Recent research suggests that Apple owns the most valuable brand in the world, worth nearly $117 billion. Google comes a close second at $107 billion and IBM third at $76 billion.
The research reinforces that brands have the potential to be the most valuable things that a company owns.
However, all this value sounds incredibly impressive for these enormous corporations but since changes to international accounting rules have prohibited brand equity from being on the balance sheet as it is considered to be an ‘intangible’ in the same way that a customer database would be, the question many business owners, particularly those of SME’s may be thinking “how is this relevant to me?” and “what’s the point?”
Brand equity as an idea has been around since the 1980’s and can be defined as “the set of brand assets and liabilities linked to the brand – it’s name and symbols – that add value to, or subtract from, a product or service.”
At the point of sale or investment, if a business has a strong brand and the potential buyer/ investor sees the brand as differentiating with relevance and engages effectively with its audience, they see it as a stronger investment and vehicle to do business from. Therefore brand equity can be a critical factor in the actual value attached to a business.
Building brand equity does however have many facets that go beyond simply the transactional value a brand may or may not have. For example increased brand equity helps a company to:
• Keep its customers (improved retention)
• Find new customers (improved conversion of prospects)
• Expand its product ranges by using the brand as a launch pad
• Attract the best talent (improving the employer value proposition, EVP)
• Provide greater value to customers
All of these points are incredibly valuable to businesses as it means by increasing value in their brand their marketing activity can drive a higher return on investment.
The final point on the list above is an important one: brand equity enhances the customer’s ability to interpret and process information, improves confidence in the purchase decision and affects the quality of the user experience – making life easier for customers to purchase products or services. Sounds like a no-brainer to me!
So how is brand equity measured?
Well, according to one of the founding thought leaders on brand equity, David Aaker, there are four dimensions to it:
Brand loyalty: the extent to which people are loyal to a brand
Brand awareness: the extent to which a brand is known among the public
Brand associations: associations triggered by a brand, it’s name, image etc
Perceived quality: the extent to which a brand is considered to provide good quality products
While you might not have the resources, or need to go through such a thorough process to measure your own brand equity the above criteria are non the less a good yard stick to ensure you are doing all you can to ensure the continued success and strength of your brand and thus improving your value to customers.
For more information or for advice on how you can add value to your own brand please get in touch.
01925 226 139