Importance of Brand Equity

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  • Post last modified:July 9, 2017

All that brand equity means to businesses


According to the American Marketing Association, brand equity arises out of the consumer’s favorable perception of a brand.  It is based on the consumers’ attitudes about positive brand attributes and favorable consequences of brand use. Most importantly it is the value a brand provides to an organization. Consumers’ perception of the brand can be positive or negative. Depending on that brand equity can be low or high. However, the benefits that arise from brand equity can be both tangible and intangible. A high brand equity can provide some benefits that cannot be substituted. Since, brand equity is as valuable, it takes time to build it. It is because it takes time for any brand to affect the consumers’ perception and gain loyalty. Still, once a brand has earned positive equity, it can keep enjoying its benefits. However, brands should focus on sustaining it.


Tangible and Intangible benefits


It terms of tangible benefits, superior brand equity leads to price premiums and higher revenue. A small price premium from such brands is acceptable for the customers. Intangibly, it can lead to higher brand awareness and goodwill. The reason that brands focus on building brand equity is for it ensures brand’s long term future. Brands cannot achieve a leading position without it. Positive brand equity can lead to a healthier bottom line. It protects against market fluctuations as well. However, the most important thing is that consumers decide it. Their perception of the brand affects its brand equity.

Positive brand equity makes marketing easier. The investment on marketing campaigns is reduced. Its direct effect can also be felt on brand awareness. Brand equity reflects a deeper connection between the customer and the brand. It makes brand recall easier. This can have obvious benefits for any brand. Such brands can benefit by price premiums. It reflects a higher level of trust between the brand and customer. The benefits are both real and big. Such brands find it easier to expand through extensions. A new product by the same brand finds easy publicity and preference over rival products.

This was just a part of the picture. Promotional activities require less investment if brand equity is high. It is because such brands are highly publicized. These brands are also less perturbed by small mistakes. Any small discrepancy is most likely to be forgiven by the customers. Brands should particularly focus upon the customer. They can afford to ignore everything but their customers. It is because customers influence brand equity. If brand equity is high, small macroeconomic fluctuations do not have a significant influence on the brand. In this way, brand equity also acts as a protective shield.


Loyalty drives it


Every brand must focus on creating customer loyalty. It is possible by providing better products and services or other benefits. Even superior customer service can create loyalty. Higher loyalty increases brand equity. This means a bigger market share. Brands must focus on creating a positive brand experience. However, there are several stages of brand experience. From awareness to recognition, preference, trial and loyalty, there are five important stages. However, at the loyalty stage, the task of the brands is not over. It begins from there. After having achieved loyalty, focus should be on increasing and sustaining it. The question is if brand equity is a significant advantage. Yes, it is and it can be a source of competitive advantage.

Abhijeet Pratap

Abhijeet has been blogging on educational topics and business research since 2016. He graduated with a Hons. in English literature from BRABU and an MBA from the Asia-Pacific Institute of Management, New Delhi. He likes to blog and share his knowledge and research in business management, marketing, literature and other areas with his readers.