Importance of Brand Equity
What is brand equity and why is it an important component for businesses? Brand equity plays a vital role in distinguishing a business’ identity. It defines the value that your products give to your consumers, and in the grand scheme of things, brand equity is how well the market responds toward your products. The importance of having outstanding branding can fare well on your return on investments (ROI).
When faced with various competitors such as larger players in the game, generic brands, and start-ups, having a brand that is well-perceived by the market will give you an advantage in terms of pricing and market share. This must all be followed by product quality, sales output, after-sales support, and efficient operations. Defining brand equity in terms of application, when your business establishes itself and acquires large brand equity, then you will have earned the trust of your consumers, garnered the reputation of your company and its products, and provide you with the allowance to test, research, and produce new products.
Businesses that have established their brand equity generally have a great portion of the market share. With your products being preferred by a large group in the market, you will be able to increase your pricing and generate higher revenue. Your ROI will reap the benefits of your brand equity. When your products are pitted against generic brands, your consumers will be willing to pay a premium for what you offer. They recognize the value that you sell and the quality they deserve. When you have brand equity, your consumers will believe in your company and its products.
Gradually increasing your pricing will most likely not impact your products negatively. That is one of the greatest things about having good branding. In the long-term, you will see an improvement in your financials and with the increasing prices from suppliers, it will be easier for you to adjust to these price increases to produce your products.
Perception of your brand is an important component of brand equity. When you look at the most popular companies today and you mention any of their competitor products, you will most likely hear someone's reason as to why the popular brand’s product is better. Even if your brand is more expensive. For example, you own a pet supply business and you increase the price of your pet food by 10%, while generic brands’ pet food prices remain the same, your consumers will still purchase your products. Good brand reputation reflects the value and quality you offer to the market.
Being a top player in the game due to brand equity will result in a chain effect in terms of customer acquisition. Your buyers will have a higher chance to refer your brand or products to others. Word of mouth is one of the most effective ways of marketing and advertising. It serves as a product review and promotion on its own. Spreading your brand awareness with a network effect will lead to exponential recognition.
Recalibration of Ad Budget
Your marketing efforts and ad spend can be reduced once you have already established your brand. Defining brand equity and expounding its effects, having a recognized and reputable brand will increase your success over time. Being known in the market can allow you to reduce marketing costs. You will not have to put in as much effort as you used to. Whether your marketing strategy involves passive or active marketing, you can allocate more funds to overhead costs or elsewhere to boost operations.
Opting for digital advertising can be an option that you may take as well. These usually cost less compared to commercial advertising. Studying ways on how to build brand equity to lower marketing costs in the future is a key factor in improving your business’ operations. Understanding brand equity definition and its effects on your business will be advantageous for the long-term.
Developing Brand Equity
How to build brand equity? This is a question that many start-ups and small businesses tend to ask when they are looking to expand their reach and tackle strategies to boost their brand awareness. Here are some basic frameworks and ways to develop your brand equity. It will involve understanding your market, identifying the gaps, and analyzing your competitors and the threats of new entrants. All of which will guide you in defining brand equity for your business.
Market research is one of the things that you do when you start a business. This process will guide you in determining your product or service’s viability. But this is something that should be continuous as your market will evolve. How to build brand equity within an ever-changing marketplace will start with your market research. Your product will need to have value for your target market. It must be a solution to a problem that your potential consumers are currently facing.
Conducting market research can be done in a variety of ways. Face-to-face interviews, online research, surveys, and focus group discussions to name a few. The information that you will gather from your market research can paint a clearer picture as to how you should position yourself in the market. It will also give you insight on how to approach your product development, especially if you have larger competitors who have established their brand equity.
Once you have your market research on-going, you can proceed to analyze the gap. When it comes to gap analysis you must have a firm understanding of brand equity definition. With that knowledge, you should be able to pinpoint the gap you must fill in. To define what gap analysis is; it is an examination and assessment of your current performance to identify the differences between your current state of business and where you'd like to be. Meaning you must look at all aspects of the business particularly brand equity.
By now you should be able to tell what your market share is in terms of each product you have in your portfolio as well as how the market reacts to it. At the end of the day, what you don’t have or where you are not is what you would want to fill in.
Filling the gap is not as easy as plastering every billboard with your brand or even turning around your content to satisfy the needs of consumers. Sometimes it requires you to step back and assess how you can work on the things that you already have. Defining brand equity is one of the few things you must do to determine what you need to do to boost product awareness.
Of course, this stage of brand equity development is done right after you get a hold of the results in market research as well as the gap analysis. If you skip those stages or precede one before the other in the wrong sequences, you will find yourself stuck in a loophole not knowing what to do next.
On a side note, boosting awareness is the job of your marketing team, you must be able to plan and execute campaigns seamlessly to send the right message to the consumers.
How to Quantify Brand Equity
Whether you are just starting to map things out, or you’ve been working on building your brand for a while already, measuring your progress lets you determine the strength of your brand in the market and how it has developed over time. This provides you a great advantage in brand awareness as well as saving resources.
Consider Preference and Knowledge Metrics
Put simply, knowledge metrics measure the popularity of your brand amongst your consumers. Ask yourself, “What is brand equity?”, then you will know how to go on about measuring preference and knowledge metrics because that should merely tell you what needs to render results.
Knowledge metrics assess the consumer’s awareness of and association with your brand or products throughout various stages of recognition and recall.
Compared to knowledge metrics, preference metrics are a bit easier to nail down. Preference metrics do deal with how your customers perceive or see your brand. These metrics are measured objectively concerning your company’s position within your industry. When looking at preference metrics, you’ll want to consider the following factors:
- Brand relevance
- Emotional connection
Review Your Value through Financial Metrics
Defining brand equity also means reviewing your financials. Financial metrics surrounding brand equity are directly connected to your sales performance. If these indicators related to the financial value of your brand are moving upwards, your revenue is more likely to be going in the same direction. Here are some ways to measure brand equity through related financial aspects:
- Price premium over the other brands considered competition
- Physical and online store sales
- The average value of each transaction
- Customer lifetime value or retention
- Rate of sustained growth
Defining brand equity does not always mean to go over and beyond what your product offers. But what your product is now. At this stage of answering “how to measure brand equity?”, you must already have enough knowledge on the product you are trying to build a foundation for. This means what is brand equity to you should be the core of planning brand equity development. If you are looking to start building your digital presence, click here to learn more about Strikingly and how we can help you design a website that will fulfill your branding.