Brand Equity | A Complete Guide

What does brand equity mean?

Brand equity in simple terms refers to the value that a brand holds in market. It is measured by the consumers perception about a particular brand in the market. Which means if a particular brand has higher preference or is more like able in the market it stands for higher brand equity. Whereas lower is just the opposite of this. Sometimes a particular brand is not known to anyone and hence it can be said it has zero or bad brand equity.

According to Philip Kotler “Brand Equity is the added value endowed on products and services. It may be reflected in the way consumers think, feel and act with respect to the brand. As well as in the prices, market share and profitability the brand commands for the firm”.

It is an asset when brand equity is at its high. It is kept under the category of intangible asset with Goodwill etc and liability when the it is low.

Factors affecting brand equity:


Do I know a particular product is the first question that comes in the consumer mind while purchasing even a little product.


It stands for how much is a particular product relevant to a consumer or what importance does that carry in consumers life.


If a particular product is opted how much will it be Advantageous and what all purpose does it solves.


While evaluating a brand equity from consumer’s end, performance of it in the past plays a vast role


Bonding with the consumer is the utmost factor responsible for a good or a bad brand equity. i.e Good bonding with the consumer stands for good brand equity.

Ways to enhance Brand Equity:

Although there are several articles published about how to enhance it. But before than looking at the ways to enhance it. It will be worth it to keep some points in the mind and then strategies accordingly.

Identity (Who are you)

Meaning (What are you)

Response (What about you)

Relationship (What about you and me)

Undoubtedly in enhancing the brand equity relationship plays a major role. It is one the most important factor which enhances it. It provides the connect which takes a particular brand from it’s low to high.

For example: A person goes to a grocery shop and asks for TATA salt instead of asking for salt. Imagine the kind of relationship TATA has with his consumers.

Several measures that can be followed to increase a brand equity are:

Brand awareness: Proper understanding of the brand is important for the it to get revolutionize. Which means that a good understanding of the product/ services should be in the market.

Brand association: In this a product and brand should be so tightly associated that the consumer do not look for product but instead looks for a brand. Last example of TATA salt shows such a kind of association.

Logo: Is one of the assets and it’s one the things that is unique. It is what determines a particular brand in the market. So a lot depends on logo when it comes to brand equity.

Brand ambassador: As it might had already been seen that some firms use popular and known faces like actors etc to advertise there brand. They either pay them accordingly in return of it or it can be done as a social welfare also at times. This is is usually done to increase the consumers perception about a brand from the Goodwill of the ambassador.

Brand loyalty: How much has the brand been loyal towards the consumer is what determines it. Once the brand starts being fit under the expectation of consumer, consumer wants to save himself from the drama of repeating things over and over and hence he becomes loyal to that particular brand.


Importance of knowing the value of brand equity:

It has been seen and proven at various places that brand equity plays an major role in price structure. In particular, firms are able to charge price premiums that derive from it only after controlling for observed product differentiation.

Few marketing researchers have made statements such as “Brands are one of the most valuable assets a company has”. It is taken as the most important factors which can increase the financial value of the brand to the brand owner. It is also vital as it is the foundation of various marketing and business strategies. Hence, it is very important understand its foundation and conceptual algorithm also.

How does brand equity differ from brand value?

Although they both are educated estimate of how much a particular brand is worth but they are not the same terms.

Brand value is the estimate of how much a particular brand is worth. It can also be looked as the price which a person will pay to buy that brand from you. Calculating brand value is not that difficult as it is a measure of all the assets and liabilities of a firm. It’s the worth of those in the market.

Brand equity is a consumer’s perception about the brand. Hence for calculating it one need to step in the shoes of the consumer and calculate it being from there. Hence, it becomes a difficult task to calculate. Many experts have formulated charts and tables that can help in calculating it. But one cannot completely rely on any of those sources to calculate it as it is market’s perception about your brand.

Long term benefits of having a positive brand equity:

Having a positive brand equity is not only helpful for an existing product to flourish. But other products can be added if need arises and the product line can be increased. Existing brand equity plays the role of backup support for the other product to revolutionize in market. Many existing firms are using this technique and increasing their reach.

Let’s say that BMW a firm with a good brand equity in automobile sector thinks of jumping into a new sector. Thinking about this you might have already got an idea of what a good brand equity can do to you.

How to measure brand equity?

Which is a strong brand among Apple, Samsung or Nokia? How do you and I calculated it?
There is no perfect framework for measuring brand equity which can be followed as it is a consumer perception about a particular brand in the market.
Organization consider measuring this important as it is a base of various strategies formulated in the firm.
Therefore there are various general metrics that firms follow to measure brand equity.

Customer mindset metric

This can be done by keeping in mind various factors like brand loyalty of the consumer, brand awareness of the particular brand.

Local market perception metric:

Knowing how well is your brand doing in the local market is the most important thing to consider while one is measuring the brand equity. After doing this, business can get an idea about what is the point one is missing.

Financial metric or the output metric:

In this, one can have an idea of brand equity by knowing the inputs of the company and what output are they getting
based on that inputs.

Competition metric:

How well are you doing as compared to your competition in the market gives you an idea about how and what should be done to uplift an brand.

To sum up all of this I would like to mention a well said line by marketing guru Tom Peters about this “In an increasing crowded market place only fools will compete on price. Winners will find a way to create an everlasting impression in consumers mind”.



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