Some brands just have the “it” factor. Apple’s got it. Coca-Cola’s got it. So do Nike, Harley Davidson and IKEA.
Each of these brands are each distinctive, and their reputations precede them. In short, they’ve got great brand equity. But what is brand equity, really? And how do you create it?
In this blog, we’ll help define this slippery concept and provide tips for strengthening your business’s brand equity.
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What is brand equity?
Brand equity is a marketing term that defines a brand’s value to its customers. It measures how much influence your branding has over its customers or in an industry. In other words, if your brand has strong (or “positive”) equity, it is memorable, easily recognizable and appreciated by consumers.
“When we look at the most successful brands on Wix, we see that the more they actively put their brand in front of customers, the greater their long-term influence,” says Yaya Aaronsohn, head of brand maker at Wix. “By using various promotional methods and tools—such as Wix’s tools for email marketing, social engagement and others—they’re able to keep their brand top of mind. This type of brand awareness (check out our guide on how to increase brand awareness), coupled with good customer experiences, ultimately creates brand equity.”
What makes brand equity so important?
Aside from improving your reputation, strong brand equity increases your sales, improves ROI and builds your customer base. Here are some of the specific benefits that come as a result of positive brand equity:
You can charge more with positive brand equity. Think of high-end fashion designers who are able to sell items like clothes, shoes or purses for a high markup compared to average retail brands.
Customers will seek out your brand instead of competitors. This will help your company increase its market share, as more and more customers are set on purchasing items specifically from your brand. Think of Apple, for example. If you’ve gotten used to an iPhone and are a loyal Apple client, when the time comes to purchase a new phone, you’re most likely to return to Apple.
Positive brand equity saves you money on advertising. Once your brand is well-known and carries a good reputation, you might not need to spend as much money on ads, since many clients are already tuned-in and engaged with your brand.
How to measure brand equity: 3 essential steps
While you’re going through the process of building up your brand equity, it’s important to measure your success along the way to get a good overall view of what’s working and what’s not.
But tracking brand equity can be tricky. After all, it’s a concept rather than a concrete product or asset. It’s based on a feeling that a brand inspires. So, while there are multiple metrics that can express the effects of brand equity on your business’ performance, there’s no single metric to use. Instead, use a combination of measurement techniques to build an accurate picture of how you’re doing.
01. Gather your brand data sources
As you embark on the quest to capture a picture of your brand equity, two primary types of information are at your disposal:
Financial/Operational data: “O data” (“O” for “operational”) involves traditional performance metrics that relate to tangible activities, such as revenue generation, repeat purchases or even employee retention. O data depicts the ways brand equity manifests itself in concrete results.
Emotional data: Emotional data (a.k.a. “X data,” with the “X” standing for “experience”) are qualitative measurements that attempt to capture consumers’ emotions and beliefs about your brand. X data can be collected through social listening, surveys, focus groups and more. Note: You may be less familiar with X data, but it’s an increasingly-critical piece of the brand equity puzzle. Consumers are willing to pay a premium for superior customer experiences, according to PwC, so measuring the overall effect of brand interactions throughout the customer lifecycle can reveal new insights about preferences and loyalty.
Once you’ve identified the data you already have and any gaps in visibility into customer behavior, you could potentially institute new processes to develop a more holistic picture. For example, you may need to establish new ways to collect user feedback in order to build your X data, or you may need to adjust O data reporting to ensure consistency over time. Shameless plug: you can also use Wix Analytics to monitor user behavior on your site, investigating everything from top traffic sources, purchases and most-viewed content.
02. Choose a multi-dimensional measurement strategy
As you collect and sift through data, aim for a balance between economic and experiential information. Select an array of metrics from both categories of data to build a comprehensive and composite picture of brand equity. Specifically:
Balance historic data with immediate sentiment. While O data can reveal a trend line, understanding the customer motivation behind the numbers reveals a truer picture. For example, rising average order values may seem like a positive sign, but if those figures are paired with decreasing customer satisfaction, then customers may actually be disgruntled over higher prices or expensive accessories.
Identify enduring signals amidst the noise. Experimenting with new sources of X data can yield a lot of brand chatter, including momentary spikes in popularity or attention. Marrying these inputs with the O data that quantifies business impact helps determine what’s meaningful. Going viral on TikTok may signal growing engagement from Gen Z customers—or, conversely, show a well-executed hashtag challenge that results in zero sales.
03. Monitor, adjust, repeat
Once you’ve assembled the right selection of brand equity metrics for your brand, track them regularly to build a picture of performance over time. While you may want to make adjustments, especially at first—consistent methods and timing is crucial for building an accurate picture of brand health.
Once you’ve established a dashboard and feel confident with the results, consider adding or integrating new data points to round out your understanding of brand equity.
5 types of brand equity metrics (and tips for tracking them)
Brand equity has five core dimensions to measure, each of which you can quantify in a variety of ways. However, don’t be afraid to skip the data points that aren’t relevant or that you can’t reliably track. It’s better to hone in on a few meaningful metrics than to face a deluge of incomprehensible raw data.
01. Brand awareness metrics
First, you’ll want to check if you’ve succeeded in creating brand awareness. In other words, how do you know if you’re top-of-mind with the right audience? There are a few ways you can do this, and your method might depend on the products or services you offer. To measure brand awareness, you’ll want to look at metrics like:
Traffic to your website or to stores: Track the number of people who interact directly with your brand and establish a baseline count to monitor how certain campaigns impact traffic.
Search volume for terms related to your business: Is your brand recognition strong enough that consumers search for you by name, or are they looking for generic categories of products or services you offer?
Social listening: Monitor mentions of your brand as well as relevant hashtags, competitor content and industry topics.
Media or news coverage: Setting up a simple and free Google Alert can surface mentions of your brand in traditional news articles and blogs.
Sentiment analysis: Sentiment analysis extracts meaning from otherwise generic text—and increasingly, AI is able to be “trained” to recognize the difference between “customer service is killing me” and “customer service is killing it.” Voice recognition and transcription tools can also help you apply sentiment analysis to customer service calls and video reviews.
Customer reviews: Track both the quality and quantity of reviews; even if you don’t earn five stars on every product, a customer’s willingness to return to your website to leave a review can show that they care enough to share their opinion.
Customer satisfaction: Survey consumers about their interactions with customer service, tech support and store personnel and seek feedback about processes, such as product customization and returns.
Surveys: Request survey feedback from customers, plus engage consumers who don’t currently buy from you to understand their priorities and perceptions of brands within your category. Internal employee surveys can also be invaluable tools to gauge whether staff members who represent your brand are aligned with its mission.
Net Promoter Score (NPS): NPS poses a simple question: would customers recommend your business to others? Their response speaks volumes about the strength of your brand. Gain further insights into the reasoning behind the scores with follow-up surveys and customer panels.
02. Financial metrics
You’re probably the most curious about how improving your brand equity has impacted your profits. While a simple check of your bank account can tell you how the business is faring at any given moment, the ability to produce solid cumulative results indicates that your brand is building strength over time. There are a few ways you can measure your success in this area:
Profitability: Generating revenue is one thing, but the extent to which you exceed your costs can signify that your brand has value in the marketplace for which customers are willing to pay a premium.
Rate of revenue growth: Is your company growing consistently? Income rising at a higher rate each year indicates momentum and positive brand equity.
Customer lifetime value (CLV): This is the average total spent per customer over the course of their relationship with your brand. If customers return more frequently or spend increasing amounts with you over time, then your brand equity strategy is likely working.
Customer acquisition costs: How much you spend to find and convert new buyers can be an indicator of brand equity. If your business has a strong word-of-mouth reputation, you likely need less advertising to lure first-time customers.
Customer retention costs: Investments in loyalty and customer service initiatives should be consistent over time. Sudden, significant growth in retention costs is a sign of flagging brand equity. If customers need huge incentives to keep coming back, reexamine their expectations and your follow-through.
Channel partner engagement: If you work with dealers or resellers, their success rate is an indicator of brand equity. Willingness to participate in promotions and incentive programs signals a belief that your brand is an asset to their business.
03. Brand evaluation metrics
What price should you assign the nebulous concept of "brand value"? Evaluation metrics help you do just that, and range from cost-based metrics (that reflect how much you invest into creating your brand) to market-based metrics (that show the value of your brand in the marketplace). There are also Income-based metrics, which reflect the earning power of your brand as expressed through potential income connected directly to your brand identity. You can cover each of these by tracking:
Historical cost (cost-based): Tally how much you’ve spent on advertising, promotions, licensing, and other start-up costs.
Replacement cost (cost-based): This is an estimate of how much you’d need to spend to launch your brand today in the current marketplace to achieve the same results you’ve already built.
Conversion cost (cost-based): This calculates how much you need to spend to create enough brand awareness to generate your current level of sales.
Comparable metrics (market-based): These metrics reference acquisitions and sales of other companies in the sector to indicate the potential value of your brand.
Equity valuation (market-based): This captures the revenue-building and cost-saving capabilities of your brand. Advertising ROI indicates earning power, while the cost savings are based on your brand’s economies of scale and existing audience. The more you’re able to do with less investment, the stronger your brand equity.
Residual metrics (market-based): Residual metrics reflect earnings that continue to accrue once the cost of your assets has already been accounted for. A positive balance reflects strong brand equity.
Royalty relief (income-based): This is the amount your company would pay in trademark fees to use the brand if you didn’t own it.
Excess earnings (income-based): This reflects the income earned over and above the costs of working capital and physical assets. The remainder indicates the value of intangible assets such as your brand.
04. Output Metrics
Output metrics measure how marketing activities perform and, by extension, whether brand messaging is resonating with your audience. By tracking engagement with campaigns and promotions, you gain a deeper understanding of how customers and followers perceive your brand. Here are output metrics that you can use to figure out if your marketing is on point:
Click-through-rate: When consumers click on ads or messaging, they’re communicating which brand attributes resonate.
Heat-mapping on your website: Track which zones of web pages attract the most attention to understand which elements are most engaging.
Video engagement: Analyzing watch time indicates whether viewers are engaging with your content, or just clicking and moving on.
Social media engagement: Go beyond tracking likes and follows to get a deeper understanding of which activities resonate. Check out comments, reposts and creation of hashtagged content.
Downloads: Consumers who download your app intend to stay in touch with your brand. Growth in app usage is a signal of growing brand awareness and strengthening brand equity.
Email marketing engagement: Signups can help you gauge intent to create an ongoing connection with your brand, while views, clicks and conversions indicate whether subscribers find campaigns relevant. Your churn rate sends another important signal; are consumers unsubscribing after receiving a discount or other reward for signing up, or do they truly want to engage with your brand?
Loyalty program participation: How often are your customers taking advantage of your loyalty points and services? Participation frequency can reflect overall engagement with your brand.
Support of brand causes: Engagement with social or environmental campaigns your brand supports indicates whether your audience aligns with your stances. Trusting your brand’s guidance on civic participation signals you’ve built a relationship that goes beyond business.
New product revenue: Track performance of new products carefully to understand the impact of your brand equity on the bottom line. Pre-orders and waiting list signups from your existing audience indicate trust that your brand will deliver on promises.
05. Competitive Metrics
Competitive metrics help identify areas in which you’re outperforming other companies in your category as well as gaps in competitor offerings that represent opportunities for your brand. You can track what’s working well in your own campaigns while monitoring competitors’ activities to understand what resonates with your audience. Here are some metrics that’ll help you figure out how you measure up:
Market share: Understand the total potential market for your brand and identify which competitors are vying to capture the same audience. Use tools such as customer surveys to understand which other brands are on buyers’ minds, compare sales figures (if accessible) and track media coverage or online buzz.
Marketing activities: Depending on what information is publicly available, you may be able to compare return on investment on marketing channels. Use tools to track trending search terms and hashtag campaigns.
Price premium: If you successfully offer items at higher prices compared with other companies in the category, that premium can be an indicator of strong brand equity.
So, how can you build brand equity?
Rome wasn’t built in a day, and your brand equity won’t grow instantly either. Building brand equity is a process that requires time and consistency. Start with the basics of building your brand from scratch and grow from there through marketing efforts and investments in the customer experience.
Whether you’re just starting to build brand equity or want to strengthen your position, focus on these priorities.
Embody an authentic mission
Customers will be more loyal to a company that has a reason for existing beyond selling products. By positioning your brand as a solution to a problem or challenge, you elevate your purpose and forge a connection with customers who can identify with the need you address.
“One of my favorite examples of this is TOMS,” says Aaronsohn. “TOMS wasn’t simply built to sell shoes, but to promote a good cause. Their ‘One for One’ model demonstrates that the company is ready to put their money where their mouth is—and to date, they’ve successfully donated more than 100 million pairs of shoes with the help of their customers. TOMS’ mission is just as well known as their products.”
These days, customers increasingly expect brands to take stands; 63% say they buy or recommend brands based on their values, according to Edelman. However, for a stance to be credible, it needs to align with your true beliefs, and be reflected in both your products and company initiatives.
Patagonia is another well-known leader in cause marketing. The company’s products are geared towards surfers, climbers and people who are environmentally conscious. In alignment with its audience and its founding ethos, Patagonia has boldly fought to protect a national monument, promoted the reuse and refurbishment of their products and pledged all of its profits to fighting climate change. Patagonia’s brand identity inspires loyalty from fully 73% of customers, Statista calculated.
Create cohesive messaging
Any ad or piece of content that your brand puts out are opportunities to cement your brand image. For example, if your mission is to save shoppers money, then discount-focused content is appropriate (think of Walmart’s catchy slogan “Save Money. Live Better.”)
Your voice and aesthetic should likewise align with your core purpose consistently across channels to reinforce your singular offering. Periodically check execution with a top-to-bottom brand audit. Is there continuity from your internal brand values to external brand messaging? Take a holistic view that includes:
Branded advertising campaigns: Create cohesive ads with an evergreen message that helps create a compelling brand story. Rather than focus on specific products or sales events, use these branded campaigns to showcase the central storyline and distinctive voice that mark your brand identity.
Social media: While consumers expect social media to be more casual and authentic than a slick branded ad, you should still focus on your core messaging and employ your unique brand voice.
Offline experiences: Store signage and shelf talkers should reflect branding as much as your online presence does. Packaging for online orders and printed brochures should all reflect your brand.
Offer a positive customer experience
The customer experience is central to perception of your brand, so to build brand equity, deliver high-quality, consistent interactions across channels. Think beyond the customer service department to include:
Ease of use when it comes to fulfillment processes such as store pickup or initiating a product return
Accessible and honest customer reviews
Responsiveness on social media, which 63% of consumers expect brands to offer as a customer service channel, according to Microsoft
Personalization in the form of consultative sales support, such as personal shopping services
The customer experience is so important that leading companies have made it their central mission. Zappos.com famously claims to be “a service company” that “happens to sell shoes” and more. Amazon.com founder Jeff Bezos claimed to be “obsessive-compulsive” about serving customers, and six customer service tenets guide decisions company wide, HubSpot reported.
Reward brand loyalty
Not only is keeping customers less expensive than finding new ones, but repeat buyers are more likely to become the advocates that help your brand equity grow. Invest in building long-term relationships with your customers through a meaningful rewards program that encourages repeat purchases or interactions with your brand. Above and beyond points, give loyal customers special treatment by:
Asking their opinion: Consider creating an audience or customer panel to consult when developing new products or services. Providing input on the direction of the business gives engaged customers more of a stake in your success.
Awarding early access: Saving a spot at the head of the line for loyalists when it comes to sought-after new products or seasonal favorites is a perk that costs you nothing but builds appreciation for your brand.
Personalizing rewards: Don’t offer generic gift prizes based on points offered; instead, consider picks tailored to loyal buyers’ individual preferences, or a meaningful discount they can apply however they like.
Rewarding referrals: Loyal customers are your best word-of-mouth marketers, so be sure to reward them for any new business they bring to your brand.
The Starbucks Rewards program is a perfect example of how a brand rewards customer loyalty, and one of the reasons Starbucks has undeniably built up its positive brand equity. By offering clients free products and personalized suggestions based on their preferences, Starbucks is able to keep its customers coming back for more instead of taking their business to a competitor. Members drove 53% of all U.S. company revenue in 2022, according to PYMNTS.com.
Start your own rewards program with Wix Loyalty Program, which supports various types of rewards and tiers.