Consumers expect their brands to treat all the stakeholders well and share the same values. The product or service is equally important as the customer relationships. Thus, organizations should concentrate on brand-building exercises and creating awareness. Brand awareness should not speak only about the offerings but also the brand values. These results in deriving the important parameter for an organization – Brand Equity.
What is Brand Equity ?
Brand Equity is a multi-dimensional term that calculates the value of the brand. The value of the brand is nothing but a cumulation of the assets, offerings, brand visibility, and loyalty of the customers. It is established by creating the right product for the consumers that caters to their needs and providing them with an immemorable experience that sways their minds.
The most important factors which lead to building powerful brand equity are – brand awareness, brand personality, and Brand Image. These contribute towards developing emotion for a brand and associate a few sentiments of the consumers with the brand name.
Aaker’s has derived a very simple model which depicts all the factors that help build brand equity.
Importance of Brand Equity
Every organization takes care of its top and bottom line. They keep a record of the return on investment (ROI). Brand Equity helps in achieving that ROI. A brand should smartly spend its budget to build a strong and positive brand image. The positive sentiment of the consumers towards a brand helps in positioning the brand as a premium product. The budget spent on advertising can be added to the cost price of the offering that is unobjectionable. The audience would willingly pay a higher price for the product as they see a value in spending higher. An ROI for the customer will result in ROI for a brand.
An increase in customer loyalty leads to an increase in the lifetime value of the customers. Customers tend to try the new launches and always stick to their favourite brands. Study also shows that customers are 7 times more likely to forgive their favourite brands for a mistake than they would do to a new brand.
Loyalty helps in brand extensions, both horizontal and vertical extensions. It can either be launching a new line of products or venturing into new markets with the same brand name. It pushes towards expanding the presence geographically and creating an impactful brand presence compared to the competitors.
Lastly, strong brand equity means a higher stock price. Brand reputation and loyalty increase the revenue as well as the valuation of a brand in the market. Thus, the stock prices of the brand increases, and it leads to a higher market share.
Steps to develop Brand Equity
Like Rome was not built in a day, brand equity takes time to be developed. To build positive brand equity, an organization should strive towards providing its target audience with the right product and a wonderful experience. This will create brand differentiation and provide the consumer with a reason to choose your brand over others.
Here are some steps that should be taken to build a positive brand equity:
Answering the “Why” of your offering – Simon Sinek has discovered a model where he insists each brand start with “Why?”. Why are you creating a product? Why are you establishing a brand? Why will your product help your audience? Why will the product succeed? Etc. Answering this Whys will give a fair idea if you are doing it right or how should you do it. When these questions are answered, and you as a brand are satisfied with it, consider it the first step towards creating a positive brand equity.
Developing strong brand awareness – For effective brand equity, the audience should be aware of the brand values and benefits of your offerings. To deliver the right message to the consumer, every brand needs to spend their time, attention, and money towards creating awareness. Strong brand awareness will establish a strong brand presence and recognition. This recognition will help establish brand equity.
Providing an immemorable brand experience – Customer experiences develop a sentiment towards the brand. It can be either positive or negative. Creating experiences is no less than developing a product. These experiences draw the customers back to the brand again and again.
Consistent usage of brand identity and integrated marketing communication -For a strong brand recall and recognition, it is important to be consistent on all platforms. The message and tone should be unanimous that reflects the brand’s personality. The recall paves the path to loyalty thus, brand equity.
Things to avoid while building brand equity
Drawing Assumption – To launch a brand, a lot of times the brand leaders draw their own assumptions. They might think certain solutions or products will be accepted in the market, but the audience might not need them. The brands might assume a lot of factors and take actions that might fail because those might be practically different.
Not researching the target audience – It is important to know your audience, their needs and then communicate with them accordingly. To make sure that the branding communications works in favour of the brand, they should know what the likings of the consumer are. Studying the market and the choices help in avoiding the risk of failing.
Ignoring the stakeholders other than the customers – We all agree that consumers are the key stakeholders for a successful brand name. But other stakeholders also play a major role in building a strong brand reputation. These are the employees, management, and vendors. While creating brand experiences it is always important to take them into consideration as well. This group of people takes brand equity to the next level.
Focusing just on profits - A lot of brands think brand equity is equivalent to making profits. Definitely, brand equity is a result of higher revenue or market share. But ignoring the brand experience while focusing on profits will lead to a downfall. We should remember that brand recognition and brand value are directly proportional to profit.
How to calculate Brand Equity
Summation of company value and market share – The firm is an asset of the brand. The net value of the brand is equal to the total value of the firm minus the tangible assets plus the market share.
Product Value – How are your products positioned as compared to the competitors or non-branded products give the value of your product. This value tells you the value of your brand equity.
360 degree Brand Audit – This is a qualitative parameter that tells the perception of the brand in the market among the audience. Conducting research or audit on all the social channels, digital platforms, analyzing the reviews, and comparing the sites with competitors indicates the perceived value or sentiment towards the brand. So social listening and sentiment analysis can help calculate the brand equity.
Examples of Brand Equity
Apple
In 1984 Apple computer took branding to another level by not promoting the product but the idea with the launch of Macintosh. That was a revolutionary step and a smart move towards gaining maximum brand loyalty. This was when they started developing brand equity. They have rightly tapped Simon Sinek’s concept of 'WHY' should a consumer purchase your product.
Coca Cola
This is another example of a brand who have outshined the rest of their competitors, not just with their product but leveraging on the emotions of their audience. They created a strong brand value by emphasizing on how their product spreads happiness and brings the loved ones together. This strategy has a direct impact on their bottom line and brand equity.
Amul
One of the oldest and most loved Indian brands that have been able to establish strong brand equity because of their consistent and unique communication. They build a relationship with their consumer with help of their mascot and storytelling. They hold a huge market share and continue to impress their consumer with their product, service, and communication.
Tata Groups
A brand that is the epitome of values and ethics. Tate groups have a wide range of products and offerings. And each of the verticals sticks to the core ethics and values of the organization. They have established themselves so strongly in the market and hold the highest market share as of today because of shared values with their end-user and other stakeholders. They have set the best example on integrated marketing communication can instill a strong brand recall and enhance brand loyalty.
Conclusion
Brand equity is the representation of the value of the brand both qualitative and quantitative. Social listening, financial calculation, and market share help in measuring brand equity. To develop strong and positive brand equity, the focus should be on creating brand awareness and establishing a strong brand image. It is the personality that drives the perception of the consumers towards the brand. Focusing on revenue or profits might not build the brand value and backlash on building positive brand equity.
To drive the ROI, establishing brands should focus on answering the “Whys” and then move on to “How to execute” and “What to deliver”. Strong brand loyalty will also lead to large market share and positive brand equity.
Your premium brand had better be delivering something special, or it’s not going to get the business – Warren Buffet