A 3D rendering of four sets of stairs that all meet to form a platform. This image is being used on a blog that describes the steps involved in building brand equity.

Brand Equity: What it is and how to build it

Perri Robinson

Mar 22, 2023

Every brand is comprised of many moving parts: visual assets like logos and colors, audio assets, packaging and design, brand image, brand values, and the size and stature of the brand in the marketplace. All of these brand assets influence how customers think and feel about a brand. Ultimately, those thoughts and feelings will translate into sales, reputation, and the brand’s overall health and longevity.

All of the components of a brand are used for building brand value. Marketers and brand specialists should pay attention to the brand value created. What is brand value, exactly? It’s also referred to as brand equity, which is how you measure the qualitative (e.g., brand loyalty, brand recognition, etc.) and quantitative (e.g. market share, profit margin, etc.) values of a brand.

Here’s a closer look at brand equity, the role it plays in your marketing and brand management, and how to grow your brand’s equity.

Table of Contents:

What is Brand Equity?

What is equity? Equity in terms of a business is the value of a business if all the business’s assets were liquidated and all the debts were paid off. It’s the byproduct of assets minus liabilities.

So, what is brand equity in marketing? Just like business equity, your brand builds value, too. This value is determined by a brand’s customers and how they have experienced your brand. If they have positive perceptions of your brand, then your brand equity is positive, too, and vice-versa.

So, brand equity can simply be defined as a brand’s value.

We can narrow this definition further by including customer-based brand equity (CBBE). CBBE attributes a brand’s success based on its customers’ sentiments and perceptions of that brand.

When you have high brand equity, you can justify higher prices for your product, increase your stock price, and potentially spend less on marketing. Things like positive word-of-mouth, online reviews, and customer loyalty can help you continue growing your brand naturally.

Why Does Brand Equity Matter?

The benefits of customer-based brand equity are hard to ignore. High brand equity can lead to:

  • Greater market share
  • Lower customer churn
  • Less price sensitivity
  • Greater brand recognition
  • More sales
  • Higher profit margin
  • Business taken away from a competitor
  • Easier entry into new markets

What’s more, your brand’s attempts to expand its product line may prove to be more fruitful. For example, pen maker Bic became well-known for inexpensive, no-frills pens that work reliably. As a result, the company was able to expand its offering to include razors and lighters, both of which maintain the reliable, no-frills image. Other pen companies may have found such a move to be out of reach since the products are so diverse. Bic's success would have been much harder to come by without solid brand equity.

A screenshot of a BIC product page showcasing an enlarged pen to emphasis the fact that their is "more than 2km of writing"

At its heart, equity in a brand builds up a loyal customer base that will continue to bring in revenue. It’s about creating a brand that people prefer over another, even if means spending more or going out of their way for something.

When you have this level of commitment from your customers, you can take advantage of all the benefits that positive brand equity brings.

How Brand Credibility Affects Brand Equity

Brand credibility is a key part of building brand equity. People favor and value brands they can trust. They don’t want to be left on the hook for a faulty product or an overcharge. They don’t want to do business with a company that closes its doors without warning.

When a brand builds enough credibility, it can leverage this perception to grow the business. Credible brands have a greater chance of building more loyal customer relationships. They may become more resilient in a crisis as customers shift to businesses that offer reliability and predictability. You might even be able to charge more for your products or services.

How to Create Brand Credibility

Sometimes, brand credibility comes from tenure in the industry. But for brands that haven’t been around for years, there are other ways to build credibility.

Generate Positive Press

Positive media coverage in trusted publications makes your brand look good by extension. Think of it as the publication’s endorsement of your brand, even if it doesn’t explicitly recommend you. Your name is associated with other credible people, companies, and sources, and that’s not something that just any brand can achieve.

Positive press starts with connecting with the right people – journalists, bloggers, and influencers, for example. You want to partner with people who have real influence and can move your brand story further. The right people will not only get you in front of the right audience to increase brand awareness but also share your story in a way that’s impactful.

Create and Share Quality Content

The internet enables every brand to become a publisher. Nowadays, you no longer have to wait for a book deal or connect with high-profile publications to create and share valuable content.

Even though the bar is lower, it’s still worthwhile for brands to create their own content to share with an audience. Content helps to position your brand as a thought leader and an authority in your space. It can also help improve your SEO and help people find you via online search, which gives you more opportunities to grow your audience.

Types of content to consider include:

  • Webinars and speaking events
  • Blog articles and guest blog posts on other sites
  • Whitepapers
  • Business-to-business industry reports
  • Client testimonials
  • Case studies

Content is a great way to establish your brand's core values, influence consumer perception, reinforce your brand promise, and support your brand purpose. Establish an emotional connection with your target market and show what makes you different from other brands.

Be Transparent – Consistently

Transparency gives your target audience a clear look at your brand values. What are brand values, exactly? Think of it as your set of brand beliefs, the ones your brand lives by. It’s a way for people to get to know the real you.

For example, Zappos.com has become the gold standard for customer service. Its customers favor the no-hassle return policy and the solution-oriented representatives. In fact, the longest customer service call took an impressive 10 hours and 51 minutes, proving that the company does anything and everything to make its customers happy.

A screenshot of the navigation bar from Zappos' customer service page

But what happens if Zappos’ customer service contact information suddenly disappeared from its website? Or the company charged for a return shipment, or tell you your time is up and you still haven’t reached a resolution? None of these things would be on brand, and credibility would suffer.

When brands make and break promises, their image is tarnished. It’s hard for the brand to re-establish its customers' sense of trust. That’s why consistency is just as important as transparency.

Everything from a brand’s policies to its blog articles to its merchandise should be in alignment. Together, these play an important part in how brands earn customer trust.

Listen to Your Customers

When building brand credibility, what you hear is just as important as what you say. While you’re excited to talk about your brand to earn consumer trust, it’s equally important to listen to what your customers are saying about your brand.

For example, branding juggernaut Coca-Cola caught a lot of flack when it introduced New Coke in 1985. The new recipe was the company’s response to a slowly dipping market share and the subsequent belief that consumers’ tastes were changing. But after customers expressed extreme dissatisfaction, the company increased its credibility by listening and bringing back the original formula, slightly rebranded as Coca-Cola Classic. Had the company ignored the warnings of its fans, the outcome might have looked much different.

A photograph of an old bottle of coke

Hear about your customers' experiences. Accept their compliments. Acknowledge their complaints and work with them on a resolution. This can be as simple as replying to comments and DMs on social media or as thorough as managing your online reputation.

Your customers are going to talk about your brand, regardless of whether you are part of the conversation. The best thing you can do to build credibility is to take their conversations seriously. Social media monitoring tools and services can help you stay in touch with what’s being said so you can decide what to do next.

3 Steps for Building Brand Equity

There’s an old saying in marketing that companies don’t build brands, customers do. While there’s a lot of truth to this, building brand equity still takes proactivity and thought. You can influence your customers’ perceptions of your brand based on your own priorities in managing your brand.

Keller’s customer-based brand equity model illustrates how a company builds a strong brand foundation and works upward to create brand “resonance,” where customers can actively identify with and advocate for a brand.

Keller's brand equity model called the brand equity pyramid

This brand equity pyramid provides a great starting point for companies to start building brand equity. Let’s start from the ground up:

Step 1: Establish a Brand Identity

Who are you as a company? What do you stand for? What do you do better than anyone else? Why should people choose you?

These are just a few of the questions that can help to shape your brand identity. Your brand identity is its personality, tone of voice, audience, and the way it looks and functions to customers.

Creating your brand’s identity is the first step in developing awareness, which will later grow sales, loyalty, and advocacy.

Step 2: Communicate Brand Meaning through Products

Next up: How do you want your customers to feel and think when using your products? What image should they associate with your brand?

In Keller’s customer-based brand equity model, brand meaning includes both performance and imagery. Nike is a great example of how a brand communicates meaning through its products. Their advertising and marketing focus largely on athletes in training or playing sports, not necessarily the products themselves. In the customer’s mind, though, we tend to think of high-quality products that perform well under pressure.

Olympic Gold Medal Winners

How you communicate your products can support your brand's meaning. Include influencers, social media, and SEO in the mix to get your products in front of the right people to start building awareness.  

Step 3: Grow Your Relationships through Brand Response

Once you’ve established your brand’s identity and are conveying its meaning through awareness campaigns, customers will have a chance to react and respond. In Keller’s model, this phase includes judgment and feelings–how people will perceive your brand.

Brands can influence this phase by connecting with customers on a personal level, taking stock of their feedback and becoming part of conversations. You can also initiate conversations and spur engagement by building communities, hosting live events, providing good customer service, and making people feel part of the brand you’re building.

As you build relationships, your brand equity will start to grow as you gain more loyal customers. The more advocates you create, the more people you can get in front of that will potentially do the same!

How have companies measured brand equity in the past?

In the past, businesses invested in traditional forms of market research to try and pin down brand equity, as well as tracking changes in equity over time. By traditional forms, we mean surveys, questionnaires, and focus groups.

With these methods, brands would ask participants about things like:

  • Brand visibility and recognition: How quickly does a brand come to mind in response to need? When a participant thinks of a particular product, which brands come to mind?
  • Value associations: What positive or negative feelings come to mind in relation to a brand? What associations does the participant have in relation to a brand? For example, participants might consider a brand like Dior as elegant, sophisticated, and refined.
  • Brand differentiation: When a participant thinks of two competing brands, how distinct are they? What differences that come to mind when describing them?
  • Customer loyalty: How likely is a participant to commit to a brand’s offerings? Does this level of commitment change to take into account factors like price and availability?

Answers to these questions help businesses to better understand their brand equity. If market research is conducted repeatedly, it allows brands to track perceptions of their equity over time.

However, traditional approaches to market research like surveys and focus groups have a lot of downsides. Namely:

  • Customers need to participate, and they don’t always feel like it
  • Surveys and questionnaires only focus on past experience, giving a static impression of a product at a fixed point in time
  • Observer bias can lead to participants reverting to preconceived beliefs
  • Market research is time-consuming and expensive
  • It can be hard to get true market representativeness
  • Results are rarely able to be compared, unless a business engages the same participants over time

So, traditional approaches to market research aren’t always so great at measuring brand equity. Unfortunately, for most of history, these methods have been the only game in town.

That is, until the rise of social media.

But how exactly has social media changed brand equity? How have platforms like Facebook, Twitter, and Instagram changed the way brands build and measure their equity?

Let’s take a look at this in detail.

Social media is changing brand equity

It’s no exaggeration to say that social media has changed what it means to be a consumer, and have radically transformed the relationship between brand and audience.

Before the rise of social media, consumers had a much smaller platform to voice opinions concerning brands and products. Besides recommending a product to friends and family, there was little a single consumer could do.

Now that social media has flattened communication between individuals and companies, it’s a lot easier for a brand’s fans, cheerleaders, or haters to make their opinions known on a huge scale.

With a single post, conversation, or exchange, consumers now have the power to improve or demolish a brand’s reputation - especially when these exchanges get public exposure.

Sainsbury's brand equity example

Source: Live Chat

More than just funny takedown tweets, social media facilitates the spread of information, including negative reviews of a brand or product. When everyone is connected, it doesn’t take much to build a wave of public sentiment.

For example, United Airlines’ decision to forcibly remove a passenger from a flight - assaulting him in the process - wouldn’t have received as much public outcry if not for other passengers capturing the moment and tweeting the video.

Studies have shown that social media’s accessibility creates unique considerations for brand equity. This is because communication with brands becomes immediate, personal, and transferable, able to be spread quickly around the world.

Brand presence on social media has turned brand equity into a constant exchange. Instead of a relationship spaced out with advertisements and product releases, maintaining brand equity is now a 24/7 responsibility.

Of course, social media also creates new opportunities for brands to define and measure their brand equity. This requires a redefinition of what brand equity means.

Enter the concept of social brand equity.

The rise of social brand equity

The rise of social media has changed the way customers engage with brands and businesses, turning Twitter and Facebook into direct lines to pretty much any company out there.

In this environment, brands and businesses need to reconsider what brand equity means to them, especially the ways they build, maintain, and track this equity.

Social media conversations now have a real, meaningful impact on business. Brands need to broaden their definition of brand equity to include these conversations and need to focus on social media engagement as part of maintaining brand equity.

This isn’t just a question of necessity - it also has major benefits for brands.

Measuring brand equity on social media is cheaper than traditional methods like surveys and focus groups, and can be performed in real time. With the help of data science and AI, these measurements can be infinitely more specific and helpful.

Brand Equity Measurement

Broadening the definition of brand equity to include social media conversations also allows for an enriched picture of brand perception. With this new definition, brands can use tailored KPIs based on social media exchanges to track what’s being said.

For example, a business could assess the positive sentiment attributed to a brand across all social media platforms before an advertising campaign, then afterwards. This allows an accurate and detailed picture of the campaign’s impact.

This requires a change in methodology, moving away from surveys and focus groups to social listening tools (e.g. the Meltwater brand management solution) and data-driven analysis backed with AI and data science.

By making these changes, brands can radically improve the way they measure equity, getting helpful and detailed information quickly and easily.

Brand equity is evolving fast - you need to keep up

The concept of brand equity has always been crucial for businesses wanting to set their products apart.

In the age of instant information, we need to redefine brand equity to make room for the huge amount of conversations and exchanges happening on social media.

Social brand equity is evolving at the speed of the web, and businesses need a way to keep up. Customers are engaging with brands in new and different ways, and brands need to get on board. If not, they risk being left behind.

Unless you rethink the way you create and track social brand equity - including through social listening tools - you’ll miss out on some amazing opportunities.

Let’s start building your brand equity strategy. Get in touch today to learn more!

Tip: Measure your brand equity with Meltwater Radarly