Brand is not just identity, brands are worth money. As Seth Godin says, “A brand is the set of expectations, memories, stories, and relationships that, taken together, account for a consumer’s decision to choose one product or service over another.
But before talking about brand equity, we should know how the brand value built, and the best way to know it through (BVC) model from Ipsos
What is brand equity?
Brand equity is the level of sway a brand name has in the minds of consumers, and the value of having a brand that is identifiable and well thought of. Companies establish brand equity by creating positive experiences that entice consumers to continue purchasing from them over competitors who make similar products. This is done by generating awareness through campaigns that speak to target-consumer values, delivering on promises and qualifications when consumers use the product, and loyalty and retention efforts.
Brand equity has roots in both consumer psychology and a company’s performance. In particular, it comprises:
- A CONSUMER’S EMOTIONAL ATTACHMENT
to the brand, good or bad, based on previous experiences
- A COMPANY’S CONSISTENCY
in areas like product quality, customer service, and niche marketing
And here you can see The top brands value in the world
1. Keller’s Customer-Based Brand Equity (CBBE) model
Keller’s model is a pyramid. The stages of brand equity move upwards towards the apex and the simple brilliance of this model is that it’s easy to tell what stage the brand is at and what it needs to do to move higher.
And here is an example of how to Audi team developed a brand based on this model
2. Aaker’s Brand Equity model
Whereas the Keller brand equity model focuses on emotions, Aaker sees brand equity as a mixture of brand awareness, brand associations, and brand loyalty. All these add up to the value provided by a brand’s goods or services. The Aaker Model helps to create a brand strategy made up of various components that separate a brand from its competition and advance it.
Approaches to Measure Brand Equity
Brand value means different things to a different set of people. It is an objective term, and quantifying the qualitative value can be difficult. Though it is difficult, and measuring brand equity can be challenging, it is not impossible. There are numerous ways in which brand equity can be measured.
The most popular valuation approaches are:
1. Cost-Based Brand Valuation
2. Market-Based Brand Valuation
3. Income-Based Brand Valuation
Brand equity formula:
Want a calculate value on your brand equity?
There is no single, accepted brand equity formula to use for calculations; different companies use different methods. However, in Pi Plus Lab we found the most suitable brand equity formula in Branding for Dummies series of books, written by the former creative director of Landor Associates, Bill Chiaravalle, and marketing author Barbara Findlay Schenck.
It’s calculated based on the three approaches of brand valuation:
1. The cost to establish/replace your band
The amount of money you spend on branding. It’s the total of expenses for:
the costs for your name registration, logo trademark, slogan, online presence (including web design and domain name) and any other strictly branding expenses like a musical jingle or mascot
all your advertising, promotions, online outreach and other paid publicity
attracting and retaining current customers:
any relevant marketing expenses above, plus money spent on lead generation, customer acquisition, loyalty programs or other endeavors like viral marketing
2. The economic value of your brand’s premium market position
When brands start selling, often they calculate the actual economic advantage of the brand. You can assess your own economic advantage by watching two indicators:
When your consumer demand remains high even when your prices go up, your brand enjoys pricing leeway known as favorable price elasticity. Price elasticity usually results from high brand value and usually leads to premium pricing.
To assess your brand’s pricing advantage, determine how much extra consumers are willing to pay in order to purchase your branded product instead of the offering of a lesser-known or lesser-valued brand. This difference, multiplied by your sales volume, indicates the economic value of your premium market position.
- If a product sells for 10 EGP and competing, nonbranded products or products with lesser brands sell for 7 EGP, the branded water’s price premium is 3 EGP.
- Multiply the price difference by the number of units sold. This product sells 100,000 units a year, its annual price premium equals 300,000 EGP (200,000 units × 3 EGP price premium).
IN THE END, REMEMBER:
When calculating the worth of a brand’s premium price position, be aware that the number you arrive at is a valuation starting point, not the finishing line. The effect of future brand-building activities, market growth or retraction trends, actions of competitors, and other market realities affect whether the value of the price premium should be adjusted upward or downward in assessing the brand’s worth. When calculating the worth of a brand’s premium price position, be aware that the number you arrive at is a valuation starting point, not the finishing line. The effect of future brand-building activities, market growth or retraction trends, actions of competitors, and other market realities affect whether the value of the price premium should be adjusted upward or downward in assessing the brand’s worth.