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Brand equity: What it is and why it is important?

By AMI Blogger | September 13, 2022

Simply put, brand equity is the marketing term used to refer to the total value of a brand as an asset. It is a sum total of all the liabilities as well as the assets that are associated with the name of the brand.

Brand equity is also a measure of how consumers feel, think, as well as act with reference to a particular brand.

The assets that affect brand equity involve intangible assets that affect tangible assets such as market prices, shares, profitability, scalability, and demand.

Many factors contribute to what is known as the brand equity of a company of a product, some of the components of brand equity are as follows:

Brand Association:

Brand association is basically everything that a consumer associates or relates with a given brand, product, or service.

Having an appealing brand association is an extremely advantageous thing considering it is precisely what boosts customer loyalty, sales, and word of mouth.

Fostering a healthy brand association is a good strategy in the long term.

Some examples of companies who have an extremely advantageous brand association are Apple (innovation) and Nike (athletic and self-improvement)

Brand Experience:

Brand experience is an overall aggregate of what the customer feels based on the interaction they have had with the brand, this includes physical as well as virtual interactions.

It is an accumulation of everything that adds to your experience with it. This includes but is not limited to the ambiance, quality, and staff behavior.

It goes without saying that this goes a long way when it comes to customer retention and brand growth.

Perceived quality:

It is no secret that customers compare brands in terms of quantity as well as quality, and delivering high-quality products is just as important as fostering the perception of quality that people associate with the brand.

This is hinged entirely on the customer’s perception of the brand and is dependent on factors such as experience, functionality, reputation, word of mouth, and reputation

Brand Loyalty:

Brand preference although very similar to brand loyalty is a slightly subservient version of it. It indicates the affinity consumers have to a particular product.

This is a precursor to brand loyalty.

Now that we know what brand equity really is, it is necessary to discuss its importance. Some quantifiable advantages of having a favorable brand equity are as follows:

Increases market share

Justifies premium pricing

Boosts intangible assets

Allows room for the extension of product lines

On a concluding note, it is important to note that brand equity essentially refers to the value added by a particular brand, and is what goes a long way when it comes to consumers being able to differentiate it from competitor brands. This is what essentially leads to a hierarchy among brands that have similar products and services.

Brand equity could be a very powerful aspect when harnessed right.

Here are a few examples of some brands that have a positive brand equity and some that have a negative one:

Brands that have healthy brand equity:





Brands that have unhealthy brand equity:

Goldman Sachs (due to the 2008 financial crisis, although they have managed to move past it)

Toyota (due to the anti-lock brake software issues)

Shell Oil (due to the oil spill in the Nigeria delta)

It is evident from the following examples that brand equity could either be extremely advantageous or detrimental to a brand based on how they choose to deal with it.


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