What is Brand Equity?
Brand equity is the total value of the brand as a distinct asset. It can be rendered as the aggregate of assets and liabilities that are associated with the brand name and symbol which brings about the relationship customers tend to create with the brand. Brand equity is reflected in a way as to how consumers see; feel as well as an act towards a particular brand. Additionally, the impact of these intangible assets is quite visible with the books of records in terms of market prices, shares, profitability, and demand.
Components of Brand Equity
Brand equity includes fulfilling the business promise towards its customers along with maintaining the business-customer relationship well. Components of brand equity include:
The first step of the brand building process is creating awareness of the brand name in the mind of consumers. This means that customers are aware of the brand and able to associate it with a particular category. Building brand awareness can help marketers to increase brand visibility to the target audience through different advertisement campaigns.
Brand association is anything that a customer relates to their preferred brand. Getting in interaction with brands allows such associations. Having a good brand association is important as it leads to repetitive sales and provides the business word of mouth marketing. Such associations are leveraging the brand and give a tough time to new entrants into the market.
This is the aggregation of customer experience with the overall brand. When customers have the good brand experience they will consider the brand as superior and will start preferring it over others. For example, how you feel when eating at McDonald’s? How is the overall inner environment, how the staff behaves and what is the quality of the food? To provide the same experience, the company have to maintain uniform standards all over the outlets in the world.
Fulfilling brand promise is the key to strong brand equity. Customer tends to assess brands with other similar brands on the basis of various quantitative and qualitative parameters. Quality perception also impacts the pricing decision of a company. If a company produce quality products, it can avail the luxury of premium pricing.
Brand loyalty is the preference of a brand by the customer over similar products in the market. This results in repetitive sales and is the best way to spread word of mouth. If a company has a higher brand loyalty, it can help to reduce marketing cost. The company can also introduce new products targeting the same customer base.
This is another component of brand equity and can charge additionally for the same product. However, this requires organizations to assure that customers have good experiences and associations with the brand.
How to Manage Multiple Brands
In today’s competitive market, managing multiple identities are very difficult and expensive activities. The brand managers should ask the question, is it really important to have multiple brands? Don’t build multiple brands unless and until you have to. There are very few companies who have consistency and resources to create multiple brands. Keep in mind that there are multiple brand strategies
- Umbrella strategy
- Single brand identity
- Multiple brand categories
- Family of Names Strategy
Why is Brand Equity Important
Brand equity is important for not only increase market share along with increasing its valuation in the marketplace.
- Increases market share: Good brand equity results in loyal customers who prefer one brand over the other and increases its market share.
- Price premium: Positive brand equity can charge more for its product than the actual market price.
- Asset: Brand equity is an intangible asset of an organization and like any other asset; this too can be licensed, leased or sold to others.
- Extension of product line: Having positive brand equity, it is easier to introduce new product lines. For example, Apple started with Mac operating systems and easily converted its equity with iPhones.
Building and Managing Brand Equity
Building and managing brand equity comprises of the following three stages:
- Introduction: Introducing of a high-quality product and use as a strategic platform from which future products can be launched. Making a positive evaluation from the customer point of view is very important.
- Elaboration: This requires making the brand to develop repetitive usage by making it easy to remember. The brand attitude should be accessible which means that the customer should easily remember their positive evaluation with that particular product.
- Fortification: Brands should carry a consistent image so as to reinforce its image in the customer’s mindset. Additionally, brand extensions can also fortify the brand but only through relative products that enjoy a perceived fit within the minds of customers.
Examples of Brand Equity
Brand equity refers to the value added to the same product under a particular brand. This makes one product preferable over others. This is brand equity which makes a brand superior or inferior to that of others.
- Apple: Apple is the best example of brand equity. Although all product of this brand has similar features, the loyalty, demand and price premium is higher than other similar brands.
- Facebook: Many other social networking websites came and gone; however, Facebook is quite consistent. Facebook has managed to attain brand loyal customers that most of its users do not even look at other social media platforms.
- Maggi: Though there was a long ban over the flagship noodle product of Maggi in India, the product had huge demand even after its re-launching in the market. This example is the best to represent that how strong brand equity can help an organization cope with different market situations.