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6 Ways to Determine Your Brand Equity

6 Ways to Determine Your Brand Equity

It's no secret that consumers tend to buy products from brands they know and trust. Here lies the true importance of brand equity.

For example, let's say that Campbell's is releasing a new soup. The positive association customers already have with Campbell's will make the new product more enticing. Without a doubt, inventing a new brand for it would make no sense. The smart choice is to keep it under the same brand name.

Two little girls eating Campbell's soup.
Undoubtedly, customers go for familiar brands.

However, it's essential to know that the value of a brand can be positive or negative. Not sure how to determine this about your brand? Following, we will explain the meaning of brand equity and how to measure it.

What is Brand Equity?

Brand equity describes the importance of a well-known brand name. The added value a company has when having a positive brand name and public perception. Therefore, a well-known brand name can make more money from products than a lesser-known one.

According to Meena Toor from Qualtrics.com, having strong equity results in:

  • A marketplace that favors the company with the strongest brand equity.
  • Increased revenue and profits when customers choose your brand over another.
  • Better hold on customers at future buying opportunities.

However, there can also be such a thing as negative brand equity in some cases. For example, a Public Relations crisis can reduce or deplete your equity strength. Consumers won't be happy if your products are shown in an unflattering light.

It's not easy to achieve strong brand equity. It takes hard work to earn it.

Components of brand equity.
Brand equity is the culmination of a process.
Why should strong brand equity be every brand’s goal? Because customers buy their products, whatever the price. - Meg, talkwalker.com

How to Measure Brand Equity

Besides understanding what brand equity is, you'll need to measure and prove your results. Following are six ways to measure it:

1. Brand Evaluation

Firstly, you need to determine your brand's total value as a separate monetary asset. This metric shows the worth of the brand. A business's balance sheet can include this information.

Consider the financial value in terms of:

  • Cost-value to create and build the brand. Take the tangible assets from the overall value of your business to find the brand equity. This could include the budget spent on advertising, trademarking, or licensing.
  • Market-value of what it's worth when put into the market to sell when looking at similar companies and brands. For example, you can calculate your sales over a certain period and divide them by the total sales in your industry for the same period.
  • Income-value of what is brought into the company. Also, consider the revenue potential for your brand and how it compares with your current revenue.
Valuation methodologies used for brand equity
Without a doubt, it's necessary to measure your brand's financial value.

2. Brand Awareness

Secondly, we have brand awareness, which is the extent to which customers can recognize a brand under different conditions. This includes target customers, the market, and key stakeholders. Undoubtedly, there cannot be strong brand equity without a strong foundation of brand awareness.

Also, brand awareness is an emotional-based metric. Therefore, according to Qualtrics.com, it can be measured by asking questions about:

  • A customer's future intent to buy.
  • A customer's current brand awareness now and over time.
  • Target customers' purchase history.
  • How much 'conversation share' there is.

Some methodologies you can apply are sales data, focus groups, customer feedback, etc.

Image showing elements of brand awareness.
Top-of-mind awareness includes the services and products someone most frequently uses.

3. Brand Strength

Thirdly, we have brand strength or the power of the brand. You can measure this using emotional data.

You can capture this data using consumer surveys. Additionally, you can use a series of evaluative questions that assess the consumer's preference for the brand.

Some standard models for establishing brand strength are:

  • Aaker Model
  • Keller's Model
  • Brand Asset Valuator (BAV) Model
  • Brandz Model.
Image showing the 5 advantages of having a strong brand.
Brand strength is a pillar for brand equity.

4. Financial Data

Fourthly, we have financial data, which is necessary to assess brand performance. Indeed this means you will need to look at the business's financial results and sales performance.

Historical data is necessary to assess brand performance, like the market share, profitability, revenue, price, growth rate, cost to retain customers, cost to acquire new customers and branding investment. - Meena Toor

In addition, don't forget these critical indicators of healthy brand equity:

  • Revenue growth rate
  • Price premium in comparison with the competition
  • Customer value over their lifetime
Measuring financial data is vital in measuring brand equity.

5. Brand Relevance

Next, we have brand relevance, which is connected to customer satisfaction. Above all, it matters whether your customers think that your brand provides unique value. Your brand equity level will increase if the brand is perceived as more valuable and relevant.

Here are some ways you can measure brand relevance:

  • Customer satisfaction surveys can help you understand your customer's satisfaction levels with your company's brands and services.
  • A Net Promoter Score can give information on the customer's emotional connection to a brand.
  • Using a survey-based statistical technique called Conjoint Analysis to reveal key consumer decision-making processes.
Venn diagram about staying relevant
If your brand isn't relevant, there's not much of a future ahead for it.

6. Competitive Metrics

Finally, we have competitive metrics, showing you areas where your competitors fail to meet consumer needs.

Consider including these metrics:

  • Customer acquisition rate - how much it costs your business to acquire a new customer. This includes sales, marketing, PR, customer experience, data, etc.
  • ROI of distribution channels - directs sales, retailers, exclusive distribution, channel partners, value-added resellers, selective distribution, etc.
  • Sales lift - increase in sales during a time-specific promotion. This is compared with the baseline sales that would have happened simultaneously but without promotion.
Image showing measurement of competitive metrics.
What's the brand equity of your competitors?

In Conclusion

When looking at the growth potential for your company, you have to make brand equity your priority. That's where your brand's strength and future lie. Taking the time and effort to evaluate it will help create a better path for your brand's future.

If you’re looking to make a quick buck, sure, focus on profits. But if you’re looking to create a business that survives and thrives, you need to focus on your company’s brand equity. - Meg, Talwalker

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Laura Amarillas
By
Laura Amarillas
On
January 24, 2022
min read