Brand equity is a phrase used in the marketing industry which describes the value of having a well-known brand name, based on the idea that the owner of a well-known brand name can generate more money from products with that brand name than from products with a less well known name, as consumers believe that a product with a well-known name is better than products with less well-known names.
Brand equity is a value premium that a company realizes from a product with a recognizable name as compared to its generic equivalent. Companies can create brand equity for their products by making them memorable, easily recognizable and superior in quality and reliability. Mass marketing campaigns can also help to create brand equity. If consumers are willing to pay more for a generic product than for a branded one, however, the brand is said to have negative brand equity. This might happen if a company had a major product recall or caused a widely publicized environmental disaster.
“The value of a brand. From a consumer perspective, brand equity is based on consumer attitudes about positive brand attributes and favorable consequences of brand use.” – American Marketing Association
“A set of assets and liabilities linked to a brand, its name and symbol, that adds to or subtracts from the value provided by a product or service to a firm and/or to that firm’s customers.” – David Aaker
“The tangible and intangible value that a brand provides positively or negatively to an organization, its products, its services, and its bottom-line derived from consumer knowledge, perceptions, and experiences with the brand.” — Susan Gunelius
Some marketing researchers have concluded that brands are one of the most valuable assets a company has, as brand equity is one of the factors which can increase the financial value of a brand to the brand owner, although not the only one. Elements that can be included in the valuation of brand equity include (but not limited to): changing market share, profit margins, consumer recognition of logos and other visual elements, brand language associations made by consumers, consumers' perceptions of quality and other relevant brand values.
Brand equity is strategically crucial, but famously difficult to quantify. Many experts have developed tools to analyze this asset, but there is no universally accepted way to measure it. As one of the serial challenges that marketing professionals and academics find with the concept of brand equity, the disconnect between quantitative and qualitative equity values is difficult to reconcile. Quantitative brand equity includes numerical values such as profit margins and market share, but fails to capture qualitative elements such as prestige and associations of interest. Overall, most marketing practitioners take a more qualitative approach to brand equity because of this challenge. In a survey of nearly 200 senior marketing managers, only 26 percent responded that they found the "brand equity" metric very useful
5 Stages of Brand Experience that lead to brand equity
Brand equity is typically the result of brand loyalty, and with brand loyalty comes increased market share. In fact, there are 5 stages of brand experience that lead to positive brand equity:
- Brand awareness: Consumers are aware of the brand.
- Brand recognition: Consumers recognize the brand and know what it offers versus competitors.
- Brand trial: Consumers have tried the brand.
- Brand preference: Consumers like the brand and become repeat purchasers. They begin to develop emotional connections to the brand.
- Brand loyalty: Consumers demand the brand and will travel distances to find it. As loyalty increases so do emotional connections until there is no adequate substitute for the brand in the consumer’s mind.
Nice article. Also read on Brand Equity.
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