Strengthening your brand equity increases value. The higher the value, the better your market position. The better market position you are in, the more money you make. The below data point from a recent report proves it.
What is Brand Equity?
Brand equity is far more than a marketing buzzword. More than some elusive, intangible emotion. More than a bullet point in a flashy PowerPoint presentation.
Brand equity is value. Cold, hard value. The type of value that hits a company right in its bottom line. But it’s not some number you can pluck from thin air and assign. True brand equity stems from cultivating interconnected components that work harmoniously to build a consistent, reliable brand image over time.
You’ve heard of these components – brand awareness, perceived quality, positive brand associations, and brand loyalty. The marketing mythology would make you believe that optimizing these in isolation will magically generate brand equity. But this is mere fantasy.
True brand equity emerges when these components unite to form a cohesive brand identity. One is conveyed at each customer touchpoint. One that permeates the entire organization, from executives to customer service. One that aligns words with actions to deliver on what’s promised.
You can develop powerful brand equity by diligently and holistically nurturing these components in unison. Equity that sets you apart from competitors. Equity that drives long-term business growth and profitability.
- Companies with positive brand equity see a 23% increase in revenue compared to competitors with weaker brand presence (Source)
- 80% of consumers are more likely to purchase from a brand they recognize and trust (Source)
- A 10% increase in managing brand equity can lead to a 5% growth in market share (Source)
So let’s dispel this misconception. Brand equity isn’t created from marketing rhetoric or vanity metrics. It stems from branding efforts that span the entire company and provide real value to back up the hype. Only then can you build equity that truly resonates with customers and your bottom line.
The 4 Components of Brand Equity
Brand equity refers to the value and perception of a brand in the minds of consumers. Several key factors contribute to building strong, positive brand equity:
| Component | Definition | Customer Value | Brand Building Tactics | Metrics |
|---|---|---|---|---|
| Brand Awareness | How easily do consumers recall and recognize your brand | Top-of-mind awareness drives preference and sales | Consistent branding across touchpoints and channels | Brand recall and recognition rates |
| Perceived Quality | Subjective consumer evaluation of overall excellence and satisfaction | Perceptions of superior quality increase willingness to pay | Deliver consistent quality; manage reviews and publicity | Customer satisfaction scores (CSAT) |
| Brand Associations | Thoughts, feelings, and experiences linked to the brand | Emotional connections make the brand relatable and meaningful | Define and communicate brand identity and values clearly | Brand sentiment and engagement on social media |
| Brand Loyalty | Repeated purchases and attachment to the brand over time | Loyalty leads to predictable sales and growth | Provide excellent service; build community and rewards program | Customer retention and repurchase rates |
1. Brand Awareness
Brand awareness is the most fundamental component of brand equity. It refers to how easily potential customers can recall and recognize your brand. When consumers are highly aware of your brand name, logo, and other visual identity, it becomes firmly planted in their minds. Your brand will be the first they think of when they need your products or services.
To build powerful brand awareness, consistently promoting your brand identity across all channels and customer touchpoints is critical. All elements, from your website to social media, advertising, and even product packaging, should reinforce your brand. Familiarity breeds comfort and preference. The more exposure people have to your brand, the more likely they are to perceive it positively and choose it over lesser-known alternatives.
2. Perceived Quality
A brand’s perceived quality and reputation majorly influence its equity. This refers to the consumer’s subjective evaluation of your brand’s overall excellence and ability to deliver satisfaction. Quality perceptions are based on direct experience using your products/services and indirect cues like reviews, expert opinions, and brand messaging.
If consumers believe your brand offers superior quality and value compared to competitors, it strengthens your equity. However, brands with a reputation for low quality, negative customer experiences, safety issues, or unethical practices may suffer severe damage to equity. Managing perceptions with consistent quality and transparency is key.
3. Brand Associations
This represents the thoughts, feelings, perceptions, images, and experiences that come to mind when customers think about your brand. Everything from your logo, tagline, advertising campaigns, and visual identity shapes these associations. When consumers feel an emotional connection and relate to your brand values, it becomes meaningful to them personally.
Building strong, positive brand associations requires clearly defining your brand identity and messaging. Then, reinforcing those associations consistently across touchpoints. Equity is enhanced when your brand elicits powerful imagery and feelings in the customer’s mind.
4. Brand Loyalty
This refers to the strength of brand preference and attachment customers have for your brand over competitors. Loyal customers purchase from your brand repeatedly and do not easily switch to alternatives.
Brand loyalty stems from consistently positive experiences and satisfaction over time. It is influenced by perceptions of quality, emotional connections, and feeling valued through incentives like reward programs. By cultivating loyalty, you retain existing customers, gain word-of-mouth promotion, and ensure predictable sales.
These four pillars – brand awareness, perceived quality, associations, and loyalty – all work together to drive brand equity. A strong brand has high visibility and an excellent reputation and elicits positive emotions from loyal fans. Managing each area thoughtfully over time leads to sustainable equity and competitive advantage.
How Building Brand Equity Reinforces Your Market Position
It’s a proven fact – building strong brand equity is an incredibly effective way to solidify your competitive position in the market and ensure long-term success.
A well-established brand increases your competitiveness, distinguishes you in a crowded market, and prepares your company to withstand market disruptions and challenges. Investing in your brand’s equity lays the groundwork for increased resilience, adaptability, and sustained growth. It equips you to navigate stormy waters that are out of your control.
Managing Brand Equity Withstands Increased Competitiveness
The world is moving fast. Technology and innovation drive constant change. New competitors can arise rapidly to disrupt established players. Maintaining strong brand equity ensures customers remain loyal to your offer even when presented with flashy alternatives.
It goes beyond mere customer retention – strong equity also attracts new customers. This is especially crucial when launching new products or entering new markets. Although building equity requires investment, doing so consistently cements your brand as top-of-mind for customers.
Crafting a unique brand identity that stands out also reinforces competitiveness. Defining your brand’s core principles, communication strategy, and visual aesthetic aids in creating a distinctive presence that resonates with stakeholders.
Better Ability to Withstand Market Disruptions
Resilient brand equity helps your company weather unpredictable market disruptions. The pace of change is blistering – you must be agile in decision-making, launching initiatives, and managing crises. Recent upheavals have caused consumers to alter their purchase behavior. Research indicates younger generations demonstrate less innate brand loyalty.
But customers nurtured through built-up brand equity are more likely to stand by you during turbulent times. This loyalty acts as a safety net, fortifying your brand to navigate disruptions and emerge stronger once the dust settles.
Assessing the Financial Impact of Brand Equity
The monetary implications of your brand’s reputation hold significance in evaluating equity. Understanding the quantitative impact guides smart investments and strategic decisions.
Sophisticated modeling can estimate potential revenue growth, profitability, and valuation attributable to brand equity. These insights help target resources efficiently to maximize ROI. Monitoring metrics like brand awareness, consideration, and loyalty over time is key.
Purposeful brand building strengthens your footing in any condition. Equity establishes trust and preference, upholding corporate health even amidst unpredictability. It is a wise investment that compounds over time.
| Aspect | Definition | Impact | Metrics | Strategies | ROI |
|---|---|---|---|---|---|
| Brand Valuation | Estimated overall financial value of the brand | Higher valuation indicates market position | Brand value calculated using models | Build awareness, quality perception, and loyalty | Increases company market value |
| Customer Lifetime Value (CLV) | Total revenue generated by a customer over time | Increased loyalty leads to higher CLV | Average revenue per user (ARPU) | Loyalty programs, excellent service, community engagement | Higher CLV means more profitable customers |
| Pricing Power | Ability to charge premium pricing | Allows for profit margin expansion | Price elasticity of demand | Maintain exceptional quality and brand image | Every 1% price increase directly expands margins |
| Reduced Marketing Costs | Decreased need for advertising spend | Benefits from WOM and organic reach | Share of voice vs. competitors | Focus on brand evangelists and influencers | Improved marketing ROI from better conversion rates |
| Profit Margins | Revenue remaining after costs | Commands higher prices without increasing costs | Gross and net profit margin | Manage pricing and costs, not just volume | Stronger margins compound over time |
| Risk Mitigation | Protection against market disruptions | Maintains revenue & minimizes impact | Revenue stability during recessions | Build loyalty & brand trust | Avoiding revenue declines saves more in costs to rebuild |
Considering these financial aspects is critical to brand management. As you build brand equity, you can make informed decisions about your marketing investments, product pricing, and overall business strategy.
Keller’s Brand Equity Model
Keller’s Brand Equity Model, also known as the Customer-Based Brand Equity (CBBE) Model, provides a thorough framework for understanding and developing powerful brand equity.
Formulated by marketing expert Kevin Lane Keller, the model posits that the key to creating strong brand equity is positively influencing customer perceptions, feelings, and actions. This enhances loyalty, perceived quality, and recognized brand value over time. The CBBE Model is structured as a pyramid with four progressive levels.
Brand Identity (Salience)
The foundation of Keller’s brand equity model is brand identity, also known as brand salience. This refers to how easily and prominently consumers can recall and recognize your brand. The goal is to establish a clearly defined, memorable identity in the customer’s mind.
Crafting a distinct brand identity involves defining visual components like names, logos, colors, fonts, and other trademarks. But it also requires consistently associating intangible elements like personality, tone, and values with your brand. Brand identity ties all cues together into an instantly recognizable package.
A strong brand identity makes your brand stand out from competitors. Your brand should be top-of-mind when customers encounter related products, services, or marketing. This primes them to choose your offer over alternatives preferentially.
To increase brand identity, marketers must promote brand elements persistently across all consumer touchpoints. Branding should be prominent on your website, social media, packaging, in-store displays, apps, advertising, and any other channel. Touchpoints range from passive exposure to active brand interactions.
Brand Meaning (Performance and Imagery)
The second level in Keller’s brand equity model involves establishing brand meaning in the minds of consumers. Brand meaning consists of functional and symbolic associations people link to your brand.
Functional associations relate to tangible product performance and attributes. This includes impressions of quality, reliability, durability, service effectiveness, and the utility of features. Customers draw meaning from how well your brand delivers on practical needs and solves problems.
Brands must consistently meet or exceed expectations around performance. Back up claims with evidence of excellence through product demonstrations, testimonials, reviews, and awards. Reliable performance builds trust and meaning over time. Symbolic associations represent the intangible traits customers connect to your brand’s personality, values, and identity. This imagery shapes how people experience your brand on an emotional level.
Brand Response (Judgments and Feelings)
The third layer of Keller’s brand equity model centers on brand response, encompassing customer judgments and feelings about the brand. Judgments represent people’s objective, rational assessments of the brand. These include conclusions about overall quality, credibility, superiority to competitors, and relevance based on their direct and indirect experiences.
Customers judge quality by expected performance, value for money, and how well the brand delivers on its claims. Credibility stems from factors like transparency, ethical practices, and acting on brand promises. Judgments continually evolve through new product experiences and brand interactions.
Feelings describe the subjective, emotional reactions customers associate with the brand. These range from positive sentiments like admiration, trust, attachment, empowerment, or even love to negative emotions like indifference, confusion, or distrust.
Building affinity requires beyond functional benefits to make customers feel understood, important, and aligned with the brand’s values. Foster feelings of community and shared identity with tribes of brand loyalists.
Brand Resonance
Brand resonance symbolizes the pinnacle of Keller’s brand equity model. This coveted level reflects the depth and strength of customers’ relationships and loyalty to the brand over time. Resonance goes beyond mere transactions – it signifies that customers feel an empathetic bond and are personally in sync with the brand. They become committed partners who actively promote and defend the brand of their own volition.
Hallmarks of resonance include customers voluntarily giving time, money, advocacy, or knowledge to champion the brand within their social circles. This motivation derives from a perceived mutual understanding between the customer and the brand.
Methodically addressing each level of the CBBE model allows brands to build equity steadily. This enhances competitive position while creating sustained value for customers over time. However, the model does not offer plug-and-play solutions. Building deep resonance requires seamlessly integrating identity, meaning, and response through cohesive strategies across touchpoints and over time.
To operationalize Keller’s framework, brand leaders should define tailored key performance indicators, objectives, and initiatives for each equity level. Measure progress through brand surveys and studies that gauge metrics tied to each tier. Regularly assess effectiveness, watching for gaps or inconsistencies across the equity pyramid. A weak foundation jeopardizes resonance at the apex. But meticulous execution of the model ultimately cements brands in the customer’s heart and mind.
Challenges with Adopting this Brand Equity Model
Adopting Keller’s Brand Equity Model in today’s market can be challenging due to increased competition and declining consumer attention spans. However, understanding these challenges allows you to adapt your approach and build brand equity regardless of external factors.
| Challenge | Impact | Mitigation Strategies | Metrics | Objectives | ROI |
|---|---|---|---|---|---|
| Increased Competition | Difficulty differentiating brands and capturing market share | Communicate value proposition. Highlight differences vs. competitors. Ensure messaging resonates. | Market share, share of voice | Gain 5% market share within 12 months | Increased market share & revenue |
| Declining Attention Spans | Harder to leave lasting impressions and build equity | Use clear, compelling messaging across channels. Leverage visuals, narratives, personalization. | Brand recall & awareness rates | Increase brand awareness by 10% in 6 months | Improved marketing efficiency. Higher conversions. |
Increased Competition: With an ever-increasing number of businesses competing for consumers’ attention, differentiating your brand and capturing a large market share is difficult. To address this issue, develop a distinct value proposition and constantly communicate it to your customers. Furthermore, underline what distinguishes your business from competitors and ensure your messaging resonates with your clients’ wants and desires.
Consumer Attention Spans Have Dropped: Consumer attention spans have dropped dramatically. It is difficult to leave a lasting impression and generate significant brand equity. Use clear and compelling messaging across all marketing channels to overcome this barrier. To attract your customers and effectively portray your brand’s identity, use compelling visual content, narrative, and personalized experiences.
Despite these factors, you can establish powerful brand equity by identifying these limitations and changing your brand-building efforts accordingly. To form lasting relationships and establish a strong market presence, focus on generating memorable experiences, fostering emotional connections, and continually giving value to your clients.
Brand Equity Examples: A Nordstrom Case Study
As a premier luxury retailer, Nordstrom exemplifies a brand that has diligently built up equity over time. The company’s efforts across four key areas – brand awareness, perceived quality, associations, and loyalty – have cultivated a powerful upscale image that resonates with consumers.
Nordstrom has invested substantially in marketing and advertising to cement brand awareness and recognition. By consistently targeting luxury shoppers through traditional and digital media, Nordstrom remains top-of-mind when upscale consumers consider retail options. The recognizable logo, featuring an elegant “N,” further drives salience across touchpoints.
The retailer is synonymous with outstanding quality products and services – a perception that attracts shoppers willing to pay premium prices. By exclusively carrying coveted high-end brands like Gucci and Burberry, Nordstrom conveys its reputation for curating luxury. Its renowned focus on personalized service and generous policies elevates the overall brand experience.
Nordstrom’s brand image evokes upscale sophistication and exclusivity, forging meaningful associations in customers’ minds. The retailer’s refined in-store atmosphere and attentive service create a memorable luxury environment unmatched by competitors. Nordstrom’s emphasis on sustainability and ethical practices also resonates with socially conscious consumers.
The brand’s track record of exceeding expectations has fostered remarkable loyalty. Devoted customers continue to shop Nordstrom despite mounting competition, drawn back by exceptional offerings and experiences. The Nordstrom Rewards program further incentivizes loyalty through personalized perks and early access to sales.
Nordstrom’s ascent demonstrates how strategically harnessing brand assets – awareness, quality, associations, and loyalty – creates lasting equity. By leveraging these pillars, Nordstrom sustains its customer base while attracting new luxury shoppers. The brand remains a model for building resonance through cohesive branding efforts.
Final Thoughts on the Role of Brand Strategy
Incorporating brand equity into strategy is fundamental, as it establishes a framework to build and preserve brand value systematically. With equity at the core, marketing efforts create a unified brand image. Consistently delivering on the brand promise and meeting expectations cultivates loyal brand advocates. Their organic word-of-mouth and repeat business drive sustainable advantage.
Thus, equity-focused strategies can catalyze lasting benefits. The four equity pillars – awareness, quality, associations, and loyalty – are key investment areas.
Building equity prepares brands for increased competitiveness and differentiation. It also enables resilience during market disruptions. As landscapes evolve, equity-building will become increasingly vital. Nordstrom exemplifies how harnessing brand assets creates resonance. By assessing brand health metrics, leaders gain data-driven insights to guide decisions. Tracking satisfaction, sentiment, engagement, and brand audits illuminate performance.
Evaluating current equity provides a roadmap for the future. It empowers brands to unlock their full market potential through strategy. Equity is the bulwark anchoring brands through inevitable storms ahead. Building it today charts the course for continued relevance and leadership tomorrow.
