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What Is Brand Equity, and How Do I Build It?

16 min read

Brand equity is the perception of your business in the mind of a consumer derived from the sum of all interactions with the company. Specifically, the value customers assign to your business.

The amount of money that consumers are willing to pay doesn’t just depend on a product’s features or its tangible value. Intangible factors, like a brand’s reputation, also influence consumer behavior.

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What Is Brand Equity?

Qualtrics defines brand equity as ““the additional value that a recognizable brand name adds to a product offering.”

Positive Brand Equity vs. Negative Brand Equity

The business decisions you make everyday either raise or lower your brand’s equity.

A company with positive brand equity is a company consumers feel loyalty towards. These brands tend to beat out their generic, less expensive competitors. They’re also the ones that can be most flexible in terms of changes to their product and pricing. In extreme cases, they have an almost cult-like following—customers will eagerly await product launches, and essentially follow them to the end of the Earth!

On the other hand, a brand that has negative equity is one that holds very little power in the market. It’s a company that consumers don’t care too much about and don’t feel loyalty towards.

Now, why is something like brand equity important? The answer is simple: a customer’s attitude towards a brand directly affects the value of that company’s products. This is true even when the physical product isn’t drastically different from its competitors.

Brand Awareness

One important aspect of brand equity is brand awareness. Do consumers know you exist? Would your existing customers be able to name your company as the product’s manufacturer?

Many consumers look to purchase popular brands first. When people think of computers, they think of Apple and Microsoft. When they think of a car to take off-roading, they think of Jeeps or Range Rovers. When people think of tissues, they think of Kleenex. Loyal consumers know their products and their value.

Brand Association

When managing brand equity, pay careful attention to your brand’s associations. What do consumers think about when they think about your brand?

If you sell high-end cars, you want consumers to perceive your products as luxurious and comfortable, with cutting-edge features and durable parts. Brands like Mercedes and Audi want their customers to feel important, beautiful, and on top of the world. And they spend money on marketing and high-level branding to make sure that their branding is on par with those feelings.

But what about poor brand association? Well, a famous example is the Colgate company and their attempt to expand with frozen dinners. Marketing tests for the product didn’t bode well. The company’s association with toothpaste was too strong for people to overcome, and resulted in a public that was largely uninterested in buying their non-toothpaste products.

Perceived Quality

Perceived quality and tangible value are two very different things. But they both affect consumers’ decisions. Perceived quality, for example, refers to the way a customer believes a product will improve their life. Will they feel successful using it? Will they be proud to tell their co-workers about it? Will they feel confident paying a premium price for it?

Tangible value, on the other hand, refers to a product’s literal features. Can it solve the consumer’s problem? How long will it last? How much space will it take up? According to Chron, a product’s value can remain unchanged even as a company increases its perceived value. One way to do this is by increasing the price. This may seem counterintuitive, but according to Chron, “Many consumers believe a product that costs more must be more in demand or offer more benefits than the competition.”

Brand Loyalty

If your customers are loyal to your brand, they are more likely to become repeat customers and to choose you over your direct competitors.

Strong brand loyalty can even counteract bad press. Loyal customers aren’t easily swayed by a bad news story because they trust their own experience with the brand. Apple, for example, removed headphone jacks from iPhones to many customers’ dismay, yet their brand loyalty was enough to overcome objections.

Successful brands use loyalty points and membership cards to keep customers coming back to their stores instead of shopping around. If a consumer knows their tenth purchase is going to be free, then they’re much more likely to return to make a second, third, and eventually, ninth purchase.

Having a unique and compelling message behind your brand, such as Apple’s “Think Different,” can also build customer loyalty. When customers identify with the core company value of your brand, they are more likely to continue buying your products.

Why Should You Build Brand Equity?

Brand Equity Increases Brand Recognition

Having a brand that is easily recognized sharpens your business’ competitive edge. When consumers know what you sell, recognize the quality of your products, and understand your brand’s story, they are more likely to buy from you.

Brand Equity Creates Positive Associations

What is your brand about? What are your brand’s core values? What causes do you believe in? Does your business support family values, breaking barriers, being bold?

People buy products for more than just their functionality. A decent rain jacket keeps you from getting wet. A great rain jacket makes you feel like an adventurer braving the elements every time you put it on.

When consumers associate your brand with qualities they want to see in themselves, they become more likely to buy from you. Think of your favorite clothing brand. How do you feel as you walk out of the store with a bag of new goodies? Are you excited? Ready to show off and take on the world? Those are the types of emotions brands are always looking to make their consumers feel.

Brand Equity Increases Consumer Demand

Brands with a strong identity also encourage consumers to buy products they weren’t necessarily planning on purchasing.

Sure, people buy things they need, but they also love to buy things they want! Successful brands are able to create demand for products that consumers don’t necessarily need by creating desire. This is an emotional process, related to the feelings a brand can produce in an individual, so when thinking through your marketing strategy, it’s important to consider the emotional value of everything you do.

Think about your own experience as a consumer. Have you ever seen an ad that made you buy a product you didn’t even know existed? What drew you to make that purchase? Was it the features? Or was it the way that envisioning yourself owning the product made you feel?

Brand Equity Improves Marketing Efficiency

Companies with strong brand equity generally spend less time explaining their value to consumers who are already familiar with it. Instead, brands can invest their time and resources to become more creative with their marketing and advertising.

This is why brands like McDonald’s can have billboards with just their logo next to an image of an item on their menu. They don’t need a tagline. You know what to expect from McDonald’s in terms of flavor, price, and atmosphere. The ad is enough to make mouths water. And the image of the food serves as an added incentive.

Brand Equity Increases Brand Loyalty

When a brand tells a compelling story, consumers will generally identify with and feel drawn to it. They will want to use the products to help tell their own story about themselves. Or at the very least, support the message a brand is aligned with.

Telling a compelling story with your brand is one of the best ways to increase engagement and grow sales. People want to be a part of awesome things!

Brand Equity Increases Customer Lifetime Value

A customer’s lifetime value refers to the amount of money they will spend on products during their time as a customer. The higher their lifetime value, the more money you’ll make!

Possessing high brand equity motivates customers to make repeat purchases. Customers believe in the value you provide over other companies. And when they need a product that you sell, they’ll be more likely to buy from you instead of your competition.

Improves Market Share and Profit Margins

When you group these benefits together, you’ll see two common themes:

  • Having strong brand equity will draw new consumers to you instead of your competition, growing your market share.
  • Your brand equity will encourage existing customers to keep purchasing new products from you, increasing your profit margin as you won’t be spending as much money advertising to attract new customers.

Brands With High Brand Equity

Below are examples of companies with a high brand value that can charge price premiums because of it.

Apple

In 2020, Apple reported over $137 billion in revenue, and it had 46% of the US smartphone market share.

Apple stands out from other tech companies for two main reasons. Apple products have a unique, loyalty-inducing interface with easy-to-navigate displays and stunning visuals and Apple has branded itself as a tech company built for creative minds.

In favor of a more restrictive platform, Apple’s operating system isn’t open source. It’s intentionally difficult to customize. While this may deter highly specialized users, it forces a majority of non-technical users into a better customer experience—encouraging greater loyalty along the way.

Apple’s products sync well with each other. iPhones sync seamlessly with Mac computers. Apps have cross-functionality between the Apple Watch, iPad, and other devices. Other tech companies struggle to develop a full product line (think of the people you know who have a Samsung phone, computer, and smartwatch).

Lego

Since its founding in 1932, the Danish company has grown its revenue to just under $6 billion from global markets in 2019.

Like Apple, Lego’s brand equity plays a large role in its success. Today, Lego is seen as the number one construction block toy brand. However, a lot of work went into establishing this beloved company’s reputation.

For example, did you know Lego’s strict quality control program ensures that their pieces are compatible with each other and older sets? And because pieces last a long time, a customer who opened a Lego set in 1997 could easily play with those same pieces alongside pieces made in 2021. This feature is emphasized on their social media, where they show off fan creations using pieces from different decades.

Lego has successfully branded itself as a toy and educational tool for children and as a high-grade collectible for adults. Lego sets are specifically designed for each age group and purpose (young children, children, adults, learners, and collectors), but their products are all compatible with each other. Because decades-old Lego pieces are compatible with modern-day ones, consumers can grow old with their childhood sets.

How to Build Brand Equity

Create a Brand Strategy

When trying to improve your brand equity, it helps to have a plan. This plan should identify which aspect of brand equity you’d like to work on specifically, which team members will work on which aspect of the project, how other team members will be affected by changes, and what the expected results should be.

Develop Brand Consistency

Your branding should be consistent across all fronts. Here are some elements to check for:

  • Do your marketing materials (email newsletters, brochures, social media pages, websites) look like they are representing the same business? Are your logos, color themes, and tone consistent?
  • Are the products in your line all of the same quality? If some of your products are durable and last years while others break after a few uses, your brand will be inconsistent and struggle to attract new customers.

Improve Customer Experience

A brand’s ability to make life easier for its consumers is essential for building positive feelings towards your brand.

What is another way to improve your customer’s experience?

Since lockdowns began in 2020, shopping habits have changed drastically, and having an online storefront has become a necessity. According to Oberlo, 63% of purchases now begin online. When a consumer starts researching a product, they start doing so online by watching demonstration videos, reading reviews, and comparing prices. After all, who doesn’t love shopping from the comfort of their own home?

Giving your customers access to your products from their own homes will improve your brand equity. Your online storefront will boost your rankings in search engines, growing your brand recognition. Customers are more likely to buy from you for the first time, and the second and third, when it’s more convenient for them to do so.

Ecwid makes establishing an online presence for small businesses easy, so you don’t miss out on attracting consumers early in their buying process. They simplify ecommerce by helping you create an online storefront, and they make sure it’s seen by coordinating it with your social media pages, and search engine rankings.

Your Brand Won’t Be Built in a Day

Understand that building brand equity is a long-term process. Start by evaluating your brand image and finding points of weakness.

Ask yourself and your team:

Do consumers have a positive experience when shopping with us? What about when they use our products? How did our existing customers find out about us? Do we only offer tangible value, or are we also selling a feeling and an identity?

As you adjust your marketing strategies to emphasize different aspects of your brand equity, build in opportunities to receive feedback from consumers. They will have some of the best insights for how you can measure brand equity and strengthen it.

Don’t get discouraged if you don’t see immediate results in your bottom line. Building a brand takes time, but the long-term benefits are worth it!

Do you want to learn more about branding your online store?

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About the author

Anastasia Prokofieva is a content writer at Ecwid. She writes about online marketing and promotion to make entrepreneurs’ daily routine easier and more rewarding. She also has a soft spot for cats, chocolate, and making kombucha at home.

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