What Is Brand Equity?

Brand equity is the power and premium that a brand has over its competitors or generic brands that develops over time. It is a brand's tangible and intangible worth = the brand's entire market value.

Companies can build brand equity for their products by making them distinctive, easily recognizable, and superior in terms of quality and dependability.

Customers happily pay a high price for a company's products when it has favourable brand equity, even if they could buy the same thing from a competitor for less. Customers effectively pay a pricing premium to do business with a company they know and respect. Because the company with brand equity does not pay a higher cost than its competitors to create and sell the goods, the price difference goes to their profit. Because of the firm's brand equity, it may earn a higher profit on each transaction.

Importance of Brand Equity

Brand equity is significant since it helps one brand gain relevance and greater money when compared to the competition. Brand equity is a complex term that considers a variety of factors such as brand image, brand identity, brand awareness, brand loyalty, brand association, and so on. It is primarily subjective and qualitative, but it can be represented mathematically.

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

The image, which is formed in the customer's mind. Brand image is the most important parameter when it comes to creating brand equity.

2.?????Brand Identity

The image that the company is trying to form. Brand identity is created by the company to try to form a positive brand image, but it depends on how customers perceive it.

3.?????Brand Awareness

Awareness is what is the level of awareness about a brand on products and services. Awareness should be high for good brand equity.

4.?????Brand Loyalty

How loyal is a customer to the brand and will buy the products again even if options are there? High brand switching can lead to less brand equity.

5.?????Brand Association

Does the customer associate brand with a positive attribute or not? Sometimes association with something existing like an event or celebrity can contribute to brand equity.

6.?????Customer Perception

What is the overall perception and experience of the customer related to the brand?

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

Steps to Calculate & Measure Brand Equity

Brand equity is a subjective concept that is determined by customer and market perception. Measuring brand equity can be accomplished through both qualitative and quantitative research. Brand equity can be measured using three key 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.

Marketers can acquire all the aforementioned data through consumer research, in which customers can be given surveys or questionnaires to provide input. Qualitative feedback can be open-ended, and other elements might be weighted to assist in calculating overall brand equity. Developing brand equity is a long process that requires years of effort to build a specific brand image or perception in the minds of consumers.