How Does Brand Equity Create Financial Value?

What is your brand worth and how do your customers perceive you? Is your brand seen as generic and cheap or premium and luxurious? How does brand equity fit into this and what does it mean?

Brand equity is the value and importance a brand is deemed to have in the eyes of consumers. It is the reason why Apple is able to price its range of sleek and easy-to-use products at a premium and have loyal customers gladly fork out the money for an iPhone. It’s why drivers aspire to own a BMW, although a Toyota is a fraction of the price. Or that many save up to buy Louis Vuitton handbags, although one from Mango might be more affordable.

Why is brand equity important?

Brand equity determines what your brand is worth, how it compares to other brands carrying the same type of product and how widely recognised it is. If your brand has high brand equity, it means it has a high perceived value, is seen as more premium and is strongly associated with positive attributes.

Consumers immediately trust that the products this brand puts out are of high quality. The brand name speaks for itself. When a brand reaches this height of esteem and an iconic status, you can place your products in a higher price category without alienating consumers. When high product prices are justified – this translates to higher profit margins for your company. Branding is also a cost-effective, long-term strategy, as less is spent on marketing campaigns to generate brand awareness.

 What is the difference between brand equity and brand value?

Both brand equity and brand value provide a glimpse into how well a company and its products are doing amongst its target audiences. However, there is a slight difference between brand equity and brand value.

Brand equity is determined by brand visibility, brand associations and brand loyalty. Brand value, however, is what a brand is worth financially. It is how much other companies would pay to buy a brand over. While brand equity is an intangible aspect of a brand, a brand’s value can be immediately ascertained by taking a quick look at what it is worth in the market. A brand that has high brand value may not necessarily have high brand equity.

How can you increase your brand equity?

Building brand equity takes years, if not decades. It requires consistently putting out products and marketing collateral that build a favourable impression with target audiences. Apple consistently delivers on its brand promise to, “Think different”, offering customers products that push the boundaries of technology and revolutionise the way people carry out daily tasks. This makes Apple’s perceived value amongst its consumers high.

Resorting to cheap promotional tactics to make fast sales and a quick buck could dilute a brand’s image and ultimately hurt brand equity. Instead, by creating quality products, increasing brand awareness and one can slowly garner brand equity over time. Quality products and a great customer experience speak for themselves and can result in increased brand loyalty and hence – brand equity. 

Investing in brand strategy

Understanding what branding is and how it helps with brand equity is critical in building a strong brand. In order to build a cohesive brand to increase brand equity, developing a sound brand strategy is key. The first step of the process involves primary and secondary market research to fully understand target audiences and the competitor landscape. In this way, you can offer products and a brand that is distinct from what’s already out there.

Brand equity also hinges on a product’s ability to deliver on its brand promise. When a consumer has a positive brand customer experience, your brand has delivered on its brand promise. This increases trust amongst its target audience, raising its profile – increasing  its worth.

Brand marketing agency based in Singapore, BDSA, develops brands in a 3-step process.

Increase brand equity and elevate your brand’s status with BDSA

Creating a reputable brand is a long, deliberate process. A thorough branding process ensures your brand’s products align with its brand promise – allowing your brand to eventually have high brand equity. BDSA offers brand consulting services that simplifies the process and takes you a step closer to having a brand that has acquired a strong reputation amongst loyal brand followers. SME marketing grants eases the costs of such services. We make the process of applying for such grants hassle-free – so you can start creating a remarkable brand today.

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