Brand Equity Basics for Small Businesses

brand equity
December 22, 2020

Would you pay more for a Mercedes than a Kia? If you’re like most people, the answer is probably yes. But why, when they’re both cars that get you where you need to go? The answer lies in the concept of brand equity, which is a vital part of brand awareness that can help grow your business.

Today’s blog post will conclude our series on brand awareness, by exploring what you need to know about brand equity – what it is, how it works, how to build it, and how to measure it.


What is Brand Equity?

Brand equity is the added value that a recognized name generates, making customers likely to choose that brand over a generic product or another competitor. Positive brand equity means that people will pay a premium for your product or service, even though someone else is offering the same thing.

If you’ve purchased Coca-Cola over the supermarket brand soda, you’ve likely made that choice because of their brand equity. You know that Coca-Cola stands for a superior, reliable product, so you choose to pay a bit more to get it.

Brand equity is tied to brand recognition and awareness, but it’s more than just recognizing a name. It’s about the consumer perception that one product has an added value, and therefore is worth paying a price premium to get it.


How Does Brand Equity Benefit Your Business?

That price premium we just talked about is what provides the real value of brand equity. Manufacturing Coca-Cola brand products doesn’t cost more than making generic soda, so production costs for both companies are the same.

Thanks to brand equity, however, consumers are willing to pay a higher price to get a real Coke because they know they prefer it. But Coca-Cola hasn’t paid money for that brand equity, so they pull in a higher profit margin on their product than the generic brand.

Plus, strong brand equity can increase your market share as well. That’s because more customers will form a strong connection to your brand, and choose your product or service even in a crowded market more often.


Components of Brand Equity

There are three key components that encompass this concept:

First, a customer needs to know that your brand exists.

Then they need to form a positive (or negative) opinion of your brand by interacting with you.

And finally, they arrive at their subconscious valuation of your brand.


Brand perception

This is what your customers think your brand represents. Note — it’s not what you tell your customers you say you do – it’s based entirely on their perceptions.

Companies can try to shape brand perception with marketing campaigns, but ultimately it depends on the experience of the customer. Brand perception includes brand awareness and recognition – knowing what features identify a product and how they’re different from anything else on the market.


Positive or negative impact

This is a highly subjective reaction based on the way a customer perceives your brand, for better or worse. Positive experiences and strong customer preference go hand in hand with perceived quality to form positive emotional connections with your brand.

On the other hand, a poor customer service experience or defective product can create negative brand equity.


Positive or negative value

These come from the results from having a positive or negative brand perception.

The tangible value could be in a high stock price or low sales due to a positive or negative brand equity.

The intangible value of your brand equity is more subtle – you could have lots of goodwill from customers towards your brand, or existing distrust or a perception of being dangerous.


What Builds Brand Equity?

Brand equity is a powerful force, especially if you’re in a saturated industry. Consumers will often go with a choice they deem safe, or a known quantity, when they’re faced with too many choices.

But how can you increase your company’s brand equity so you can reap the benefits too?


Build Your Brand Awareness

Customers can’t have positive feelings about your brand if they don’t know who you are. You need to make sure they can recognize your brand identity, and that they form positive associations with that identity. That’s what building brand awareness is all about.


Communicate Your Brand Values

What are the core values of your brand and company?

Making sure your products and services meet the needs of your customers (both their immediate needs and their emotional and social needs) and articulating your core values are both important here. While customers will ultimately form their own judgements, you want to share why what you do is different and important so they’re aware.


Build Customer Loyalty

Gaining customers is no small feat – and keeping them coming back again and again is even more difficult. But creating loyal customers is vital to increasing your brand equity.

Those who have positive experiences with your company will want to share their love for your brand with their friends and family – this is the science behind the Net Promoter Score system. They’ll shout your praises on social media and stick with you for the long-term. These are the customers you really need – so work on ways to engender that kind of loyalty.


How to Measure Your Brand Equity

There isn’t just one metric that can measure your brand equity. It’s a combination of three factors – your financial health, the strength of your brand, and consumer metrics.

Finances will tell you part of the story about brand equity. If you have a lot of market share, growth, and high profitability, that’s a good sign for your brand equity.

Brand strength metrics like awareness and unaided recall will tell you how much customers remember your brand.

And measuring customer sentiment through feedback surveys and retention fills in the rest of the blanks.


Need Help with Marketing Your Brand?

If you know you need to start increasing your brand equity for your business, but you’re not sure where to start, you’re not alone. ContentFirst.Marketing is here to help businesses just like yours build brand awareness and equity so your customers get to know and love you. That’s how you build a sustainable brand for the future.

Looking for the right marketing partner who will create a plan for your unique business and help you get real results you can measure?

Schedule a free business review here to find out how we help businesses grow. You can use these insights for inspiration, and let us do the marketing for you.




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Brand Equity Basics for Small Businesses
The true measure of success for a business? When customers choose your brand. See more about brand equity and how it helps businesses today.

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