Brand equity
Brand equity is the value a brand has through what consumers think, feel and experience about it. Two almost identical products can command a different price purely because of the brand on them. Here you can read how brand equity is built, how you measure it and why it protects your margin.
- 7 min read
What is brand equity?
Brand equity refers to the value a brand has through the positive perceptions, associations and experiences consumers have with it. A brand with strong brand equity is generally seen by consumers as more trustworthy, more recognisable and more valuable than its competitors. This results in benefits such as customer loyalty, higher profit margins and a competitive advantage in the market.
Brand equity can be both positive and negative:
- Positive brand equity: When consumers have positive associations and experiences with a brand, this increases the brand's value. This can result in higher sales volumes, pricing power and a stronger market position.
- Negative brand equity: When a brand receives negative publicity or when consumers have bad experiences, this can lead to negative brand equity, where the brand loses value and consumers turn away from it.
The building blocks of brand equity
Several factors contribute to building brand equity. These are the main elements that can strengthen your brand:
1. Brand awareness
The first step towards strong brand equity is that consumers know and recognise your brand. Brand awareness matters because consumers are more likely to choose brands they already know. The more often consumers come across your brand and the more consistent the brand expressions are, the stronger the brand awareness and the greater the chance they choose your brand.
2. Brand associations
Brand associations are the images, feelings and thoughts consumers have when they think of your brand. Positive associations can set your brand apart from competitors and create an emotional bond with consumers. This can be influenced by factors such as product quality, brand messages, advertising and customer experiences.
3. Perceived quality
Perceived quality is the consumer's perception of the quality of your product or service. If consumers regard your brand as high quality, they will be more willing to pay for your product and will be more loyal. It is important that your brand consistently delivers high quality to maintain this positive perception.
4. Brand loyalty
Brand loyalty refers to the degree to which consumers repeatedly buy a brand's products and have a strong bond with the brand. Loyalty strengthens brand equity because loyal customers are less sensitive to price changes or competitors' offers. They stay true to your brand, even when alternatives are available.
5. Emotional connection
Brands that build an emotional bond with their customers have considerably stronger brand equity. Emotional connections mean consumers buy a product not only for its functional benefits, but also because they feel connected to the brand values or brand personality.
Why is brand equity important?
Brand equity offers numerous benefits for businesses, adding value in both the short and the long term. Here are some key reasons why strong brand equity matters:
1. Pricing power
Brands with strong brand equity can often charge higher prices than their competitors. Consumers are willing to pay more for brands they trust and value. This is also known as the price premium . The higher price is justified by the perceived value and quality of the brand.
Example: Apple can charge higher prices for its products than many other electronics brands because of the strong brand equity the brand has built up.
2. Customer loyalty
Consumers with a positive perception of your brand stay loyal for longer and buy from you repeatedly. This creates a stable base of returning customers and can lead to higher customer value in the long term. Loyal customers are also less sensitive to competitors' marketing efforts.
Example: Starbucks has built strong brand loyalty, so customers often keep coming back, even when there are cheaper alternatives.
3. Lower marketing costs
As brand awareness and brand loyalty grow, marketing costs often fall. Well-known brands have to make less effort to get their message across and win new customers, because consumers already know and trust the brand. In addition, loyal customers can promote the brand by word of mouth.
Example: Nike has very strong brand awareness, so it needs to do less to convince customers to buy its products, because the brand associations are already strong.
4. Competitive advantage
A brand with strong brand equity has a considerable competitive advantage. Consumers are more likely to choose a known and trusted brand, even when alternatives are available. This can help your brand keep and expand market share, even in a saturated market.
5. Brand extension
Brands with strong brand equity can more easily launch new products or services under the same brand name. This is known as brand extension. Consumers are more likely to try new products from a trusted brand because they already have a positive association with the brand.
Example: Dove, originally a soap brand, has used its brand equity to successfully launch a line of skin and hair care products.
How do you build brand equity?
Building strong brand equity requires a strategic and consistent approach. Here are some key steps to build brand equity:
1. Ensure a consistent brand message
One of the most important factors in building brand equity is consistency. Make sure your brand message, visual identity and communication are consistent across all channels and touchpoints. Consistency helps consumers recognise and remember your brand.
2. Focus on quality
The perceived quality of your product or service plays an important role in building brand equity. Make sure your products and services meet your customers' expectations, and keep striving for high quality and customer satisfaction.
3. Create an emotional bond
Brands that build an emotional bond with their customers often have stronger brand equity. By telling stories, tapping into emotions and communicating brand values that resonate with your audience, you can create a deeper bond with consumers.
4. Invest in customer relationships
Building strong relationships with your customers is important for strengthening brand loyalty and brand equity. Offer excellent customer service, listen to your customers' feedback and show appreciation for their loyalty.
5. Ensure a unique brand identity
Your brand needs to stand out from the competition to build strong brand equity. That means your brand needs a unique identity and positioning that appeals to consumers. You get there through a combination of your brand values, your personality and the way you present your products or services.
How do you measure brand equity?
Measuring brand equity can be complex, because it has both quantitative and qualitative elements. Here are a few ways to measure brand equity:
1. Brand awareness surveys
A simple way to measure brand equity is to run surveys to see how many people know and recognise your brand. Also ask how familiar they are with your products, services and brand message.
2. Customer satisfaction and loyalty
Measuring customer satisfaction and loyalty gives you insight into how consumers experience your brand. You can do this with Net Promoter Scores (NPS), customer reviews and repeat purchases.
3. Perceived quality
Research how consumers rate the quality of your products or services compared with those of your competitors. You can do this through product reviews, surveys and customer feedback.
4. Financial performance
Brand equity can also be measured by looking at financial indicators such as market share, revenue growth and the price consumers are willing to pay for your products compared with those of competitors.
5. Social media and online sentiment
Social media analysis and sentiment analysis can help you see how consumers talk about your brand and what associations they have with it. This gives you a picture of how your brand is perceived online.
Common mistakes when building brand equity
Building brand equity is a long-term strategy that takes careful planning. Here are some common mistakes to avoid:
1. Inconsistent brand communication
Inconsistency in your brand message or visual identity can confuse consumers and make it harder to build strong brand equity.
2. Neglecting customer relationships
Customer loyalty matters for brand equity. If you pay no attention to your customer service or ignore your customers' needs, it can damage your brand.
3. Poor product quality
Even with strong brand awareness, poor product quality can damage your brand equity. Consumers will associate your brand with disappointing experiences, which leads to negative brand perceptions.
Conclusion
Brand equity is one of the most valuable assets a brand has. It brings benefits such as higher prices, stronger customer loyalty and a competitive advantage. By investing in brand awareness, positive associations and high product quality, you can lay a solid foundation for strong brand equity.
Building brand equity takes time and effort, but the reward is a stronger, more recognisable and more valuable brand that is better able to withstand competition and changes in the market.
You build brand value through repetition and consistency, not with a single campaign. That is what Social media advertising is well suited to, because you reach the same people more often. Keep reading: brand awareness and brand loyalty.
Frequently asked questions
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Wat is het verschil tussen brand equity en merkwaarde in euro’s?
Brand equity is de waarde die een merk heeft in de hoofden van klanten: herkenning, vertrouwen en de bereidheid om voor jou te kiezen. De financiële merkwaarde, ook wel brand value, is wat een merk in geld waard is, bijvoorbeeld bij de verkoop van een bedrijf. Sterke brand equity is meestal de basis voor een hoge financiële merkwaarde.
Heeft een klein bedrijf ook brand equity?
Ja. Een vakbedrijf dat in de regio bekendstaat om net werk en goede afspraken, krijgt vaker aanvragen via aanbeveling en hoeft minder op prijs te concurreren. Dat is brand equity op lokale schaal, opgebouwd met reviews, een herkenbare uitstraling en tevreden klanten.
Kan brand equity dalen?
Ja. Slechte ervaringen, negatieve reviews of een wisselende uitstraling verlagen wat mensen van je merk vinden. Mensen kiezen dan liever een ander, ook als het aanbod gelijk is. Problemen snel oplossen en reviews goed opvolgen beperkt de schade, zie review management.
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