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We live in a world where brands are becoming household names. You can google things to learn, use Photoshop images to make them better (or worse), and don’t even get started on the infamous Netflix and relax. If you want to become the next Sharpie or Kleenex, you need to build your brand equity early.
Before we tell you the “why,” let’s address the “what.” Brand equity is a more intangible measure of your brand’s awareness, trust and goodwill. However, despite its short-lived nature, it has a direct impact on your sales as consistent branding can increase your sales by 23%.
You can use many metrics to measure your brand equity, including brand awareness, associations and loyalty, customer lifetime value (CLV), marketing ROI, and even overall audience sentiment.
With the semantics out of the way, let’s explore the six reasons why you should increase your brand equity early.
1. Creates recognition and differentiation
Unless you’ve been living under a rock, you’ve probably heard of Coca-Cola, a soft drink mastodon that has not only become entrenched in our everyday lives but has even become the unofficial symbol of Christmas. It’s easily recognizable, googleable, and generally has a good reputation.
Compare that to something like DRY, which enjoys 18% awareness in its home country, the US, and has no presence elsewhere. Because of its name and the existence of Canada Dry, a root beer brand from 120 years ago (still alive and kicking), it’s not easy to google. It may be a good product, but it’s fighting an uphill battle against its own brand.
No matter how good your product is, 59% of people prefer to stick with something they are familiar with rather than trying unknown brands. So it’s not enough to develop an exceptional product – you also have to make it stand out from all competitors.
Related: Building a Brand: How to Build a Brand from the Ground Up
2. Builds trust
However, mere recognition isn’t enough – even though everyone knows it, you don’t see people lining up to buy ISIS’s latest summer collection.
While word of mouth is important in getting an initial sale, your commitment to maintaining the trust placed in you will earn you continued patronage. 67% of customers admit that a good reputation makes them want to try your product. But they won’t continue using it if you don’t earn their trust.
Related: “Brand equity” is an intangible asset that is worth real money
3. Increases brand value
While brand equity is typically calculated using concrete metrics such as the value of its assets, some more ephemeral metrics such as brand equity have a significant impact on costs.
Building positive brand equity is a lengthy process. As Warren Buffett famously said, “No matter the talent or effort, some things just take time. You can’t give birth to a baby in a month by impregnating nine women.”
Putting more money into marketing doesn’t guarantee an instant sensation. Additionally, there have been many cases where teams with limited marketing budgets, like Cards Against Humanity or Dollar Shave Club, managed to go viral almost overnight. So the sooner you start investing in marketing, the higher your chances of cutting through the noise.
Related: Are You Acquiring a Brand? This is the secret formula for calculating its real dollar value
4. Demand higher prices
Conversely, if you want to capitalize on your established brand, having a lot of equity can allow you to get a higher price for your products or services. Customers would not take the risk of paying more for a noticeably higher quality product.
Incredible equity allows Balenciaga to sell seemingly nonsensical products like $1,850 trash bags or $4,400 bracelets (along with the shock value and viral PR, but that’s beside the point).
5. Reduces marketing costs
Okay, bear with me. Growing your brand from the ground up takes a lot of time, money and creativity. However, once you get the ball rolling, you will see greater returns from your marketing efforts.
On average, the customer needs eight touches with the brand (this number can vary depending on the industry) to make a purchase. This means they have to hear or see your ads eight times before they actually make a purchasing decision. However, user-generated content helps reduce this number and is, in a sense, free “touches.”
The math is simple: the fewer contacts it takes for the customer to convert, the fewer resources you have to spend, even if the initial investment is high.
Related: Why Successful Entrepreneurs Understand the Power of Brand Equity
6. Improves crisis resilience
Crisis resilience is a two-way street.
On the one hand, when your brand is in crisis, good equity will help you stay afloat as you will have a stable flow of loyal customers.
On the other hand, if the crisis is more global and affects customers’ purchasing power, positive equity makes you the main candidate for purchase. Because why should people try something new when they know your brand offers quality products at good prices?
Of course, the way crises affect different industries varies greatly. Chanel, for example, felt neither the recession nor the COVID-19 pandemic and reported a 23% increase in sales.
Related: If you’re not thinking about brand equity, you should be. Here’s why.
Diploma
Building brand equity is a lengthy process. Ultimately, the sooner you start encouraging trust, loyalty and recognition among your customers, the better. A well-established brand brings in more revenue, has more competitive advantage and can weather any storm, making it easier to run your business and experiment with new tactics.