What is Brand Equity, and what is it Worth to my Business?

 In Branding, Rebranding

From digital advertising to email marketing, companies today try everything imaginable to get customers to remember their name. While they may catch your eye for a moment, they rarely build brand equity that translates into long term success.

According to Investopedia, “Brand equity refers to a value premium that a company generates from a product with a recognizable name, when compared to a generic equivalent. Companies can create brand equity for their products by making them memorable, easily recognizable, and superior in quality and reliability.”

It can offer your business tangible value, such as revenues and price premiums, or intangible value, like awareness and goodwill.

Benefits of Brand Equity

brand equity

Brand equity is an indicator of your company’s strength and performance. If your company has earned strong equity for its brand, then there is wide recognition for its branded products or services. These products and services often command a higher price than those without name recognition.

The process of building equity in a brand can be broken down into five stages:

  • Brand awareness
  • Brand recognition
  • Brand trial
  • Brand preference
  • Brand loyalty

The ‘Kleenex’ Effect

The best result of brand building is when a company becomes synonymous with an entire product category, like how many people say Kleenex instead of tissues. Or, at the very least, a business may enjoy the benefits of consumer recall and recognition of their brand.

brand equity

Raises the Bottom line

Although it takes time, patience and a lot of effort, brand equity can result in increased sales and revenues. It can also give your company the resources and momentum to introduce new products or services.

With an increased brand reputation, there is less of need to rely on things like online or print advertising to build awareness. Instead, you can focus on strategic marketing campaigns that reach new audiences and position your business for long term success.

Negative Effects

If potential customers already have a negative view of your business, this can hurt your chances of closing a sale. For example, a restaurant which received unfavorable reviews on Yelp may experience a decrease in diners as a result of a negative association with their brand.

Although the exact benefits of this branding concept can be difficult to quantify, its presence can strongly influence your company’s overall return on investment.

brand equity