What Is Brand Equity?

What Is Brand Equity?

What Is Brand Equity?

Brand equity is a lot like love. Everyone admits that love is wonderful and necessary, yet no one agrees on just what it is. Similarly, every marketer worth his salt understands the importance of brand equity. Yet no one agrees on what it is. In fact some of the world’s biggest brands, are unable to define what brand equity is.

In the absence of a standard definition how can one safely say that the brand equity of a particular brand is high while that of another is low? The answer to this question is the same as the answer to “how can one say that one you are in love with loves you back?”-You just know. One cannot define love yet one is able to comprehend it. Similarly though there is no specific definition of brand equity, one can easily grasp whether a brand has high brand equity or not.

This is possible because just like love, brand equity too displays tell-tale signs of its presence. Thus, while answering the question what is brand equity, a few of the following tell-tale signs can come handy.

Brand Loyalty
If the consumers of a brand do not switch over to other brands in the same category, in spite of being offered incentives by the competitor brands, it displays brand loyalty on part of the consumers. This not only indicates high brand equity but also implies a steady flow of sales, all things being equal of course.

Brand Referral
Brand referral becomes a measure of brand equity when the consumers are not just loyal to the brand but are also proud of owning or using the brand. Thus, not only are they devoted to the brand but they also persuade others to do so.

Brand Recall
Brand recall refers to the recollection of the brand attributes and the brand communication, by the consumers when they have been presented with a brand reference. A high brand recall indicates that consumers are likely to remember and therefore purchase the particular brand, when they have the will and ability to buy the product. This also contributes to the brand equity.

Financial Value of the Brand
While answering the question what is brand equity, the financial value of the brand can be viewed from two perspectives. If a brand is sold at a premium over the other brands of the same quality, belonging to the same product category, the brand is said to have high brand equity. On a macro perspective, when it comes to acquisitions or sell-outs, the price commanded by the corporation not for its production or marketing facilities, but for the brand under which its products are sold, is known as brand equity of the brand.

High Perceived Quality
As the market moved to being a buyer’s market, a strange phenomena was observed- consumers would prefer one brand over the other, though the two had the same functional quality. While this confounded marketers in the past, today’s sellers have realized that consumers are not driven by quality but by perceived quality. Thus, even if the quality of a product is superior to that of the other, but the consumers think otherwise, the brand cannot be said to have better brand equity. On the other hand, if the consumers prefer a brand with low product quality vis-à-vis one with better quality, the former brand is said to have higher brand equity.

Thus though one cannot exactly know “what is brand equity,” but recognizing and gauging the brand equity of the multifarious brands using the above tell-tale signs is a sure fire way of at least knowing which brand has the “it” factor and which does not.