Building Brand Equity: Strategies for Growing Your Brand’s Value
In today’s business landscape, companies are prioritizing the perception of their brand over their products, recognizing that roughly 74% of customers expect more from organizations in terms of their treatment of customers, employees, and the environment. Therefore, it is crucial for organizations to evaluate how their marketing efforts impact their brand equity, which ultimately influences key performance indicators such as revenue and customer loyalty. By focusing on brand equity, businesses can strengthen their overall image and maintain a competitive edge in a consumer-centric market.
What is Brand Equity?
Brand equity refers to the degree of influence a brand name has on the perceptions and attitudes of consumers. It is a valuable asset for companies to possess, as it signifies a recognizable and well-regarded brand. To establish brand equity, organizations must create positive interactions that encourage consumers to repeatedly choose their products over those of competitors. This is typically achieved by raising awareness through campaigns that align with the values of the target audience, delivering on product promises and attributes, and implementing loyalty and retention strategies.
Importance of Brand Equity For Businesses
Brand equity is a valuable asset for companies because it leads to a host of benefits, including increased customer loyalty, reduced marketing costs, and increased revenue and market shares. As customers become more familiar with a brand, they tend to develop an emotional connection with that company’s products. This connection transforms into brand loyalty, which is evidenced by three key behaviors that benefit companies in the long run:
- Brand-loyal customers tend to make repeat purchases, driving up the customer lifetime value for the company.
- Brand-Loyal customers are more likely to refer the brand to others, creating positive word-of-mouth and generating new customers.
- Brand-loyal customers tend to be less susceptible to competitive marketing campaigns, making them less likely to switch to a competitor’s brand.
These three behaviors are a direct result of brand equity, and they help companies build a loyal customer base, strengthen their brand image, and increase their revenue over time.
Creating a Strong Brand Identity
Developing a strong brand is not a task to be taken lightly. It’s a comprehensive process that goes beyond simply designing a logo or picking out colors. Crafting a brand identity requires careful consideration and attention to detail, including a range of moving parts that must come together seamlessly. To create a brand that truly resonates with your audience, you’ll need to approach the task thoughtfully and strategically, honing in on what sets your brand apart and developing a cohesive identity that captures your unique vision and values.
Developing a Brand Personality
An effective brand personality is crucial for businesses to stand out in a competitive market. It helps shoppers connect with brands that resonate with them, making the company more dynamic, memorable, and human. This differentiation is essential for gaining loyal customers who grow more connected to the brand over time. Building a brand personality can also increase brand equity, making customers willing to pay more for products or services due to the unique values and personality that the brand embodies. Without a strong brand personality, a company can feel bland, boring, and less valuable to customers.
Crafting a Compelling Brand Story
While many aspects of setting up a business are important, branding is often overlooked despite its significant impact. An essential part of branding is storytelling, and a compelling narrative can lead to massive results in both your personal and professional life. A well-crafted brand story can be a powerful tool for creating a connection with customers and establishing a unique identity that sets your business apart.
With just three simple steps, you can create a captivating narrative that engages customers and sets your brand apart.
Share a relatable journey: Brand story is a journey. Share the struggles, beliefs, and wins to create a relatable story.
Offer value in every piece of content: Quality over quantity when telling your brand story. Share meaningful and strategic content, even if it’s long-form. Focus on delivering value to your ideal audience.
Include a call to action for your audience: Brands need a human connection in their stories. Calls to action create moments of connection by inviting the audience to share their stories or connect with each other, without sales pitches.
How Brand Equity Impacts Return on Investment (ROI)
Positive brand equity can bring many benefits, but its impact on the bottom line is the most significant. Building a strong brand can lead to increased revenue in the future.
Increased Order Value Per Consumer
Positive brand equity can increase the order value per customer, resulting in higher profit margins. Consumers are willing to pay more for products with a strong brand name, even if they cost the same to produce as those of competitors. For example, designer shoes are more valuable to consumers than shoes from a lesser-known brand.
Increased Sales
Strong brand equity not only increases profit margins but also drives sales. A company’s brand equity can be based on various factors such as being the cheapest, most efficient, or flashy. Consumers always seek the best and are drawn to popular offerings, resulting in increased sales and beating the competition.
Increased Profit
Positive brand equity can increase the perceived value of a company’s products and services compared to competitors or generic alternatives. This allows the brand to charge higher prices, even if the goods and services are not necessarily superior. Higher prices can boost profit margins without increasing costs or reducing sales, putting the company ahead of its competition.
Maximum Customer Loyalty
Positive brand equity creates high customer retention, reducing the need for a company to spend on marketing to attract new customers. For instance, Apple’s customers tend to buy multiple products from the brand and upgrade to the newest versions regularly. The reason for their loyalty may be Apple’s innovation, ease of use, or aesthetics, but their high positive brand equity undoubtedly contributes to their customer retention.
The Advantages of Brand Equity Development
Expand Your Market Share
In crowded industries, a strong brand with unique selling points can make you stand out and appeal to customers. Developing brand equity provides a competitive edge and increases the chances of successful sales by making your brand memorable to customers at the point of sale.
Easily Expand Your Product Line
High brand equity increases customer loyalty and willingness to try new products or services from your brand. Leverage this advantage by involving your customer community in product development, or launch new offerings directly to the market with confidence in their success.
Brand Equity Allows for Higher Pricing
Having a strong brand equity allows a company to charge more for its products or services, resulting in a higher price premium compared to the market average. The price premium, which is the percentage of the selling price exceeding or falling short of the benchmark price, is a useful metric to assess a product’s financial performance.
Your Company Can Have a Greater Impact
Your high brand equity can unlock new opportunities for your company. With increased revenue and market dominance, you may be able to form new partnerships, negotiate better supplier rates, or be recognized as a major player in your industry. This can lead to collaborations, business ventures, or investment opportunities that may not have been possible otherwise.
Examples of Brand Equity
Positive Brand Equity
Amazon and Apple are renowned for their strong brand equities, which are rooted in their ability to consistently provide customers with exceptional experiences. These brands have earned their positive reputations by offering innovative, purposeful, and dependable products that seamlessly integrate into people’s daily lives. Whether it’s Amazon’s industry-leading shipping options or Apple’s sleek and cutting-edge designs, these companies deliver on their promises to their customers. As a result, they have established themselves as indispensable players in the marketplace, setting a high bar for other brands to aspire to.
Negative Brand Equity
Volkswagen serves as a cautionary tale for negative brand equity. In 2015, the brand faced a crisis when the EPA accused them of manipulating emissions data, leading to a loss of public trust and brand reputation. As a result of this scandal, Volkswagen’s brand equity took a significant hit, as consumers no longer viewed the company as honest or committed to environmentally friendly practices. The incident serves as a stark reminder that a company’s reputation is closely tied to its actions, and that even a single misstep can have long-lasting consequences on brand perception.
Conclusion
Developing brand equity is a gradual process that requires a thorough evaluation of your brand image to identify weak points. You can start by assessing your customers’ experiences when using your products or services, how they found out about your brand, and whether your offerings provide tangible value or an emotional connection. Incorporate feedback from customers as you adjust your marketing strategies to improve brand equity. Keep in mind that building a strong brand is a long-term endeavor and may not yield immediate financial gains, but the benefits in the long run are valuable.
