Defining Brand Equity

Brand equity refers to the value you have built into your brand. That value is primarily a function of how well known your brand is to a target audience and what feelings they associate with that brand awareness. Across all industries, consumers largely consider products and services with well-known brand names to be superior to those without comparable recognition. This is why well-known brands generate more revenue than their lesser known competitors and ultimately, own far greater brand value.

Firm level brand equity is derived by a number of competing calculations, but a fairly basic one subtracts all tangible assets (i.e. capital holdings) from the total market capitalization of the company. The resulting figure is designated as intangible, brand equity.

For example, here is a list of brand equity associated with these leading brands as published by Forbes for 2017:

It’s no surprise that the list above, and the full list on Forbes, consists of a balance between B2B and B2C brands. People determine brand value, and we’re all in the people-to-people business. The increasing access to information and high-impact marketing and advertising resources has quickly eroded the differences between B2C and B2B strategies for driving brand awareness and preference. Because of this change in the marketing landscape, all brands that want to thrive and build long-term equity must make every effort to stay top of mind, in a positive and easily recognizable way.

Calculating Brand Equity

There are numerous ways to measure changes in brand equity, but some of the most common considerations are:

  • Market Share
  • Profit Margin
  • Recognition of Visual Branding
  • Brand Language Associations
  • Consumer Perceptions of Quality

These factors are often divided into two broader categories. Measurable financial changes like market share and profit margin are quantitative equity values. Consumer associations of interest and prestige are qualitative measures. Large brands measure these factors carefully and at considerable cost. Smaller brands may not have the luxury of that extensive measurement so, they have to proceed based on what they recognize as proven success by their larger competitors.

Building the Brand

A brand is composed of a name, visual and verbal identities, and perceptions that take hold in the mind of the public at large. Over time, consumers develop relationships with brands they encounter frequently, forming associations and expectations. Those expectations amount to a brand promise: assurances of consistency in quality, pricing, speed of delivery, customer service or whatever meaningful differentiation they have selected as their core promise.

So, given that brand equity is such a powerful resource, how do companies go about attaining and growing it? They do so through strategic investments in a variety of targeted communication channels. Put more simply, they broadcast messaging that builds awareness and reinforces recognition.

Strategic investments in brands have a cumulative effect. Each additional message makes the brand more familiar, growing its equity, leading to price and revenue increases, and ultimately, improving the return on marketing investment.

Thrive to Survive

Growing brand equity by building brand awareness and recognition is a never-ending and constantly evolving process. The marketplace isn’t static. Consumer behavior and values shift, and competitive strategies evolve. Brand managers have to adjust their marketing communications and brand platforms to these shifting winds to maintain growth. Even when external factors aren’t limiting advancement, simple stagnation can depreciate brand equity. It takes continual reinforcement to sustain a growing brand.

Ultimately, the benefits of building brand equity aren’t just added value either; they are necessary for continued survival, and in an increasingly competitive marketplace, you must thrive to survive. Inaction leads to diminished value and eventual extinction.

Want to learn more about building your own brand equity? Download our Blueprint for Successful Branding and get started now.