When you’re considering both accountants and marketing professionals also include certain intangible assets when they calculate the value of a business. Whether they refer to it as “goodwill” or “brand equity”, the effects of a great brand will always be reflected in a company’s books. There is a bit of confusion about what makes up brand equity and what it contributes to a business’s bottom line. This article will help you understand the concept of brand equity and explain how to build and maintain it.
Strictly speaking, brand equity is the sum of assets and liabilities that are associated with a business’s brand name. It is a reflection of the relationship customers build with the brand. Marketing experts believe brand equity has six components.
The first step in establishing brand equity is creating awareness of the brand. This means customers know what the brand is and are able to associate it with certain product categories.
The goal of the brand association is to make customers associate brands with certain key attributes. For example, if you manufacture and market sports apparel, you may want to associate your brand with talent, competitiveness, and brawn.
This is the sum total of your customer’s experience with your brand. When you are able to provide quality products or services, they will start preferring your brand over others.
A brand is a promise, and quality is the way your company fulfills that promise. Customers compare different brands in terms of the quality of similar products.
Customers tend to be loyal to brands that they think offer them the best quality compared to similar products. This results in repeat business and helps reduce the market cost.
Once a brand has established loyalty, it can then capitalize on that preference to charge more for the same type of products.
Now that we’ve defined what makes up brand equity, we can determine why brand equity is important to businesses. Good brand equity has four main effects on your business.
You don’t build a brand overnight. Good brand equity is the result of years of hard work, research, and strategy. Building brand equity takes place in three stages.
Building brand equity won’t have apparent benefits right away. However, if you keep plugging away at it, you’ll see its effects in the form of customer preference and public perception. Maggi, the Swiss manufacturer of instant soups, is one brand that took good care of its brand equity. The brand is very popular in India, where customers consumed over 400,000 tons of Maggi products in 2014. Not even a food safety scandal could wean consumers away from the brand. In 2015, the Indian government banned nationwide sales of Maggi products due to high MSG content. Maggi kept up its marketing efforts and brought itself back to the shelves before the end of the year.
If your organization does not take care of its brand equity, two things could happen. First, customers could be antagonistic towards the brand. First, they could express their dislike of the brand openly. Alternatively, people can stop caring about your brand, which is worse. One illustration of a brand not taking good care of brand equity is BuzzFeed. Many feel that the brand jumped the shark when one of its email campaigns sent out a newsletter titled “Hi, You’re Fired”.The email contained a link about people who failed spectacularly at work. The newsletter title seemed like a good idea at the time. However, it also led to numerous people getting upset, including BuzzFeed’s own staffers.
The rise and fall of BuzzFeed. Chart from Trackalytics. The “Hi, You’re Fired!” email newsletter also foreshadowed a string of layoffs within the company itself — BuzzFeed cut 100 jobs in 2017 and daily pageviews also dropped from a high of 36 million to just 8 million. It is very crucial to follow the right email marketing practices, especially when the brand name is at stake.
Brand equity is often overlooked, underestimated, and unnoticed, especially since its value is not immediately apparent. But, as we’ve seen in the examples we’ve given in this article, it is one of a company’s most important assets.