What is brand equity?

DSM Digital School of Marketing - brand equity

The term ‘brand equity’ refers to the value as well as strength of the brand which determines its worth. Brand equity can also be defined as different impact of brand knowledge on consumers’ responses to the marketing of the brand.

Brand equity is a function of what consumers choose in the marketplace. The notion of brand equity comes into existence when consumers choose a product or a service. It comes into play when the consumer knows the brand and holds some favourable positive, strong as well as distinctive brand associations with it.

What defines brand equity?

There are three main points which define brand equity:

  1. Tangible and intangible value – This can be tangible value such as revenues and price premiums or intangible value such as awareness and goodwill.
  2. Positive or negative effects – The organisation, products, services and bottom line can benefit or suffer from brand equity.
  3. Consumer catalysts – Brands are built by consumers, not companies. Therefore, brand equity is built by consumers as well.

The value is determined by the consumers’ perception of, as well as experiences with, the brand. If individuals think highly of a particular brand, it is said to have positive brand equity. If a brand consistently under-delivers, as well as disappoints to the point where consumers recommend that others avoid it, it has brand equity which is negative.

The value of positive brand equity

Companies are able to charge more for a product which has a great deal of brand equity. This equity can be relocated to line extensions which are products that are related to the brand. Line extensions  include the brand name.

Aaker’s model of brand equity

Aaker asserts that brand equity is determined by four interdependent factors:

  1. Brand Loyalty
  2. Brand Name
  3. Brand Awareness
  4. Perceived Quality

Aaker defines ‘brand equity’ as the brand assets or liabilities which are linked to a brand’s name as well as the symbols that add to, or subtract from, a product or service.

Brand equity derives from consumers’ perceptions of a brand, product or service. It is reflected in the way consumers act, think and feel with regards to the brand as well as the price, market share and profitability that the brand commands.

How you can develop brand equity for your company

So, how can you develop brand equity for your business seeing that it’s vital to have this characteristic for your company? Well, here are a number of pointers on how you can develop the must-have elements of brand equity for yourself:

  • Brand Name – Having a recognisable and sustainable name can keep a brand strong, and become pioneers in a particular niche. So, the brand name has to be recognisable in the eye of the consumer.
  • Brand Loyalty – People who are loyal to a brand are likely to become advocates and not switch brands – the life value of a consumer then increases.
  • Brand Awareness – The ability to place your product/service in the correct place with the correct target audience is important with brand awareness. If you are not aware of who your primary target audience is, you are creating a brand which is not relevant in the eyes of the consumer.
  • Perceived Quality – This directly relates to how much people are prepared to pay for the services/product that is on offer.

Get in touch with the Digital School of Marketing

Want to learn more about branding? If you do, we highly recommend that you check out our brand management course as this will help you to navigate the wilds to branding and will assist you with leveraging this for your business.

DSM Digital School of Marketing - Brand Management