Fundamentals of Brand Equity

In this post, we explore the fundamentals of brand equity, which is the value and power of the brand that determines its worth.

That value is determined by the collective consumers’ perception of, expectations of, and experiences with the brand.

Building brand equity is a long-term strategy that can generate high returns on investment if done right. Some ways brand equity can be measured is using metrics such as:

  • The price premium that the brand charges over other brands for the same category of product.
  • The additional volume of sales generated by the brand as compared to other brands in the same category.
  • The popularity or positive image of the brand among its target customers. This can be measured through surveys or the number of users/ fans/ followers on social media platforms.
  • The share prices of the company that owns the brand if it is a publicly listed company.

The fundamentals of brand equity include the following elements:

Fundamentals of Brand Equity

AWARENESS

Building brand equity may be positioned at the final stage of the customer journey as it takes place post-purchase. However, the seeds of branding begin right at the top of the funnel.

Awareness is the first stage of the customer journey and means putting the brand in front of target customers. Customers learn of the existence of the brand and what category the brand is in, and at times, what the brand stands for.

Building awareness involves making the brand visible to the relevant target audience through the second aspect of marketing in the Marketing Inverted PyramidTM – ‘communication’.  Communication utilizes all available marketing methods, including both traditional and digital marketing channels to create awareness for the brand.

BRAND ASSOCIATIONS

Anything that is connected to the customer’s memory about the brand is an association. Customers form associations based on quality perceptions, their interactions with employees and the organization, advertisements and promotions, price points, product categories that the brand is in, experience in retail stores, publicity in various media, celebrity associations and from word of mouth marketing.

Positive brand associations can help the company to leverage the brand, create strong barriers to entry for competitors, and differentiate itself from the competition.

Nike’s brand equity is brand association. While their core associations include innovative technology, high quality/stylish products, and the celebration of sports and maximum performance, they also associate their brand with famous sports celebrities, typically top athletes in their field, with similar values. Probably, the most famous example of brand association is the on-going collaboration between Nike and Michael Jordan. The association succeeded in personifying Nike as a superior, successful and amazing top-performing brand.

PERCEIVED QUALITY

Perceived quality is a powerful form of brand association. However, it is singled out due to its strong influence on the perception of the overall brand.

Quality is one of the main reasons for consumer preference for a brand in any product category. Better quality products can command a higher price and create positive impressions of the brand at all levels.

Toyota built its brand on a form of quality, producing reliable cars. I will never forget the TV ad that Toyota ran more than a decade ago. Two guys are driving down a countryside road in a truck when they see a beautiful lady with model-like features with a broken-down car.

They slow down to help. Suddenly, the driver accelerates and speeds off, claiming it is a trap. He asked his partner “Have you ever seen a broken-down Toyota? The scene ends with the beautiful lady ripping off a mask, Mission Impossible-style, to reveal a male evil villain.

It was a great ad that highlighted Toyota’s brand equity of being reliable. And it only worked because of said brand equity, all wrapped in a story with a timely pop culture reference (at that time. Although Tom Cruise is still making Mission Impossible movies to this day).

BRAND LOYALTY

A customer is brand loyal when she purchases one brand from among a set of alternatives consistently over some time.

Higher loyalty levels mean more returning customers that skip the ‘awareness’ and, at times, the ‘consideration’ stages of the customer journey. This means the cost per acquisition is reduced, and money saved can be reinvested to attract new customers or brand-building efforts.

J C Sum

J C Sum is a certified management consultant (TR 43:2015), an American Marketing Association Professional Certified Marketer (PCM®) in marketing management as well as a certified digital marketing strategist (SSG-WSQ accredited) with 11 years of experience specializing in search engine optimization, content marketing and analytics. He is the author of "Evolve, Adapt or Collapse" and has been featured on The Straits Times, Business Times, Channel News Asia, The Edge Singapore, CNA938 and Money FM 89.3.

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