Finding It Difficult To Write A Paper On Brand Equity?

Brand Equity 

"Your brand is the single most important investment you can make in your business." - Steve Forbes

A brand is something that highlights the image of your company. It conveys the goals, mission and vision of your company to your target audience. The brand can make all the difference between a good reputation and a bad reputation.

Brand equity is crucial to any business since it maintains a relationship between you and your target audience. It increases the value of your brand in the market share and increases the valuation in the market.

Before discussing the importance of brand equity, let us understand what brand equity is.

What Is Brand Equity?

The total value of your brand as a separate asset is considered as brand equity. It is the combination of liabilities and assets attached to your brand name and symbol. Thus, it either makes or breaks its bond with the customers depending on how you spread brand awareness.

You can also consider it as the way your customers see, act and feel towards the brand. The effect of brand equity is also visible in the financial books such as demand, market share, profitability, and prices. Take a look at this example.

Say brand X produces shoes and has a renowned reputation among its target customers. It has earned the trust of all the customers for a long period. Now, X decides to produce soup too. But, owing to its high popularity, X decides to keep the category of the new product under the same brand instead of inventing a new brand. Thus, X can expand its product line easily because of the positive association that customers already have with the brand.

In simpler words, brand equity describes the value of a brand. It is determined by consumer experiences and perception with the brand as shown in the example.

How Brand Equity Calculated? 

It is important to calculate the equity of your brand to know the worth of the assets you are protecting, leveraging and building. This way, you can understand your brand’s possible sales price.

Determining the economic value of the premium market position of your brand

Often when businesses get ready to sell their brands, they start calculating the actual economic advantage of the brand. These are the two indicators that would help you assess the value with accuracy.

• Premium Pricing: 

  This factor determines the extra amount that your customers are willing to pay for the product of your brand instead of purchasing it from some other less-popular brand. Multiply the difference to your sales volume to deduce the economic value of your premium market position.

• Price elasticity: 

  Favorable price elasticity is the condition in which your customers agree to pay for your branded product even after you have increased its prices. The condition usually forms due to high brand value and ultimately leads to premium pricing.

Do you want to know what the premium pricing of your brand is? Here is a simple formula along with examples to guide you through the process of calculating your premium pricing position.

1. Find out the difference between the offerings from lesser-known brands and your brand 

   Example: Say a bottled water product sells for $2.29. The same product from lesser-known brands sells for $1.99. The premium price of the branded water product is $0.30.

2. Multiply this difference in price by the number of units sold 

   Example: Say the bottled water product sells almost 50, 000 bottles per year. Its annual price premium is $15, 000 (50, 000*0.30)

3. Adjust the result to affect the brand’s performance in the future 

   This step will ensure that your customers will behave in the same manner even in the future. They can secure their trust in you if you keep the brand’s current economic reality transferrable to new owners. The brand’s momentum will also continue at its own pace. 

   Example: Say the owner of the water bottled product decides to sell the brand. In that case, you can purchase the brand at quite a competitive rate. 

   There are several factors that determine whether the premium pricing value should go upward or downward. Some of the factors include:

   • Actions of the competitor’s
   • Market growth
   • Retraction trends
   • Other market realities

Whichever method you choose to calculate the premium price, just remember that the value you arrive at is the valuation starting point and not the finishing line.

Deducing The Cost Of Establishing Or Replacing Your Brand

This is the most popular step to calculate your brand’s equity. You can determine the worth of your brand in case you are planning to create your brand or other organizations are planning to build your brand from scratch. You need to take the following factors into account to execute this step.

• The cost of creating your brand identity
• Development of name and registration
• Trademarking and logo development
• Establishment of online presence and domain name registration
• Development of brand identifying elements that include widely and uniquely accepted color scheme or a musical signature

The cost to earn your current level of market awareness

• Advertising
• Promotion
• Brand publicity
• Web presence

The cost to retain your current customer base

• Promotions
• Customer acquisition
• Lead generation
• Relationship development

Apart from these techniques, you can also implement loyalty programs to develop the level of customer retention and passion. This factor should contribute to your brand’s growth, sales, positive reviews and repeat purchases.

Difference between Positive and Negative Brand Equity

The two kinds of brand equity are positive and negative. The difference may occur due to wrong strategies or irrelevant branding techniques. Whether you are an entrepreneur or a Marketing student, the following difference is something you shouldn’t avoid.

Positive Brand Equity

As the name suggests, ‘positive brand equity’ suggests that your customers trust the brand. They have a good opinion of your brand. In the case of positive brand equity, customers trust the brand completely. They believe in the services you provide and prefer to choose you over your competitors. Apple is the best example of positive brand equity.

After all, people wait for long hours only to lay their hands on new iPhones launched in the market. The unbelievably high rate of sales growth proves that the iPhone’s popularity is determined by the quality and fresh design. The global value of the iPhone is amazingly high because consumers perceive it as something not only valuable but also worth having.

Negative brand equity

Negative brand equity, on the other hand, occurs due to a tarnished reputation. In this case, your target customers do not trust your product enough to invest money or time in.

The best example of negative brand equity is Volkswagen. The shares of Volkswagen reduced considerably the moment they admitted false emissions tests.

Here’s How Branding and Advertising add Value to a Brand

A brand is more than just a logo. It is probably the primary reason that your business has a rapid sales growth. Strategic branding and advertisements not only sell your products but also add value to your lives. Check out how branding and advertisement add value to your business:

• Price: A well-reputed brand has the power to influence the market price of its products. This is possible only if your brand has a good reputation with its customers. Say you sell coffee at a local level at quite a cheap rate. Most of your potential customers would rely on you rather than other costly brands such as Starbucks.

• Awareness: This is the greatest impact of strategic branding. Without proper branding, your brand doesn’t even exist in the market. Your potential customers do not even think about connecting with you for your products or services. It is impossible to imagine sales growth without making your customers aware of your services.

• Engagement: When your brand is pretty popular among your target audience, it becomes easier to engage with your target audience. The more positive interaction you have with your target audience, the more likely you are to sell more often and at high prices. 

• Consistency: Businessmen and entrepreneurs need to make sure that your brand is consistent with the quality of customer services, staff members, product quality, packaging, etc. It is crucial to keep all your staff members on the same page. This is how you can maintain the consistency of your brand in the competitive market.

These steps could be used to increase your brand equity. You can also use content marketing as an effective tool to communicate with your target audience. The bottom line is, if you want to thrive for a longer period in the market, you need to get the brand right and follow the opportunities strictly. 

Brand Equity Pyramid: A Brief Analysis

The brand equity pyramid lets us know about the requirements for building brand equity. It shows the pathway to understand the target audience and implement relevant strategies. The pyramid establishes the connection between the customers and the brand. The pyramid consists of an overall 6 parts. 

• Part 1: Brand identity or who you are

This is where you decide how your customers will look up to your brand and how they would distinguish each brand from another. Think about how you would introduce yourself to new people. Brand identity is the same thing.

• Part 2: Brand Meaning or what are you?

The second level of the pyramid is about the goals and mission of your brand. Once a customer knows about your brand, he/she would be interested to know more about it. Your target audience would want to know if the brand is reliable enough and whether it has good customer service.

• Part 2A: Brand performance

Part 2 is further subdivided into two parts and brand performance is one of them. Companies such as Caterpillar, Boschand Siemens reached the highest levels of success due to their improved level ofperformances with time. Even services such as Google, Apple and Microsoft have also earned a huge client base due to their performances.

• Part 2B: Brand Imagery

This determines the image of your brand in the eyes of your customer. Word of mouth and targeted marketing act as effective tools to create a strong image of your brand among your target clients. For example, BMW needs to be rugged as a brand while Barbie needs to be soft as the same.

• Part 3: Brand Response or what are the feelings for the brand?

This is about meeting or exceeding your customer’s expectations regarding your brand. After a customer buys your product, he/she builds up expectations towards the product or the brand. When you can meet his/her expectations, the customer is bound to generate positive feelings towards your brand. A company with a maximum of positive feelings assists in building brand equity.

• Part 4: Brand resonance or a strong relationship

 This is where the brand and its targeted audience develop a huge social and psychological connection between your brand and customer. Take the example of Harley Davidson in this case. Harley Davidson bikers love their bikes and Harley imparts an unmatched quality feeling to its customers. Also, when 2 riders find themselves using the same product, it builds a new connection between them.This pyramid tells which stage the brand belongs to. You can also understand which measures to take in order to move up the pyramid. But, you must remember that moving from one stage to the other can take years. The highest level of the brand equity pyramid consists of brand resonance. It is the result of 100’s of branding and marketing executives along with creative campaigns throughout the year.

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