What Is Brand Equity? How To Build Brand Equity

To understand brand equity, imagine you’ve just bought a house. Your house’s value grows as you pay your mortgage and upgrade for functionality and aesthetics. So does your equity, which is the difference between the money you owe on the home and its market worth. 

Brand equity is similar. Just as a quality renovation can grow a home’s value, a successful brand marketing strategy can build your brand’s value. The more equity your brand has, the stronger it is. 

What is brand equity?

Brand equity is the market strength of a brand or the value it accumulates based on people’s perceptions. It can influence brand loyalty and how much customers are willing to pay for your products and services, making brand equity important to your business strategy. 

Brand equity is not a fixed element; people’s thoughts and feelings toward your business can change, increasing or decreasing your brand equity. Direct associations with your brand—intentional activities like sponsorships, endorsements, and product placement—and indirect associations—unexpected and organic events like rapper Doechii naming a song “Nissan Altima”—can impact its equity. 

You can accumulate brand equity over time by putting your customer first and delivering a quality experience—“time” being the operative word. New brands won’t build brand equity overnight. 

The benefits of brand equity

Substantial brand equity is good for business, increasing customer trust, loyalty, and advocacy, and enabling you to charge higher prices.

Good brand equity can also help you weather market ebbs and flows to withstand competition, afford resources to launch new products and services, and even bounce back after a misstep like a disorganized product launch. 

Elements of brand equity

• Awareness
• Brand perceptions
• Brand associations
• Brand assets

You can break brand equity down into the following elements:

Awareness

Before customers form opinions about your brand, they have to know it exists. Brand managers build awareness by identifying their ideal target audience, which shapes their advertising and marketing strategies. 

Running ads, securing press mentions, appearing as a podcast guest, partnering with influencers and creators, and improving your search engine optimization are tactics for getting your brand noticed. 

Brand perceptions

Once people know your brand, it’s time to determine how they perceive it. What are their general impressions? Do they think you offer good quality products or services? Would they pay more for them? Do they desire and trust your offerings? What do they think about your customer service? 

Cultivate favorable brand perceptions by offering consistently excellent products or services and great customer service. Addressing negative feedback and showcasing positive reviews can also encourage customers to perceive your brand positively. 

Brand associations

Brand associations are the ideas, places, or characteristics customers connect to your brand. Think about the people who love purchasing certain brands, then ask yourself why. Does the brand convey status or an affiliation with a particular value, person, or thing? 

You can increase positive brand associations by creating a clear brand identity, building a consistent marketing strategy, forming strategic partnerships, and developing a plan to combat negative associations. 

Brand assets 

Use brand assets to distinguish your brand from competitors. Brand assets can be visual—such as logos, colors, graphics, type treatment, or photography style—or auditory—such as jingles or sonic assets like Netflix’s “tuh dum.” They can also be conceptual—think mascots and slogans—or represent a unique feature of your product or service, like La-Z-Boy’s recline function. The more distinctive your brand assets, the more they will distinguish your brand.

How to measure brand equity

• Brand awareness
• Brand affinity
• Brand perceptions
• Brand loyalty and advocacy

Is it possible to track something as intangible as brand equity? Actually, yes. 

To measure brand equity, start with these metrics:

Brand awareness

Here are two common ways to measure brand awareness or brand recognition:

• Unaided awareness: This is the percentage of people who can recall your brand when they hear a relevant category. For example, you might ask survey respondents: “Which brands come to mind when you think about fast food?”
• Aided awareness: The percentage of people surveyed who recognize your brand when it is named. For example, “Have you heard of Del Taco?”

Generally, you measure brand awareness by surveying your target audience. If a statistically significant amount of your audience has heard of your brand, you can extrapolate how many people know it. 

Brand affinity

As the term suggests, brand affinity measures customers’ emotional connection with your brand.

You can measure brand affinity by asking people what they think about your brand and how satisfied they are with your business. Qualitative data, such as customers’ thoughts and quotes, and quantitative data, such as their ratings and rankings of survey questions, are both valuable.

Metrics such as Net Promoter Score (NPS), which measures customer satisfaction and advocacy, and brand mentions, social media engagement, and repeat purchase rates can provide insights into customer perceptions.

Brand perceptions

You can measure brand perception through brand perception surveys, customer satisfaction surveys, brand audits, and focus groups.

Building positive associations with your brand is as much about what you focus your brand messaging on as what you don’t focus on. You can create a positive brand perception by providing a clear and consistent message and honing in on your brand purpose. 

Brand loyalty and advocacy 

You can measure brand loyalty—when a customer feels strongly attached to your brand—through repeat purchases, customer churn, and average customer lifetime value. 

To measure brand advocacy, when customers promote your brands to others, you can use NPS, brand mentions, referral rates, and customer acquisition costs.

How to build brand equity

1. Deliver on your promises
2. Be thoughtful about your messaging
3. Build an emotional connection
4. Lean on social proof
5. Be consistent over time

Brand equity develops from customers’ positive experiences with your brand, but managing brand equity takes commitment. Here are a few ways to build beneficial brand equity:

1. Deliver on your promises

A brand promise is what customers gain from using your products or services. Consistently delivering on promises establishes a strong foundation for building brand equity. 

If your brand is new, focus on offering a phenomenal consumer experience. First, nail your operations and quality control, then invest in marketing. Accelerating demand before you can handle it can create a negative customer experience.

Mind your digital assets, too. Customers expect ecommerce brands to present a frictionless website with high-quality product photos and descriptions, intuitive navigation, helpful content, and a seamless checkout experience. An ecommerce platform like Shopify, which automates many technical aspects, can help you deliver a great user experience. 

2. Be thoughtful about your messaging

What do you want prospective customers to take away from your messaging? Whether sponsoring posts on social media or talking on the local news, make sure you tell a coherent story. 

Ask yourself these questions:

• Who are you trying to reach?
• What problem or need do you solve for customers?
• What makes you unique? What are you bringing to the table that competitor brands aren’t?
• What principles do you stand for and refuse to sacrifice?

Once you have a consistent brand story, start building brand awareness by crafting a unique social media presence, running targeted ads, partnering with influencers, pitching your brand to media outlets, sponsoring events, and showing up as a thought leader online and at networking events. With consistency, prospective customers will understand what your brand stands for, even in a crowded market. 

3. Build an emotional connection

Developing a consistent, quality product or service is half the work of building brand equity. But people stick with brands over years and decades because the products become more than just products to them. 

Your brand’s emotional connection to customers is a give-and-take relationship. Letting them express their thoughts or feedback and replying to them on social media helps your customers know you genuinely care. 

You can also communicate your brand’s beliefs and put its values front and center to attract like-minded people. Support causes that matter to you and your brand, maintaining transparency around your contributions to build trust. 

4. Lean on social proof

Once you build a small but mighty fan base, lean on their words to build you up. Highlight positive reviews on your website, showcase user-generated content (UGC) on your social profiles, and feature heartfelt testimonials in ads.

A whopping 93% of marketers say that UGC content performs better than classic branded content, with six out of 10 consumers agreeing that it’s the most authentic type of content and the type of visual content they trust most.

5. Be consistent

Consistency is key. Deliver quality products and great experiences every. Developing a brand style guide, goals and values, and brand training will help you do that. 

Once you craft strong brand messaging, stick with it. Keep your brand values and purpose at the core of every marketing tactic to ensure authenticity.

Examples of positive brand equity

• Apple
• Fenty Beauty
• Stanley

Here are some brands that have maintained positive brand equity: 

Apple

Apple, considered one of the world’s most valuable brands, is a classic example of a brand with positive equity. The company built its positive reputation with its user-friendly Mac computers before extending the brand to iPhones, which deliver on the intuitive and innovative brand promise that Apple’s computer customers expected.

Fenty Beauty

Fenty Beauty is an excellent example of a brand that saw the positive equity of its celebrity founder, Rihanna, transfer over to the business. Rihanna’s star power gave the brand an immediate boost upon launch, one it has maintained, at least in part, because its high-quality products and diversity of foundation shades deliver on its promise of inclusivity. 

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Stanley 

The drinkware company Stanley grew its brand equity by expanding its audience—and doing it well. It went from catering to day laborers who needed sturdy thermoses to yoga enthusiasts meeting their hydration needs. 

By introducing its signature 40-ounce tumbler in dozens of colors, Stanley made its jumbo-sized drinking vessel a highly covetable item. The viral TikTok of a woman whose Stanley survived a car fire (and kept her drink cold!) didn’t hurt either. 

Examples of negative brand equity

One negative incident can significantly damage a brand’s reputation and undo years of positive brand equity. For example, Volkswagen suffered a hit in 2015 with its “dieselgate” scandal, where the public learned that the company had installed software in its vehicles to cheat emissions tests. It cost the company billions in fines and missed sales. Perhaps worse, it significantly tarnished the brand and the public’s trust for years. 

In other cases, the damage happens over time. For example, the investment bank Goldman Sachs lost brand value for its role in the 2008 financial crisis; it faced further backlash in the late 2010s and early 2020s because it helped clients evade taxes in various countries.