Branding and brand equity

The basic purpose of branding is to show a mark of ownership. This can refer to a name, logotype or trademark. However, branding has evolved over time to provide several functions other than just a mark of ownership.

Branding is now also a tool for corporate image building. Branding is symbols associated with key values of an organisation or consumer that evoke trust. Branding is a conduit by which pleasurable experiences are consumed.

On average we are exposed to a whopping 4000 brands a day! To put that into perspective, that’s about 33 brands an hour. Whether it’s like this, watch that, subscribe here, read more or buy now, it’s safe to say we have all seen our fair share of the good, the bad and the ugly when it comes to branding. So does good branding equal high brand equity?

What is Brand Equity?

Ever been in your local supermarket when suddenly you notice a brand new range of sauces, spices or seasonings from your favourite restaurant chain? How many of you would boldly wear an outlandish outfit, as long as it boasts designer labels? When your favourite tech giant launches a new range of products, how much convincing does it take to make you want it? Or is the news of a new launch enough?

So, is it the brand, or the product that you’re really buying?

Perhaps the reason we buy into brands rather than products is because as consumers we feel that by endorsing particular brands, the message or values of these brands extends to us as individuals. That’s brand equity, and it’s one of the most powerful assets a firm can have

The power of brand equity

Brand equity is the added value endowed by the brand to the product. Brands like Apple, Dyson, Nandos, Nike, Uber and Unilever are all examples of firms that regularly enter new markets by having a powerful and well recognised brand, or corporate portfolio of brands. Recently, the power of branding has become one of the major areas of focus for firms due to its major role as a significant intangible asset.

It could be argued that market differentiation resulting from strong brand equity is likely to positively influence the financial performance of a firm and its business units while helping minimise entry barriers for firms looking to extend into new markets.

We can conceptualise brand equity as a set of brand assets and liabilities linked to a brand, its name and symbol that add to or subtract from the value provided by a product or service to a firm and/or to that firm’s customers.

Brand equity can be categorised into three main perspectives

1.The Financial perspective 2.Consumer perspective 3.Employee perspective

The Financial perspective

The financial perspective is focused on stock prices or brand replacement, and can be defined as the incremental cash flows which accrue to branded products over and above the cash flows which would result from the sale of unbranded products. Essentially, brands with  higher brand equity can charge a higher premium for their products. 

The Customer perspective

Consumer-based brand equity occurs when the consumer is familiar with the brand and holds some favourable, strong and unique brand associations in their memory that influence their decisions. This is especially the case when brands attempt to form emotional connections with consumers around events, or occasions. 

A good example of this is the John Lewis Christmas adverts such as “the bear and the hare” and “Excitable Edgar”. After continued success, many people in the UK now look forward to these adverts, they have become a part of the festive season. John lewis have successfully managed to invoke a deep emotional connection with its audience, translating to a rise in profits year on year around the festive period.

The Employee perspective

Employee-based brand equity is defined from the employees perspective and is based on the differential effect that brand knowledge has on an employee’s response to his or her work environments and cultures.

Imagine your friend graduated university and landed an engineering job with a small local business. Now imagine they graduated university and landed the exact same job, but for Lamborghini. Would you feel differently about their capability? 

Conclusion

A firm’s brand equity is an important intangible asset. Strong branding equates to consumer recognition and a notion of consumer trust and confidence. This confidence and trust translates in higher prices and premiums.

Assessing brand equity is important when a brand is transitioning or extending into new markets as it helps an organisation make more informed decisions when extending product ranges under existing brands, or through the introduction of new brands within the firm’s corporate portfolio.

For information on how we can help grow your brand equity, get in touch with us today.

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