It was 3am on the last day of 2023, and people were lining up outside of Target. Shoppers described a scene that sounds like a Black Friday nightmare: arguments over who was in line first, crowds racing through the store the moment doors opened, and the product gone in minutes. Those who braved the madness would tell you (with pride) they did so for a limited-edition Stanley cup. But as any good marketer would tell you, they were there because of brand equity.
The type of brand loyalty that leads customers to rush to the stores on day one for a new product is hard to come by. It’s also extremely profitable. Stanley experienced a 751% year-over-year increase (no, that’s not a typo!) in its tumbler sales in 2022. Talk about results that justify a marketing budget.
Stanley’s breakout story isn’t a trajectory most retailers can hope to mimic. But it is a success story we can all learn from. The secret sauce isn’t a colorful 40-oz tumbler — it’s in the brand equity that Stanley built among its loyal customers.
This guide will help you understand what brand equity means, how you can build it, and how to handle brand challenges that many retailers face.
- What is brand equity?
- What goes into brand equity?
- The importance of brand equity
- How to create brand equity through the consumer experience
- How to measure brand equity
- Solving brand equity challenges
- Every company has a brand equity journey
What is brand equity?
Brand equity is the value attached to a certain brand name. It’s a combination of brand awareness and brand reputation, and maintaining both is essential for companies of all sizes.
In practice, brand equity measures customer loyalty. It helps you understand how much more your consumers are willing to pay for your products, how likely they are to choose you over a competitor, and whether they’ll consider trying completely new products or services from you.
Sound simple? It is. The hard part is building it.
What goes into brand equity?
As a whole, brand equity is intangible. It’s based on consumers’ perceptions and emotions, which means it can be hard to measure. However, there’s a few elements that strong brand equity is built from.
The first is brand awareness. Awareness, in this case, doesn’t mean whether people have heard of your company. It means what they know about your products, the things you stand for, and the benefits you offer your customers. The value of your brand depends on consumers’ understanding of your purpose.
The second is brand perception. This might seem similar to brand awareness, but perception is born in your customers’ minds. It’s what your brand represents to them. For instance, Stanley sees its core values as “invention, innovation and inspiration” and its purpose as “build[ing] a more sustainable, less disposable life and world.” However, to its current fans, Stanley Tumblers are about staying hydrated (if you #WaterTok, you know) while making a fashion statement. They perceive Stanley as a status symbol, whether the brand is meant to be one or not.
Third, we have brand associations. These are the concepts and feelings consumers attach to your brand. Think of your car. You likely equate it with the freedom to go where you want. Depending on the type of car you have, you may also consider it a leader in safety features or a way to save money and the planet by reducing your gasoline use. If you’re like most consumers, you ascribe those specific feelings to the car brand. (This can work the other way, too, if you really hate your car.) Those would be your associations.
Fourth comes perceptive quality. As the name suggests, this is a measure of how consumers feel about the standard of goods or services they’ll receive from a brand. Perceptive quality doesn’t need to be based on personal experience. Consumers may make quality assumptions based on price point or the selection of stores that carry a brand or product. They may also form their opinions from word-of-mouth or marketing campaigns.
Fifth is brand experience. This is the part where customers interact with your products or services — and yes, it really is fifth on the list! However, brand experience is still an important part because it’s where their impressions of your brand can be proven true or false.
The sixth is brand loyalty. This is your customers’ decision to keep interacting with your brand. For some, brand loyalty means continually rebuying consumable products. Brands that make durable goods may instead measure loyalty through customers’ engagement with social media or newsletter content. The most loyal customers will try other products from your brand and recommend you to friends and family.
Together, these six components add up to a perception and experience of brand value among your customers.
The importance of brand equity
It’s hard to overstate the value of brand equity because there are so many ways you’ll see positive ROI if yours is strong.
On the customer level, you’ll find it easier to attract new buyers because they’ll know your products or services are of high quality. A company with high brand equity also finds retention easier since equity includes trust — and trust is a factor in over 90% of consumers’ buying choices.
When it comes to profitability, brand equity allows you to charge more than competitors without losing your customers. It helps you increase your sales volume as brand advocates share their love for your products with friends.
Plus, brands with a high level of trust can be more efficient with their marketing spend. Customers who already know and trust your brand don’t need nearly as much enticement to buy. Between a decrease in spending and an increase in prices, your company will see higher profit margins overall.
Brand equity matters because it increases your market share over competitors. It makes it easier to expand into new products or verticals because you have a base of buyers who are willing to try out a new product. And, for publicly traded companies, brand equity increases your stock price.
Brand equity is sort of like money: The more you have, the better off your company is. You might even argue it’s a type of currency in its own right — the currency of trust.
How to create brand equity through the consumer experience
Look up “how to create brand equity,” and you’ll get a laundry list of action items — be consistent in your branding! Run the right kind of marketing campaigns! Make good products! But brand equity can’t be built in a vacuum. It’s a relationship between you and your consumer base. It’s, therefore, best to start from the consumer perspective.
Consumers go through a journey with each brand that either ends in them valuing the product or deciding they want to try something new. Here are the five steps you must lead your buyers through to develop brand equity.
Brand awareness is the top element of brand equity, and it’s also the first step in each consumer’s journey. They have to know who you are, what you do, and what you stand for.
Advertising is typically the best way to introduce yourself to new customers. But awareness marketing can’t just include the name of your brand and a picture of your product or a description of your services. If you’re unknown to a consumer, they need a reason to care about you.
A strong brand story can help you break through the noise with your awareness campaign. The best awareness campaigns cater to the values or interests of your target demographic. For instance, if your buyers care about supporting small businesses, your ads might emphasize that your products started from a home recipe. If they’re nature lovers, talk about your company’s sustainability efforts while showing how your product will help them enjoy the great outdoors.
Awareness campaigns are often easier to disseminate through mass or social media. PPC ads keyed on your brand name won’t be reaching new potential buyers. You’ll need to identify the spaces where your target audiences hang out and then go to them there. Maybe that means buying ads in publications centered around a certain topic.
Or maybe it means encouraging your existing fans to share user-generated content (UGC), such as reviews and media your customers create about or featuring your brand. UGC can be reshared by your brand, but it also spreads organically through the networks and communities you want to reach.
Once customers know who you are, you want them to start seeing your product around. The familiarity will help build trust and cement you in their mind as an option.
Building recognition requires you to focus on brand consistency. Consumers expect a certain uniformity in aesthetics — that’s your logo, fonts, colors, and other design elements — to help them quickly identify brands. Depending on how your product is presented, you might consider appealing to other senses. You know exactly what that Slack “new message” sound is, thanks to consistent branding.
Consumers are also more likely to recognize your brand or product when they routinely encounter it in the same context. You can use that context to start building associations. For instance, a product that’s consistently shelved with premium goods will come across as a quality item. One that’s mentioned in buzzy publications will seem on-trend to consumers.
The techniques you use for recognition are similar to those you use to build awareness. But you shouldn’t think of the two as interchangeable. Your goal in the awareness step was to get your name and story out there. When you’re building recognition, you have the chance to go deeper into your story and cement your values, mission, and desired preconceptions in your audience’s mind.
After a consumer gets to know your brand, those who find it intriguing will move to step three: trialing your product or services.
You typically have one chance to impress a new consumer (unless you’ve done an extremely good job in steps one and two!), so delivering on your promises in short order is of the utmost importance.
First, the recognizability must be there. If buyers have only ever seen your product in photos and videos, the item they receive has to match. (If they’re picking it up on a store shelf, you can assume you’ve succeeded on this point.)
Second, your product must be of the expected quality. It doesn’t need to be the best on the market, but it should meet or exceed the standards for the price point and perform as you’ve stated it will.
Third, users must find your product memorable. Whether that’s because it introduces a new and fun way to address an old problem or just because it looks different than competitors, there has to be something about it that sticks in their heads.
Keep in mind that the physical product is only part of the equation here. If the trial stage is about your company delivering on its promises, it’s your job to craft guarantees your product can easily meet. Set your company up for success by guiding your buyers’ expectations through advertising, product copy, or post-purchase communications. You may want to test this messaging with focus groups or survey customers to learn where you’re hitting the mark and where you can be more accurate or specific.
The number of customers who choose your product over others is an indicator of brand equity. You can earn your customers’ preference by providing an excellent brand experience.
Make sure your buyers are getting the most out of your product with tutorials, user guides, or inspiration. More complex or technical products are more likely to call for the first two; we trust you can figure out if a user guide would be helpful to your audience.
For items that don’t need a how-to, you might instead show suggested uses. This is another place where UGC works well. For instance, apparel sellers might share ‘fit inspiration to help buyers style their new clothes. Or, help customers think outside the box by offering some “hacks” that repurpose your product for unexpected uses. There’s a whole community centered around stretching the use cases for Ikea furniture; if your devoted users have similarly clever tips, don’t be afraid to share.
Keep in mind that your customers’ experiences go beyond their interactions with your product. Every interaction with your company matters — whether that’s the emails they open (useless or worth reading?), their visits to your website (is there an annoying modal in the way?), or communications with customer service (nobody likes those AI chatbots. Nobody.).
You’ve succeeded in building brand equity with a consumer when they convert from a sometimes-buyer to a loyal customer. Loyalty may seem like the natural outcome of the previous steps of the journey, and you certainly can’t earn it without focusing on them as well. However, you can also nudge customers into becoming more loyal.
Keep customers around by following through on the experience-building work you did previously. A buyer’s seventh purchase should be just as valuable and enjoyable as the first. Therefore, your efforts to engage customers with your product and brand can’t stop after that first W. Treat each new purchase as an opportunity to engage them more with your brand story and values, and make your product even more central to their life.
Beyond that, you can build brand loyalty in two ways. The first is by building a community around your brand. If you don’t have your own platform to bring people together, create a hashtag for users to share related content on their socials. This is where resharing UGC can be a big boon; customers love to see their content endorsed by an official brand account.
If a community isn’t a viable option, try a loyalty rewards program. There’s multiple ways to structure a loyalty program. You can offer discounts, exclusive or early access to new products, or perks like free shipping or birthday rewards. Just getting people to enroll in a loyalty program makes them 30% more likely to increase their spending with you. If you can talk them into paying for it, they’re 60% more likely to drop more on your products.
Loyalty matters because it’s cyclical. Once someone starts thinking of themself as a loyal customer, they’ll start acting more loyal, reinforcing their perception. The more value they get from your brand, the more value they’ll perceive it as having.
How to measure brand equity
There’s not a brand equity meter you can access to measure how much consumers value your company and its products. You can, however, gather internal benchmarks for related metrics within a few categories:
- Financial “big picture” numbers like market share and company value
- Financial “small picture” figures like price growth and sensitivity, revenue potential, and purchasing frequency
- Sentiment measurements from web analytics, online engagement statistics, reviews, focus groups, and surveys
- Customer metrics like loyalty program participation, purchase frequency, and retention
The valuation and strength of your brand depend on your brand equity. Watch for fluctuations in any of the metrics your company uses to track these two KPIs, along with those listed above.
You’ll have to rely on your judgment to determine whether a change in one number reflects a change in brand equity or whether it’s a response to other factors. If you see growth or declines across the board, though, you’re likely seeing the impact of your brand equity efforts.
Solving brand equity challenges
Brand equity, like the stock market, can go up and down. All companies face challenges (whether from internal or external factors) that decrease the perceived value of their brands. If you’re not already performing regular brand reputation maintenance, it’s time to draw up a program. Then, get ahead of these hardships with our playbooks for some common obstacles.
Crowdsourced brand information
Brands largely controlled their image when mass media was dominant; now, consumers can get their information anywhere. Customers who detail negative brand experiences online can drive away potential buyers and pollute your brand’s image.
Negative reviews from customers who just enjoy yelling about things are part of life — every Swiftie knows that the haters gonna hate, hate, hate, hate, hate. You should start worrying when those bad reviews start to outnumber the good ones or customers share stories outrageous enough to go viral.
Prepare yourself by learning how to respond to bad reviews (tl;dr: quickly, briefly, and with empathy) so you can step in when a customer is unhappy. You’ll hopefully improve their experience and show shoppers your company cares about making things right.
Failure to deliver on promises
Customers expect good value in return for their money. What defines “value” will vary based on the individual and type of product, but they’ll know when a product isn’t up to snuff. For instance, if a phone’s battery keeps catching fire until that phone gets banned from commercial flights, you’re probably not meeting expectations.
Most products don’t have this big of an expectations-reality mismatch, but you may face a disconnect between the product your company announced and the product it was able to create. When you learn customers aren’t having the experience you thought they would, it’s time to shift your messaging.
There may not be a lot you can do to reach those who have already bought the hyped-up version of a product except offer refunds. But you should adjust your future marketing pitch so your next crop of buyers knows what they’re getting.
Breaches of customer trust
People make mistakes, including people who are on the job. When those mistakes affect your customers, you may see a large decrease in brand equity.
A 2023 survey by PwC found that protecting consumer data is essential to earning trust — so hacks or other data breaches will harm your customer relationships big time. AI use is also shaping up as a trust-breaking practice for some companies.
38% of customers stop purchasing from a brand altogether after that brand damages their trust. The others will need some reassurance that your company understands the problem, takes it seriously, and is coming up with a plan to prevent further issues. Your exact approach will vary based on the incident that sparked the outrage, but as in the other cases, communicating with empathy and a genuine desire to make things right can help salvage your image.
Every company has a brand equity journey
It takes time for customers to see your brand as a valuable part of their lives. It will take time to build that perception of value, too. You’ll likely see ups and downs during the process, and you may learn about some problems you didn’t even know existed.
Don’t let these roadblocks deter you, and don’t feel down if you don’t get results overnight. Think about the brands you trust completely — how many months or years did it take for them to win you over? You’ll be starting at the same place with your customers, so have patience. Things will start to change as you follow the steps laid out in this article.
One last tip: Keep yourself motivated by breaking your grand plan into small, concrete steps. The first thing you can do now — today! — is to take control of your brand communications. It’s an easy starting place, and it will set the foundation for more important work you’ll have to do later. Read our complete guide to ensuring brand consistency across channels to get started.