Today, brand equity is created and destroyed faster than has ever been possible. Digital marketing and social media have spurred a rapid acceleration in companies’ ability to reach consumers. As culture becomes more familiar with and averse to pop-ups, ads, and influencers, certain evergreen truths about how people interact with brands emerge. One of those maxims is that trust is far more potent than impressions or clicks.
Brand success boils down to three core components: compelling, effective storytelling; authentic human connection; and trust. By telling their story effectively and engaging customers in a genuine, human way, brands can build the trust critical for developing and growing brand equity. In this exercise, brands with strong equity hold an unfair advantage. Brand equity is extremely valuable because it represents an irreplaceable edge that competitors cannot match.
Introduction
Understanding brand terminology is essential in building and maintaining a successful brand, but often, terms are used interchangeably or incorrectly, leading to confusion. From the foundational elements of brand design to the strategic frameworks of brand equity and brand strategy, each plays a crucial role in shaping the way a company and its customers perceive and interact with brands. In this article, we’ll delve into the concept of brand equity, as well as some of the key terms and concepts in branding, providing insights to demystify their meanings and significance.
What is a Brand, Really?
“Brand” is possibly the most misunderstood and misused term in the branding lexicon. At its core, a brand is much more than just a logo or a product. A brand encompasses the entirety of a consumer’s perception of a company, product, or service. It’s the emotional connection and the associations that people attach to a particular business. A strong brand evokes trust, loyalty, and differentiation in the minds of consumers, ultimately driving purchasing decisions and building long-term relationships. Every brand will change or evolve over time, either actively or passively, as markets and cultures shift. If you take a look at top-performing brands, you’ll notice the way they perpetually evolve and grow their brand experience.
What is Brand Equity?
Brand equity refers to the intangible value that a brand holds in the minds of consumers. It encompasses factors including brand awareness, perceived quality, brand loyalty, and other associations tied to the business. Brands with high equity command premium pricing, enjoy customer loyalty, and can effectively withstand competitive pressures. Negative brand equity does the opposite. Building and maintaining strong equity for your company requires consistent brand messaging, exceptional customer experience, and ongoing brand management and marketing efforts.
Brand Equity Examples
Familiar brands with strong equity at the time of this article include Patagonia, Google, BMW, and Disney. According to Brandirectory, an international platform for branding analysis, Apple is the world’s most valuable brand. Tracing the company’s rise from the ashes of negative brand equity in the 1980s to its position today as the most lucrative brand in the world is a master class in building positive brand equity.
Think about brands that you associate with positive feelings. Is it the brand image you find attractive or the dependability of the product line? Or is it what an association with the branded product says about you to others? Are there brands with comparable competitors for which you are willing to pay higher prices to gain that association? What brands, despite alternatives, inspire you to make repeat purchases? Then, think about brands that, in your mind, hold a negative brand image. What turns you off?
Everyone defines brand equity differently in their minds based on personal experience and myriad other factors. Thinking about the components of brands that form your personal brand equity model can add insight when thinking about your brand.
Why is Brand Equity Important?
Each year, we speak with dozens of founders and CEOs, and many of them enter the conversation with a clear understanding of the value and importance of brand equity. These entrepreneurs know businesses with strong brand equity can charge a premium, whereas less recognizable brands cannot. Thinking longer-term, they see that positive brand equity empowers founders to negotiate a higher purchase price in a business merger or acquisition.
Managing brand equity is a seismically important part of any company’s success because it represents the overall value and reputation of the brand. Having positive brand equity makes it easier for a business to attract new customers and retain existing ones since customers are more likely to choose a company with a good brand reputation. They are also more likely to pay a premium for products or services from a well-known and trusted brand.
Brand equity also differentiates your company’s products or services from your competitors. So, investing in building and maintaining healthy brand equity can help you increase your chances of long-term success. But how do you calculate the ROI of your brand equity efforts?
Measuring Brand Equity
Strong brand equity leads to increased customer satisfaction and loyalty, the ability to demand a higher price, and a more significant share of authority across every channel and platform, all of which can help drive revenue. Taking measure of your brand’s reputation helps to set goals and chart a course toward growth.
Any ROI calculation that looks at a single part of brand-building is tedious—in part because branding boosts businesses as part of a suite of efforts working together to optimize and grow the business. It’s tricky to attribute exact growth to exact measures, which can make it challenging to measure brand equity.
However, anecdotally, we can look at industry trends to see the value that high brand equity creates. Branding and brand value represent over 20% of the value of the entire S&P 500. And 77% of consumers are likely to refer to specific items by brand name rather than product names. Consistent presentation of a brand can increase revenue by 33%—which shows that time and money spent on building your brand equity can pay impressive dividends.
To calculate brand equity, you can evaluate key metrics like brand awareness, brand recognition, perceived quality, brand associations, customer loyalty, repeat purchases, competitive analysis, and brand value. Often, utilizing market research surveys, focus groups, and analytics can help your team understand how consumers perceive your brand compared to competitors—and whether it meets their needs. Positive brand equity develops at different rates across these categories of calculation. A comprehensive approach to weighing the data will allow you to gauge your brand’s overall strength and value in the market.
How Do You Build Brand Equity?
Think of brand equity as the sum of consumers’ thoughts, feelings, and attitudes about your brand that influence their willingness to pay for your product. Brand awareness and knowledge form the foundation for consumer-brand relationships that develop engaged communities and create meaning in consumers’ lives.
Building brand equity may seem daunting, but systematizing your approach is the best way to achieve success. Here are a number of ways to harness positive experiences and improve brand value.
Insight: Understand Your Audience
Invest in market research to gain insights into your target audience’s preferences, aspirations, and values. Understand their perceptions of your brand and identify areas where it can better align with their needs and desires. Refresh and evolve your brand to speak to those needs and provide solutions.
A brand refresh provides an opportunity to realign your business with the evolving expectations of your audience. By understanding your audience’s preferences and aspirations, you can make informed decisions about the direction of your brand refresh, ensuring that it resonates with your tribe.
Strategy: Embrace Authenticity
Conduct a thorough audit of your company messaging, identifying key equity that resonates with consumers and differentiates your brand in the marketplace. Understand what aspects of your heritage are most cherished today and leverage them as pillars for your brand refresh. Dig deep to mine your uniquely ownable assets—and avoid mimicry or fabrication.
Clarity: Define Your Brand Essence
At the heart of every successful brand is a clear understanding of your brand’s essence: the core values, personality, and purpose that define it. Take the time to define your brand essence, distilling it into succinct statements that capture its soul. Nailing this exercise will benefit your brand tomorrow and your company culture today.
Your brand essence should be timeless yet adaptable, allowing your brand to evolve while remaining true to its heritage. Let this serve as a guiding light throughout the brand refresh process, ensuring consistency and coherence across all consumer touchpoints.
Evolution: Refresh Your Message & Visual Identity
Your message and brand identity should represent a concise distillation and spirited amplification of your brand essence. Evaluate visual elements throughout your brand’s history with a keen eye for components that hold significant brand equity. Identify opportunities to modernize these elements while preserving key visual cues that tie to aspects of heritage that resonate with your audience.
Avoid succumbing to the stickiness of momentary trends, focusing on building a look that is ownable and fresh but timeless. A great brand agency can guide you through a process to ensure a refreshed visual identity that resonates with your brand’s heritage and future aspirations.
Communication: Share Your Evolution & Educate Your Consumer
A successful brand evolution is not only about updating visual elements but also about communicating the progression of your brand to the world. Transparency and authenticity are paramount in this process—consumers value honesty and consistency from the brands they engage.
Develop a comprehensive communication strategy to articulate the rationale behind your brand refresh and the benefits it brings to consumers. Leverage multiple channels to reach your audience and engage them in your brand’s evolution, and invite feedback to start a conversation with your tribe. This marketing exercise should be considered as an ongoing part of brand management.
Empower Customers as Brand Ambassadors
In recent years, social media has become an influential force for building positive brand equity. Far more than paid ads, user-generated content (UGC) has become a poweful tool. It delivers far more than simple recognition for a company’s brand—it shapes consumer perception.
UGC is essential for brands because it provides authenticity and builds trust with consumers by showcasing real customer experiences, fosters a sense of community, and significantly increases brand awareness and engagement by leveraging the reach of existing customers who share their positive interactions with a brand on social media platforms. Unsurprisingly, people listen to other people’s experiences with more attention than traditional marketing campaigns—the added value is substantial. Harnessing those positive brand associations is smart business strategy.
Wrap-Up: Embracing Change to Build Brand Equity
Building brand equity requires a delicate balance of preserving tradition and embracing innovation. Top-performing brands stay ahead of the curve, taking the approach that brand equity building is not a one-time event but an ongoing evolution process to adapt to changing markets.
Orchestrating a brand equity renaissance for your company can be challenging, but institutions with an eye on longevity learn that embracing change is an opportunity for growth and transformation. With careful planning and strategic execution, a brand refresh can breathe fresh life into a brand’s equity, securing its place in the hearts and minds of consumers for years to come.
We hope this high-level overview adds perspective on cultivating brand equity. Still have questions? Give us a shout, and let us guide you to find the best fit for your goals. Each week, we donate a free hour of consultation to aspiring brand-builders, so sign up using our contact form!
