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Good branding builds equity, not just sales

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Good branding builds equity, not just sales

Branding Equity and Sales: a balancing act.

Good branding builds equity, not just sales, but we have an equity problem if sales do not materialize!

The relationship between branding, equity, and sales is at its most controversial. In the era of growth, hacking, branding, and marketing are expected to drive traffic and improve conversions. However, branding still needs to build brand equity – first and foremost.

What is branding equity?

In my P&G days, I learned that consumer understanding is the connection between “what” consumers expect the product to do and “why” it is relevant to them. Equity is foremost a “promise” to consumers on “how” they will feel between the “what” and the “why.” Equity is about setting expectations. When using a brand pyramid framework, we often refer to it as the brand idea. When working with the brand critical model, it is identifiable as brand essence.

What could brand equity mean?

The problem with branding equity is the multiple meanings associated with the notion: the promise, as already defined. But it is, in a financial context, often used as a synonym for the monetary value of a brand. But even in advertising and communication, brand equity is analogous to “tone of voice” or “look and feel.” The latter two are critical components of how design executes a brand promise.

How do you measure brand equity?

Branding Equity as a System is a marketing research framework that measures and monitors brand equity. It has four key components:

1) Awareness: to have an opinion about a brand, you need to first and foremost know the brand. Awareness is measurable through three components:

a) Top of mind: which is the association between a specific brand and a category

b) Unaided: the awareness of who knows the brand but does not consider it a first choice.

c) Aided: people who know the brand but need help remembering it.  

2) Differentiation: it’s a qualitative measure of what makes your brand different from others. What’s its point of view on the category? What makes it stand out in communication? 

3) Loyalty: awareness is always compared with consideration and preference: the first measures how likely consumers are to consider buying, and the second, how likely they prefer buying. Consumers and shoppers make basket decisions and consider several brands while selecting fewer. What if my preferred vodka is not available? A small group of consumers will not purchase any other vodka, whereas the vast majority will pull another brand they are comfortable with from their consideration basket.

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4) Esteem is the pivotal ingredient of branding equity as a system. It includes:

a) Preference: What are the drivers behind choosing the brand?

What is the level of preference?

b) Brand Perception: What dimensions are most commonly associated with the brand? What is the relative score vs. Competitors?

c) Innovation: Is the brand perceived as innovative? Why? Why not?

Is it perceived as a leader or a follower?

d) Intention: Is the brand story compelling enough to drive consumption?

e) Recommendation: Would you recommend the brand? Why? Why not? The latter of this dimension belongs to the famous Net Promoter Score dimension, which is vital for many corporations to track.

How do you develop branding equity?

1) First and foremost, choose a brand positioning model that speaks to you and use the framework to develop a brand positioning. 

2) Use the same model to reverse engineer the positioning of other brands in your industry or category (as we do here). Make sure your positioning is distinctive enough in terms of insights, benefits, and Reasons to Believe

3) Build a positioning relevant to consumers and customers and unique enough to distinguish your brand from its competitors. 

4) Develop your brand promise, equity, and idea in a way that convinces you and fits the model

5) Convert your positioning into design briefs

6) Develop and execute a marketing plan

7) Be Patient!

In Conclusion: Branding Equity and Sales

The Branding Equity as a System underscores the link on why building a brand is critical for commercial success in the longer term. (No authentic brand is an overnight success). In a nutshell:

1) Building equity drives better conversion rates between prospects aware of the brand, opportunities that would consider buying it, and prospects who prefer buying it. 

2) Brand associations, innovativeness, and the ability to drive purchase intentions are critical to the commercial success of luxury and premium brands. They deal with the emotional context, making product specs almost irrelevant and elevating brand experiences. This context is not about the pig or the lipstick; it is about compelling storytelling that takes away consumers’ hearts.

3) In an era where buying decisions feel the repercussion of network meddling (via social media or not), recommendations and advocacy are fundamental pillars of commercial success, especially in the long term. NPS is just the tip of the iceberg, the most visible and known measure of all the branding efforts. 

Frequently Asked Questions

How does brand equity affect consumer behavior in different market segments?

Brand equity significantly influences consumer behavior across different market segments by shaping perceptions and attitudes toward a brand. In high-end market segments, substantial brand equity can create a sense of prestige and exclusivity, leading consumers to prefer these brands despite higher prices. For everyday consumer goods, brand equity may translate into trust and reliability, encouraging repeat purchases and loyalty. In technology or innovative product segments, brand equity can be closely associated with innovation and quality, influencing consumers to choose one brand over competitors for the latest advancements. Brand equity can either attract or deter consumers in various segments based on perceived value, quality, and emotional connection.

Can brand equity be negatively impacted, and how can companies recover from such impacts?

Yes, poor product quality, negative publicity, or failure to meet consumer expectations can negatively impact brand equity. To recover from such impacts, companies should first acknowledge the issue and communicate with their customers about the steps to address it. Implementing corrective measures, enhancing product quality, and improving customer service are crucial. Rebuilding trust may also involve transparent, consistent communication and engaging with customers through feedback and community-building efforts. In some cases, rebranding or strategic partnerships may be necessary to refresh the brand’s image and values in the minds of consumers.

Are there industry-specific strategies for building brand equity that are more effective than others?

Yes, there are industry-specific strategies for building brand equity that can be more effective due to the unique characteristics and consumer expectations within each sector. For example, in the luxury goods industry, exclusivity, heritage, and craftsmanship are key elements that enhance brand equity. In contrast, innovation, user experience, and cutting-edge features are more critical in the technology sector. Through storytelling and community engagement, fast-moving consumer goods (FMCG) companies often focus on reliability, quality, and emotional connection. Understanding the specific drivers of brand equity in each industry and aligning brand strategies to meet these expectations is essential for effective brand equity building.

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