Brand equity

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Brand equity - ToolsHero

This article explains brand equity in a practical way. After reading you will understand the basics of this powerful strategic marketing tool.

What is brand equity?

A brand is not just a logo or a name, because for a consumer a brand reflects a certain emotion or association. This added value of a brand is called brand equity.

Brand equity is a broad concept, however. It is the value of a brand that is expressed in financial, strategic and management advantages and benefits for the firm that owns the brand.

In 1993, the American Professor of Marketing, Kevin Lane Keller, developed the brand equity model, which is also known as the Customer Based Brand Equity model of CBBE model.

Two dimensions

Keller´s model is based on two dimensions: Brand Awareness and Brand Image.

Brand Awareness

Brand Awareness plays an important role in consumer buying decisions, in which the brand determines whether a product is seriously considered for purchase by the consumer.

Brand Image

Brand Image is about the effect of differentiation, when a consumer can choose between two identical products from two different brands. A consumer’s brand knowledge and brand preference of the consumer also play a role in this.

Practical brand equity example

When a consumer wants to buy a personal computer, he can choose from a number of brands: Apple, Hewlet Packard, Dell and Acer.

When the brand equity of Apple is high, the consumer will choose this brand. When there are more products under this brand name, the consumer will have a strong preference for all of these products.

When the customer does not know anything about a brand, the preference for this product will be low and as a result the chances decrease that the consumer will buy this product. High brand equity will make a brand less vulnerable to competitive marketing actions.

Advertising

A positive image will help a certain brand sell more. Also, customers are more willing to pay more money for this brand. The unknown or lesser known computer brand advertises a lot, whereas Apple only needs one advertisement.

This has to do with the consumer’s awareness. The Apple logo alone creates an image and evokes positive associations. This is the reason why Apple does not invest in expensive TV commercials any more. High brand equity makes the customer feel good, and this results in an automatic acceptance of other products of this brand.

Brand loyalty

In brand equity, the measure of how loyal consumers are to the brand is taken into consideration. The more loyal customers the better. Customer retention efforts are cheaper for an organization than acquiring new customers. After all, loyal customers ensure a stable source of income.

Loyal customers remain loyal to ‘their brand’ and they help spread this brand affection to others.

Brand awareness

Secondly, brand awareness is important in brand equity. Are there plenty of associations with a brand, is there consumer brand preference, does the consumer know what the brand represents and what products are sold under this brand?

When the consumer actively thinks of the brand during the purchasing process, then there is a high brand equity level.

Quality

In addition to brand loyalty and brand awareness, quality is also important. When the quality of the product is the reason for buying this, the brand exudes status, the perceived quality is a distinctive feature that sets it apart from the competition, then there is a high level of brand equity.

Brand associations

Brand equity also exists when the brand evokes strong and unique associations. For example the detergent Omo is associated with clean laundry and Witte Reus with economical to use.

These are associations that are mainly brought about through advertising. The positive feelings that a brand evokes and the preference for certain brands are also part of brand association. Why does one customer choose for an I-phone and another for a Samsung smart phone?

Advantages

High brand equity is equivalent to a high brand awareness, loyalty, association and perception of quality. Furthermore, it results in lower introductions costs and higher sales percentages.

Repetition

Repetition is the magic word to arrive at high brand equity. It will have the best effect when the new brand name is mentioned everywhere, consumers are flooded with the product and when they are brought into contact with it at any given opportunity.

Suppose a new hair loss prevention shampoo is introduced on the market. In specific magazines and glossies, editorials pieces can be bought, the so-called advertorials, in which the product is explained. This provides the reader with insight and understanding and they will have a favourable view of the product.

Their behaviour will change, they will recognize the brand and eventually they will buy the product. A sample may be inserted in the magazine.

Touch, smell and experience are the best way to trigger association and make the consumer remember the product.

Successful

In financial terms, brand equity means ‘big business´; it always generates a substantial market share. Successful brands such as Coca-Cola, Apple and McDonald’s are known all over the world and their sales are huge.

Brands with high brand equity are usually listed and spend a lot of money on all kinds of advertising. A brand does not obtain brand equity without making an effort. They have to build up brand awareness that triggers positive associations with consumers.

When consumers can name the product or service of a brand by hearing its name, there is high a high level of brand equity.

It’s Your Turn

What do you think about brand equity? Why is this so important? What is your experience and what would you like to share? Share your experience and knowledge in the comments box below.

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More information

How to cite this article:
Van Vliet, V. (2016). Brand equity, a powerful strategic marketing tool. Retrieved [insert date] from ToolsHero: http://www.toolshero.com/marketing/brand-equity/

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