What is brand equity and why is it important?
Brand equity represents the intangible assets that a brand possesses. Assets that can have a significant impact on a company – from attracting prospects to building advocates for the brand. You can define it as the perceived value or worth of a brand in the eyes of those you hope to serve. Put another way, it is a reflection of how people feel and think about your brand.
Brand equity is built over time through intentional branding strategies, consistent efforts, and positive brand experiences.
The importance of brand equity
Brand equity is about forging emotional connections with people that translate into long-term relationships, higher customer lifetime value, and a sustainable competitive edge. It's the bedrock upon which successful businesses build their reputation, resilience, and enduring legacy.
Here are some of the specifics on the value of brand equity:
It can build trust and confidence
One of the fundamental aspects of brand equity is trust. Trust is built over time through things like consistent quality, positive experiences, and ethical business practices. Brands with high trust levels are perceived as reliable. In the chaotic world we live in, having something that you know is reliable and gives you confidence can be very reassuring. And valuable.
It creates a competitive advantage
Having strong brand equity can set a company apart from its competitors. When consumers feel good about a brand, they are more likely to choose it over the alternatives. This leads to increased market share and a competitive edge.
It can allow for premium pricing
Consumers are willing to pay more for brands they perceive as trustworthy and of superior quality. Brands with high brand equity can often command premium prices for their products or services.
It fosters customer loyalty
When people have a positive perception of a brand, they are more likely to become repeat customers. This contributes to higher customer lifetime value (CLV)because they are choosing the brand over an extended period. Repeat customers are not only more profitable but also can grow into brand advocates, helping to attract new customers through word-of-mouth recommendations.
It can protect a brand in bad times
Strong brand equity acts as a buffer during times of crisis. Whether it's a product recall, a negative news story, or an economic downturn, consumers are more forgiving of brands they trust. They are more likely to give the brand the benefit of the doubt and continue their patronage. This resilience can help businesses weather storms that might otherwise be devastating.
It can lay the foundation for expansion
When a brand is well-regarded, consumers are more open to trying new products or services under that brand's umbrella. This allows companies to enter new markets or launch extensions more easily, leveraging their existing brand equity.
A cautionary tale about ignoring brand equity
The Oscar Mayer Wienermobile has been a beloved symbol of American culture for decades. Shaped like a giant hot dog on wheels, this vehicle served as a lighthearted and instantly recognizable representation of the Oscar Mayer brand.
The Weinermobile has been building brand equity since 1936 for Oscar Mayer. Abandoning that equity, the company decided to rebrand this cultural icon as the "Frankmobile".
As you would imagine, there was significant blowback from the public. After all, the company was messing with a beloved icon that represented a wealth of fond feelings for so many. Just months later, Oscar Mayer changed the name back to Wienermobile. And had to deal with brand damage caused by failing to respect the power of brand equity.
It is essential that a brand recognize that it is more than just the sum of its products and services. It also embodies a wealth of emotional and cultural meaning. That is its brand equity. Equity that forges emotional connections with consumers that translate into long-term relationships, higher customer lifetime value, and a sustainable competitive edge. Nurturing and protecting that is crucial.