Building a successful business requires the interplay of several critical elements like planning, financial management, marketing, customer service, sales and estimation among others. However, many businesses forget the impact that brand equity has on organizational success and your bottom line. So, what exactly is (or isn’t) brand equity?

 

In the 1990s, branding guru David Aaker coined brand equity as “A set of assets and liabilities linked to a brand, its name and symbol, that adds to or subtracts from the value provided by a product or service…”. And this is a definition that still holds up currently.

Brand equity covers several aspects such as:

  • Client perception and how that perception affects your organization (from interactions to purchase and reviews)
  • Your organizational sales and revenue
  • Your brand awareness in the market at large

However, due to its complex terminology, there is confusion sometimes on what exactly brand equity is and isn’t. For example, brand equity is not the same as:

  • Market equity, which is the actual value of your assets
  • Shopping experiences, which is only one aspect of your brand
  • Business outcomes, and the means to accomplish said outcomes

In other words, brand equity is the value of the brand you have created. Take the case of reputed conglomerates that sell handbags at nearly 20 times the cost of manufacturing them. Oliver Cabell, a travel and leather goods manufacturer makes bags that cost approximately $80 to manufacture, but which are sold at a retail price of a whopping $970. All because the brand name dictates the product price and not the product itself. Now, that’s powerful brand equity for you!

The Importance of Investing in Brand Equity

Brand equity can help in generating tremendous value for your organization. While there are many benefits to investing in your brand equity, some of them are listed below:

  • Customer Loyalty and Retention

Customer purchase patterns are deeply linked to how they feel about brands. A strong, positive brand with a proven track record can help in driving loyalty and retention in customers. Enhanced loyalty minimizes churn, which increases market share, which further establishes you as a brand with higher equity. This in turn leads to stronger and deeper customer relationships – a constant, positive cycle.

Premium Pricing on Products

The stronger the brand equity, the higher the price that your product can demand. People are more than willing to invest tens of thousands of dollars on Cartier watches, Louis Vuitton bags and other luxury brands because those companies are great at enhancing customer perception, which reflects on purchases and product reviews.

Larger Margins

A strong brand equity helps achieve larger margins, primarily because the customer becomes less price conscious with a reputed brand. This results in more cost-effective marketing due to increased awareness and loyalty to your brand. Simultaneously, this also strengthens your brand’s sales and competitive positioning due to the positive customer perception you’re building. All this leads to higher margins.

Brand Extensions

As your customers already know you as a credible and reputed brand in the market, it becomes relatively easier to branch out into related lines of business as well. With strong brand equity, you can stave off price battles with competitors and not be burdened with the disadvantage of being a new player.

Ultimately, how your brand is perceived today will affect how and who you’ll be doing business with tomorrow. By measuring it, you’ll be able to build deeper relationships with existing customers, connect with new ones and contribute to a healthy bottom line in turn. This will help you create lasting value for your business.

With our cutting-edge behavioral analytics and big data technology, we help you measure and significantly improve brand equity with OSG’s Dynamo. With more than 10 years of experience in understanding human behavior for Fortune500 clients, we are uniquely positioned to interpret and quantify your brand equity. Our behavioral science experts can incorporate live data feeds and utilize machine learning to produce models and live dashboards to accurately measure brand equity. Write to us at website@osganalytics.com to find out what Illuminate can do for your business.

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