Why Building Brand Equity is Essential for Long‑Term Success

What is brand equity?

Understanding the brand equity meaning can be confusing because it's not defined by a single metric. Brand equity is the added value of brand recognition—the perceived quality and superiority of a brand from awareness and reputation. In our previous example, we discussed the brand Kleenex.

When we discuss building brand equity, we're talking about positive brand equity. In our example, positive brand equity results from brand awareness and reputation for being the best tissue brand in the industry with the most market share. Kleenex attained positive brand equity among consumers. Often, brands like these come at a higher price point, but customers are willing to pay a premium for them because they have a positive brand association.

There's also something called negative brand equity. If you have negative brand equity, you'll get the opposite result. Therefore, if positive brand equity increases profits and demonstrates your good reputation, negative brand equity indicates a poor reputation and decreases profits.

So what is brand equity in marketing? It's the same concept. Marketing is more than just promoting your products and services; it's how you elevate your brand by improving brand awareness, building a reputation, and attaining brand equity.

Every company wants customers to recognize it, but brand equity means clients can identify your brand and your products are perceived as high quality or better than the competition. Building positive brand equity is crucial for your business because it allows you to offer your products at higher prices. However, you can't build brand equity overnight.

Businesses should strive for positive brand equity, but it's crucial to understand the components that go into it. Building a recognizable, quality brand that consumers trust takes time and hard work.

Here are the 4 essential components of brand equity:

1. Brand awareness. You can't have strong brand equity without brand awareness. If you want to become a household name, customers must know about your brand and identify it while shopping. Your branding should be cohesive, with similar messaging and visual elements recognizable across channels.
2. Brand attributes. Brand association is how your customers perceive your brand. What words come to mind when customers think of your business? Your brand attributes are characteristics customers might use to describe your products and services, including personality traits; they're part of your overall brand identity. For instance, a clothing brand might be inclusive because it offers a wide range of sizes, while a linen brand might be sustainable because its fabrics are made from bamboo or organic cotton. Whatever the case, every business has attributes, and you should know what customers see or think when looking at your brand.
3. Perceived quality. Any brand can say it sells quality products, but consumers know not to believe everything they read or hear. Your perceived quality is what customers think about your offerings. You might have a quality product, but you can't build positive brand equity if your customer doesn't think it's high quality or of value. Instead, you want your customers to respond to your brand positively; you have to be the best.
4. Brand loyalty. Building loyalty takes time because it's the sum of past experiences with a brand. The more positive experiences your customers have, the more loyal they'll feel to you. Building brand loyalty can increase profit margins because it's much more cost-effective to maintain customers than advertise to new ones.

Examples of brand equity

We've already discussed a few brand equity examples to help you understand what it is and why it's important. A few additional brand equity examples include the following:

• Starbucks. There are plenty of coffee shops around the United States, but none are as popular as Starbucks. Whether or not you believe Starbucks offers quality coffee is a matter of personal preference. Some people love Starbucks brand coffee, while others don't. However, Starbucks still has substantial brand equity because of its brand awareness and perceived quality, which can lead to fierce loyalty among coffee lovers.
• Walmart. Walmart is one of several brands that has achieved brand equity by offering low prices on everything from groceries to clothing. There's a reason why Walmart is one of the largest retailers in the world. Walmart's main goal is to keep costs low for customers, which tends to resonate with all consumers.
• Apple. Apple is one of the world's most recognizable brands today and has something referred to as positive equity. This brand is known for its high-quality products, something customers are willing to pay a premium for.

It's important to realize that strong brand equity doesn't come from the price of your products. While you pay a premium for brands like Starbucks and Apple, Walmart sticks to its original positioning to keep prices low for customers. Consumers don't determine a brand's quality or value from the price; perceived quality comes from good customer experiences and consistent branding.

The importance of strong brand equity

We've touched on a few reasons why brand equity is important. Ultimately, every business wants to be on top of consumers' minds. If you sell dog food, you want your customers to think of your brand whenever they need to restock at home. Likewise, if you're an e-commerce fulfillment company, you want all e-commerce business owners to know your name in case they need your help.

Building brand equity improves your company's success because it directly results from the perceived quality and your brand's reputation within a market. Having a positive brand image makes it easier for you to attract customers who are willing to pay a premium for your products and services because of your brand's perceived quality.

Let's take a closer look at some of the top benefits of managing brand equity:

Increased market share

Positive brand equity translates to a higher market share that helps your brand stand out even more. In addition, building brand equity gives you a competitive edge because your company stays on top of consumers' minds; they'll think of your products or services before anyone else's.

Price increases

We've mentioned numerous times that brands with higher brand equity tend to charge higher prices because they have perceived higher quality. Therefore, the higher your brand equity, the more you can charge for products similar to your competitors, improving your company’s financial performance.

Improves sales across the board

Once you've achieved brand equity, consumers will continue to purchase your products and services. If you choose to expand your offerings with new products, your customers already know they can trust you because they're loyal to your brand.

Resilience

Unfortunately, no one can accurately predict the future. While we can use data to help us understand what may happen to a business in the future, all companies deal with market fluctuations. However, having high brand equity puts you in a better position, making your brand more resilient than others and protecting you from shifting consumer demands and market changes.

How to measure brand equity

There's no single metric you can use for measuring brand equity. Instead, you'll need to track various aspects of your business, such as financial performance, strength, and consumer data.

Financial performance

You're in business to make money, and healthy financials directly result from brand equity. You can calculate profitability, market share, revenue, growth, and customer acquisition and retention costs to determine if you're building brand equity. Ultimately, you should see higher revenue and profits with lower customer acquisition costs.

Brand strength

A brand's resilience and strength allow them to survive and thrive when other brands fail. Your brand's strength is a measurement of awareness, recognition, customer loyalty, and customer retention. You can measure your brand awareness with an awareness survey or using metrics like reach, impressions, and website traffic from specific types of marketing campaigns.

Consumer metrics

Measuring brand equity relies on customer data. One of the most important components of brand equity is perceived quality. You must determine if your customers have positive brand associations. How your customers feel about your business determines whether you have positive or negative brand equity.

You can measure customer sentiment and brand associations across channels and invest in social listening tools to see how your customers talk about your brand. Learning their perception of your brand is crucial when developing and building a business, especially one where you want to increase your market share and brand equity.

What affects brand equity?

You already know the four most important components of brand equity: brand awareness, attributes, perceived quality, and customer loyalty. However, several key factors can impact your brand's equity and help or hinder your efforts. This includes:

Customer experience

Providing an excellent customer experience increases your brand's perceived quality and value, which can improve brand equity. Of course, excellent customer service is a component of the customer experience, but it's not all of it. Instead, your customers must have a positive experience with your brand across channels from their first interaction to their last.

Branding

One of the most crucial parts of any effective brand is branding. Without it, you can't effectively communicate with customers and differentiate your products in the marketplace. Having a brand strategy will ensure consistent and cohesive communication with customers.

Reputation

Your brand reputation will impact all aspects of your business. Consistent negative reviews online can hurt your sales and profit margins because of a poor reputation. You must deliver on your brand's promises to have a good reputation. Therefore, if you claim your products are of higher quality and they're not, your existing customers will no longer trust you.

Consumer preferences

Unfortunately, you can't make every consumer prefer your brand instead of another, but you can give them a reason to. You want consumers to choose your brand over the competition, so it's best to focus on building relationships and branding that inspires customer loyalty. Why should someone prefer your brand over another? It all goes back to branding and ensuring you're targeting the right audience.

Tips for building brand equity

By now, you understand the importance of developing brand equity and how it's a long game that's well worth it. Remember, consumers prefer to purchase brands they know and trust, so the key is ensuring they believe in your brand and that it offers the best products or services.

Here are a few easy tips to help you create brand equity:

Increase brand awareness

Brand awareness is one of the most important components of brand equity. If you want to get on top of consumers' minds, they have to know your brand's products and services exist. There are several ways to improve your brand awareness, but we recommend setting marketing goals to ensure you're developing the right strategies for your business.

Build strong relationships with customers

Brand equity relies on your ability to become a trustworthy brand. Your customers must know that you deliver on your promises. Building strong relationships gives them a positive sentiment about your business, making them more likely to tell family and friends about your products and services or purchase them again.

Reward loyalty

Not every customer will become loyal, but you can increase the number of returning clients by rewarding loyalty. Loyal customers have a stronger bond with your brand and make more repeat purchases, acting as brand ambassadors by spreading word of mouth. You can reward loyalty with deals on new products, promotions, giving away free products, or letting them be the first to try something new.

How to maintain and manage brand equity

Building and maintaining brand equity increases your market share and directly impacts your revenue and profit margins. However, brand equity centers around your customers. You need to build valuable relationships with them, deliver on promises, and differentiate yourself from the competition to grow brand equity.

Having an effective marketing strategy is crucial for brand equity. Use Mailchimp's suite of tools to market your business, foster brand awareness, and boost sales.