Brand Equity

Published by MBA Skool Team, Last Updated: May 13, 2020

What is Brand Equity?

Brand Equity is a qualitative measure of the brand’s positive recognition or goodwill in the minds of the consumers considering the brand as an independent entity. Brand Equity is the tangible and intangible worth of a brand. The degree of premium that a brand can charge on its offering is a direct measure of the equity it possesses with its customers. Brand Equity is kind of power that the brand has over its competitors or the generic brands and is developed over time.

Brand equity can be said to be coming from the aggregate worth of the following constituents in the minds of its consumers:

Importance of Brand Equity

Brand Equity is quite important in the fact that it helps one brand gain importance and additional revenue as when compared with the competitor. Brand Equity is a complex parameter which takes into account a lot of parameters like brand image, brand identity, brand awareness, brand loyalty, brand association etc. It is mainly subjective and qualitative but can be represented quantitatively.

Brand Equity is driven by marketing strategy & efforts over the years and consistency which results in customer perception & brand knowledge which may be positive or negative. Positive perception would result in increase in brand equity. Effectively communicating the product benefits to the customers helps in brand building. Companies spend huge sums of money in advertising using integrated marketing communications (IMC) channels to promotes its goods & services.

Example of Brand Equity

Some examples of brand equity are as follows. Consumers pay more for a Garnier beauty product than an Ayur product. A brand can also have negative equity in cases where it does not fit well with its consumers. As an example, Tata Nano  users reported some fire incidents with the product which led to its negative equity for a while.

Since brand equity is based on several parameters like brand image, brand identity, customer perception etc, it is primarily a qualitative parameter for a brand or company.

Elements & Components of Brand Equity

Brand equity is a function of several other qualitative parameters which a customer can associate with a brand. Some of the main components or elements of brand equity are as follows:

1.Brand Image

2.Brand Identity

3.Brand Awareness

4.Brand Loyalty

5.Brand Association

6.Customer Perception

Since brand equity gives a qualitative outlook, it is quite complicated to define it through numbers or a value.

Steps to Calculate & Measure Brand Equity

Brand equity is a subjective concept based on customer & market perception. Measuring brand equity can be done by both qualitative research as well as quantitative research. Brand Equity can be measured on the basis of three important parameters which are:

1.Consumer Metrics: This measure of brand equity focuses on evaluating brands & products on the basis of factors like customer perception, attitude, belief, brand association etc.

2.Financial Metrics: Financial factors like revenue, profits, cost of new acquisition, growth, market share etc help in measuring brand equity.

3.Strength Metrics: The strength of the brand in terms of brand recall, brand awareness, brand loyalty etc are used in the measurement of brand equity.

All the above data can be collected by marketers using consumer research where customers can be given surveys or questionnaires to have their feedback. Qualitative feedback can be open-ended and other factors can be given weights which can help in the calculation of overall brand equity. Creating brand equity is a gradual process & takes years of efforts in establishing a particular brand image or perception in the mind of the consumer.

This article has been researched & authored by the Business Concepts Team. It has been reviewed & published by the MBA Skool Team. The content on MBA Skool has been created for educational & academic purpose only.

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