What is your brand equity?
It’s not how much profit you earned this year, although it definitely contributes to it. It’s not the value of your company assets nor the revenue. It’s something more intangible but even more important. It’s how much your brand is worth. Positive brand equity can be the difference between a failing company and a successful company so let’s have a look.
What exactly is Brand Equity?
Brand equity is the value that your brand delivers to your company. You already understand that your brand is an intangible feeling that your customers have about you. You can’t exactly control what your audience says about you, but through your brand strategy you have directed the conversation and your audience have favourable and positive emotions towards your business.
So how does my brand deliver value to my business?
Let’s say that you make widgets. Company X also makes widgets. Your widgets are fairly comparable re quality but you have a stronger brand. Mrs Brown wants to buy a widget – she looks at both and her feeling is that she recognises and trusts your brand more. You immediately gain in two ways.
1 – she chooses your widget over Company X’s widget and you get the sale.
2 – she trusts your company so much she is willing to pay £5.50 for your widget rather than £5 for Company X’s widget.
So your brand delivers value to your business:
♦ by putting you front of mind when a prospect has to buy your product or service
♦ means you can charge premium prices for your service
♦ lowers marketing costs
♦ can help negotiate lower costs when dealing with your suppliers (remember- you should be extending your brand strategy to dealing with your business partners too).
Positive v Negative Brand Equity
All of the above benefits can only happen if your brand equity is positive. Mrs Brown is still looking for a widget. If she goes for the cheaper generic store widget because either she’s not aware of your brand or even worse, she knows about it but not in a good way, then you’ve got negative brand equity.
Negative brand equity can be the result of a poorly devised and/or executed brand strategy or the total absence of any brand strategy. There are even times when it comes from one poorly handled incident or situation. Things like environmentally disastrous oil spills by oil companies or reading the market wrong (pink pens for ladies anyone?). But it can also arise from the more mundane – bad customer service or poor post-purchase advice. This is why keeping a tight control on the experiences your customers have at every touchpoint is vitally important to ensure that your brand equity is always positive.
The advantages of a family branding strategy
This is when you leverage the positive equity you have in your brand to expand into other products or services. Your widget brand is going great guns, so you decide you’re going to expand into making grommets. Mrs Brown loves your widget brand so when she needs to buy a grommet she’s more than happy to continue her business with you and buy your grommet.
The positive equity of the world’s most valuable brand
Apple is widely considered the most valuable brand in the world and has amassed huge amounts of positive brand equity. They’ve used this to extend their brand from the original Apple computers through to phones, tablets, watches, streaming music etc. As a result their annual revenue has quadrupled in the past 10 years. You may not want to be the next Apple (or maybe you do!) but you can certainly look to them as a fantastic example of brilliantly conceived and executed brand strategy.
How do I improve my brand equity?
By using a brand strategy. You need to decide on the essence of your business and the emotions that you want to evoke in your audience. You have to ensure that the experiences of your customers and prospects are in line with your essence and emotions. You need to continually evolve your brand to ensure it is always relevant and can endure. And you must make sure that you are always executing your brand strategy in the best possible way.
I have good positive brand equity, what next?
Eh you keep going. Your brand strategy is never going to be a set and forget process. So if you want to maintain your positive brand equity you need to make sure that you are continually working on your brand strategy.
This article completes a set of articles on the 7 Es of branding – a proprietorial framework that we have developed at Frejz to help you develop your unique brand strategy.
Understanding the value of your brand and building positive brand equity are important steps when you require investment to expand your business. At frejz.biz/invest we help you to prepare and find the right investors for your business and can combine investor readiness coaching with brand strategy consultancy.
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