In today’s competitive business landscape, it’s more important than ever to establish a strong brand identity. But with terms like “brand equity” and “brand value” being tossed around, it can be difficult for entrepreneurs to know which one they should focus on.
Brand equity is the value that a brand brings to a company, based on the perception and awareness of the brand among its target audience. While brand value refers to the monetary value of the brand, calculated as the net present value of future earnings that can be attributed to the brand.
Brand Equity vs. Brand Value
| Brand Equity | Brand Value |
|---|---|
| Brand equity refers to the value that a brand adds to a product or service beyond its functional benefits. | Brand value refers to the monetary value that a brand adds to a business as a financial asset. |
| It focuses on consumer perception and the emotional connection that a brand has with its customers. | It focuses on the financial value that a brand brings to a business and its potential impact on revenue and profits. |
| Brand equity is made up of several components, including brand awareness, brand loyalty, perceived quality, and brand associations. | Brand value is typically calculated based on the financial value of a brand’s assets, such as its trademarks, patents, and customer relationships. |
| It is measured through market research, such as surveys and focus groups, to gauge consumer perception and sentiment. | It is measured using financial metrics, such as revenue, earnings, and cash flow, and may be estimated using methods such as the income approach or the market approach. |
| Brand equity can impact customer loyalty, purchase behavior, and overall brand reputation, but may not directly impact a company’s financial performance. | Brand value can have a direct impact on a company’s financial performance, including revenue, profit margins, and market capitalization. |
| It is important for creating a strong brand image and building long-term customer relationships, which can lead to increased sales and market share. | It is important for determining a company’s overall financial health and potential for growth, as well as its attractiveness to investors and potential buyers. |
What is brand equity?
Brand equity is the value of a brand, based on the perceived quality of the products or services that it offers. This can be measured by customer satisfaction surveys, brand recognition studies, and other research methods.
A brand with high equity is one that customers know and trust, and are willing to pay a premium for. For example, Apple has built up strong brand equity over the years, and customers are typically willing to pay more for its products than they would for similar products from other companies.
Building up brand equity can take many years, and it requires a consistent commitment to offering high-quality products and services.
What is brand value?
Brand value refers to the monetary and intangible worth or equity associated with a particular brand. It is a measure of the overall perception, reputation, and influence that a brand holds in the marketplace.
Brand value encompasses various factors such as brand recognition, customer loyalty, brand reputation, market share, and the overall financial performance and success of the brand.
A strong brand value indicates that the brand has a positive image, is well-regarded by consumers, and has a competitive advantage in the market. It can lead to increased customer trust, higher sales, premium pricing, and long-term sustainability for the brand.
Benefits of increasing brand equity/value
- By having a strong brand, businesses can see an increase in sales, market share, and profits.
- Additionally, customers are more likely to be loyal to brands that they perceive as being valuable. This loyalty can lead to repeat purchases and referrals, which can further grow the business.
- Furthermore, investors are often more willing to provide funding to companies with strong brands because they see the potential for long-term success. Therefore, businesses should focus on increasing both their brand equity and value if they want to be successful in the long run.
How to measure brand equity/value
- Brand Value-Added (BVA):
This method calculates the difference between the perceived value of a brand and the actual cost to produce the goods or services associated with that brand. The higher the BVA, the greater the brand equity. - Net Promoter Score (NPS):
This measures customer loyalty and satisfaction with a company’s products or services. It’s based on responses to the question, “How likely is it that you would recommend our company/product/service to a friend or colleague? The higher the score, the better brand equity and value.
Examples of companies with high brand equity/value
Some of the most valuable companies in the world have built their business by investing in strong brands. A few notable examples include Apple, Google, and Coca-Cola. Each of these companies has a brand that is recognized and respected worldwide.
Investing in brand equity can be a key driver of business growth. Strong brands can command premium prices, attract new customers, and build loyalty among existing customers.
Brand equity can also help businesses weather tough times by providing a buffer against competition and economic downturns. If you’re looking to grow your business, investing in brand equity is a strategy worth considering.
Strategies for improving your own brand’s equity or value
- Increase awareness of your brand. Make sure your target audience is aware of your brand and what it stands for. Use marketing and advertising to reach them, and make sure your branding is consistent across all channels.
- Create a strong emotional connection with your audience. Your brand should evoke positive emotions in those who interact with it. Focus on creating an engaging and positive customer experience that will foster loyalty and repeat business.
- Differentiate your brand from the competition. Make sure your brand is unique and stands out from the rest. This could involve anything from having a strong USP to simply having a more memorable logo or tagline.
- Build up customer trust and confidence in your brand. Ensure that customers know they can rely on your products or services to meet their needs and expectations. Offer guarantees, testimonials, and social proof to build up this trust factor.
- Deliver your promises consistently over time. It’s not enough to simply make promises – you need to follow through on them as well! Consistency is key when it comes to maintaining a strong brand image, so make sure you deliver on what you promise, time after time.
Key differences between both
- First, brand equity is the value of a brand in the eyes of consumers, while brand value is the financial worth of a brand.
- Second, brand equity is more intangible and difficult to measure than brand value. While both are important for businesses, brand equity is typically seen as more important than brand value.
- Brand value, on the other hand, is much more tangible and easy to measure. It’s simply the sum total of all the revenue that a business has generated from its products or services.
- Difference between functional and divisional structures
- Difference between invention and innovation
- Difference between industries and markets
Conclusion
The two concepts are related, they are distinct and require different approaches to measure and manage. Strong brand equity can contribute to a higher brand value, and businesses that invest in building both can see significant benefits in terms of customer loyalty, revenue growth, and overall business success.
