Your company can only go as far as your customers. If your client base shrinks, looks at what you're doing unfavourably or they start to turn to the competition, you will face an uphill battle in keeping the company afloat. But how can you actually determine the value of your company, based on the eyes of your customers? This is where brand equity comes in. Brand equity provides an assortment of valuable information, ranging from what your customers think to even how non-customers view your products and services. The more you know about brand equity, how to use it and how to properly obtain it, the better off you and your business regardless of what it is (or where it is) will be.
In short, brand equity is the value of your company's name and symbol (such as the logo). That's an oversimplification of what brand equity really is, but it should give you a basic understanding moving forward. You can break brand equity down into three individual sections, with each section made up of several smaller sub-sections. These three individual sections are:
-Brand Association (and Perceived Quality)
The value of your business begins with brand loyalty. Are customers likely to come back to your business? Beyond this, are they more likely to select your products over the competition? Brand loyalty plays a vital role in the overall level of brand equity. Brand loyalty is an important measuring stick. Apple, for example, has extremely high brand loyalty. Many of its current customers have been with the company for years and won't purchase any other products. You'll find the same is true with automobiles. The Ford F-150 has been the best selling vehicle, year in and year out, in the United States for several decades running. Customer loyalty plays a big part in that. You likely have particular brands you feel loyal too as well when you stop and think about it. Whether it's a brand of dish soap, toothpaste, clothing or dog food. For one reason or another, you've developed a strong loyalty to the brand.
There are many perks to establishing strong brand loyalty. For starters, you don't need to pump as much money into marketing. As more customers not only know of your business but are already loyal to what you offer, they do not need the constant reminding of products and the latest updates. Instead, marketing can (and should) be directed towards potential customers on the fence with other service providers. As your business gains in brand loyalty, you can reduce the amount of money you put into general marketing and instead focus it on attracting new customers into the fold.
Higher levels of brand loyalty give your company an increase in trade leverage. Should you ever decide to step away and sell the business, the value of the company increases as it already has built-in customers. This gives you trade leverage other companies lacking brand loyalty simply do not have. In addition, should your business ever run into PR issues or product problems, you have a built-in buffer period to work on the situation as your brand loyalty helps maintain these customers (although PR problems can affect other elements of brand equity).
The brand loyalty tentpole of brand equity relates to how strongly your current customers are likely to both come back to your business and recommend it to others. Brand awareness relates to how both customers and non-customers view your product, brand and logo. Are they even aware of it? What do they know about your company? If you see the Nike Swoosh symbol, you already have a strong brand awareness, even if you don't own anything sold by Nike. Visibility plays a big part in connecting with the customer. If someone within your target audience already knows about the company, it's a foundation you can build from. However, without brand awareness, customers don't recognise your brand name, your logo, or what your business stands for. A lack of brand awareness requires you to increase marketing and product exposure.
In marketing, you need to first build brand awareness. If someone doesn't know your business or what you sell, they will not buy from you. Only after you build brand awareness can you begin to connect directly with the customer as you become more visible and gain consideration from the key demographic.
The idea of brand association is how others perceive someone who uses your product. Is what you sell hip and cool? When someone sees another person walking down the street with your product, are they envious? A mental association with a product isn't always good. You might see someone with a product from a company that is in trouble for polluting water or using inferior parts, in which case you look negatively on the product and even the person using it. Brand association doesn't necessarily need to come from only customers. It comes from how people perceive your company and its products.
With public perception making up a major portion of brand association, any negative publicity, product recalls or other issues can negatively affect the public's opinion of a company and its perceived identity. On the other positive, PR can greatly enhance the way the public views a product and it's perceived quality. Consider TOM'S Shoes. This is a company that, for every one pair of shoes purchased, donates a second pair to a child in a third-world country. The offered good will not only helps others in need, but it enhances the company's public image, boosting its brand association and, ultimately, improving brand equity.
Check out this discussion about Brand Equity at the 2017 dmexco event:
Poor brand equity affects a company in varying ways. When you build your brand and company from the ground up, you have no equity. Nobody knows of the products you offer and the services you provide. There is no brand loyalty and brand awareness. You need to build all of this up through hard work, marketing and other outreach methods. However, poor brand equity differs from no brand equity. With no brand equity, you're looking to educate consumers and draw more attention to what you offer. Poor brand equity, on the other hand, generally comes about for a few varying reasons, each of which impacts your company in different ways.
If your company suffers from brand loyalty problems you need to take a step back and look at why this might be. Why are customers not coming back? Perhaps your business isn't really set up for repeat customers. If you run a company such as this you'll need to find ways to change this, as continually bringing in new clients is both tedious and expensive. If customers can return for repeat buys but are not, there must be another reason as to why they are not. Are your prices too high? Is the quality inferior? Were they not satisfied with what you offered the first time around? Brand loyalty problems mean there is a product or service provider. It's up to you to identify what the problem is, otherwise customers will continue to leave and not come back.
Lack of brand awareness is an issue your company will face when you're just starting out. As you grow, brand awareness should grow along with it. However, if this is still an area you're struggling with there are a few reasons why. First, consider your logo. Is it too complicated? Your logo needs to stand out. The most recognisable logos in the world are simple. Most are a single shape and may consist of one or two colours. Think of Apple, Nike and McDonald's. You can go anywhere in the world and just about everyone will instantly know the logo. The main similarity between all of these companies is the logo is extremely simple. The same is true for most car companies and other major corporations. If your logo is too complicated and doesn't easily stand out from the pack, consider not only new branding but putting it out on everything so it's easily seen.
Companies often go through rebranding phases. Fast food chains constantly switch to no tag lines and catch phrases to stay both fresh and relevant. When the marketing department of these companies find sales begin to slow, they often look towards new branding opportunities. So if your company currently struggles with brand awareness, you just need to look at your logo and increase marketing toward your key demographic in order to increase this exposure.
If your company struggles with brand association, you have a larger issue on hand. Struggles in brand association usually mean customers have a negative view of your product. Likewise, non-customers have a perceived notion of either an inferior product or they view your company in a negative light. Usually, this kind of an issue comes about in one of two ways. First, you have a bad product. If you have a universally regarded bad product word will spread and you'll be known as a company that provides a bad product, terrible customer service or something else along these lines. If your problem with brand association comes from an inferior product, the only way to correct this is to improve the product. Food chains all the time reinvent recipes to improve taste when negative reviews come out regarding what the company offers. Chances are if you suffer from poor brand association due to an inferior product, you also suffer from poor brand loyalty as well.
The second problem is bad PR. From an environmental problem. If a company has a CEO arrested for one reason or another it reflects badly on the business. Product recalls can lead to poor public relation issues as well. There are ways to turn bad PR around in your favour, depending on the situation, although not all corrective measures work. The international food chain Chipotle ran into a number of public problems, including an E. Coli outbreak. Despite offering out free burritos to customers, the chain has yet to fully recover.
Measuring your company's brand equity provides several desirable benefits. First, should you consider selling the business to an interested buyer, you'll have a better idea as to a fair asking price, as selling based on brand equity can bring about a greater value than simply the estimated cost of goods, contracts and real estate owned. Second, measuring brand equity provides a better understanding as to where your business current sits, both with current customers and the market in general.
To measure brand equity you need to determine the overall cost of establishing or replacing your brand (if you were to start from scratch, what would it cost to reach your current position) (Dummies, 2017).
Listen to Professor Eric Bradlow talk about his research on measuring Brand Equity:
When determining the cost to replace your brand, there are several points you'll need to determine the value for, this includes creating the brand, level of market awareness and the value of attracting and retaining your current client base. First, incurred to develop and register your brand name. Second, the costs associated with developing and trademarking your log and slogans. You'll need to identify the cost of creating and maintaining domain name registration and current Web presence (including all Web identities spread over social media, online shopping markets like Amazon and your website). The last pillar in identifying the cost for creating your brand identity is to look at any research put into selecting the corporate colour scheme, musical jingles used in advertising and anything else utilized to build the brand identity.
Next, you'll need to look at the cost to achieve your current market awareness level. To do this, look at the cost associated with advertising, building a digital presence, promotion and publicity.
Lastly, the final aspect of determining the cost to replace the brand is to identify the cost to establish a new client base. This includes looking at lead generating, promotions, advertising, relationship development, customer acquisition and loyalty programs.
It takes a considerable amount of research into the overall finances of a company, not to mention time and resources utilized to build the business to its current position. However, once all of this is identified, it indicates the overall brand equity value of the business.
To boost brand equity, it takes dedication to set the brand apart from the competition and bring customers back into the fold. Simple changes may impact all three phases of brand equity, so with proper execution, increasing brand equity doesn't need to prove complicated.
According to MarketingProfs, boosting brand equity for any small business should consist of five phases. First, you must clarify your position. This identifies what your company stands for. What's the identity of your business? Along the way, it may have become convoluted and spread out too thin. Focus on what's important to the business and what makes the company different.
Second, turn to marketing and tell the world the company's 'story. Every brand comes with a story. When Gatorade market shares started to tumble, the company released a host of ads revealing the origin of Gatorade and the science used to develop it. Your business has its own unique story. It helps make it different. Target your key demographic and make sure they know what it is.
Third, make your business personal. Breath life into it. If the company comes off as stiff, customers are less interested to interact and shop with it.
The fourth step is to build a bond with customers prior to them buying goods. Brands begin connecting with a customer far before the first purchase is made. From outreach programs to improving social media marketing, this helps improve product awareness and develop brand loyalty.
Lastly, make sure to measure all your efforts. Look at what works and what doesn't. This way, you can edit and adapt your approaches to find the best course of action to boost brand equity.
Your marketing department likely takes several different roads to inform customers of products and services. This ranges from television spots to social media marketing, blogs and email marketing. However, one of the biggest problems brand run into is a lack of brand consistency. Each marketing presence and interaction a customer has with your company needs to remain consistent. This not only helps push the same idea and identity to your customer, but it helps build brand awareness. If a company tried to attach a different pitch, different colour scheme and different logo to every Internet ad. It would become next to impossible for the company to improve brand identity. That is exactly why every part of brand outreach, marketing and even in-store promotions need to remain consistent. This includes everything from using the same colour scheme to incorporating the same logo.
Brand equity is a valuable tool designed to not only measure the success of a company but how the outside world views it. When running a business, you're often inside a bubble. You see your own products and services from a very specific perspective. Brand equity shows you how the rest of the world looks at the company. With this information, it's possible to implement new changes, focus on better educating customers and boosting the way it holds up against the competition. No matter the kind of business, your location or target demographics, the more your company understands its brand equity, the better off it will be now and in the future.