What Is Brand Equity?
Did you ever think of brands as valuable assets that determine the financial strength of a business? If you are a brand manager, your charge is to produce value for the company and its investors. You should improve the brand’s value by developing and implementing strategies that promote the brand and increase brand equity.
Brand equity makes one brand more preferable than another competing brand. While opinions differ on the factors that influence brand equity, four commonly mentioned factors are innovation, exceptional customer experience, transparent values and strong market leadership. Companies with high brand equity include Apple, Microsoft and Google.
Businesses with strong brands consistently outperform the markets where they do business. As a company’s brand equity improves, it generally commands higher prices, profitability or market share relative to competitive products.
Why Is Brand Equity Important?
Brand equity is important to marketers for 4 primary reasons.
- Brand equity can be either positive or negative.
While low brand equity is a threat for a business, high brand equity is an asset that provides obvious benefits.
- Brand Equity improves competitive positioning.
In mature markets, a significant degree of parity characterizes competing products. Most competitors offer similar warrantees, service, innovation and pricing. As one company markets a new feature, others quickly follow. Brands with high brand equity benefit from a differentiating quality that rests on soft features. Consequently, loyal brand customers are more likely to base a purchase decision on soft issues, more emotional choices rather than on rational comparisons.
- Brand Equity creates potential for successful product line additions.
As brand equity increases, consumers become increasingly attached and loyal. Businesses recognize that they can charge higher prices, even as product consumption increases. This strong loyalty creates opportunities for businesses to develop additional products to sell to these customers.
- Brand Equity promotes powerful word-of-mouth advertising
Because more than 40% of the world’s population is connected to the Internet, brands are becoming increasingly global, multilingual and multicultural. The growing number of Internet users means that more online consumers like and follow brands and tell others about their experiences. These powerful word-of-mouth testimonials contribute to perpetuating brand equity worldwide.
Developing Brand Strategies
All brand strategies should focus on maximizing brand equity without weakening long-term profitability or tarnishing the reputation of the brand. The brand strategy should also align with the overall marketing strategy. Brand managers have an unlimited number of choices when they determine how they can best improve brand equity; however, strategies should focus in these 8 essential factors.
- Brand Strategy
The strength of the brand strategy drives the success of each of the remaining factors. Every brand has a life cycle that includes an introduction, growth, maturity and decline stage. A successful brand strategy can influence the duration of each stage. For the brand’s strategy to be successful, it requires an exceptional communications plan that includes employees, customers, suppliers, retailers and other stakeholders.
Strong brand equity demands a strong communication plan. In today’s global marketplace, communication must be increasingly multilingual, culturally sensitive, online and mobile. Partnering with an experienced translation services company is essential for communication success in foreign markets. Whether brand decisions are made in small business or a global conglomerate, communication skills are needed to locate investors, promote products, and direct teams. Strong communication is so critical in branding that it influences each of the remaining factors.
Regardless of whether a brand offers the greatest befits, consumers can’t buy it if they don’t know about it. One of the first places consumers turn for product information is the Internet. Therefore, a strong multilingual content marketing program is an essential component for building brand awareness.
Many factors can influence a company’s reputation. It’s critical that brands monitor what people are saying online. When a customer has a negative experience, the situation should be addressed quickly and professionally. Since reputation can be destroyed online, in person or in print, someone who is a skilled communicator must respond in person or online. Caution: A rebuttal that is communicated poorly can inflame a situation and damage a brand’s reputation.
- Legal and ethical decision-making
Brands are expected to maximize their positive impact while minimizing their negative impact on society. Brands must also adhere to the laws and regulations of the municipalities in which they do business. Brands that invest time in ascertaining the legal and ethical challenges that pertain to their business and how decisions regarding them affect stakeholders are most likely to avoid legal and ethical problems.
Many branding decisions today are so complex that success depends on working with people from a variety of fields. Because one individual cannot possibly have adequate knowledge and time to plan, launch, control and monitor all aspects of branding successfully, branding becomes a team enterprise. Successful branding demands collaboration and teamwork that crosses trade specialties and functional areas within and outside a business. To achieve success, everyone involved must demonstrate collaboration and strong communication skills. Thus branding necessarily includes engineers, marketers, sales representatives, compliance officials and external stakeholders.
A brand must offer value to both intermediaries and consumers of brands. Distributors and retailers of brands need brands that offer distinct features that are not available in other products and that will drive demand. Such features promote premium pricing and better margins that enable businesses to grow. Consumers also need a simple way to understand how one product is better than another and why that product’s pricing and benefits represent good value.
- Emotional Capital
Emotional capital refers to the strength of the bond that ties a consumer to a brand. A strong bond will keep a consumer tied to a brand through adversity, competitive challenges and other market pressures. These strong bonds are based on strong levels of trust, unwavering loyalty and great experiences. This friendship that a consumer builds with a brand becomes a subject of conversation.