Understanding The Real Value of Brand Equity

by Cody Martin on January 27, 2013

When a company’s brand matures after a certain period of time, it acquires a monetary value higher than what it started out with. Especially when the brand carried by a company’s products or services become hugely successful, the chances of its value appreciating all the more increases. You can observe this at work in the way a particular company’s viable products or services are viewed both by its consumers, media and the industry to where the company belongs.

As the company’s heritage of value delivery through its products lengthens as time passes, the brand’s prestige, credibility and significance as a brand name, trademark and commodity symbol likewise attains more consequence. This is why branded retail items are premium priced for they have already proven themselves to all sectors of the retail trade. The brand equity is what consumers go by in terms of the following:

  • The product maker’s credentials. When a manufacturing company successfully makes all its products perpetuate the brand value through the years of being in the business, this creates a sense of credibility in the consciousness of its consumers. This enables brand loyalty and therefore equates automatically to higher brand equity for its maker. A company may sometimes diversify into other businesses not necessarily related to its original line of business but may use the same brand for the new business model. By association, consumers, media and industries may be influenced by the same equity that the brand carries. In the process, they will all come to expect the same amount of value delivery from the company’s new business venture.
  • Recognizability of the trademark. A brand that has been in existence for so long is naturally rewarded with easy recognizability by consumers and even the competition. Logos, brandings, trademarks, insignias, slogans and the like in labels, packaging and marketing collaterals become easily recognizable fixtures that perpetuate the brand further. When applied to other business concerns that the company owning the brand may venture into in the future, this easy brand recognizability makes it easier for the enterprise to make its new business known to consumers. That convenience is also a form of brand equity and of course, immensely valuable as a contribution to a new venture’s potential success.
  • Value symbol. Proven brands are symbols of excellence in the minds of consumers. Value symbol in brands make it easy for companies to maintain a consistently profitable relationship with its market. Since brand loyalties are also borne out of such among products and services, consumers feel confident that they can never go wrong with certain brands. In the context of industrial importance, powerful brands are symbols of great value delivery. All efforts are made by companies to protect the brand from negative publicity, adverse information, and unfavorable associations with entities that can taint the brand and depreciate its value.
  • Dependability. Consumers are usually of the belief that long-existing brands are proven brands made by companies with the competence, credibility and capability to consistently provide them with valuable products or services. This sense of dependability is what separates mature brands from the new ones. This plays to every consumer’s retail reflex that when in doubt, go branded!

On the other hand, the retail industry acknowledges successful brands as a benchmark for all other competitors to base their brand status from. Brand equity can command a high price in the market. You can think of this in terms of market value like the Coca-Cola brand. If you were to buy the soft drinks company, you must be willing to pay not only for the business and its entire infrastructure (real estate, production machinery, IT system, facilities; RingCentral telecom if it has one; human resources, etc.) — but also for the brand. Most likely, the price you have to pay to acquire the company’s entire infra would be just as much as the amount you have to pay for the Coca-Cola brand name alone. You would have to buy into both for the sale to be considered lock, stock and barrel.

Products and services may come and go. Companies may change hands along the way. Brands stay on, however. They can only appreciate in value for as long as those who own them know how to handle brands well. This is the real value of brand equity.

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