Brand equity: measuring, building & maintaining

Brand equity is the extra value a business gets from a product with a recognizable name, or high brand awareness, compared to the generic alternative. It can be broken down into three basic components: brand perception, the effect this perception has on your company, and the value of that effect.

With strong brand equity, a business has an easier time retaining customers, charging a premium for products, and launching new products to a receptive market. In fact, 60% of people would rather make a purchase from a familiar brand than from a brand they don’t know or like.

Let’s take a closer look at why brand equity is important, some examples of brand equity, and the most well-known brand equity model. As you work to build your own brand equity, surveys that measure brand awareness, brand perception, and brand loyalty can help you track your progress and improve your approach.

What makes brand equity work is customer brand perception, whether that perception is positive or negative, and the resulting value that comes from all of that. And that value can be both tangible and intangible. Let’s look a little closer at these components:

Brand perception derives from the thoughts and feeling consumers may have about your product or service. That perception will have an impact on your brand. A person needs to have invested in your business before forming an opinion. On the other hand, they don’t need to purchase anything to form an opinion about your brand. Brand perception is all about how people see your brand, which can be through what they’ve heard and how it’s represented.  

How your business is perceived can have a positive or negative effect that reflects in a tangible and intangible way. The positive impact of an intangible effect will manifest through customer satisfaction resulting in referrals and repeat sales. And this increase in sales through customer loyalty results in tangible proof of higher revenue and profits.

Through higher sales due to customer loyalty, the resting value of a brand can also increase. The resting value determines the worth of your brand equity. If you achieved a high level of customer loyalty, chances are they value your brand to be the best in the market. If this is the overall consensus of all your customers, then you can afford to increase the monetary value of your products or services and still maintain customer retention.

When customers like your brand, they’re loyal to your products. A brand that inspires brand loyalty and repeat business can make sales without having to constantly convince new customers to buy its products. And because it costs 5 times more to acquire a new customer than it does to retain an existing one, businesses with a loyal customer base spend less money on marketing per sale.

It costs the same amount for businesses with and without brand equity to bring a product to market, but a business with brand equity can charge more for its products (and fetch a larger profit on each sale) without spending more on product development.

Take Heinz ketchup, which controls 60% of the ketchup market in the United States. Heinz costs about 60% more than a generic store brand like Great Value, but as long as the company has solid brand equity, it can charge that higher price and still make more sales.

If a customer is willing to pay more for a generic product than a brand name product, that brand has negative brand equity. This can occur after a major product recall or a well-publicized business scandal. For example, many people avoided purchasing financial products from Goldman Sachs in the period right after the financial crisis of 2007-2008.

Brand equity is valuable for product launches too. A business with brand equity will have a much easier time expanding its product line than a business without brand equity, since people are more likely to purchase an unfamiliar product from a familiar brand. In fact, more than 20% of people have purchased a new product because it was from a brand they liked and 15% of people have purchased a new product because it was from a well-known brand.

Tylenol, for example, has launched many successful products—including Tylenol Extra Strength, Tylenol Cold & Flu, and Tylenol Sinus Congestion & Pain—under the same brand name. Companies with brand equity, like Tylenol, will often sell their products under a single brand name, while companies without brand equity will sell products under multiple brand names. This is because once a company has established brand equity, the success of one branded product can translate to other products under the same brand name.

Brand equity is a clear indicator of a business’s strength and performance, especially relative to its competitors. If you prioritize shaping how customers think and feel about your brand, you’ll set your business up for long-term success.

Customer-Based Brand Equity (CBBE) is based on the idea that customers’ attitudes toward your brand have a direct impact on your brand’s overall success. The most well known CBBE model was devised by Kevin Lane Keller, Professor of Marketing at Dartmouth and author of Strategic Brand Management.

The Keller brand equity pyramid breaks the development of brand equity into four sequential stages—brand identity, brand meaning, brand response, and brand resonance—which build on each other to support a positive customer perception of your brand.

1. Brand identity answers the question “Who are you?” and includes the most visible elements of your brand, such as your name, your logo, your color scheme, and your brand voice. These basic elements help people identify and remember your brand, which builds brand awareness and distinguishes you from the competition.

2. Brand meaning is the expression of your brand values, which make up the value proposition you offer your customers. A clear value proposition helps customers understand exactly what they’ll get when they do business with your brand. Brand meaning is the answer to the question “What are you?” and is expressed in two ways:

3. Brand response answers the question “What about you?” and is the way customers react to your brand once they’ve made a purchase. Some customers will become brand advocates by sharing their positive customer experience, while other customers might become brand detractors by sharing a negative experience. Their experience, or brand response, will generally fall into two categories:

4. Brand resonance is the strong relationship a customer forms with your brand over time. It’s what happens when a customer is loyal to your brand, advocates for it, and won’t consider buying any other. When your brand resonates with customers, they want to share their positive experience with as many people as possible, which drives more sales than any other type of marketing. Brand resonance answers the question “What about you and me?” and is the ultimate goal for any business looking to build brand equity.

Here are some examples of positive brand equity: 

Starbucks achieves international success with its coffee. Because it reached a high volume of positive brand perception, Starbucks can afford to sell its coffee at a premium price. An attribute of having a positive brand perception is trust. Establishing trust with consumers allowed Starbucks to expand its products and services into retail spaces and partner with other businesses to sell their brand. 

Apple sells its products at a premium price due to its technological innovation that, in turn, drives the quality. They were already a household name because of their PC, but the iPhone's success led Apple to launch other products in that line like the iPad, Airpods, and the Apple Watch. The success and popularity of its products allowed the company to maintain premium pricing on all of its products and streaming services.

And here’s some examples of negative brand equity:

Tide is one of the top-selling detergent brands, but when they introduced their Tide Pods, the younger generation took to social media, consuming it and hashtagging it the “Tide Pod Challenge.” This stunt is an example of consumer perception being out of the company’s control, but still negatively affecting its image resulting in a reduction in sales and more money spent toward repairing its brand image. 

McDonalds’ “Super-size” campaign offering a larger portion of french fries and soda backfires when an independent filmmaker produces a documentary about the negative health hazards the company’s food has on the human body. It wasn’t too long after the documentary when McDonalds began promoting healthier food options on their menu. 

Since brand equity is all about customer perception, building brand equity centers on shaping how customers think and feel about your brand. The more customers recognize and trust your brand, the stronger your brand equity.

Here are 3 steps you can take to build brand equity:

Once you have a handle on the definition of brand equity and the stages of the pyramid, you’ll want to track and measure your brand equity. One way to do this is by surveying your target market or customer base at each stage of Keller’s brand equity model. Run surveys 2 to 4 times per year to measure the impact of your initiatives, identify your brand’s strengths and weaknesses, and see how you stack up against competitors. 

By frequently surveying your target market and customers, you can ground your brand equity initiatives in real data about brand perception, impact, and value.

Once you have a handle on the definition of brand equity and the stages of the pyramid, you’ll want to track and measure your brand equity. One way to do this is by surveying your target market or customer base at each stage of Keller’s brand equity model. Run surveys 2 to 4 times per year to measure the impact of your initiatives, identify your brand’s strengths and weaknesses, and see how you stack up against competitors. 

Alternatively, you can measure several of these metrics, such as brand awareness, consideration, usage, and perceptions, in one go, using our Brand Tracking solution. By frequently surveying your target market and customers, you can ground your brand equity initiatives in real data about brand perception, impact, and value.

Let’s take a look at some of the quantitative means of measuring brand equity:

For those looking to assign a numeric value to a brand, consider the following metrics:

In addition to quantitative metrics, you can measure brand equity using a qualitative approach. Two key approaches you should consider using are:

A good way to measure product value is to compare a generic product with the branded product. That’s because generic brands tend to be cheaper than branded products and more regularly available. For instance, you might ask customers about their preferences for your soap brand versus a grocery store generic brand. Brand equity is high when customers prefer your brand, in spite of higher prices, lower availability, or some other difference.

You might also consider conducting a brand audit to help better understand how your brand is performing. This is a comprehensive evaluation of your brand's position in the marketplace, its strengths and weaknesses relative to competitors and the extent to which it aligns with customer expectations and your mission and values. Undertaking a comprehensive brand audit can help you identify where your marketing is  going wrong, or any missteps you’ve taken in communicating your brand to your target audience. 

Brand equity is a clear indicator of a business’s strength and performance, especially relative to its competitors. If you prioritize shaping how customers think and feel about your brand, you’ll set your business up for long-term success. If you want to take the first step towards measuring your current brand equity, SurveyMonkey Audience can help put together the perfect consumer panel.