What Is Brand Equity?

Designer clothing brands charge £500 for t-shirts made from the same cotton as cheaper alternatives. Yet people still queue up to buy them. Why? Because they perceive extra value, which we call brand equity.

The magic behind this pricing power lies in something called brand equity. But it’s not just for for-profit brands. Public sector organisations, healthcare providers, educators, and charities all benefit from brand equity too. Strong reputations earn trust, which results in loyal supporters and consistent funding or attendance.

In this guide, we cover:

• What brand equity is
• Why it matters
• How to measure and build it for your business

Defining brand equity

Brand equity transforms an ordinary product or service into something people desire and trust. When customers happily pay more for your offering simply because it bears your name, you've built valuable brand equity.

But don't confuse brand equity with brand awareness! While brand awareness means people know about your brand, brand equity means they actually value it. For instance, everyone knows about Marks & Spencer, but people choose to shop there because they trust the quality and service - that's brand equity at work.

Mind you, brand awareness is very much a part of brand equity, but they are not one and the same. We'll take a closer look at the distinction in the next section.

Why Brand Equity Matters

Strong brand equity delivers three big wins:

• Price power – people happily pay a bit more for your product.
• Loyalty – customers keep coming back.
• Resilience – you absorb market shocks better than weaker brands.

All this can boost your bottom line in the long run.

Many businesses face a natural ceiling on sales volume. Consider your local hair salon. No matter how big its reputation, there are only so many hours in a day. Brand equity, however, can help you charge more per service once those hours fill up.

Customers gladly pay more because they trust the expertise and experience your brand promises.

Sources of Brand Equity

The next question becomes: where does brand equity come from?

Business owners need to understand how to build their brand's value. Fortunately, several pathways can lead to stronger brand equity. Let's explore each one through the lens of successful brands that have mastered these elements.

Brand Awareness

Greggs demonstrates strong brand awareness. People recognise the brand instantly and actively seek out its shops. This recognition drives sales and loyalty, further supporting brand equity. Brand awareness survey template

Brand Associations

Costa Coffee is a brilliant example here. When people think of Costa, they often think of comfortable chairs, friendly baristas, and that familiar red cup. These positive associations didn't happen by accident - they were carefully built over time.

Perceived Quality

This is about how good customers think your products or services are. It's why people believe German cars are well-engineered, or Swiss watches are precise. The quality doesn't just have to be about the product itself - it can be about the whole experience.

Brand Loyalty

Brand loyalty is one of the strongest indicators of your brand equity.

Proprietary Assets

These are the unique things that only your brand owns. Think of McDonald's golden arches or Cadbury's distinctive purple packaging colour (yes, they actually owned the rights to that specific shade for over two decades!). These assets help make your brand instantly recognisable.

Components of Brand Equity

Brand equity is best understood by looking at it from three angles: customer, market, and financial.

Customer

Market

Financial

How people feel about and interact with your brand

How your brand performs against competitors

What your brand is worth in pounds and pence

Brand equity might come from many places, but it can also take many forms. Regardless of the form it takes, brand equity is a combination of factors that contribute to its overall strength and value.

Customer-Based Brand Equity (CBBE)

Customer-Based Brand Equity (CBBE) means what's going on in your customers' heads. For someone to love your brand, you need to build pleasant experiences around it. Every interaction counts – from how your website works to how your staff treats them.

Market-Based Brand Equity (MBBE)

Market-based equity looks at how well your brand performs in the market compared to competitors. This component focuses on the brand's performance relative to competitors across various market metrics. It includes distribution power, shelf space allocation, bargaining power with suppliers, and the ability to attract strategic partners.

Financial-Based Brand Equity (FBBE)

Financial-based brand equity translates brand strength into monetary terms. This component measures the financial value that the brand generates above what an unbranded product would achieve. It encompasses premium pricing potential, cost savings from marketing efficiencies, and the brand's contribution to company valuation.

It also includes the brand's impact on customer lifetime value and reduced customer acquisition costs.

The interplay between these three components creates a comprehensive picture of brand equity. Success in one area often catalyses improvements in others, creating a virtuous cycle of brand strength.

Brand Equity Models

Several bright minds have developed frameworks to understand and measure brand equity. These models help businesses track and improve their brand's value systematically. Let's explore how brands can successfully apply these frameworks.

Keller's brand equity model

Professor Kevin Lane Keller developed the Customer-Based Brand Equity pyramid. Think of it as a roadmap for building deep customer connections. Starting with brand awareness (salience), you progress through performance and imagery, then to customer judgments and feelings, and finally, reaching brand resonance - where customers feel a profound connection with your brand.

Aaker's brand equity model

David Aaker's model looks at the mental connections people make with your brand. It's about the emotions, attributes, or images that pop into someone's head when they think about you. While Keller focuses on customer experiences, Aaker emphasises developing unique brand assets like personality and values.

BrandAsset® Valuator model

If you want to put a number on your brand equity, there's the BrandAsset® Valuator model. Created by Young & Rubicam, this model measures four key things: differentiation (what makes you unique), relevance (how much people care), esteem (how much people respect you), and knowledge (how well people know you).

Comparing Models

Each model offers unique insights for different situations. Keller's model works brilliantly for building new brands or repositioning existing ones. Aaker's approach helps establish a long-term brand strategy. The BrandAsset® Valuator proves particularly useful when you need to quantify brand strength for investors or strategic decisions.

How to Build Brand Equity

Here's how to build brand equity in practice. Building brand equity takes time, but each step strengthens your relationship with customers. Let’s explore key strategies you can start using now.

Consistency in Branding

Your brand should feel the same everywhere people meet it - whether that's your website, social media, or in-store experience. Consistency builds trust because customers know what to expect from your brand.

Your brand voice, visual style, quality standards, and service approach should stay steady across all touchpoints. Now, that doesn't mean never changing. Instead, it means making thoughtful changes that align with your brand's core values and personality.

Creating an Emotional Connection

Building emotional connections with customers is crucial. Here's how you can do it:

• Tell authentic stories about your brand
• Support causes your customers to care about
• Create memorable experiences
• Listen and respond to customer feedback
• Show the human side of your business

Delivering Value Through Quality

Quality isn't just about your product - it's about every single touchpoint with your customer. When people know they can count on you to deliver excellence consistently, they'll keep coming back.

Remember that quality includes both the tangible and intangible aspects of your brand. The actual product or service quality matters, but so does the quality of customer service, packaging, delivery, and after-sales support.

Providing Excellent Customer Experiences

Every interaction is a chance to strengthen your brand. Look at how John Lewis has built its reputation on outstanding customer service. Their "never knowingly undersold" promise and hassle-free returns policy have made them a trusted name in British retail.

Innovating and Staying Relevant

Stay current with industry trends while maintaining your core values. Pay attention to trends in your industry, but don't chase every new fad. Focus on innovations that genuinely add value for your customers and align with your brand's purpose.

Keep learning from your customers about what they want and need. Use their feedback to guide improvements and new offerings.

How to Measure Brand Equity

You'll want to measure your results to see if the efforts are paying off. Here's how to do it:

Quantitative metrics

e.g. Net Promoter Score (NPS)

These are the numbers that tell you how you're doing. Track things like:

• Net Promoter Score (NPS)
• Customer lifetime value
• Brand recall rates
• Market share
• Price premium

Qualitative Metrics

These help you understand the why behind the numbers through:

• Focus groups
• Customer interviews
• Social media sentiment
• Customer feedback

Financial Metrics

Look at:

• Brand valuation
• Revenue growth
• Profit margins
• Market share trends

Survey-Based Approaches

Market research surveys are an effective way to gather insights on customer attitudes. With SmartSurvey’s UK-based hosting, advanced security features, and industry compliance, you can confidently explore how people perceive your brand.

Brand equity survey questions

FAQ: What are the four dimensions of brand equity?

According to Aaker’s model, the four dimensions are brand loyalty, brand awareness, perceived quality, and brand associations. Each dimension influences how customers perceive and value your brand.

Surveys are especially effective in gauging customer perception of your brand and its equity. However, you have to design them carefully to get accurate results. First, keep your surveys focused and user-friendly. Ask clear questions that measure specific aspects of brand equity, and make sure they're easy to understand and quick to complete.

Try questions like:

"How likely are you to recommend us to a friend?"

"What words come to mind when you think of our brand?"

"How would you rate the quality of our products compared to competitors?"

"What makes our brand different from others?"

Upon receiving the responses, it's crucial to analyse the surveys. Look for patterns in your survey responses. Pay attention to both the numbers and the comments. Use this information to make improvements and track changes over time.

Brand Equity FAQs

What is brand equity in simple terms? : Brand equity is the extra value your name or logo brings to what you sell.

How does brand equity help a business? : It boosts loyalty, lets you charge higher prices, and protects you in tough markets.

How do I measure brand equity? : Use surveys, track financial data, and monitor customer engagement metrics.

Do non-profits also benefit from brand equity? : Yes. A strong reputation helps them gain support and donations more easily.

Wrapping up

Building brand equity takes time, effort, and consistent dedication to create a brand that people truly value. But the rewards - customer loyalty, premium pricing power, and market leadership - make it worth the investment.

Making brand measurement smarter

Capturing, understanding and acting on brand feedback is vital if you want to create and maintain successful products, services and events. Find out how SmartSurvey makes market research easier and more effective.

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