Brand equity is a marketing term describing the value of a brand's image. A value is determined both by the perception and by the experiences of consumers with this same brand.
The more customers know a brand and have a good opinion of it, the stronger the brand equity. Conversely, the more disappointing the experience (delay in delivery, defective products, etc.), the more the brand equity will be negative.
Working to optimize your brand equity generates value. A company converts better and can charge more if it has high brand value. A capital that can be extended to the different ranges and products including the logo or the name of the brand.
Apple company is one of the most famous companies in the world. The company built its reputation on the quality of its Macs before extending its ranges through iPhones, iPods, etc... So many products that keep their promises and meet customer expectations - at prices... superior to those of the competition.
Conversely, the American bank Goldman Sachs is one of the most convincing examples of a brand equity deficit. A major player in the 2008 financial crisis, the bank lost all its credit very quickly in the United States.
The importance of brand equity
Improve the relationship with your customers
Brand equity is a (very) long-term investment, but the ROI can be very interesting since consumers end up being more likely to buy a product from the same brand, which they know better. By working in the long term on the notoriety of your brand, you can hope to gradually reduce your investments on Facebook, TikTok, or google ads and thus lower your customer acquisition cost.
The mere fact that the brand is known brings real added value to the product on sale. By becoming aware of this, you might be tempted to develop your brand's visibility, to the point of making it familiar. Consumers will then associate it with positives.
Increase your brand awareness
It is about five times cheaper to retain an existing customer than to acquire a new one. Companies that build a lasting relationship with their customers and promote loyalty generally achieve better long-term results.
Consumers are willing to spend more money with a brand they identify with.
Faithful, the latter do not hesitate to buy goods or products that they did not even think they needed. The concept of brand loyalty offers a real advantage to these companies which, in addition to increasing the value of their brand, take a real advantage over the competition and reduce the costs associated with marketing.
The 3 main components of brand equity
A good brand equity strategy consists of 3 points.
1. Brand perception
The concept of "brand perception" refers to the representation that a customer can have of a product or service and not of the image of this same brand, which the owner company wishes to impose.
Ultimately, it is the customer who creates the image of a brand to which he/she turns. He/she owns the perception, not the company that owns it.
2. Positive and negative effects
If a consumer reacts positively to a brand's message, their image will improve, their sales will increase, and their results will be more than positive. On the other hand, if the message conveyed by this same brand is misunderstood by prospects and customers, the observed result will be the opposite.
3. Company values
The positive effects (explained above), generate tangible and intangible value:
tangible value: improved profits, revenue
intangible value: reinforcement of the brand image, increase in global notoriety
The negative effects have the opposite effects. Take the example of Uber, the VTC service. Until 2016, the brand was relatively well regarded. But a series of scandals (sexism, espionage, etc...) impacted the image of the brand and its reputation. As a result, customers have turned to similar, safer services, with values that correspond to them.