By Samuel Thimothy, VP at OneIMS.com, an inbound marketing agency, and co-founder of Clickx.io, the digital marketing intelligence platform.
Some Xiaomi smartphone models are comparable to the latest iPhones in terms of functionality. Somehow, they cost three times less. Tory Burch accessories are also known as a luxury brand, but they are not nearly as expensive as Hermès. What makes customers want to pay more for some brands than others? The answer is two words: brand equity. Developing your brand’s equity could help you increase your margins by increasing its perceived value in the eyes of your customers.
The Importance Of Brand Equity
Why is brand equity important for companies? There are a couple of reasons.
1. It helps increase awareness of the brand.
Brand awareness isn’t something that comes naturally. The biggest of brands spend millions of dollars on putting their names out there in front of the customers and there’s a good reason for it. People are more likely to buy from the brand that they are familiar with. Just the mere fact that the brand is known brings more value to the products that are sold under its name. By gaining awareness, you develop familiarity and visibility, which serves as an anchor for other positive associations.
2. It creates brand associations and grows the perceived value.
When you hear about Apple or Hermès, what comes to your mind? That is the concept of brand associations in action. It occurs when some company traits become ingrained in the minds of customers. A brand association seeks to link it with positive attributes — “premium,” “quality,” “luxury” and so on. Brands with positive characteristics have a better chance of cornering the market by giving people more reasons to buy.
Perceived value is yet another important factor. Brand equity helps build the relationships between the perceived benefits and perceived costs that people relate to that product. As a result, nobody questions the prices of Hermès goods. When people see the brand, they assume it must be good. That’s why they are ready to pay the high price for a Birkin bag.
3. It builds relationships with clients by promoting brand loyalty.
Every marketer would agree that it’s a lot cheaper to keep the existing customer than to acquire a new one. Companies that strive to build genuine relationships with their customers and deliberately work on promoting brand loyalty get substantial financial benefits in the long run.
People are willing to pay more for a brand they are loyal to. Moreover, if the brand has done a really great job, the customers will buy the goods they didn’t know they needed. Customer loyalty gives brands a tremendous advantage as it not only increases the brand value and gives massive leverage over the competition, but also reduces marketing costs.
How To Build Brand Equity
Establishing brand equity has obvious benefits, but it requires a lot of work and research to achieve and maintain it. Figuring out what makes your brand unique starts with identifying the values and needs of your target audience. As your organization grows, you must keep spreading awareness to generate new business and foster loyalty among existing customers at the same time.
1. Recognize your “why” and capitalize on it.
If you look at the companies like Apple and Hermès, you can easily tell what their “why” is. It explains a lot about their advertising, which is mostly focused on their brand as a whole rather than a specific product. Such brands can expand their product lines to infinity because people love them for what they are.
2. Test your positioning with customers.
Marketing is always a process of trial and error. Even the most popular brands take time to test how their messaging is perceived by the consumers every time they introduce something new. With every alteration, it’s important to see how the audience reacts, what they like or dislike, and whether they get their needs fulfilled. The messaging and creative elements should be based on data and what appeals to your customers.
3. Prioritize creating the best customer experience.
With the rise of social media and the ability to voice opinions and share experiences online, brands are no longer defined by how they position themselves in ads. The brands are what people say about them. If you put the customer at the center of what you do, your brand equity will grow and you’ll be able to enjoy all the benefits.
All in all, creating brand equity is more than a way to generate short-term sales. It is also a means to support long-term value creation. Your branding strategy must include the equity element because it has a profound impact on a brand’s ability to create and sustain a competitive advantage.