Brand Equity – How Important Is Brand Equity As An Intangible Asset ?

This post was written by Internet Marketing John on December 11, 2009
Posted Under: Branding Information

Brand equity is one of the most important assets to any company.

It is a marketing term, that examines a product’s performance in the market arena, as if it had no benefit of a brand name.

It refers to the marketing impact of a specific product, in association with a brand’s name.

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As an intangible asset, the impact of brand equity on a business, is based on the customer’s knowledge of that product.

The brand itself plays a critical role in building the customer’s knowledge and awareness about that product. It is vital in determining the choices that customers will make, based on that knowledge.

Brand equity reinforces the importance of a brand’s value, and produces positive recall about the product in the mind of the consumer.

You can view brand equity in three different perspectives.

  • Monetary

One way to determine the value of brand equity, is to calculate the premium placed on a product.

To better explain this; let’s assume we have two products.

One product is an easily recognized brand, such as Heinz ketchup; and the other is an unrecognized brand.  The premium that is placed on the Heniz ketchup over the unrecognized brand, is the amount of money that consumers are willing to pay for the branded product over the unrecognized brand.

  • Extensions of the Brand

Most companies will consider extending their product lines, and adding additional products under the same brand name, when their brand achieves a certain level of commercial success, and public recognition.

Companies that achieve this level of brand recognition, no longer need to invest as much money on large advertising campaigns, to promote their newly introduced products to the consumer.

  • Consumer

The associations that a customer makes with a brand,will determine what their attitude, and how much trust, they will show towards that given product.

Their associations are based on their experiences using the brand.

The actual experience a customer has with a brand, plays a crucial role in the marketing strategy; especially in the early stages, when the brand is being developed by the business.

What are the Benefits of Strong Brand Equity?

Brand equity can be a negative as well as positive. Therefore, it pays for a business to invest in building a strong brand equity to benefit the company in a positive light.

Here are some benefits a company can expect to receive with strong brand equity.

  • A more reliable income stream
  • Increased profits through increased market share, and higher pricing for fewer advertising dollars.
  • With an established brand, you can more easily sell that name at a given price.

Brand equity, being recognized as an intangible asset, acquires its value from the perceived quality of a product, and from the positive experiences that consumers have with the product.

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