Brand Equity

Brand Equity

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What is brand equity and what does it mean for your business?

“Products are created in the factory, brands are created in the mind.” – Walter Landor

A former CEO of McDonald’s once said, “If every asset we own, every building, every piece of equipment were destroyed in a terrible natural disaster, we would be able to borrow all the money to replace it very quickly because of the value of our brand… The brand is more valuable than the totality of all these assets.”

In addition to being Intern Extraordinaire by day for Shout Out Studio, I’m a full-time college student at night. Think Batman, only for the good of marketing instead of justice. As I sit in my Marketing class I often come across a few terms, models and theories that make sense to share. That brings us to Brand Equity.

As we know, brands are not just names and symbols, they are the key factors to your relationship with your customers. Brands represent what consumers think about you, your product, and its performance. Put it this way, brands only exist in the minds of your audience. Having a powerful brand means that you have high brand equity.

So, what is brand equity eh?
Brand equity is the positive differential effect that the brand name has on the customer response to the product or service. It is a measure of the brand’s ability to capture preference and loyalty.

Why do you want high brand equity?
If you make deep connections with your customers you set yourself apart from your competition by creating excitement and loyalty. If customers are loyal to you, they are much less likely to switch. A brand is experiential. It’s not just a thing like a logo or a name.

Remember folks, it is cheaper to keep your audience than to gain a new one.

Once upon a time in my Marketing class, I heard about these cats called Young & Rubicam who ran an Ad agency. They had a Brand Asset Valuator that measures brand strength by four different consumer perception dimensions:

  • Differentiation: What makes the brand stand out
  • Relevance: How consumers feel it meets their needs
  • Knowledge: How much consumers know about the brand
  • Esteem: How highly consumers regard and respect the brand

Brands with high brand equity rate high on all of these dimensions. So ask yourself this: Where does your brand rate?

A strong and powerful brand forms the basis for building strong and profitable relationships with people; the perfect asset to underline brand equity is customer equity.

Customer Equity is the value of the customer relationship that the brand creates. Take with you these, if you please:

  • A powerful brand is important, but what it really represents is a profitable set of loyal customers.
  • The best way to focus your marketing is building customer equity, with brand management serving as a major marketing tool.
  • Companies need to think of themselves not as portfolios of products, but as portfolios of customers.

Source: Marketing: An Introduction (9th edition), by Gary Armstrong and Philip Kotler; pages: 210-212

Cover Illustration credit: Khalid Albaih

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