Brand Equity: Definition, Impact, Measurement, and Best Practices - Explained with industry example

Brand equity is a crucial concept in marketing that can significantly influence a company's success. To understand its importance, we can ask ourselves a few questions. For example, are you willing to pay higher price for a pair of shoes from your trusted brand instead of buying a cheap one from some brand you have never heard of?

What is Brand Equity?

Brand equity, according to Professor Aaker's definition, is a set of assets or liabilities in the form of brand visibility, brand associations and customer loyalty that add or subtract from the value of a current or potential product or service driven by the brand. The definition highlights that brand equity is not simply a positive value; it can also negatively impact a product or service associated with the brand. It's an added or subtracted value that a brand name brings to its offerings. 

The Impact of Brand Equity

Strong brand equity can have positive impacts on a business in many ways. Trusted brands usually charge premium prices because consumers would rather pay a higher price to get reliable services and quality products. Strong brand name can also have more repeat purchases, larger order values from their loyal customers. It also makes new product launch a lot smoother for a business, and make potential competitors less possible to enter the market.

Conversely, negative brand equity can significantly harm a business. When consumers have negative perceptions of a brand, it can disrupt the entire purchase funnel at every touchpoint, leading to decreased sales, customer loss, and damage to the company's reputation. Let's take a look at a few examples when the brand equity were degraded. 

Bud Light's brand health crisis

In April 2023, Bud Light partnered with a trans influencer for a short video on social media. The video went viral and sparked anger from a lot of consumers who started to boycott Bud Light. The partnership had a significant negative impact on Bud Light's brand health, resulted in its lost of its market share to the competitors. 

If you are interested in more detailed story of this crisis, please follow me. I will write a separate post about it in the future.

US consumer's view of Bud Light

Measuring Brand Equity

While brand equity is somewhat intangible, there are several approaches to measure it. I group them into these buckets below. 

If you need consultation on how to attribute the revenue to Brand Equity using data-driven solution and machine learning, please reach out via Email. 

Best Practices for Building and Maintaining Brand Equity

Brand Equity emerges from the brand's core values, identity, responsibilities, and actions. Before cultivating Brand Equity, a business must engage in a thorough introspection. It is critical to understand your business' essence. Who are you? What principles guide you? What is your USP? What's your Unique Value Proposition? How do you distinguish yourself from competitors?

Once you have a clear self-understanding, you can present your brand to the world with consistency. Authenticity and truthfulness should permeate all channels and stages of customer interaction as you build your Brand Equity. Simultaneously, you must remain vigilant and adaptable in maintaining it. Consider these key strategies for effectively building and maintaining Brand Equity:

By understanding, measuring, and strategically building, continued evaluating, and maintaining brand equity, companies can create a powerful asset that drives long-term success and sustainable competitive advantage.

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