When you think about the Starbucks mermaid, Nike swoosh, or Apple logo, your brain may fill with associations, emotions, and attitudes. Customer experiences, advertisements, sponsorships, product placements, and social media feature brand markers like these and create meaning over time.
Now, think about a new product. Its name, logo, and design are all intended to communicate the brand’s meaning. But if the brand doesn’t yet have a relationship with consumers or a cultural history, those markers are empty. The brand may have an identity but not an image.
“An effective brand resonates with consumers,” says Harvard Business School Professor Jill Avery, who teaches the online course Creating Brand Value. “It powers their purchasing decisions and reflects who they are and what they stand for. Yet, competing for consumers’ attention and actually capturing it and retaining it has never been more difficult.”
Brands create their images over time as consumers buy and use their products and develop personal relationships with them. Simply stated: Brand image forms brand equity’s backbone. By understanding what brand equity is, you can take the steps toward achieving it.
What Is Brand Equity?
Brand equity encompasses consumers’ individual and collective levels of brand awareness and knowledge.
- Brand awareness refers to consumers’ level of recall, salience, and familiarity with your brand. It’s just one step in the brand equity-building process.
- Brand knowledge refers to consumers’ thoughts, feelings, attitudes, and relationships regarding your brand. Your brand can communicate a great deal of meaning through its identity (logo and packaging) and narrative. Consumers receive, interpret, personalize, and remember those brand associations, personalities, and images.
Why Is Brand Equity Important?
Think of brand equity as the sum of consumers’ thoughts, feelings, and attitudes about your brand that influences their willingness to pay for your product.
"In commodity businesses, a lot of times, you'll see things that are much more purpose-driven,” says Chief Marketing Officer of egg producer Pete and Gerry’s Phyllis Rothschild in Creating Brand Value. “That they talk about whether it’s an organic product or whether it’s where the animals that produce it are much better cared for. Those are things that matter to certain consumer segments. And they start to infuse the brand with values, with attributes, with associations that go beyond the product itself."
While brand equity can influence customers’ willingness to pay, it’s only when it affects their purchase and consumption behaviors that your firm can benefit.
If your brand has positive, strong brand equity, consumers may be less price-sensitive and willing to pay a premium. They may also be more loyal and willing to make repeat purchases or try new products bearing your brand’s name and less likely to be swayed by competitors.
Related: Listen to Professor Avery discuss how to build a winning brand portfolio on The Parlor Room podcast, or watch the episode on YouTube.
What’s the Difference Between Positive and Negative Brand Equity?
In short: If your brand has positive equity, your customers are likely willing to pay more for your product.
Positive brand equity examples from Creating Brand Value include:
- Nike: Nike has an enduring association with peak athletic performance, dedication, and inspiration.
- Apple: Apple is known for constant innovation, intuitive experience, and clean design.
- Lego: Lego is known to deliver a high-quality, creative play experience.
Negative brand equity occurs when your brand's reputation decreases in consumers’ minds. They may avoid your brand, even when its quality is on par with competitors.
That can be due to:
- Product recalls
- Poor customer service
- Inconsistent products
- Scandals involving business ethics, cultural insensitivity, and inauthentic branding
- Price increases without added value
- Environmental damage
- Associations with controversial figures
Beyond these issues, mishandling public relations can cause you to lose consumer confidence—potentially affecting your brand’s credibility and resulting in reduced loyalty and sales.
How to Build Brand Equity: A 5-Step Process
Brand awareness and knowledge form the foundation for consumer-brand relationships that develop engaged communities and create meaning in consumers’ lives.
Building brand equity can seem daunting, but systematizing your approach is the best way to achieve success. Here’s a five-step process for improving brand value.
1. Invest in Marketing
Brand equity directly results from your brand-building marketing efforts. It’s also influenced by consumers.
Begin with strategic design and brand positioning strategies to ensure you address the right audience and use appropriate imagery to communicate value. Logos and narratives are part of your brand’s story and vehicles for delivering meaning to consumers.
In a consumer-brand relationship, every touch point between your brand and the consumer is an investment in your brand and those who interact with it. That’s why marketing is a critical starting point—it affects everything from the customer experience to service and sales. Consumers can knowingly—or unknowingly—scrutinize all you use to market your brand, and they decide whether that experience is positive or negative.
The following marketing tactics can help you build brand equity as part of your marketing plan.
Common Marketing Investments:
- Price promotions
- Trade promotion
- Television, magazine, newspaper, radio, podcasting
- Influencer marketing
- Trade shows
- Branded retail stores
- White papers
- Direct mail
- Digital marketing (social, website, search engine marketing)
- Sponsorships
2. Educate Your Consumer
Consumer-based brand equity captures and quantifies consumers’ collective level of brand awareness and strength. Each time you invest in marketing, you deepen their understanding of and attachment to your brand.
Through brand awareness initiatives, consumers can receive, interpret, and personalize information and store it in their memories—enabling them to form perceptions and beliefs about your brand. Positive feelings toward your brand can create clear connections and attachments and a need to be associated with it.
Creating Brand Value illustrates this concept by considering the act of purchasing a T-shirt. If you buy a plain black T-shirt from Walmart, a retailer known for selling products at low prices, and another person buys one from Prada, a premium designer brand, the consumer buying the Prada shirt likely believes it's higher quality. They probably wouldn’t feel or perceive the same value or quality if they were to buy a similar shirt from Walmart. While they’re essentially the same product, the messaging and connection to the Prada brand are enough to warrant spending more money without purchase friction.
3. Develop and Communicate Customer Behaviors
Any brand-building effort aims to get consumers to purchase your product or service. While all brands hope to achieve high conversion rates based on consumer-based brand equity, that isn’t always the case. Strong brands drive trials and purchases with great customer loyalty and retention.
If your brand struggles with bottom-of-the-funnel conversion rates, you may need to focus more on encouraging consumers to co-create brand meaning. That can empower consumers to advocate via word of mouth to organically build brand perception and improve velocity through the purchase process.
Displaying purchases publicly helps shape consumers’ brand perceptions because it builds brand trust and equity with social proof and authenticity. Influencers, product experts, social media personalities, celebrities, and salespeople can also offer thoughts and opinions about your brand. As others help co-create your brand, you can develop a shared cultural meaning and private meaning for individual consumers.
Remember: Your brand is a meaning-based asset. For it to be powerful, its meaning must be inherently social.
4. Build Firm-Based Equity
As your brand becomes more popular, its equity strengthens. Stronger brand equity can cause people to consume at a higher rate—propelling growth, profitability, and stability. Once your brand reaches this stage, consumers are likely more willing to pay higher prices, driving firm revenue.
That increases your firm’s marketplace power while reducing variable costs. Higher sales volume supports scalability and can increase marketing efficiencies, allowing you to do more with less. Opportunities can continue to emerge, such as advantages in negotiations and distribution.
5. Increase Shareholder Value
Branding’s effects on shareholder value are vital to understanding how it influences growth. When cash flow becomes more stable and predictable, your company’s shareholder value increases. With a better flow of purchases and revenue, you get higher returns with lower risk.
“Brands create shareholder value because when a brand is strong, and when consumers continue to invest and purchase from that brand, it creates stability for the business,” Rothschild says in Creating Brand Value. “And the worst thing for a share and for a stock price is volatility.”
How to Measure Brand Equity: 3 Methods
Brand value is equity’s observable, measurable outcome on customers’ purchasing and consumption behaviors. It’s the financial benefits your company gets from developing positive, strong brand equity.
You can use several metrics to measure brand equity. Assessing brand awareness, brand relevance, and brand power can help you gauge brand equity over time.
1. Brand Awareness
How well does your target audience know your brand? Measuring brand knowledge can signal future intent to purchase. Your brand must first be in the consumer’s selection set.
You can measure unaided and aided brand awareness via:
- Consumer focus groups
- Consumer surveys
- Social media reviews and mentions
- Website search volume
2. Brand Relevance
Do consumers believe your brand provides unique value? Proving your brand’s value to your target market can build brand equity and, in turn, brand preference.
You can assess brand relevance using:
- Customer satisfaction surveys
- Net promotor scores
- Conjoint analyses that examine consumer decision-making processes and the value they place on your brand’s attributes
3. Brand Power
How strong is your brand’s equity in consumers’ minds after multiple interactions? Measuring your brand’s power can indicate its relative consumer demand. You can capture that data using surveys with questions evaluating consumers’ relative preferences for your brand.
Measuring brand equity can also help assess your brand’s health and potential to create value. But it’s important to understand that brand equity metrics measure consumers’ mindsets, attitudes, and intents rather than their behaviors. You can only create brand value if and when consumers act.
Take Your Brand Knowledge to the Next Level
Remember: Brand equity comprises consumers’ thoughts, feelings, and attitudes about your brand and can influence their willingness to pay for your products. Ensure you evaluate your brand’s metrics to assess its health and build strong, positive equity and value.
To dive deeper into brand equity, consider enrolling in Creating Brand Value. Beyond gaining insights from industry leaders through real-world case studies, you can join a vibrant global community of lifelong learners to receive and share advice and support.
Are you interested in deepening your brand value knowledge? Explore Creating Brand Value–one of our marketing courses—and download our interactive online learning success guide to discover online programs’ benefits and how to prepare for one.
