What Is Brand Equity?

Brand equity is defined as the perceived value of a company based on its reputation with its audience.

For example, when a consumer buys a name-brand product over a generic product, even though there aren’t any differences between them and the name-brand product is more expensive, that brand has positive equity. The value of that brand name allows the company to sell the same product for more money while maintaining the same cost as competitors. Knowing your company’s brand equity can help you make actionable business decisions that can boost your reputation and contribute to your bottom line. 

Discover your business’ brand equity with Compass by The Harris Poll today.

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Written By: Amir Kanpurwala

Published: 2/14/20

Screenshot displaying the brand equity interface of the Compass tool

Measuring Brand Equity

While brand equity is universally sought after, it is uniquely difficult to measure. On one hand marketers can look at quantitative metrics such as market share, profitability, revenue, or growth rate. On the other hand businesses want to understand the less tangible and qualitative aspects of equity. Being able to correlate these two ends of the spectrum can be challenging. 

While surveys can serve the purpose of evaluating qualitative factors, Compass is your new way of knowing where your company stands with its audience. By polling consumers through a variety of touchpoints and placing numerical values to them, we are able to see how your audience perceives your brand. You can then easily compare this data to your quantitative or financial metrics with ease. This type of brand tracking allows you to have a full picture of your brand’s influence on its industry.

Compass displays these competitive insights in several, easy-to-understand categories.

Momentum

A brand’s ability to consistently maintain its market position and beat out its competitors.

Consideration

How relevant a brand’s product or service offering is to its audience’s needs.

Quality

The perceived and actual quality of your business’ service offerings compared to your competitors.

Familiarity

How recognizable a brand is to the general population.

Brand Equity Model

Brand Perception

How your audience perceives your brand is vitally important to overall brand health. Brand perception stems from the knowledge and experience that your audience has with your service offering. It measures what your audience believes your brand represents, whether or not it aligns with your overarching marketing efforts. This perception can help or hurt your business in the long run.

Negative & Positive Effects

Brand perception can manifest in both positive and negative ways. If your brand equity is high, your company, products, and financials will benefit because your audience will continue to interact with and recommend your services. Unfortunately, if it’s low, the opposite can be true, and you’ll have to do a lot of work to build your reputation up again.

Value

Brand equity, along with being a valuable tool for businesses, holds even more value for customers. If a company has a positive reputation, customers will inherently trust it and its ability to deliver services, which improves their confidence in the purchase decision. By using consumer insights, Compass is able to see the value of a company through the eyes of its audience, giving that company a leg up against the competition.

Benefits of Brand Equity

One of the most significant benefits of having positive brand equity is that your audience trusts your company. This allows your company to hold a piece of the market that competitors will have a hard time influencing. Other benefits of brand equity include:

  • Consumers are willing to pay a premium for your products.
  • Brand equity can extend to other product lines so your company can expand and capitalize off your existing good standing.
  • Strong brand equity can improve stock prices because investors feel more confident in its stability.

Building Brand Equity

Brand Awareness

To build positive brand equity, your business needs to work on building up its brand awareness. Brand awareness is the extent to which your audience is familiar with the services and reputation that your company offers. Your brand health depends on having a strong foundation of awareness with your audience to maintain salience. Beyond just building awareness your brand needs to stand out from the rest. One way to do that is to tell a compelling brand story that will impact your audience.

Graphic depicting a consumers awareness of a brand
Graphic symbolizing a customer's brand loyalty to one over another

Brand Loyalty

Consumers who have strong brand loyalty are devoted to a specific product or service and are compelled to perform repeat purchases with that company, despite competitor’s efforts to lure them away. Having a high level of brand loyalty contributes significantly to positive brand equity. Consistency is the key to maintaining brand loyalty. It is important to ensure your company always lives up to expectations so consumers never have to think twice. Some of the benefits of brand loyalty include:

  • Less of a need for marketing
  • More leverage in the industry
  • Better positioned to compete with new competitors

Brand Reinforcement

Reinforcing your brand’s values with consumers will draw in those with similar values who are more likely to exhibit loyalty to your brand. For example, if you have a brand that is committed to manufacturing environmentally-friendly products and you have strong brand equity, environmentally-conscious consumers will be more likely to buy your product even if it is more expensive.

Brand Equity Examples

Higher Brand Equity

Company A has been selling insurance to consumers for over 50 years. Because of its ongoing commitment to providing excellent customer service and innovating its products, its customers have remained loyal to its brand and products, despite not always having the lowest prices. 

Graphic showing a high brand equity score
Graphic displaying a low brand equity score

Lower Brand Equity

A company typically has lower brand equity when they go through an incident that affects their brand’s or product’s reputation. For example, Company B, an independent credit card provider, had a data breach that resulted in millions of consumer records being released to the public, tanking their brand equity and reputation.

Along with them having to settle a major lawsuit and pay millions of dollars in damages, this hit made the brand look untrustworthy, which hurt customer retention & acquisition in the long run. To combat this, the company needs to continuously monitor their brand’s perception and revamp its image to reinstate the trust and brand loyalty it has lost.

Harris Clients

Available for a fraction of the cost of custom research

Subscriptions to Compass offer you continuous, real-time tracking on five brands. With your membership, we will collect over 10,000 interviews per brand, giving you a robust ability to conduct pre-/post-testing and dive deep into various customer groups.

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