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Understanding Brand Equity: The Core Pillar of Success.

Vikeduonuo Behlo
19th April, 2024
5 min read
Table of Content


Brand equity is a term that refers to the value of a brand in the market, based on the perceptions and experiences of consumers. They can have a positive or negative impact on a company’s performance, as it influences customer loyalty, pricing, market share, and profitability. Therefore, it is important for marketers to measure and improve their brand equity, as it can provide a competitive advantage and long-term growth.

What is Brand Equity?

Brand equity is the difference between the value of a branded product or service and the value of a generic equivalent. For example, if consumers are willing to pay more for a product with a recognizable name, such as Nike or Coca-Cola, than for a similar product without a brand name, then those brands have positive brand equity. On the other hand, if consumers prefer to avoid a product with a negative reputation, such as Enron or Volkswagen, then those brands have negative brand equity.

It is composed of four dimensions: brand awareness, brand associations, perceived quality, and brand loyalty.

  • Brand awareness is the extent to which consumers recognize and recall a brand name and its products or services. It is the first step in building brand equity, as it creates familiarity and visibility.
  • Brand associations are the attributes, benefits, emotions, and experiences that consumers link to a brand. They can be positive or negative, and they can influence consumer preferences and purchase decisions. For example, Apple is associated with innovation, design, and quality, while McDonald’s is associated with convenience, affordability, and fun.
  • Perceived quality is the consumer’s judgment of the overall excellence or superiority of a brand and its products or services. It is based on both objective and subjective factors, such as performance, features, reliability, durability, and aesthetics. Perceived quality can affect consumer satisfaction, loyalty, and willingness to pay a premium price for a brand.
  • Brand loyalty is the degree of attachment and commitment that consumers have to a brand. It is reflected by repeat purchases, positive word-of-mouth, and resistance to switching to competitors. They can reduce its marketing costs, increase sales volume, and enhance profitability.

Why Does Brand Equity Matter?

Brand equity matters because it can have a significant impact on a company’s financial performance and strategic goals. Some of the benefits of having positive brand equity are:

  • Increased customer loyalty: Customers who have a strong bond with a brand are more likely to buy from it again, recommend it to others, and resist competitive offers. This can result in higher retention rates, lower acquisition costs, and more referrals.
  • Higher pricing power: Customers who perceive a brand as superior or unique are more willing to pay a premium price for its products or services, as they believe they are getting more value for their money. This can increase its profit margin and revenue.
  • Greater market share: Customers who are aware of and attracted to a brand are more likely to choose it over other alternatives in the market, especially if the brand has a distinctive positioning and a clear value proposition. This can increase its demand and sales volume.
  • Enhanced brand extensions: Customers who trust and like a brand are more likely to accept and try its new products or services, especially if they are related to its core offerings. This can enable it to leverage its equity and enter new markets or categories with lower risk and cost.
  • Improved brand image: Customers who have positive associations and experiences with a brand are more likely to have a favourable impression and attitude towards it, as well as a higher level of satisfaction and advocacy. This can enhance its reputation and credibility and protect it from negative publicity or crises.

How to Measure Brand Equity?

Measuring brand equity can be challenging, as it involves both quantitative and qualitative data, as well as different perspectives and methods. However, there are some common approaches and metrics that can help marketers assess their brand equity, such as:

  • Financial metrics: These metrics measure the monetary value of a brand, such as its market value, revenue, profit, or return on investment. They can be calculated using various methods, such as the cost-based, market-based, or income-based approaches. For example, the cost-based approach estimates the brand value based on the cost of creating and maintaining it, while the market-based approach estimates the brand value based on the price that consumers or investors are willing to pay for it.
  • Preference metrics: These metrics measure the consumer’s choice and preference for a brand, such as its market share, penetration, or loyalty. They can be obtained using various methods, such as surveys, experiments, or behavioural data. For example, the market share metric indicates the percentage of sales or customers that a brand has in a given market, while the loyalty metric indicates the percentage of customers who repurchase or recommend a brand.
  • Strength metrics: These metrics measure the consumer’s perception and evaluation of a brand, such as its awareness, associations, or quality. They can be obtained using various methods, such as interviews, focus groups, or rating scales. For example, the awareness metric indicates the percentage of consumers who recognize or recall a brand name or logo, while the quality metric indicates the consumer’s rating of the brand’s performance or excellence.

How to Improve Brand Equity?

Improving brand equity requires a strategic and consistent effort to enhance the four dimensions of brand equity: awareness, associations, quality, and loyalty. Some of the strategies and tools that can help marketers improve their brand equity are:

  • Brand identity: This is the core essence and identity of a brand, including its name, logo, slogan, colours, and symbols. It helps to create a distinctive and memorable image for the brand, and to communicate its vision, mission, and values. A strong brand identity can increase brand awareness, recognition, and differentiation in the market.
  • Brand positioning: This is the way a brand defines and distinguishes itself from its competitors, and the value proposition it offers to its target customers. It helps to create a clear and compelling message for the brand, and to align it with the customer’s needs, wants, and expectations. It can also increase brand relevance, preference, and loyalty in the market.
  • Brand communication: This is the way a brand interacts and engages with its customers and stakeholders, using various channels and media, such as advertising, public relations, social media, or events. It helps to create a consistent and coherent voice for the brand, and to convey its identity, positioning, and benefits. An effective brand communication can increase brand awareness, associations, and image in the market.

Brand experience: This is the way a brand delivers its products or services to its customers, and the overall impression and satisfaction they have with the brand. It includes all the touchpoints and interactions that customers have with the brand, such as the product quality, design, packaging, service, delivery, or after-sales support. A positive brand experience can increase brand quality, trust, and loyalty in the market.


Brand equity is a crucial factor that determines the success of a brand in the market. It reflects the value that consumers perceive and experience from a brand and its products or services. By measuring and improving its four dimensions, marketers can enhance their brand’s competitive edge and long-term growth. To do so, they need to use various strategies and tools, such as surveys, focus groups, social media analytics, brand audits, and brand valuation methods. By understanding and optimizing their brand equity, marketers can create a strong and distinctive brand identity that resonates with their target audience and delivers value to their stakeholders.

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