Brand equity is the value that a brand brings to a product, service or organisation. How can a brand have value? Well, imagine if Coca Cola suddenly changed all their products to plain blue packaging with a simple typeface and no embellishments – consumers would fail to recognise the product and fail to value it.
Their distinctive red and white branding represents value for the business, adding substantial worth to the company. (About 63 Billion dollars, according to Interbrand). The brand means something to consumers; it stands for something and elicits an emotional response.
This brand equity is not built overnight and is not created by chance; it must be planned, sculpted and revised to develop a real asset.
You can think of brand equity as how much of the brand's success is down to your customers' feelings about it. To paraphrase Kevin Lane Keller (see below) 'The power of your brand resides in the minds of your customers.'
Developing significant brand equity adds real benefits to your business, including:
- Increased customer loyalty
- Ability to charge more for your products or services giving you greater margins
- Insulating your business from potentially detrimental market events
- It can lessen the impact of an increase in price
- Sets you apart from competitors and makes your market position more secure
- Gives you a more significant influence on the industry
- Gives you more power in relationships with suppliers and collaborators
- Increases the effectiveness of your marketing communications
- Opens up opportunities for brand extensions and new ventures
- Adds real monetary value
On that last point, Apple's brand equity is said to be worth 234 billion dollars or 30% of the value of the company (Interbrand 2019).
It's worth remembering that brand equity can also be negative – if a brand becomes tainted by poorly performing products or terrible customer service, or if it acquires a bad reputation for any reason – such as a public scandal or an ecological disaster – or it simply fails to live up to expectations, then the brand can become toxic, and anything it touches will suffer the consequences.
Positive brand equity creates loyal customers – customers who sing your praises and become powerful, unpaid salespeople for your brand.
Remember, 80% of your profits will come from 20% of your loyal customers.
Getting B2B brand equity right creates a powerful asset that adds significant value to our business, but how do you go about creating positive brand equity and maximise its potential?
Developing brand equity
One of the foremost authorities in this area is Kevin Lane Keller, who wrote Strategic Brand Management, which is generally considered the textbook on brand development.
Keller proposed a pyramid model of brand equity creation, known as the Customer-Based Brand Equity model. Each step rising up the pyramid defines the customer's perception of the brand.
The four steps in Keller's Brand Equity model are:
- Who are you? (Brand Identity)
- What are you? (Brand Meaning)
- What about you? What do I think or feel about you? (Brand Response)
- What about you and me? What kind of association and how much of a connection would I like to have with you? (Brand Relationships)
It's a road map to higher value brand equity. Keller refers to it as a "branding ladder."
In his words:
"Meaning cannot be established unless identity has been created; responses cannot occur unless the right meaning has been developed, and a relationship cannot be forged unless the proper responses have been elicited."
Each stage relies on the previous step being in place and effective.
(Like any marketing model, it may seem relevant to your situation, it may not. It is important to remember that it is just a model, so use it if you find it helpful, amend it to suit your circumstances, or ignore it entirely if you feel it has no value or relevance to you.)
The model has four levels – let's look at each in turn, from the bottom upwards.
Brand Identity – Who are you?
The foundation on which the brand equity pyramid is built is brand identity – having a well-targeted, distinctive and memorable brand.
Customers and prospects need to be able to recognise your brand and remember it. This is often thought of as brand awareness. But it isn't just remembering the name, or recognising the logo. Along with that should be an association with where your product sits in the market, broadly knowing what it does, who you are as a company and what other products or ranges you produce.
There are many elements to effective brand identity, from graphics and typography, through tone of voice and personality. Creating your brand's identity is a fundamental and significant task and should be more about reaching your customers than what you would like it to be.
A robust and compelling brand identity is crucial; after all, if your potential customer cannot remember who you are and what you do, you will not even be considered as a supplier.
It is imperative in purchase decisions where the buyer has not got the time or the interest to undertake in-depth research – they need a quick solution – in these instances your strength of brand identity may be the deciding factor.
Your brand identity and associated marketing content should always place your brand in context – your brand should always evoke what you do and the products or services you offer.
You also need your potential buyer to remember you at the right time – so you are top-of-mind when they are researching or making a purchasing decision.
After all, it's no good if they remember your brand on the golf course, but they can't recall your brand or what you do when they are back in the office.
These two dimensions of brand awareness – depth and breadth – are equally important. It is not enough that customers can readily recall the brand (depth), but where do they think of the brand, when do they think of the brand, and how easily and often do they think of the brand? (Breadth).
Brand Meaning – What are you?
Keller's model's second level is brand meaning, which consists of two components, performance and imagery.
Performance is all about how you perform as a brand. It is about functionality and meeting your customers' expectations and satisfying their needs – their requirements.
To a certain extent, you can influence this with marketing content – portraying your company in a certain way and making promises. Still, the actual value comes from what a customer hears from their peers or their personal experience of your business.
Do you do what you say you are going to do? Does your product or service do what you say it does?
Performance is all about:
- Customer Service
- Customer Satisfaction
In these competitive times, you cannot afford to have a sub-standard product or provide inadequate aftercare and support levels. To create brand equity, your product or service should meet customers' expectations, or better, exceed them.
Imagery is about how you portray your brand. Where you position it –and the stories you tell about it. But it is also about how your customers perceive it – how they think about your brand?
Four main areas where brand imagery influences what your audience thinks about your brand are:
Perceived buyers of your product/service - these are your brand's typical customers as imagined by other prospects and customers. What kind of people does your audience think are buying your products or services? Do they recognise and relate to these perceived buyers?
Purchase and usage situations – under what circumstances would a potential customer think of buying or using your brand? They will have some preconceptions of when your product or service would be appropriate – but are they correct?
Personality and values – brands can have personality traits, just like a person. How do your customers imagine your brand personality? Is it sincere? Exciting? Competent? Sophisticated? Rugged?
History, heritage and experiences – what do your customers know or have heard about your history and past events? What personal history do they have with your brand?
Three factors determine how effective your brand meaning is in adding to brand equity:
Strength – how strong is the association of the brand's imagery with a brand?
Favourability – how important are those elements to your customers?
Uniqueness – how distinctive are those elements?
Each one of these factors relies on the previous one being sound. It is no good having unique and distinctive imagery around a brand if that imagery is not favourable. Nor having favourable reactions to your brand if they cannot remember them.
Strong brand meaning is the basis from which you can create loyalty and turn your customers into advocates.
Brand Response – What do I think or feel about you?
This third level of the pyramid is again split into two areas – Judgements and Feelings. Similarly to the previous level, you could think of these as the rational and the emotional aspects of the customer's decision-making process.
Using the impressions of imagery and performance, the customer will form some opinions about your brand in the following four areas:
These are all functional considerations and are relatively self-explanatory, but customers will also have some feelings about your brand:
Warmth – does your brand give them a sense of calm? Are they affectionate or sentimental about your brand?
Fun – does your brand invoke a sense of fun or playfulness? Does it make them happy?
Excitement – does your brand feel like something special? Is it cool or sexy?
Security – how safe does your brand make a customer feel?
Social approval – does the brand add to the customer's perceived approval by others? Do they think that others will feel better about them?
Self-respect – Does your brand make the customer feel better about themselves?
Although not mentioned in Keeler's original model, I would add one other area to consider in today's world:
Saving the planet – does your brand make the customer feel they are doing their bit?
As before, these brand responses need to be positive, and they need to be strong enough that they are recalled at the research, consideration and decision phases of the buyer's journey.
Brand Relationships - What type and extent of association I would like to have with you?
At the highest level of Keller's pyramid model is brand resonance – the level of personal identification with your brand. The more a customer personally identifies with your brand – the more your brand messages resonate with them – the more loyal they will become, the more likely they will sing your praises to their peers.
People in this category become brand ambassadors – they genuinely bond with the brand. There are four segments to this, and customers may be in one or more of these:
Behavioural loyalty – your customers become repeat customers or purchase in high volumes.
Attitudinal Attachment – Customers may feel personally attached to the product or service somehow, and purchasing it makes them feel good. They 'love' the brand.
Sense of Community – Customers feel like they belong with the community around the brand – whether other customers, company employees or anyone associated with it.
Active Engagement – Customers become brand ambassadors, going out of their way to promote the brand or extol its virtues at any opportunity. They are investing their own time, energy, money or other resources in ways that ultimately benefit your brand.
Building brand equity
This model of Keeler's offers a clear path to building brand equity through four upward steps:
1. Creating a strong brand identity
2. Associating meaning with the brand
3. Eliciting appropriate brand responses
4. Enabling strong and loyal relationships with customers
In some ways, brand equity can be thought of as the process of creating a harmony – synchronicity – with customers. This model rightly emphasises that brand equity is entirely in the hands of customers – understanding their needs and issues is paramount to create the right circumstances to enable brand equity to build.
Going beyond the model
By now you may be wondering why this article's title references five steps – when so far we have only mentioned four. The fifth step is the most important. The model is a guide to the steps you need to achieve. It cannot tell you how you are doing or what level you have attained. To do that you need comprehensive and continual monitoring, measurement and appropriate tweaks to the brand strategy, to address any shortcomings.
Before you do any brand development or embark on a revamp of your brand, the first thing to do is to take stock of your current brand equity. Traditional market research can help with this – asking relevant questions of customers and prospects alike to see where you sit within the brand pyramid model.
Once you have established a current benchmark, you can use that research to look at critical areas where your brand is in deficit and plan your brand's development strategy to address any shortcomings.
After a reasonable period, you should go through the market research process again and see what progress you have made and what is still left to do. It would be best if you repeated this cycle regularly.
Building brand equity takes time, a clear strategy and hard work, but everything you do that adds to customers' positive perceptions of the brand increases brand loyalty which will add real value to your brand.
Building brand equity with these five essentials will result in more significant sales, better retention and the creation of a loyal customer base whose authority is trusted and whose independent recommendations via word of mouth will be priceless.