What is branding equity and its importance?

The brand is made up of a variety of components, including its values, vision, personality, and voice. Together with the things you provide, these branding components let your customers know who you are.

Additionally, your brand leaves a lasting impression on your customers—one they’ll recall the next time they make a purchasing decision—evoking either positive or negative emotions.

If you are unfamiliar with brand equity and its function in online commerce. We will break down the importance of branding equity and help you in utilising it for your Knowledge Commerce business.

What is Branding Equity?

In the marketing world, the term “brand equity” is used to define the worth of owning a well-known brand name.

It is based on the notion that a brand with a well-known name may generate more revenue from sales of goods than a brand with a lesser-known name. It is the strength of the brand that decides its worth. Although brand equity serves the same purpose as equity in a property, it cannot be easily converted into cash.

When a business wants to increase the number of products it offers, brand equity is crucial. If the brand equity is strong, the company can boost the likelihood that customers will purchase its new product by linking it to an already existing popular & successful brand.

For instance, if Patanjali introduces a new soup, it will probably continue to sell it under the same brand name rather than creating a new one. The positive associations people currently have with Patanjali would make the new product more alluring, than if the soup had an unknown brand name.

Businesses may build brand equity for their products by making their products unique, instantly recognized, and of the highest calibre and dependability. Brand equity can also be developed through mass marketing campaigns.

However, a brand is said to have negative brand equity if consumers are more prepared to pay for a generic product than a branded one. This would occur if a company had a major product recall or brought about a widely publicized environmental disaster.

How To Calculate brand Equity?

There are a lot of different ways you can calculate brand equity. You can look at the book value versus the market value. But what you want to do is kind of focus on the overall qualitative equity that a brand can bring to a company. And probably the biggest thing you want to look at in terms of brand equity is actually what’s called brand awareness.

How much do people know about your brand? When you say Coca-Cola, what comes to people’s minds? What do you think of it? Do you know it? These kinds of things. But that has value. Being known means something. There’s a reason why those celebrities, when they don’t get to parties, they go, “Don’t, you know who I am? Cause it helps them to get into the party.

But also that brand awareness, if you know what a brand is, it’s helping them get into your shopping bag because you know this. So, just the fact that a brand is known, that awareness factor, really brings value to the actual product.

Cause businesses know if people just hear about our brands and they see it, then the brand awareness will grow, and there’s a better chance customer are going to buy, and so that brings some brand equity in there.

What is the Importance of branding equity?

Positive brand equity will allow you to:

• Increase your market share: You’ll generate more sales and revenue thanks to the competitive advantage that comes with strong brand equity.
• Create new product lines with assurance – Customers are more likely to try new products when they are familiar with and confident in your brand.
• Gain industry esteem – Businesses with strong brand equity are regarded highly not only by their customers but also by other businesses in the same field.
• Lower marketing expenses – Strong brand equity benefits from lower marketing expenses because it is already a well-known brand and does not require significant investment in product marketing. There is no need to inform and create awareness, which lowers the expense and effort associated with marketing.

The components that create strong brand equity

Understanding the components of brand equity is necessary before measuring and managing it. As we’ve already established, brand equity is the value that comes with having a well-known and trustworthy brand name. Therefore, you should think about the aspects of your brand that help it become a recognizable and trustworthy one.

The following are some of the most significant components of brand equity:

Brand Awareness:

The main aspect influencing brand equity is brand awareness. Understandably, many people mistake brand equity with brand awareness. Despite seeming very similar, these concepts are different. The level of consumer awareness of your brand is measured by brand awareness. Brand equity is the value that your products gain as a result of increased brand awareness.

Perceived Quality

Customers’ opinions on the product have a big impact on their decision to buy. Brand equity will increase if customers view your product positively and identify it as being of “good quality.” Additionally, customers will be more likely to pay extra for a product because they believe it to be of good quality, enabling you to charge a premium price.

Brand  association

Brand equity is also influenced by brand association, commonly known as the qualities that consumers associate with your brand. These associations help consumers in recognising your brand and setting it apart from your competitors. After all, it makes it much simpler to remember things if you can mentally link them to something else. Making it simpler for customers to remember your brand by using brand associations will increase brand equity by facilitating customer brand recall.

Brand loyalty:

Another factor of brand equity is what we call brand loyalty. Like the fact that people become loyal to your brands, that means even if your products are more expensive than the competitors, customers are more likely to buy from you. So if you like Vistara and you fly with Vistara and you’re willing to spend 2000 more to fly with Vistara than Air India, well there’s value right there. That loyalty to get those points, to get that upgrade, that got you to spend more money for it. And right there, that’s a lot of brand equity too.

Conclusion

Positive brand equity indicates that your target market holds you in high regard and is familiar with your offerings, and customers would be prepared to pay more for your digital products than you are currently asking. Exactly where you want to be.

Start by enhancing consumer experience as well as brand awareness. You want them to choose your brand over every other one which makes sure branding equity remains high.