‘Brand Equity’

Brand Equity is the commercial value of all associations and expectations (positive and negative) that people have of an organization and its products and services due to all experiences of, communications with, and perceptions of the brand over time. This value can be measured in several ways: as the economic value of the brand asset itself, the price premium (to the end consumer or the trade) that the brand commands, the long term consumer loyalty the brand evokes, or the market share gains it results in, among many others. For instance haven stayed this long without a single post on this blog I’m quite sure I will have lost some of my devoted readers.

From an economist’s perspective, brand equity is the power of the brand to shift the consumer demand curve of a product or service to achieve a price premium or a market share gain. I’m talking about a positive shift in demand.

To use a metaphor, brand equity is like a pond. People may not know how long the pond has been around or when it first filled with water, but they know that it supports life, from fish and frogs to ducks and deer. It also may be a source of recreation, irrigation and possibly even human drinking water. Clearly it is a valuable resource. But many people take the pond for granted. It seems as if nothing can diminish its supply of water, but yet we sometimes notice that it rises with the spring rains or lowers after a long draught or excessive overuse for irrigation. Brand equity is a reservoir of goodwill. Brand building activities consistently pursued over time will ensure that the reservoir remains full while neglecting those activities or taking actions that might deplete those reserves will reduce the reservoir, imperceptibly at first, but soon all too noticeably until it is too late and all that is left is mud.

[This article comes as an apology and as bonus to all my readers that may have been disappointed by my silence and may have moved on to other things. I know I have been taking an action whose result means depletion in the reservoir of readers I may have built before now. I’ve been busy with my book(s). Here is a little token as I welcome you back.]

This illustrates one of the most difficult problems in brand management. While brand equity is critically important to a company’s success, because of its reservoir-like nature, it is often taken for granted, overly drawn upon, and not adequately replenished, especially in times of crisis.