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Brand Equity | What it is and Why it’s So Important  

December 8, 2021

Research shows that consumers are willing to pay extra for a product or service if it meets their criteria. For instance, shoppers will pay more for a high-quality experience, or they’ll spend extra if a store or manufacturer reflects their values. These are modern examples of brand equity — a concept we’ve seen throughout time, with no signs of slowing down.

What is Brand Equity?

The above examples showcase the importance of a strong brand. It’s a new spin on the age-old theory that customers will gladly pay more in order to associate themselves with a particular brand. They do this for a variety of reasons, including prestige, reliability and convenience.

No matter the reason, a demonstrated preference of one brand over all the others — to the extent that a consumer is willing to pay more to buy from that brand — creates brand equity.

Brand equity itself is the value that’s derived from this consumer preference. Brands with high amounts of equity have more leeway with customers to charge more, launch new products or attempt creative marketing strategies.

Brand Equity Examples

One only needs to open their eyes to see the power of brand equity all around them. Walk around the Apple Store and take a look at the high prices for phones and computers.

Those high prices aren’t just to cover the costs of production — they’re Apple’s way of reinforcing its premium branding, one for which consumers are glad to pay extra. Apple’s brand equity is sky-high because of the millions of people who will only buy Apple phones, laptops and headphones.

Apple is just one of many companies that have built tremendous amounts of brand equity. Nike is another brand that speaks to the customer in a way that drives brand equity. Starbucks is yet another example.

Any ubiquitous brand with prices a little higher than the competition, but still manages to draw tons of traffic, is in possession of significant brand equity. These are the leaders in their respective fields, and the competition is simply playing catch-up.

Why Does Brand Equity Matter?

Brand equity is about much more than convincing loyal customers to pay a premium price for their products and services. Brand equity has ramifications that go well beyond the point of sale.

For the brands themselves, brand equity is a measure of the strength of their brand. If people stopped buying iPhones because they’re too expensive, Apple would know right away that they’re in serious trouble. But because people are willing to pay that additional price, Apple can rest easy knowing they’re doing just fine. As long as that higher price point isn’t an issue for consumers, brands can feel confident in the consumer response to their offerings, both now and in the future.

But brand equity isn’t just about the issuing brands. Retailers rely on brand equity to draw traffic into their stores. No retailer wants to be perceived as the uncool store that only has the brands that nobody cares about.

Stores are more willing to work with brands with high equity, and deal with the terms set by those brands, because they’re essential. Brands with equity might be exempt from promotions and coupons, but they’re well worth dealing with because of the eyeballs they bring to a store.

Building Brand Equity

Of course, companies like Apple and Nike didn’t begin with brand equity. They built it from the ground up. Slowly but surely, companies with the right approach and the right business model garner brand equity, and they use that existing brand equity to create more.

While there isn’t a universal formula to quantify brand equity, there exists a model through which any brand can start to establish its own equity. Accordingly, the model to demonstrate brand equity is a pyramid.

The Customer-Based Brand Equity Model, also known as Keller’s Brand Equity Model, demonstrates how brands can cultivate equity and harness it over time.

Identity

The lowest level of the pyramid is identity, or salience. At this level, there’s one simple question facing your brand — “Who are you?” The brands with strong equity all have a unique and clear identity, and they don’t shy away from what they stand for.

For instance, Nike isn’t afraid to confront social issues; instead, they’re always right at the forefront of the social justice conversation. Your brand doesn’t have to be as outspoken as Nike, but it’s important to let people know who you are, what you believe in and what people can expect to learn about themselves through supporting your brand.

Just as importantly, the perception of your brand from others informs your brand’s identity. If you stand for something, but people don’t know it or if they think you’re pandering, that identity of yours serves no purpose. Communicating your ideals and values in a clear and relatable way is an important part of identity, and it’s an essential building block for brand equity.

Meaning

Okay, so you’ve got an identity. What does that mean for the customer? The meaning of your brand consists of two key factors — performance and imagery. In other words, if your marketing catches the eye of consumers, and if your product does what you say it will do, you’re in good shape.

The sentiment that Apple products “just work”, especially in comparison with PCs and Android devices that can be more complicated, exists because it’s actually true. Anyone can get an Apple device to work. And it’s that process of discovery and connection that keeps consumers coming back to Apple, even if it’s at a higher price point than the competition.

Response

Being a strong brand goes hand in hand with having a positive perception in the community. Look at Under Armour, a brand that took years of being compared unfavorably to top brands like Adidas and Nike.

They took a long time to build their brand equity, but they’ve become a top brand in their own right. Why? Because they’ve associated themselves with professional athletes like Steph Curry and Tom Brady, two household names synonymous with winning, and now winning has become synonymous with Under Armour.

The public response is all about judgments and feelings. You want those judgments and feelings to be positive ones. An inferior brand is mocked. A superior brand makes people look with admiration at a consumer wearing that brand.

Relationships

So far, the pyramid has dealt with outward projections of brand identity, imagery and feelings. But no brand can survive without two-way communication. That’s where relationships come into play.

When we’re talking about relationships, what we really mean is resonance. A brand’s resonance shows the other side of things — in particular, how people identify themselves in relation to your brand, which reflects on the brand itself.

Going back to the example of Apple, there are some people who will only use Apple devices. They perceive Apple’s products to be of better quality, and they may also perceive themselves as superior to others.

This doesn’t make those individuals arrogant, of course — but these people feel that their Apple devices make them more efficient and better organized, and that makes them simply more appealing as people. That, in turn, draws more consumers to Apple, so that they too can realize the benefits that come from using Apple products.

Building brand equity is a slow and arduous process, built one customer at a time. But the benefits of having brand equity are tremendous. It’s not about charging more money for the same product. Instead, it’s about transforming the perception of your brand and making it say something far more significant than it currently says.

If you’d like help in assessing and improving your brand’s equity, contact us today.

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