Brand – Feb, 2024

Brand Equity and Brand Value

Brand equity and brand value are integral components that contribute significantly to a company’s success and longevity. These terms are often used interchangeably, but they encompass distinct aspects of a brand’s identity, perception and presence.

Brand equity refers to the intangible value a brand holds beyond its visible assets. It is a culmination of perceptions, emotions and associations that consumers attach to a particular brand. Brand equity is the premium that consumers are willing to pay for a product or service based on the brand name and the understanding of the brand.

There are five key components to brand equity.

Brand awareness: The degree to which a brand is recognised by consumers. Increased awareness leads to higher brand equity as consumers are more likely to choose a brand they are familiar with.

Brand image: The overall impression and perception of a brand in the minds of consumers. Positive brand image contributes to higher brand equity, fostering consumer trust and loyalty.

Brand association: The connections consumers make between a brand and specific attributes or values. Strong, positive associations enhance brand equity by creating a unique brand identity.

Perceived quality: Consumer judgments about a brand’s product or service quality. Higher perceived quality leads to increased brand equity and customer satisfaction.

Brand loyalty: The extent to which consumers consistently choose a particular brand over others. Brand loyalty contributes significantly to brand equity as it ensures a stable customer base.

Understanding brand value:

Brand value is a more quantitative measure that represents the financial worth of a brand. It takes into account the tangible assets of a brand such as market share, revenue, and tangible brand-related assets.

Key components of brand value:

Financial performance:

  1. Revenue and profit generated by the brand.
  2. A brand’s financial success is a crucial component of its overall value.

Market share:

  1. The portion of the market a brand captures.
  2. Higher market share often correlates with increased brand value.

Intellectual property:

  1. Trademarks, patents, and other proprietary assets.
  2. Protecting intellectual property contributes to brand value by securing a brand’s uniqueness.

Customer base:

  1. The number and loyalty of a brand’s customers.
  2. A large and loyal customer base positively impacts brand value.

Interconnected nature:

Brand equity and brand value are intertwined, each influencing and reinforcing the other. A strong brand equity often leads to increased brand value, as consumers are willing to pay a premium for a brand they trust and perceive positively. Simultaneously, a higher brand value provides resources and opportunities for a company to enhance its brand equity through marketing, innovation, and customer experience initiatives.

Building and sustaining brand equity and value:

Consistent branding: Maintain a cohesive brand image and messaging across all touchpoints to reinforce positive associations.

Quality and innovation: Continuously invest in product or service quality and innovation to enhance perceived brand value.

Customer engagement: Foster strong relationships with customers through effective communication, personalised experiences, and addressing feedback.

Market positioning: Clearly define and communicate the brand’s unique selling proposition to establish a distinct market position.

Brand protection: Safeguard intellectual property and actively address any issues that may tarnish the brand’s image.

Brand equity and brand value are pivotal elements that contribute to the success and sustainability of a business. While brand equity focuses on intangible aspects such as perception and emotions, brand value encompasses the tangible, financial aspects of a brand. Both are interconnected and a strategic approach to building and maintaining both can lead to a resilient and thriving brand in the competitive landscape of today’s business world. Companies that understand and prioritise the cultivation of positive brand equity and brand value are better positioned to withstand challenges and capitalise on opportunities in an ever-evolving market.

How to measure the value of a brand

Organisations we work with understand the value of a brand and the importance of brand equity. We also work with company directors conscious of their exit strategy. Our focus here is to build the value of the company divorced from considering more tangible assets, such as talent, premises, balance sheet, stock etc. The objective is to build strength, resilience and add value to the brand.

Brand value­­­­ can be described as the commercial value derived from the perceptions and attitudes of people towards it. Measuring brand equity is important for companies to understand the value of their brand and how it is perceived in the market. Also, how they can increase its value. Here are some helpful ways to judge brand equity:

What is brand awareness? This is a measure of how familiar consumers are with a brand. It is usually measured by surveys and market research, which ask consumers to name brands they recognise in a particular category.

What is brand association? This is a measure of what consumers associate with a brand. It is usually measured by surveys and market research, which ask consumers to describe the personality, values, and attributes they associate with a brand.

What is band loyalty? This is a measure of how likely consumers are to continue buying a brand. It is usually measured by surveys and market research, which ask consumers to rate their likelihood of buying a brand again in the future.

What is perceived quality? This is a measure of how consumers perceive the quality of a brand’s products or services. It is usually measured by surveys and market research, which ask consumers to rate the quality of a brand’s products or services compared to its competitors.

What is brand recognition? This is a measure of how easily consumers can identify a brand’s logo or other brand elements. It is usually measured by surveys and market research, which ask consumers to identify brand identities, logos or other brand elements.

What is brand differentiation? This is a measure of how unique a brand is compared to its competitors. It is usually measured by surveys and market research, which ask consumers to rate how different a brand is from its competitors.

By analysing these different metrics, organisations can get a better understanding of their brand equity and develop strategies to improve it.

Measuring the value and equity of a brand can be confusing as it heavily relies on an understanding of consumer psychology. It can be complicated and difficult to determine, though there are organisations who’s function it is to do just that.

Value, in its real sense, is ultimately how much people are prepared to pay for something. The most straight-forward way of determining brand value is asking that very question. That is, asking other businesses what they would be prepared to pay for the rights of that brand. Clearly a range of figures will emerge where the market value will be determined by the highest bidder.

An alternative reference might be asking the question, ‘what cost would be involved if that brand in question needed to be built from scratch.’

Posted by Jack Owen