Brand Equity Definition
‘Brand equity is defined as “the set of associations and behaviors on the part of a brand’s customers, channel members and the parent corporation that permits the brand to earn greater volume or greater margins than it could without the brand name, and that gives the brand a strong, sustainable and differential advantage over competitors” as per Marketing Science Institute 1988, cited in Chay 1991.
Brand equity is the additional brand value that a customer attaches to a particular brand due to the perception and the experiences with the brand. A positive experience will generate positive brand equity, while dissatisfying expertise will result in negative brand equity.
In simple terms, brand Equity is the loyalty, perception, and awareness of a customer towards a brand. Brand equity can be created over a period of time by offering products that give a memorable experience, excellent quality, and highly reliable products to its customers.
Brand Equity Advantages
Brand equity is important to increase the valuation of a brand. The value of a strong brand translates into number of advantages:
1. Competitive Edge
Brand equity offers a competitive edge in the market. Customers identify a brand and are loyal to a brand. This leads to improving the competitive edge of the products. When there is higher brand recognition for a company, there is higher brand equity, which automatically gives a competitive edge with other well-known brands.
2. Increase in margin
A brand can charge higher than the market price when it has positive brand equity as customers are ready to pay a premium for your brand. The additional value that customers pay in the name of brand equity will boost your profit margins.
3. Increases market share
Brand equity gives rise to brand loyalty, which makes a customer stick to a particular brand, thereby increasing the market share.
4. Business expansion
Brand equity gives the opportunity to a company to spread its business into new products and new geographies by using the positive brand name that already exists.
Brand Equity Example
Porsche is a brand with a very strong equity in the automobile sector. It has built a strong image and has built its brand equity by the use of high-quality materials as well as unique designs. Porsche has gained the image of a luxury brand and is not just a product but has become an experience. Porsche ranked second when compared to some popular brands such Mercedes and BMW.