company’s brand equity might benefit its bottom line:

●      Order Value per Customer: When the brand has positive brand equity, customers are more inclined to spend more money on your products and services. Profit margins will increase as a result. A product’s manufacturing costs may be comparable to those of its competitors. Brand recognition can increase a product’s value in the eyes of consumers.

●      Reputation & Less Ad Spend: People will seek out your brand if your products have a solid reputation. Having built up a customer base, you may launch a new product with less advertising expense and see an uptick in sales. Customers who remain loyal to your brand will spend more money with you throughout their relationship. No one can deny Apple’s position as one of the world’s most valuable companies. While Apple fans are more likely to own other Apple goods, Android users are less likely to have a preference for a single PC technology company.

●      Customer Loyalty: Customers are seven times more ready to forgive brands they are loyal to for their mistakes. The likelihood of returning to a familiar brand is nine times greater than switching to a new one.

●      Substantial brand equity: It can increase a company’s stock price because of the belief that it will continue to perform.

Examples Of Brand Equity

You need to know the difference between a company’s brand equity and brand recognition. Despite their widespread recognition, some well-known businesses suffer from a lack of positive brand equity.

●      Uber is an excellent illustration of this. However, negative coverage has dominated recent headlines even though the brand is well-known. This year, Uber’s valuation fell from $70 billion to $48, even though things appear better. It made matters worse when their stock price dropped from $41.57 to $26.79 between May 2019 and November 2019.

●      Salesforce, HubSpot, and Adobe are a few well-known SaaS companies that have built excellent brand equity.

 

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