Brand Equity

What is brand equity?

Brand equity is the value a company gains from a consumer’s positive perception of their brand compared to a generic equivalent. Consumers are known to be willing to pay more for a product from a brand they perceive as being trustworthy and reliable, despite the fact they could purchase a similar product from a generic brand for lower cost. And a business that can charge more for a product than their generic counterparts (without additional production costs), earns a higher profit margin. This margin contributes to brand equity.  

 

How brand equity develops

Brand equity is developed with every positive experience a consumer has with your brand. It starts with a consumer’s first exposure to the brand and continues to increase as the customer journey continues.

For example:

A prospective customer is first introduced to Brand X through some form of advertising or marketing. They then familiarize themselves with Brand X by researching it online, seeing other advertising, reading reviews, or hearing about it from existing customers.

The true test of Brand X comes when the prospective customer commits to trying the product. They may initiate a free trial offer or purchase a product. If they have a positive experience, they are likely to continue with Brand X and may even try other its products/services.

Brand loyalty occurs when the customer chooses Brand X over similar competitors and tells others about the positive experiences they’ve had with Brand X.

Over the course of this process, Brand X has:

  1. Acquired a new customer
  2. Satisfied the customer
  3. Retained the customer
  4. Earned word of mouth referrals

Because of their newfound loyalty and trust in Brand X, this customer is now apt to be willing to pay more for a product produced by them. Brand X has now earned brand equity.

It’s important to note that brand equity can increase or d