When presented with a number and said that it represents the value of a certain company, we all know what it means. But when talking about brand equity, very few people understand what it's all about. So today we're going to dive into the world of brand equity - what it is, why it's important and how you can measure it for your brand.
What Is Brand Equity?
Brand equity refers to the value your company gains from your brand's recognition. This can also be applied to products and/or services. In that case, brand equity refers to the value you gain from branding that particular service or product. In simple terms - brand equity is the perceived value of your brand by the customers.
Read also: Understanding brand equity
Why Should You Care About Brand Equity?
To answer this question, we're going to ask you to think of a soda drink. Chances are your first thought would be Coca Cola, Pepsi or Sprite. And that's because they have higher brand equity than other brands. And even if a soda made by another brand tasted the same and cost the same amount or even less - potential customers would likely choose Coca Cola at the store anyway. This is the power of brand perception. Positive brand equity can be directly linked to more sales, higher customer loyalty and, overall, higher profits. So if you never cared about brand equity research - it's time to start doing that.
How To Measure Brand Equity?
When someone wants to measure the value of a company, it's easy to come up with the monetary amount that company is worth. When it comes to measuring brand equity, things are a little more complicated. That's because brand equity is tightly connected to brand awareness, brand perception as well as the customer experience and many other factors. That's why you will often encounter terms like "positive brand equity" or "negative brand equity".
The truth is that it's hard to evaluate how much of your revenue or growth can be attributed to brand equity specifically. But that doesn't mean it's not worth it. Brand equity research will give you a better understanding of the overall market, your target audience and their needs. So, how can you find out what your own brand equity is?
Read also: Bigger marketshare with brand research
4 Elements Of Brand Equity Research
There isn't a single, clean formula for calculating brand equity. But there's other metrics you can measure to determine your brand equity. Here's the 4 elements your brand equity research has to take into consideration:
Brand Awareness & Perception
When it comes to brand awareness and perception, the best way to measure that is through brand equity surveys, focus groups and consumer interviews. However, even those often cannot provide hard, quantitative data, so there's other methods to measure your brand awareness:
- Search volume for your brand/products or services
- Social media mentions and reviews (based on brand monitoring from social media platforms and the search engines you can evaluate the mentions to determine the percentage of positive and negative sentiment)
When it comes to market research, the important thing is to include both unaided awareness as well as aided awareness. The former is when your brand is the first brand on consumers' minds with no outside help when they think of your industry. The latter is when you only enter customers' minds when asked for a specific brand from a niche or a recognizable name. The best way to include both is by conducting interviews or focus groups.
Market Research & Competitors' Research
The next element of brand equity research is taking a look at your brand versus the competitors. Of course, the metrics in this area are affected by multiple factors but they also have an impact on your brand equity. To understand how well is your brand doing against other brands on your target market, focus on these metrics:
- Market share (do you dominate your niche?)
- Price premium over competitors (how much more are customers willing to pay for your product vs a similar one by some other brand)
When it comes to brand research, looking at the overall landscape is a crucial element, because it helps you understand brand positioning and how well your brand fulfils customer expectations.
Read also: The secrets behind brandbuilding
Brand Loyalty
The next very important element of measuring and understanding brand equity of your company is determining how loyal your customer base is. High brand loyalty is tied to high brand equity and is a sign that your brand is successful and loved by consumers. Here are the top metrics that provide valuable data on your consumers' loyalty:
- Customer Lifetime Value (CLV is a metric to help you evaluate how much revenue a customer is bringing for your business during their entire experience with your company)
- Number of returning customers
- Number of referrals (if you have a referral program you can track how many customers are using it and making referrals to their friends and family)
Financial Metrics
And lastly, to truly measure a specific brand's equity, you need to look at some financial metrics. After all, brand equity and brand performance have a direct impact on sales and revenue. The reason brands like, for example, Apple or Starbucks can charge more for their products is because they have positive brand equity and consumers value their products over other brands'. So to understand how brand equity is impacting your brand's performance, look at these metrics:
- Price premium over competing brands
- Profit margin (positive brand equity will allow you to increase profit margins over time)
- Sales volume
- Customer acquisition cost (brands with a high brand equity will have an easier time acquiring consumers and will, therefore, have lower customer acquisition costs)
Monitoring Your Brand Value Can Make A Major Difference For Your Business's Success
The key objective of measuring brand equity is to, in the end, drive more consumers to your business, increase sales and secure more profit. Conducting a single brand equity survey won't do the trick but it's a good start. Your brand's value and how it's perceived by consumers on the target market should be a top priority for your marketing and sales team.
If you're looking for a 360 market research solution that will help you get an overview of the target market, the customer feedback and your overall brand value - check out this example report by brandr. It also includes actionable insights that you can start implementing right away. To request your own brandr report - contact us and we'll get back to you right away!
