Brand equity – what is it and how can you increase it?

Brand equity is one of the most important assets of a business, and at the same time one of the most difficult to quantify. Brand managers need to be able to measure brand equity on a regular basis to know how well their efforts are serving to raise it. However, different brand equity surveys and marketing consulting firms define brand equity differently and propose different measurement models. Therefore, it is sometimes easy to get lost as to how brand equity should be measured. At We are testers we want to make things easy for you and that’s why we tell you which aspects have the greatest influence on brand equity. This way you can choose the way to measure them that best suits your needs and your budget.

Let’s get started!

What is brand equity?

If we ask different people to define brand equity, we will probably get different answers. Generally, they will fit into one of three possibilities.

• Brand equity as a financial valuation. In financial terms, brand equity refers to how much a brand is worth as an intangible asset within the total value of a company. It is a cash estimate of the contribution the brand makes to a company’s revenues and profitability. Some organisations such as Interbrand or Brand Finance regularly publish rankings of ‘the world’s most valuable brands’. These rankings use this financial perspective.
• Brand value as a price premium. When a brand has a high perceived value, it may charge more for its products or services than lesser-known or private label brands, even if the objective quality is similar. A Nike branded T-shirt can easily cost €40 while a similar T-shirt from unknown brands may cost €20 or less. This higher price that consumers are willing to pay for the brand alone is a recognition of its value.
• Brand value as the brand’s attractiveness. If a brand has a high attractiveness – either because it has a very large, very loyal buyer base or because it has a high capacity to continue to increase its market share – it is considered to have a good brand equity. In this case, the idea behind brand equity is closer to its performance, its strength and the expectations of its future growth.

Of the three meanings of brand equity, the most useful for brand managers is the one related to the brand’s attractiveness. After all, improving brand performance is the primary objective of any brand manager. And the price premium is a consequence of brand performance. Only if a brand performs well can it demand a price premium on a sustained basis over time. However, not all major brands make this strategic decision. There are big brands that are not characterised by being premium or higher priced than their competitors, and yet they are benchmark brands in their sectors. Mercadona or IKEA are good examples of this. For these reasons, for the rest of this article, we will refer to brand value as its capacity for attraction and growth.

Factors influencing brand equity

Brand equity is an intangible asset, but it depends on factors that can be measured.

• Brand Awareness, brand recognition and brand salience. As buyers, we tend to prioritise brands we know. This facilitates and accelerates decision-making. Therefore, having a brand that is familiar to the maximum number of buyers will help us to be chosen on more occasions. To this end, it is important to measure spontaneous awareness – the ability to mention a brand when asked about a product category – and brand recognition – the ability to identify a brand as familiar when shown a stimulus. In recent years, the concept of brand salience has been developed, which goes one step further. Salience is the ability to remember a brand in a specific purchase situation. For example, remembering a brand of drinks suitable for satisfying thirst after sport. Or a brand of drinks for teenagers. According to advocates, the more instances of consumption or ‘category entry points’ associated with the brand, the greater the ability to grow sales.
• Size and evolution of the buyer base. Today we know that business growth is achieved by growing the customer base. All brands lose some of their customers every year, so the key is to gain more than you lose. If a brand has a good buyer base that grows year on year, the brand value increases.
• Brand image. This is the perception consumers have of a brand; the idea or mental impression that forms in people’s minds when they hear a brand’s name or see its logo. It is not what the company says it is, but what people think it is. This brand image is influenced by a multitude of aspects, such as product features, price, communication or experiences buying or using the brand in the past. An unambiguous brand image makes it easier to associate the brand with the different ‘category entry points’ coveted by the brand. For example, Volvo cars have a safe image, which allows them to be associated with family use, extreme weather driving, heavy use and other situations where safety brings value. To achieve this association with safety, Volvo has for many years focused its marketing and communication strategy around this idea, and consumers have picked up on it. Consistency across the different elements of the marketing mix and in brand messages over long periods of time is therefore essential to establish the desired brand image. A brand with a clear, consistent and relevant image will be more likely to be associated with category entry points, enhance brand equity and drive sales.
• Satisfaction. We know that loyalty is partly determined by market share (Double Jeopardy Law). But it is also true that there are many, many things you can do to create better experiences that influence the image consumers have of a brand. And this is fundamental to customer retention in all sectors and especially in services.

Brand managers need to choose ways of measuring brand equity that really help them. All the factors we have described have a direct impact on business performance, are easy to measure and understand by all stakeholders, and enable brand managers to take the necessary actions to increase brand equity.

Research to measure and increase brand equity

Market research helps you build stronger brands. Here are some tips to help you find better ways to do this:

• Understand your buyers. Usage and attitude surveys provide you with a wealth of information about buying habits and product usage, as well as shoppers’ needs and expectations. This knowledge is essential to formulate winning marketing strategies. Everything else you can do will only succeed if you have this precise knowledge.
• Segment and choose your target audience. The broader your target audience, the better your chances for growth. But be careful, marketing budgets are limited, and if your marketing budget does not allow you to reach all buyers, it is better to concentrate on a part of the market. Set up segmentation surveys to create several homogeneous groups and choose those who will be your target audience today. You will gradually increase your target audience.
• Periodically measure the performance of your brand. In previous sections we have highlighted the importance of metrics such as brand awareness, recognition and salience. It is also important that you measure penetration – the percentage of consumers who buy your brand – and calculate the size of your buyer base. To anticipate the expected evolution of your brand equity, metrics such as purchase consideration or future purchase intent. Brand tracking that incorporates the different stages of the brand funnel will help you collect all this information. Use the data to determine your brand’s performance and evaluate the impact of actions taken between survey waves.
• Remove the barriers to buying your brand – what are the reasons that prevent new shoppers from choosing your brand? Maybe they can’t find the brand in shops? They don’t know it? They don’t think it’s right for their need? Find out where the barriers to shopper acquisition are with a survey of drivers and barriers and work to progressively eliminate the most important ones.
• Measure the experience to encourage retention. Conduct regular customer satisfaction surveys and address issues that jeopardise the quality of the experience and repeat business.

Measuring brand equity with We are testers

If you want to measure your brand equity, We are testers can help. We have a team of research experts who will help you create the perfect questionnaire for the different surveys you want to conduct. We have a research platform capable of carrying out all types of surveys efficiently. Thanks to automation, market surveys are now much more accessible for all types of brands.

Find out about all the possibilities to design the research you need to calculate your brand value and progressively reinforce it. Contact us today.