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.
Why this matters:
If you can provide emotional or rational value to your customers, your brand equity will remain strong, even amid new competitors, inflation, and other market conditions.
By the numbers:
- Companies with positive brand equity see a 23% increase in revenue compared to competitors with weaker brand presence (Forbes)
- 80% of consumers are more likely to purchase from a brand they recognize and trust (Edelman)
- A 10% increase in managing brand equity can lead to a 5% growth in market share (HBR)
What is Brand Equity?
Brand equity is not a buzzword. Emotion. Or a bullet point on a PowerPoing slide.
Brand equity is value. But it’s not a number that you just assign. It stems from various components that work together to build a reliable image. You’ve heard of these: brand awareness, perceived quality, positive brand associations, and brand loyalty.
By consistently delivering on these components, you can develop strong brand equity that sets you apart from competitors and drive long–term business growth.
The 4 Components of Brand Equity
Brand equity refers to the value and perception of a brand from those who matter most to your business. Several factors contribute to this, including:
- Brand Awareness is the first component of positive brand equity. This represents how your target consumers recognize every element of your brand. When this happens, your brand will always be top of mind when making purchase decisions.
- Perceived Quality refers to the overall impression of your brand’s ability to deliver value to your customers. This perception can influence your brand equity because customers often make decisions based on their experiences. Brand equity will rise if they have a positive experience with your products and services. In contrast, brands with a history of poor quality or negative customer experiences may experience will undoubtedly cause a decline in brand equity.
- Brand Associations involve the mental connection points that consumers have when they think about your brand. These factors include the overall identity, logo, messaging, and campaigns. Brand equity benefits when consumers associate any of these elements with a personal experience.
- Brand loyalty represents the degree of commitment that customers have to a particular brand. Loyal customers are more likely to continue purchasing from you, even with alternative options.
How Building Brand Equity Reinforces Your Market Position
It’s fact. Building brand equity is an effective way to solidify your market position 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 growth. It prepares you to navigate stormy waters that are out of your control.
Managing Brand Equity Withstands Increased Competitiveness
Technology and innovation are more likely to occur during a recession. This means that, regardless of the economic climate, you should always be prepared to be both proactive and reactive when managing brand equity.
Maintaining a strong brand ensures customers remain loyal to your offer even when presented with alternatives. So it goes beyond customer retention to attract new customers, which is especially important when launching new products or entering new markets. Although the investment and brand equity may appear obvious, doing so on a consistent basis ensures that you are top of mind for your customers.
Creating brand equity can help you with a unique identity that stands out from the rest. Your brand’s basic principles, communication strategy, and visual identity will aid in creating a distinctive presence that appeals to your brand’s stakeholders.
Better Ability to Withstand Market Disruptions
Building brand equity helps your brand withstand market disruptions. It’s moving so fast that you need to be agile and how you make decisions, go to market, launch programs in campaigns, and react to crises. As mentioned, the recent economic downturn has caused consumers to change how they buy. In fact, several studies show how younger generations are less loyal to brands.
When you’ve built strong brand health, “your customers” are more likely to remain “your customers” during turbulent times. This loyalty acts as a safety net, helping you navigate market disruptions and emerge stronger once it passes through.
Assessing the Financial Performance of Brand Equity
Financial considerations hold a significant role in understanding and evaluating brand equity. The more you know about the monetary impact of your brand’s reputation, the better you can decide where you should make investments and other strategic initiatives.
Here are some key financial aspects to consider when analyzing your brand equity:
- Brand Valuation: Estimating your brand’s overall financial value involves evaluating factors like brand awareness, customer loyalty, and perceived quality. A higher brand valuation indicates a solid market position.
- Customer Lifetime Value (CLV): Elevated brand equity often leads to heightened customer loyalty, which results in a higher CLV. By assessing the total revenue a customer generates throughout their relationship with your brand, you can allocate resources more effectively and prioritize long-term relationships over short-term sales.
- Pricing Power: Companies with brand equity can often charge a premium for their products or services because customers perceive them as higher quality or more desirable. This pricing power allows you to improve profit margins and generate more revenue, which can be reinvested in marketing or product development.
- Reduced Marketing Costs: A well-established brand often benefits from a higher level of awareness and positive brand associations, which can lead to lower marketing costs. Customers may be more likely to recommend your brand or share positive experiences, leading to increased word-of-mouth marketing and reducing your need to invest heavily in advertising.
- Profit Margins: Another important financial consideration tied to brand equity is the impact on profit margins. Managing brand equity will ensure that your customers perceive your products or services as more valuable, allowing you to command higher prices without increasing production or operating costs. The result is an expansion of your profit margins, which can be reinvested in your business to fuel further growth, enhance product offerings, or improve operational efficiency.
- Risk Mitigation: Strong brand equity can act as a protective barrier during market disruptions or economic downturns. Customers are likelier to remain loyal to brands they trust and perceive as high quality, even in challenging times. This resilience can help maintain revenue streams and minimize the impact of external factors on your bottom line.
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, the Customer-Based Brand Equity (CBBE) Model, offers a comprehensive framework for understanding and building a powerful brand. Developed by marketing professor Kevin Lane Keller, the model suggests that the key to creating brand equity is influencing customers’ thoughts, feelings, and actions, increasing brand loyalty, quality, and recognized brand value. See below for the model.
The CBBE Model is organized as a pyramid with four primary levels:
Brand Identity (Salience): This foundational level represents brand awareness and recognition. A robust brand identity ensures customers can effortlessly identify and remember your branding efforts when they purchase products.
Brand Meaning (Performance and Imagery): The second level concentrates on brand perception in terms of its functional performance (i.e., product features, quality, and dependability) and its symbolic imagery (including brand personality, values, and emotional benefits).
Brand Response (Judgments and Feelings): This level pertains to customers’ assessments of the brand based on their experiences, knowledge, and perceptions. Judgments involve customers’ opinions about the brand’s overall quality, credibility, and relevance, while feelings encompass the emotional responses customers associate with the brand.
Brand Resonance: At the top of the pyramid, brand resonance denotes the highest level of customer loyalty and engagement with the brand.
By addressing each level of the CBBE Model, you can methodically develop brand equity, enhancing your market position and creating lasting value for your customers. Keller’s Brand Equity Model is a core component of brand management, but it’s not that simple.
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.
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 client’s 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 Nordstroms Case Study
Nordstrom is a luxury brand and a prime example of a company that has built significant brand equity. They are consistent, recognizable, and known for delivering exceptional customer experiences in all of their retail locations.
Brand awareness is a crucial aspect of brand equity, as it refers to the degree to which consumers recognize and remember a brand. Nordstrom has made substantial investments in marketing and advertising efforts to ensure its name remains top-of-mind for potential shoppers. By targeting upscale consumers through traditional and digital media channels, Nordstrom maintains a strong presence in the luxury retail market. Moreover, the company’s iconic logo, featuring a stylish “N,” is easily identifiable, further reinforcing its brand recognition.
Perceived quality is another vital component of brand equity, as it encapsulates the customer’s overall evaluation of a brand’s offerings. Nordstrom is synonymous with high-quality products and services, catering to consumers willing to pay a premium for top-tier products. The retailer’s commitment to stocking items from renowned designers, such as Gucci, Prada, and Burberry, has solidified its reputation for carrying a wide range of coveted luxury brands. Nordstrom’s focus on exceptional customer service, including personalized shopping assistance and generous return policies, further elevates the brand’s perceived quality.
A brand association or the mental connections consumers form with a brand contribute significantly to brand equity development. Nordstrom has crafted a brand image that evokes luxury, sophistication, and exclusivity. With its upscale ambiance and attentive staff, the company’s store environments create a memorable shopping experience that sets Nordstrom apart from its competitors. Additionally, Nordstrom’s commitment to corporate social responsibility, including its focus on sustainability and ethical sourcing, fosters positive associations among socially conscious consumers.
Lastly, brand loyalty is pivotal in shaping brand equity, reflecting customers’ commitment and trust toward a brand. Nordstrom’s consistent delivery of exceptional products and services has fostered a devoted customer base that continues to shop at the retailer, even in the face of increasing competition from e-commerce giants and other luxury brands. The company’s loyalty program, Nordstrom Rewards, further incentivizes repeat business by offering perks such as early access to sales and personalized shopping experiences.
Nordstrom’s success is a testament to the company’s strategic management of its brand assets. By leveraging brand awareness, perceived quality, brand associations, and brand loyalty, Nordstrom has cultivated a robust reputation that sustains its customer base and attracts new shoppers.
Final Thoughts on the Role of Brand Strategy
The role of brand equity in a brand strategy is crucial, as it establishes a basis for generating and preserving brand value in the market.
Incorporating brand equity into your strategy ensures that every aspect of your marketing efforts, from product development to customer experience, functions together to create a unified and strong brand image. By consistently delivering on your brand promise and meeting customer expectations, you can build and maintain a loyal customer base that not only results in repeat business but also acts as a brand ambassador, spreading positive word of mouth. Consequently, a well-executed marketing strategy prioritizing brand equity can produce long-term benefits, supporting a sustainable competitive advantage and fueling business success.
Investing in brand equity is vital for your success and growth. By concentrating on the critical components of brand equity – brand awareness, perceived quality, brand associations, and loyalty – you will be prepared for a more formidable market position.
This enhanced brand position enables you to experience heightened competitiveness, better differentiation, increased resilience during market disruptions, and the capacity to confront market challenges directly. As the business landscape evolves, the significance of building brand equity will only expand. By prioritizing your brand’s equity and learning from successful examples like Nordstrom, you can confidently navigate the future, ensuring your brand remains a trusted, appreciated, and durable presence in the marketplace.
Take control by assessing your brand health metrics today. Gain insight into your brand’s performance, enabling you to make data-driven decisions that can impact your brand’s reputation, customer loyalty, and market position. Focus on your brand’s future by tracking essential metrics such as customer satisfaction, sentiment analysis, social media engagement, and a brand audit. Begin evaluating your brand health now and unlock your brand’s market potential.