What Is Brand Equity?

Have you ever wondered why designer clothing brands can charge £500 for a t-shirt made from the same cotton as a £15 one from the high street? More importantly, have you ever wondered if your own brand could benefit from such a premium?

The magic behind this pricing power lies in something called brand equity. When Nike can sell trainers at triple the price of similar quality competitors or when people drive across town to shop at Waitrose instead of their local supermarket, that's brand equity in action.

In this guide, we'll explore what brand equity is, why it matters, and most importantly, how you can measure and build it for your own business.

Why brand equity matters

Strong brand equity works wonders for your bottom line. Of course, it enables you to charge premium pricing. But it also helps you weather market storms and keeps customers coming back even when cheaper alternatives pop up. During economic downturns, brands with strong equity maintain customer loyalty, while weaker brands lose out to cheaper alternatives.

Here's something interesting to think about: for many businesses, there's a natural ceiling to how much you can sell. Consider your local hair salon. They can only squeeze so many haircuts into a day - there's a natural ceiling to their service capacity. Yet, with strong brand equity, they can transform from a £15-per-cut business into a £50-per-cut destination salon.

Customers gladly pay more because they trust the expertise and experience your brand promises.

Sources of brand equity

The next question becomes: where does brand equity come from?

As an ambitious business owner, you'll want to know which levers to pull to build your brand's value. Fortunately, several pathways can lead to stronger brand equity. Let's explore each one through the lens of successful brands that have mastered these elements.

Brand awareness

When people instantly recognise your brand, you've cleared the first hurdle toward building equity. Take Greggs, for example. They've become such a beloved British brand that people get excited just hearing about a new store opening. That's powerful brand awareness working in their favour.

Brand associations

Costa Coffee is a brilliant example here. When people think of Costa, they often think of comfortable chairs, friendly baristas, and that familiar red cup. These positive associations didn't happen by accident - they were carefully built over time.

Perceived quality

This is about how good customers think your products or services are. It's why people believe German cars are well-engineered, or Swiss watches are precise. The quality doesn't just have to be about the product itself - it can be about the whole experience.

Brand loyalty

Brand loyalty is when customers stick with you through thick and thin. Imagine a local café where the owner knows your usual order and asks about your family. That personal touch creates loyalty that makes customers choose you over the big chains, even if you're a bit pricier.

Proprietary assets

These are the unique things that only your brand owns. Think of McDonald's golden arches or Cadbury's distinctive purple packaging colour (yes, they actually owned the rights to that specific shade for over two decades!). These assets help make your brand instantly recognisable.

Components of brand equity

Brand equity might come from many places, but it can also take many forms. Regardless of the form it takes, brand equity is a combination of factors that contribute to its overall strength and value.

Customer-based brand equity (CBBE)

CBBE means what's going on in your customers' heads. For someone to love your brand, you need to build pleasant experiences around it. Every interaction counts - from how your website works to how your staff treats them.

Market-based brand equity

Market-based equity looks at how well your brand performs in the market compared to competitors. This component focuses on the brand's performance relative to competitors across various market metrics. It includes distribution power, shelf space allocation, bargaining power with suppliers, and the ability to attract strategic partners.

Financial-based brand equity

Financial-based brand equity translates brand strength into monetary terms. This component measures the financial value that the brand generates above what an unbranded product would achieve. It encompasses premium pricing potential, cost savings from marketing efficiencies, and the brand's contribution to company valuation.

It also includes the brand's impact on customer lifetime value and reduced customer acquisition costs.

The interplay between these three components creates a comprehensive picture of brand equity. Success in one area often catalyses improvements in others, creating a virtuous cycle of brand strength.

How to build brand equity

Now that you understand the theory, let's roll up our sleeves and get practical. Building brand equity takes time and dedication, but these proven strategies will set you on the right path. This isn't a quick fix - it's a long-term process that requires dedication and consistency.

Consistency in branding

Your brand should feel the same everywhere people meet it - whether that's your website, social media, or in-store experience. Consistency builds trust over time. It's like meeting a friend who always behaves the same way - you know what to expect and feel comfortable with them.

Your brand voice, visual style, quality standards, and service approach should stay steady across all touchpoints. Now, that doesn't mean never changing. Instead, it means making thoughtful changes that align with your brand's core values and personality.

Creating an emotional connection

Building emotional connections with customers is crucial. Here's how you can do it:

• Tell authentic stories about your brand
• Support causes your customers to care about
• Create memorable experiences
• Listen and respond to customer feedback
• Show the human side of your business

Delivering value through quality

Quality isn't just about your product - it's about every single touchpoint with your customer. When people know they can count on you to deliver excellence consistently, they'll keep coming back.

Remember that quality includes both the tangible and intangible aspects of your brand. The actual product or service quality matters, but so does the quality of customer service, packaging, delivery, and after-sales support.

Providing excellent customer experiences

Every interaction is a chance to strengthen your brand. Look at how John Lewis has built its reputation on outstanding customer service. Their "never knowingly undersold" promise and hassle-free returns policy have made them a trusted name in British retail.

Innovating and staying relevant

You must keep up with the times while staying true to your core values. Pay attention to trends in your industry, but don't chase every new fad. Focus on innovations that genuinely add value for your customers and align with your brand's purpose.

Keep learning from your customers about what they want and need. Use their feedback to guide improvements and new offerings.

How to measure brand equity

You'll want to measure your results to see if the efforts are paying off. Here's how to do it:

Quantitative metrics

These are the numbers that tell you how you're doing. Track things like:

• Net Promoter Score (NPS)
• Customer lifetime value
• Brand recall rates
• Market share
• Price premium

Qualitative metrics

These help you understand the why behind the numbers through:

• Focus groups
• Customer interviews
• Social media sentiment
• Customer feedback

Financial metrics

Look at:

• Brand valuation
• Revenue growth
• Profit margins
• Market share trends

Survey-based approaches

Market research surveys are an effective way to gather customer insights. SmartSurvey provides powerful tools to create and distribute professional surveys that measure brand perception and equity. Our platform makes it easy to collect and analyse customer insights that drive brand strategy

Brand equity survey questions

Surveys are especially effective in gauging customer perception of your brand and its equity. However, you have to design them carefully to get accurate results. First, keep your surveys focused and user-friendly. Ask clear questions that measure specific aspects of brand equity, and make sure they're easy to understand and quick to complete.

Try questions like:

"How likely are you to recommend us to a friend?"

"What words come to mind when you think of our brand?"

"How would you rate the quality of our products compared to competitors?"

"What makes our brand different from others?"

Upon receiving the responses, it's crucial to analyse the surveys. Look for patterns in your survey responses. Pay attention to both the numbers and the comments. Use this information to make improvements and track changes over time.

Wrapping up

Building brand equity takes time, effort, and consistent dedication to create a brand that people truly value. But the rewards - customer loyalty, premium pricing power, and market leadership - make it worth the investment.