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What is brand Equity?

brand equity

Brand Equity is the value of the brand in the perception of the customers. It is related to the experiences people have of the brand. If a business has a positive image of a brand, the brand has positive brand equity.

 Every brand entices to create a positive image of the brand for the consumers to experience the best. Campaigns and awareness techniques are used to remind people of the exceptional quality and promising services the business will continue to offer. This would further lead to brand loyalty, forcing the customers to purchase from the brand again and again. Offering incentives and valuable customer service will keep the customers focused and intact on your products and services. 

Brand awareness and brand experience are the most important components of brand equity. It is an intangible asset that a business has. Let’s discuss the two components: 

  •  It is all about how people know your brand. Are your customers able to identify your brand? Is your marketing strong enough for the audience to be aware of your brand? These are important questions you must consider while marketing your brand.

    Brand awareness plays a pivotal role in creating positive brand equity. Your advertisements, messages, and marketing tactics must be cohesive so that your brand is easily identifiable.

     Is your brand seen as a sustainable one, a budget-friendly one, or a family-friendly one? All this depends on how your brand awareness has been done and what the customers perceive  about the brand.

  •  It is the way things have gone when you first encounter a new product. It is the latter you decide. The experience is about how well you liked the product. Did the product work the way you expected? Was the service satisfying? If all these areas are covered and you like the product with its services, you had a great brand experience. It is important to have a positive meeting between the representatives and the customer that develops brand loyalty of the customers for an exceptionally satisfying brand experience. 

Why is brand equity important?

Brand Equity is very important as it has a direct relation with the Return On Investment (ROI). If a business has positive brand equity, the business tends to earn more than its competitors. These businesses have the leverage to earn more while spending less. Once the brand equity is established, the business can charge high premium prices and the customers will pay the price as they have a strong trust established with the brand. 


"Strategic Brand Development: Fostering Growth and Building Brand Equity"

Moreover, growth is a strategy everyone is planning for. Growing up means introducing new products in the same industry, or getting engaged with a new industry. People are already aware of the business and will buy the newly launched products easily. However, a new business with no brand equity will face difficulty to sell its products. Customers now are very brand conscious and 90% of them rely on brands they have an experience with. 

If you want higher profit margins with a large customer base; brand equity is vital. Invest your money in marketing the business correctly which will asses you in developing positive brand equity. 

How brand equity impacts Return On Investment?

  1. Brand Equity can impact positively several different things. Let’s see how it can have an impact on revenues: 

• Increases order value per customer

If a business has developed positive brand equity, the customers are more likely to pay for their products. They may have the same cost of production as the competitors; but, they will enjoy high-profit margins. E.g: designer clothes are priced high than local brands. Customers hold more value for the designer ones and consider them precious. 

• Reduces Ad spending by improving reputation

If your brand has a good reputation you will need to spend a lower amount on advertisements. People are aware of your products and will buy from you as they have developed a relationship of trust. 



• Increased Sales

Similarly, if you have strong brand equity you will have increased sales with high-profit margins. You have brand awareness, brand loyalty, and intact customers; what can stop you from increasing your sales? 

You may be famous for selling the cheapest goods and services, being efficient, long-lasting, premium, or any USP that has attracted your audience the most. Your customer service matters the most to captivate the attention of your audience. Competition here does not matter to your sales, s the brand equity has been developed in the roots. 

How to measure brand equity in financial terms?

Brand equity is a term that is hard to measure in financial terms. To give it a financial value, it can be measured through the: 

• Company Value:

While looking for the company value, you can consider the firm as an asset. Count on all the tangible assets and subtract them from the overall value of the company. The leftover is your brand equity. 

• Market share:

Market share is the total share of the company in the market. The higher the market share, the more the brand equity. 

• Profit Margins:

Profit margins are the easiest way to know your brand equity. If you have positive brand equity, it means that you have customer loyalty. Your loyal customers will purchase from you again and again which would lead to higher profit margins for your organization. Moreover, you are a known, trusted brand that people are aware of. Customers tend to buy from brands they trust!

• Price sensitivity:

Price sensitivity is about how long your customers stay with you if you are increasing the prices. It is like how much can you increase the price until your customers jump to your competitors. 

• Purchasing Frequency

How frequently are your customers purchasing your products? The frequency shows how fast the customers come back to you, or are they switching to other brands? 


Brand equity is the foremost important thing for every business organization. Large investments should be made to establish brand equity by spreading awareness about the brand. Once you have established brand equity, you have the opportunity to sell products at your prices. Be careful, produce goods and services that the consumers love, and customize them according to the perception of your customers. Create a relationship of trust that is not easy to break. 

Your customers are an asset! Love them to love you. 



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