Why Measuring Brand Equity is Crucial to Business Growth

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In today’s highly competitive business landscape, a company has to do everything in its power to stand out from the crowd and attract customers. This is especially important for new businesses that have to make a name for themselves and find their place on the market.

Imagine this: you launch a great product at a reasonable price, but customers still don’t rush to buy it and instead choose similar products from other companies, even if they cost more. Why does this happen? The answer is simple: because your business hasn’t built brand equity, something that your competitors understand very well and know how to use to their advantage.

It goes without saying that you have to provide great quality products that meet consumer’s expectations if you want to succeed, but you should also understand that in large part people base their purchasing decisions on emotional factors. Most individuals prefer to buy from brands they know and love rather than opt for a cheaper alternative from a company they’ve never heard of.

Apple doesn’t need to tell its customers that its products are innovative. Everyone already knows that and they’re happy to pay what it takes for them, even if there are cheaper options on the market. This is the power of brand equity and that’s why some brands are always one step ahead of the competition.

What is brand equity?

Brand equity is a concept that refers to the commercial value a company gets from having well-known and recognizable products or services. It’s determined by the public’s perception of your brand, not by the real value of the products you provide. It’s also different from brand loyalty, although they are closely related, in that brand equity derives from a brand being recognizable, while brand loyalty refers to the customer’s tendency to continue buying from the same brand, regardless of what happens in the market.

Brand equity is made up of three components:

  • Public’s perception
  • The impact of this perception on your business
  • The value derived from this impact

To put it simply, a company that has good brand equity can charge more for their products, even if they didn’t spend more on production than their competitors, and people will be willing to pay for them. Although it seems like a simple notion, building good brand equity is not as easy as one might think.

A business can develop products with great potential and unbeatable quality, but the customers’ perception of their brand might still be less than favorable. The solution is to switch from a brand-centric approach to a customer-centric strategy to gain the attention and trust of the audience.

The benefits of good brand equity

To really understand the importance of brand equity, let’s take a look at the benefits generated by consumers’ positive perception of your brand.

  • Achieve higher sales – Positive brand equity means that consumers will choose you over other companies who offer similar products. Consumers will be tempted to buy from a company with a good reputation and come back for more because it offers the quality guarantee and the certainty, they’ll get exactly what they expect. This will obviously give you a competitive edge and boost sales.
  • Increase profit – Companies with positive brand equity can charge more for the products they provide. If you take a look at stores’ shelves, you’ll see a big difference in pricing between branded and generic products. That’s because consumers have no problem spending more money on products from brands they recognize and like. It doesn’t matter if your product is superior to others or not in terms of quality. If you have good brand equity, you can sell it at a higher price, leading to higher profit margins.
  • Greater influence – Brand equity can do more than improving your financial performance. When you enjoy a great reputation, a lot of doors will open for you. You’ll have more negotiation power and you’ll be able to secure better deals. It will also be easier to find reputable partners or hire talented people for your team as people will be eager to work with a well-respected company.

The brand equity metrics you should focus on

It’s clear that positive brand equity can have a significant impact on business growth. When trying to build or improve brand equity for your company it’s important to start by measuring brand equity and know what metrics you should focus on in the process.

Knowledge Metrics

Knowledge metrics will help you assess your brand’s popularity. These metrics focus on evaluating brand awareness and the association’s consumers make with your brand, be it functional or emotional associations. To do that, you should:

  • Monitor web traffic
  • Conduct surveys
  • Conduct focus group discussions
  • Pay attention to social media mentions

By analyzing functional associations you’ll be able to understand how consumers use your products if they understand their purpose, and what they expect from your brand. Evaluating emotional associations will reveal how consumers feel about your products. The data you’ll collect will help you get in the mind of the consumer and identify the areas you have to work on to keep your target audience happy.

Preference Metrics

Preference metrics focus on finding out how customers perceive your brand within your industry. There are various aspects you should be looking at when using preference metrics, including:

  • brand relevance – the benefits your brand provides
  • accessibility – the brand’s ability to reach its target audience
  • emotional connection – the ability to create a bond with the customers
  • value – the value customers get for the money they pay

The results you get will give you a clear image of where your company is positioned in the market, and whether you need to put in more effort to build or improve brand equity.

Financial Metrics

It’s pretty obvious what financial metrics are meant to do – evaluate your company’s financial performance. This will help you understand the true financial value of your brand. When conducting the evaluation, you should consider:

  • the company’s market share – the percentage of your company’s total sales in the market
  • transaction value – how much you charge for your products
  • price premium – the ability to charge a higher price for your products
  • growth rate and sustainability – your company’s growth potential as income increases

Once you’ve completed your evaluation, you should set the results of all measurements against each other to draw your conclusions and determine the value stemming from your brand. These data will later help you build and implement the right strategies to improve brand equity and drive business growth.


Author Bio


Jet Saini is the owner of DripDigital.com – a popular Digital Marketing blog that publishes detailed tutorials that focus on helping people to build and run a successful online business. He started his blog in 2018 and since then has helped hundreds of people reach their marketing, blogging, and SEO goals.

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By Sidharth

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