Brand Equity Definition
‘Brand equity is defined as “the set of associations and behaviors on the part of a brand’s customers, channel members, and the parent corporation that permits the brand to earn greater volume or greater margins than it could without the brand name, and that gives the brand a strong, sustainable and differential advantage over competitors” as per Marketing Science Institute 1988, cited in Chay 1991.
Brand equity is the additional brand value that a customer attaches to a particular brand due to the perception and experiences with the brand. A positive experience will generate positive brand equity, while dissatisfying expertise will result in negative brand equity.
In simple terms, brand Equity is the loyalty, perception, and awareness of a customer towards a brand. Brand equity can be created over a period of time by offering products that give a memorable experience, excellent quality, and highly reliable products to its customers.
Brand Equity Advantages
Brand equity is important to increase the valuation of a brand. The value of a strong brand translates into a number of advantages:
1. Competitive Edge
Brand equity offers a competitive edge in the market. Customers identify a brand and are loyal to a brand. This leads to improving the competitive edge of the products. When there is higher brand recognition for a company, there is higher brand equity, which automatically gives a competitive edge over other well-known brands.
2. Increase in the margin
A brand can charge higher than the market price when it has positive brand equity as customers are ready to pay a premium for your brand. The additional value that customers pay in the name of brand equity will boost your profit margins.
Brand equity gives rise to brand loyalty, which makes a customer stick to a particular brand, thereby increasing the market share.
4. Business expansion
Brand equity gives the opportunity to a company to spread its business into new products and new geographies by using the positive brand name that already exists.
Brand Equity Example
Porsche is a brand with very strong equity in the automobile sector. It has built a strong image and has built its brand equity by the use of high-quality materials as well as unique designs. Porsche has gained the image of a luxury brand and is not just a product but has become an experience. Porsche ranked second when compared to some popular brands such as Mercedes and BMW.