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Branding

Strategy

planning

marketing

What Is Brand Equity? (+5 Ways to Build Yours)

by Ameer Drane

In a way, you already understand brand equity. But you may not know it. 
It’s the reason you’re willing to spend more money on branded pain medications like Tylenol or Panadol even though you could get the same thing - albeit from a generic brand - for less. 

We’re not judging. We do it too. But why? 
Well, that’s the power of branding. We pay more for the brands we recognize and trust. And brand equity is how we talk about that extra value a strong brand brings to a business.

Of course, there’s more to know than that. 
So, let’s dig a little deeper into the term brand equity, why it is important for your business, and 5 things you can do to build yours. 

What is Brand Equity? 

Marketers use the term brand equity to describe the value of a brand.
A company’s brand equity has three components:

  1. Consumer perception - what consumers believe your brand represents 
  2. Positive or negative effects -  the overall reputation of your brand 
  3. The resulting value - the financial value that the brand generates for your company 


Having positive brand equity is an important goal to have for any business because it comes with far too many benefits that you won’t want to pass up. Let’s take a look now at what those benefits are. 

Benefits of Positive Brand Equity 

We’ve already discussed one of the most notable benefits of having positive brand equity at the beginning of this post. Do you remember? If not, let us jog your memory. 
Yep, it’s that you can charge consumers more - even when there are comparable (e.g. generic) products that sell for much less. 
But that’s not the only benefit. So, let’s look at what else having a positive brand equity can do for your business: 

Higher Profit Margins 

You likely already figured this one out. But companies with positive brand equity have higher profit margins. Just because your prices are set at a premium rate that doesn’t mean your production costs have gone up. In fact, the quality of your product and the cost of production may be exactly the same as the generic alternative. 

Customer Loyalty and Retention

A positive brand reputation strongly influences the likelihood of customers continuing to buy from your business. In turn, this also affects how willingly your existing customers will be to trust new product lines or extensions from your brand.     

Increased Success for New Product Lines 

If a consumer grows to trust your brand, they’re likely to extend that trust to whatever new product or services you attach to your brand name. That means positive brand equity can help you easily enter new markets, quickly build recognition and loyalty, and beat out competitors -- all while still being able to charge premium prices. 

A Boost in Your Company’s Stock Price 

Along with profit margins and retention rates, companies with positive brand equity are more likely to experience an increase in stock prices. This is in part due to investors having increased trust that strong brands will continue to perform well.  

5 Ways to Build Brand Equity 

So, now that you know exactly what brand equity is and why it’s important for your business, it’s time to look at those ways you can improve consumer perception and build positive brand equity.  

1. Improve Your Customer Experience 

Your customers may not care about price as much as you do. But they definitely will care about how your business treats them. According to Econsultancy and Adobe’s 2020 Digital Trends Report, 86% of buyers are willing to pay more if they have a great customer experience. 
The customer experience also influences how people will talk about your business. Your customers who have a positive customer experience with your brand will tell an average of nine people. But they’ll tell an average of 16 people if they have a negative customer experience. 

2. Be Consistent with Your Brand Image

Making sure consumers can easily recognize your brand is important in establishing a positive reputation. So, be consistent with things like where and how you display your brand image. According to a study by Lucidpress, consistent presentation of a brand has been seen to increase revenue by 33%

3. Share The 'WHY' Behind Your Brand

These days, many consumers don’t just want to know what you sell. They also want to know why you sell it. By sharing the story behind your brand or, as Simon Sinek refers to it, your brand’s WHY, you begin to establish relationships and build trust with your customers. One study found that nearly 80% of consumers want brands to tell stories as part of their marketing. 

4. Speak to Your Target Audience’s Values 

In addition to wanting to know the story behind your brand, consumers also want to know if they can identify with your brand. To know for sure, they will begin to evaluate your brand messaging to see if your values and theirs line up. Check to make sure that you’re communicating with them in ways that reflect your shared values. According to the Havas Group’s Meaningful Brands report, 77% of consumers buy from brands that share their values.

5. Build a Community Around your Brand 

Creating a space for your target audience to come together is one of the best things you can do for your business. Why? Because when consumers feel like their part of a community, they are more likely to become loyal advocates of your brand. By building a brand community, you can also reap other benefits like useful feedback and ideas, user-generated content, and PR opportunities - which can all help to boost your brand equity. 

An Example of Positive Brand Equity 

Think of the companies you know and love. It’s quite likely that they all have positive brand equity. That’s because successful companies have put a lot of time and consistent effort into building the value of their brand. 


One of the best examples of a company with positive brand equity is Apple. 
Although this Silicon Valley tech company entered the market as a producer of Mac computers, its consistently positive reputation has made it easy for the brand to extend its product line to phones, MP3 players, watches, TVs, and more. 


The Apple brand is also distinct in the minds of consumers. It is sleek, innovative, convenient,  dependable, and has built a reputation of over-delivering on its commitment to its customers. In 2019, Forbes valued Apple’s brand at $205.5 billion.

Key Takeaways

Positive brand equity is important to build and maintain the success of your business. 
Your company’s brand equity has three components:

  1. Consumer perception - what consumers believe your brand represents 
  2. Positive or negative effects -  the overall reputation of your brand 
  3. The resulting value - the financial value that the brand generates for your company 


By building positive brand equity, your business will benefit from: 

  1. Higher profit margins 
  2. Customer loyalty and retention 
  3. Increased success for new product lines 
  4. A boost in your company’s stock price


To build positive brand equity, you can: 

  1. Improve your customer experience
  2. Be consistent with your brand image
  3. Share the WHY behind your brand
  4. Speak to your target audience’s values
  5. Build a community around your brand


Now, go start building a brand you and your customers will love! And, if you want some help really perfecting your brand strategy, reach out to schedule a free consultation with our creative team.







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