Brand equity: The Added 'Value'

Published by MBA Skool Team, Published on March 07, 2011

Business organizations are always innovating and creating new methods for luring customers. Product innovations, breakthrough products, new features, improved quality, design, logos etc are some ways by which newer products hit the market. This not only gives more choice to consumers but it also improves the image of a brand in the eye of the customers. Brands life cycle of growth and maturity also undergoes a change. But there comes a stage in the life time of a brand where the brand name itself is the marketing fundamental, and this phenomenon is known as brand equity.


Brand Equity The Added Value

Brand equity doesn’t have a definite definition. Brand equity is basically the 'added value' to a product which comes with the experience, strength and excellent history of a brand. Brand equity for any brand takes time to form and it takes into account every action, good or bad, which has been done under its name. Brand equity is just a concept which shows the importance of brands in being recognized, different and having its presence in this competitive world.

Let’s understand the concept of brand equity.

What is the price of a guitar?

What is the price of a gown?

What is the price of a spectacle?

What is the price of a sword?


All the above mentioned products are affordable to every person. Any person who earns well and can afford spending a little money can easily find the above things at any shop or market. But if the guitar was used by Michael Jackson, if the gown was worn by Princess Diana, if the spectacles belonged to Mahatma Gandhi, if the sword belonged to Tipu Sultan, then the price of these products would be beyond even millionaires. This added value because of a strong brand being associated with a product is the best example to explain the concept of brand equity.


Brand equity of organizations can also be made strong and eternal by various exercises like brand revitalization, brand reinforcement, by associating itself with supreme brand ambassadors etc. This is the reason why brands associate themselves with celebrities and powerful names. For e.g. Shahrukh Khan gives energy and versatility to a brand, Amitabh Bachchan give charisma and excellence to a brand and Sachin Tendulkar gives faith and superiority to a brand. And all this value added cannot be evaluated in monetary terms.


Logos, brand image, brand awareness, marketing etc are some ways of creating a value proposition for a product. McDonalds means 'cleanliness, fast service', Mercedes means 'status, perfection' etc. All these brands have taken years to become a strong entity. Each one of these brands has created a place for itself in the mind of a consumer. And once a brand is associated with a strong perspective in the mind of the customer, brand equity adds more value than any amount of money can.

If we say that this is an added value, what is the value ? Can Brand Equity be measured ?

Companies conduct brand audits and tracking studies to measure the Brand Equity directly and indirectly. The indirect approaches include tracking and identifying consumer brand knowledge whereas the direct methods include in assessing the actual impact of brand knowledge on consumer response to the product or the brand and its marketing.

Companies also use brand evaluation to measure the worth of their brand. This is the total financial worth of a brand, This is not a measure of brand equity but still it gives an idea of the added value we are looking for. More is the worth of a brand, higher is its brand equity. Exceptions can be there though. Microsoft as a brand might still have one of the highest brand worth in technology companies but its brand equity might be eroding.

Brand Equity can also be increased by intelligent use of line extensions and brand extensions. A Line extension is a new product in the same category which uses the existing brand. For example, If Surf comes out with a new detergent powder called Surf Excel, it’s a line extension. They are still in the detergent segment but a different product which uses the same brand name Surf with Excel. People who are already influenced by Surf brand may actually buy this new product. If the product is nice, the equity rises. This can also some time lead to the other situation in which the new product was not as good and actually caused a drop in the brand trust and hence equity.

Brand extensions are more tricky when it comes to Brand Equity. Brand extension or brand stretching is a marketing strategy in which a firm marketing a product with a well-developed image uses the same brand name in a different product category. Same theory as the line extension also applies here.

So Brand Equity is a very important asset for any company. Its more valuable than anything in the organization. Once a company loses this extra (additional) value called brand equity losses might be more than what you can imagine.

John Stuart of Quaker Oats once said, “ If this business were split up, I would give you the land and bricks and mortar, and I would take the brands and the trademarks, and I would fare better than you.”  This is the importance of this Added Value called Brand Equity.



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