What Is Brand Equity? Definition, Examples & Importance

What Is Brand Equity?

“Your brand is the single most important investment you can make in your business.” – Steve Forbes

Building a strong brand is so essential for any business. Your brand represents your company and is what customers think of when they hear your name. Developing high brand equity takes time and effort, but seeing your brand thrive is worth it.

Brand equity refers to the value a recognizable brand name adds to a product or service compared to an unknown brand. Customers who recognize and favor your brand are willing to pay a premium simply because it’s your product. It allows companies to earn higher profits from each sale.

There are several benefits to developing positive brand equity. It can help increase your market share as customers choose your brand first. The high brand value also enables companies to occasionally increase prices without losing sales. Strong brand equity leads to improved and more resilient sales that aren’t as impacted by market changes over time.

Naturally, key factors influence how much equity a brand has. Brand awareness speaks to how well-known your brand is. The brand image focuses on customers’ perceptions and feelings with your name. Perceived quality considers if customers view your products as high quality. Brand associations and brand loyalty look at how connected people feel to your brand through their experiences. We will explore each of these components next.

Suggested Read: What Is Branding? Definition, Process and Examples

Components of Brand Equity

Five key components make up a brand’s overall equity:

• Brand loyalty
• Brand awareness
• Perceived quality
• Brand associations, and 
• Brand experience. 

Let’s explore each one in-depth.

Brand loyalty is essential as it signifies customers returning for more, ensuring a consistent and dependable source of revenue. There are behavioral and cognitive dimensions to loyalty. Behavioral looks at past purchase patterns, while cognitive considers underlying favorable attitudes. Loyal customers are less likely to switch brands during changes.

Brand awareness examines whether customers recognize or recall the brand when considering its category. Recognition confirms prior exposure to the brand, while recall retrieves the brand from the category cue alone. High awareness means the brand comes to mind quickly and gets considered for purchases.

Read our fluff-free guide on what is brand reputation and why It matters.

Perceived quality matters because it’s the customer’s subjective view of the brand’s excellence versus alternatives. There’s an objective quality level, but perceived quality drives behavior more. It provides a reason to buy and allows premium pricing. High-perceived quality aids acceptance by retailers, too.

Brand associations are the links formed in our minds between the brand and specific attributes, benefits, or attitudes. They differentiate the brand, motivate buying preferences, and can even extend the brand into new areas. Attributes describe what the brand is and the benefits that owners get from it, while attitudes represent overall evaluations. Lastly, brand experience encompasses all customer interactions with the brand over time. Positive experiences leave strong, favorable impressions that bolster the other four equity components long-term. These five work to maximize a brand’s value and competitive power.

Suggested Read: What is Brand Recognition?

Examples of Companies That Have Successfully Built Strong Brand Equity

Here are some great examples of positive brand equity that will surely help inspire you.

Nike

Nike thrives due to strong brand associations that connect it to feelings like motivation and victory. Nike markets these positive connections through emotional TV ads and sponsorship of respected athletes. 

It also utilizes other equity aspects like loyalty, perceived quality, and trademarks – owning over 200 registered marks, including its iconic swoosh logo. This high equity allows Nike to lead the athletic footwear industry with a 39% global market share. Crafting marketing that evokes emotions or features role models can similarly improve brand perceptions for small businesses.

Apple

Apple is renowned for its devoted customer loyalty. Though shoppers increasingly buy online, many still wait long lines for new iPhone releases. This loyalty stems from Apple’s streamlined brand experience, delivering innovative, seamlessly integrated minimalist products into its ecosystem. Its clean design also enhances perceived quality above competitors. A unique customer experience distinguishing your offering can elevate brand value similarly.

Coca-Cola

Through decades of memorable slogans and iconic trademarks, Coca-Cola cultivated perceptions as the higher quality cola choice versus Pepsi, despite near-identical ingredients. Positive associations with happiness and refreshment built its equity. Even without product changes, strategic branding enhances perceived quality for small firms, just as Coca-Cola’s efforts elevated its products and services.

Toyota

From 2009 to 2011, Toyota endured a substantial recall crisis, but customer perceptions started improving before the company fully resolved the issues. By focusing on quality production and special sales valuing customers, Toyota regained its reputation for durable vehicles. While brand value declines from problems, consistent high performance in remediation and going forward allows damaged equity to recover, as Toyota demonstrated.

Starbucks

Starbucks has become one of the most influential global brands, largely thanks to its extensive loyalty program with over 21 million members. 

Ranked the fifth most admired company by Fortune magazine, Starbucks’ social responsibility pledges have cultivated high regard. Though competing against establishments like Dunkin Donuts, Costa Coffee, McDonald’s, and Tim Hortons, Starbucks remains the largest specialty coffee retailer and roaster with a presence in over 32 countries. 

Through consistent quality offerings and customer experiences across its vast store network, Starbucks has amassed immense brand equity, demonstrated by its ranking as the 125th largest company on the Fortune 500 list. A brand as ubiquitous as Starbucks shows that small details scale up to represent enormous value when delivered systematically over time.

Read our step-by-step guide on how to measure customer experience

How You Can Build Your Brand Equity Like These Brands

Here are some strategies to help you build brand equity:

Focus on Your Target Audience

The foundation of any strong brand is connection. Before increasing equity, you must understand how your target audience views your company. Listening to customers is key.

Start by monitoring online mentions and searches related to your brand. See where curiosity and interest currently lie. Popular social platforms today also provide valuable insights. Watch for engaged discussions about your products or services.

Another great option is hosting focus groups. Meeting face-to-face allows candid feedback on what resonates and what may need improving. You’ll gain perspective directly from your demographic. While in-person sessions take planning, the payoff in insights makes the investment worthwhile.

Live streaming is also a fun interactive method for connecting. Whether through social media or a dedicated site, broadcasts let you address questions in real time. Customers appreciate the personal touch. These types of engaging online experiences can raise awareness and positively shape perceptions.

Paying attention to what current and potential customers say now sets the stage for a stronger relationship. Their thoughts should always guide your brand strategy. After all, it’s their loyalty you aim to earn through quality offerings and service.

Enhance Your Brand Awareness

Consistency in branding is critical – your logo, colors, and imagery should always look the same so people immediately recognize you. Excellent customer service also spreads positive word of mouth like wildfire.

Share your company’s story to help connect on a personal level. Keep putting yourself out there through various marketing channels, too – your existing customers and new prospects need to see what you offer regularly.

Providing ongoing value through newsletters or social content shows people why you’re a trusted source. Keeping in touch regularly gradually cements brand familiarity.

Social media is a powerful awareness booster when used strategically. Posts showing your personality and expertise via visuals, video, and more go a long way.

Positive customer experiences are incredibly important – that’s how word-of-mouth referrals grow. Targeted campaigns reinforce your messaging for the right audience.

Building awareness takes time, but focusing first on solid brand fundamentals lays the groundwork for faster results. Remember that established brands like Coke succeeded by making strong, lasting impressions through memorable branding over decades of visibility.

Building Brand Loyalty Through Positive Experiences

A great product is just the start. Maintaining positive customer relationships is vital to long-term success. Research shows that companies focusing on continuously improving the customer experience see real results at the bottom line. By prioritizing positive interactions at every touchpoint, brands can transform casual buyers into lifelong advocates.

From the moment of discovery, customers evaluate what a company stands for. People judge quality, value, convenience, and whether one brand satisfies their needs better. Staying on the top of one’s mind means nothing if perceptions don’t align with reality. That’s why consistency across messaging, products, and service is paramount. Positive feelings like trust, satisfaction, and respect go a long way in sealing the deal.

Remember first seeing an iPad and realizing what it could do? For many, it became much more than a tablet – it was a multipurpose companion. Apple mastered seamlessly blending hardware, software, and content into a cohesive experience that simply delights users. The joy of discovery and exploration keeps customers coming back for more.

As the world’s largest online retailer, Amazon sets the bar in prioritizing the user. Features like free returns within reason and detailed product reviews create transparency and reassurance. It’s easy to feel heard when a service anticipates needs proactively. This attentiveness is why, for many, Amazon is the default for online shopping across categories.

The most successful brands build relationships by genuinely understanding customers and crafting tailored solutions. When people feel seen and assisted, loyalty follows naturally. Focus on enriching each interaction and finding new ways to make lives easier – that consistent effort is the recipe for lasting enthusiasm.

Grow Your Brand by Using Strategic Partnerships

Partnering with reputable brands is a savvy way to gain exposure and build trust. When done effectively, collaborations can boost awareness, drive new customers, and enhance the value proposition of both parties.

Doordash struck gold by teaming up with convenience store giant 7-Eleven. As the leader in its field, 7-Eleven attracted new customers to Doordash’s delivery platform without having to build out that capability internally. For Doordash, the partnership lent credibility and expanded its product catalog – a win for both.

There are many partnership models to explore. Co-developing products allow brands to enter new categories jointly. Co-sponsoring industry events is a relationship-building exercise that raises visibility. Co-marketing campaigns produce synergies through shared messaging.

The opportunities are endless when openness to collaboration exists. Strategic partners enhance rather than compete. Whether combining forces or exchanging expertise, joining forces with reputable peers opens doors that solitary promotion cannot. In an increasingly crowded marketplace, alliances present a low-risk growth strategy with rewards for all.

Conclusion

We are seeing brand equity take on new dimensions in this era of constant connectivity. Where advertising messages used to be one-way broadcasts, brands now must actively listen and engage to understand how they are perceived online. Those who view brand equity solely through traditional metrics may struggle to keep pace. 

Businesses need new approaches to incorporating social media conversations into their definition of the brand experience to stay relevant and build lasting connections with customers. 

Those able to flexibly redefine brand equity and authentically participate in online discussions will find growing opportunities to strengthen loyalty and gain insights to inform innovative new strategies. As social brand equity evolves at hyper-speed, adaptation is critical to outlasting competitors in today’s constantly reshaping marketplace.