Earlier this month we discussed the difference between brand and identity—with brand essentially being the relationship that a company has earned with its audience over time. But what about brand equity? Here is a look at the meaning of brand equity and why brand equity is such an advantageous thing for a company to have.
“Brand equity” defined
As you’ll remember from our brand versus identity post earlier this month, a strong brand is something that a company earns over time using a delicate combination of marketing, public relations, design, naming, and more. The term “brand equity,” then, refers to just how strong this brand is, and just how strongly that brand can influence a consumer’s purchasing decisions. Wikipedia describes it as “the value of having a well-known brand name.” You can actually apply a figurative value to the definition of brand equity, as the term, more specifically, refers to how much more money consumers are willing to spend on a product from a brand name that they know rather than from a brand name they are unfamiliar with.
Have you ever stood in the medicine aisle at your grocery store deciding on which brand of ibuprofen to get, only to go with Advil because it was a brand name that you knew and trusted? You probably even paid more for that Advil than you would have paid for the generic store brand of ibuprofen. This is an example of how brand equity (in this case, Advil’s brand equity) influenced your decision on which brand of medicine to buy.
What does brand equity mean for your business?
Having strong brand equity is important, firstly, because means that you have the power to rise above your competition. If, hypothetically, two companies both sold the same exact duffle bag, and the only difference between the two companies was that Company A had more popularity and more recognition than Company B, chances are that Company B would sell more duffle bags. Why? Because consumers have a tendency to go with names they know and trust when making purchases—it’s as simple as that.
Another added power that brand equity carries is that it can help make your marketing dollars go further. As your advertising works to build your brand and strengthen your identity, your name will start to be remembered by consumers. And once consumers are beginning to remember your name when making purchasing decisions—without being prompted to at the point of purchase—your name is beginning to speak for itself. At this point it’s almost as if it’s your brand and identity doing the marketing rather than the dollars you’re spending on advertising. Still, advertising will always be important for keeping your brand engaging and relevant.