What is Brand Equity?

Brand equity is a well-known phrase in the marketing industry that describes the value of a brand name. Primarily determined by consumers, brand equity plays a significant role in driving a business’s sales and success. When a consumer has a positive perception of a brand, it has high brand equity. Likewise, when a consumer has a poor opinion of a brand, the brand has low brand equity.

Brands can drive their brand equity by creating a positive consumer experience, enhancing the quality of their products, and by increasing their brand recognition.  Brands that tend to spend more time and effort on marketing have higher brand equity.

Businesses that desire to build high brand equity need to invest time in creating brand awareness and brand loyalty.  To develop brand awareness and brand loyalty, however, a business must first focus on brand identity and brand resonance.

  • Brand Identity
    Brand identity builds upon the ideals a company holds for its products and services. Significant components of brand identity include product quality, quality of service, style of products and services, as well as how the company positions itself in public.
  • Brand Resonance
    Brands that take the time and effort to build a positive brand identity are likely to have a positive brand resonance with consumers.  Brand resonance is how well consumers relate to a particular brand.  Brands should align their identity and strive for high brand resonance with their ideal consumer.

Once a business has developed a brand identity and brand resonance they create a cycle around them to build brand equity.  The cycle includes introducing the brand to new consumers, getting products or services into the hands of new consumers, earning the trust of new consumers, and finally building a steady relationship with new consumers.

This cycle can be broken down into two main components:

  • Brand Awareness
    Brand awareness is the familiarity of a brand with consumers.  It is the image of a brand as painted by its qualities and marketing efforts.  Brand awareness includes logo recognition, product recognition, and brand service recognition.
  • Brand Loyalty
    Brand loyalty is a consumer preference of one brand over another. When a consumer develops brand loyalty, they will likely continue to purchase that brand regardless of price, environment changes, or brand action. Brands that produce a high level of brand loyalty create a safety net for their business.

In the end, brand equity is built upon brand identity and brand resonance and is the outcome of brand awareness and brand loyalty.  Brands that can produce a steady cycle of identity and resonance are more likely to have high brand awareness, high brand loyalty, and ultimately high brand equity.

The Importance of Brand Equity

Brands that have positive brand equity can charge more for their products and services regardless of the cost to produce them. Overall, brand equity improves business margins, stock prices, and creates security for a business.


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