You want to win your market? Focus on building brand equity.
In simple terms, brand equity is the value your business has because of how people connect with it. It’s not just your products/services but the reputation, recognition, and associations built up over time.
Strong brand equity affects every part of your business, from how you price things, to the profit you make, to how well you hold onto marketshare. Why? Because when people have a positive perception of your brand, they’re more willing to buy from you, to pay more for your product/service, and tell their friends about you.
But what contributes to brand equity? How do you build it? And what should you prioritize? Here’s a look at what shapes brand equity, the benefits it provides, and the practical ways to track and grow this hidden asset.
What Is Brand Equity? A Quick Overview
Brand equity is the extra value a brand name adds. It’s why someone picks one label over another when both products come off the same assembly line. Marketing expert David Aaker calls brand equity a collection of assets and liabilities tied to a brand. Kevin Keller describes it as the impact brand knowledge has on how people respond to that brand and its marketing.
Both get at the same thing: brand equity sits in the minds of customers. It’s an amalgam of:
- Brand awareness
- Quality (or how people see it)
- Associations
- Loyalty
Blend those elements together, and you get a brand reputation that goes beyond what’s inside the box.
TL;DR: When you have strong brand equity, people trust your brand, spot it quickly, and feel good about buying it. When equity’s weak, it’s much tougher to stand apart. People feel no spark or reason to stick around. So the story of your brand’s value is really the story of how people feel at every touchpoint.
Impact on Profit Margins and Market Share
Strong brand equity helps strengthen the bottom line and ensure brand longevity in multiple ways.
It means your company can set higher prices—people pay because they trust what they’re getting. And that boost in profit doesn’t require extra volume or massive marketing pushes. It’s supported by your brand equity, and it can also carry you through downturns.
Additionally, when people love your brand, they bring others along. More people buying and spreading the word naturally increases market share. This cycle grows visibility and solidifies brand reputation, helping keep loyal customers. That is the real power of brand equity.
The Four Pillars of Brand Equity
There are four main elements that contribute to brand equity. Each one shapes how people view your brand and influences their decision to buy:
- Brand awareness: Do people know your brand? Do they remember it when shopping? Awareness is the base. Nobody picks something they can’t recall. If your name pops up right away when someone thinks about a product, that’s strong awareness.
- Perceived quality: This is how people judge your product’s excellence. It’s not just the facts but reputation and word-of-mouth. Perception does a lot of heavy lifting here. If people believe your brand is top quality, you can charge more.
- Brand associations: These are the instant mental and connections people make when they encounter your brand. Are they inspired? Are they excited? Are they relieved? Strong, positive associations build emotional bonds that go way beyond features or specs.
- Brand loyalty: Loyal customers come back again and again due to their overall brand experience. They don’t jump ship at the first sign of a discount elsewhere.
Each of these elements works symbiotically to build your brand equity. Familiarity inspires people to try your product/service. Perceived quality earns their trust. Associations stick in their minds. Loyalty keeps them coming back. When your brand fires on all four, you create compounding value.
But let’s dig a little deeper into each of these elements.
Why Brand Awareness Is Essential
Brand recognition is when someone spots a product on a shelf and knows your brand; recall is when they think of your brand first for a certain need. Recall is the goal, as people are more likely to buy if your brand jumps to mind, but it all starts with brand awareness to help people recognize your brand.
Hence, brand equity has to start with brand awareness. Every interaction with your brand shapes awareness—ads, packaging, even a chat with customer service. The more consistent the experience, the stronger awareness grows. A brand with a steady drumbeat in the marketplace gets picked more often, even when other names hover nearby. (That’s why even young companies invest steadily in repeated and consistent messaging.)
Exploring Brand Associations and Positive Feelings
Think about what comes to mind when a friend mentions a favorite brand. Whether it’s confidence, nostalgia, fun, or belonging, those memories, emotions, or ideas are brand associations. And they go far beyond features.
Associations can be:
- What the product does (functional)
- How it makes people feel (emotional)
- What it means for the kind of person who buys it (symbolic)
Competitors can copy your product/service, but positive associations are hard to imitate. For example, some people choose the same running shoes as their favorite athlete—not because of technology but because of how they feel when they wear them.
These connections build with every interaction with your brand: the colors, the tone of your website, the support call when something goes wrong. Consistency will keep associations tight and clear, but confusing signals water them down.
If you can cultivate positive associations that are relevant to what people care about, you can make your brand the natural choice. At that point, the decision is about more than just price or features—it’s about what your brand means to each person.
Understanding Perceived Quality
Perceived quality is what people believe about how well your product performs—and that belief doesn’t always match reality. It’s built through reputation, reviews, pricing, and even packaging. When your brand consistently delivers, that perception strengthens. When it falters, trust erodes fast.
High perceived quality lets your brand charge premium prices, as people will pay more when they’re confident they’re getting something worthwhile. It also creates a buffer during tough times, as customers give the benefit of the doubt to brands they believe in.
This perception forms through direct experience but also through signals: a polished website, thoughtful customer service, or how your product feels in hand. Even small details matter (e.g., a sturdy box or a quick response to a complaint reinforces the idea that a brand cares about excellence).
The catch? Your perceived quality must align with actual quality over time. Overpromise and underdeliver, and the gap becomes obvious. But when perception and reality match, that’s when your brand earns lasting credibility and can stand apart from competitors who may offer similar features at lower prices.
The Role of Brand Loyalty and Loyal Customers
Loyalty is gold for a brand. People who stick with a brand not only keep buying but also talk it up to others. Their advocacy fuels growth through word of mouth, which is more valuable than any ad campaign.
But loyal customers do more than buy again. They give your brand second chances, try new things you introduce, and spark conversations about it. (Research shows loyal customers are 5X more likely to return, and 7X more likely to try new products.)
Brand loyalty is also important to your company’s bottom line:
- It’s 5X more expensive to find a new customer than to keep a current one.
- Current customers are more likely to make another purchase than new ones.
- Longtime customers spend more as they go.
However, building that loyalty ultimately depends on consistency and your ability to cultivate trust with a customer base.
Differentiating Positive Brand Equity from Negative Brand Equity
Not all brand equity helps. Positive equity happens when people favor your brand, pay more for it, and even recommend it. Trust, strong reputation, and loyalty all signal positive equity. This usually means better profits and steady, loyal customers.
Negative brand equity is the opposite. In that case, your brand alienates people. Maybe the brand name puts people off. Or people only buy when prices are slashed. Or, worse, they avoid your brand after something goes wrong. This often happens when trust is broken or the brand experience is degraded.
Think back to big moments in recent years: a tech brand launches a product that flops, and suddenly, opinions shift. A fast food chain mishandles a customer complaint, and people talk about it for months. Rebuilding from there takes open communication and steady delivery on promises. Quickly fixing problems, staying transparent, and showing genuine care go a long way to regaining trust. But the goal is to prevent any of these issues before they happen.
That’s why the most successful companies keep an eye on reputation. Addressing little issues now avoids big problems down the line. And in all cases, positive equity comes from delivering on quality and keeping communication real and honest.
Measuring Brand Equity for Sustainable Growth
Brand equity can’t be managed without measurement, so companies use a mix of qualitative and quantitative approaches to gauge brand equity, including:
- Customer interviews and focus groups for honest feedback
- Social media tools to track feedback and customer sentiment
- Simple surveys for brand awareness and how often people recall the name
- Metrics like Net Promoter Score (NPS) to gauge retention and recommendation rates
- Market share and pricing power as financial proof
Some things to keep an eye on:
- Awareness: How quickly do people remember your brand?
- Preference: Do they choose it when other options exist?
- Loyalty: Are people coming back and encouraging friends?
- Financials: Can premium prices stick, and does market share hold steady?
Tangible assets like trademarks and technology count too, but real equity shows up in how people talk about and remember your brand. Regular measurement is crucial to spot problems early and track if new efforts are hitting the right mark.
How Brand Identity Impacts Brand Equity
Brand identity is the way your business shows up in the world, including everything from the logo and color palette to your brand personality on social media. A strong brand identity is how people pick your brand out of a crowd.
Brand identity includes:
- Logos, color schemes, and design elements
- Voice and messaging (what’s said and how it’s said)
- Brand values and core personality traits
Consistency across all these parts builds trust. Think of the brands that never waver in tone, service, or design, whether you’re on their app or at a live event. That consistency anchors memories in people’s minds and, again, influences perceived quality, emotional associations, and more.
(For more tips to bring an identity to life, see our guide to build a strong brand identity.)
Brand Strategy: The Key to Building Brand Equity
You can’t build brand equity overnight, but you can create a strong brand strategy geared to strengthen equity.
Brand strategy is the high-level thinking that identifies who your brand is for, what it stands for, and how it shows up in the market via brand identity. A brand strategy guides everything—what gets made, how it’s packaged, how it’s talked about online or in-person, and what promises get kept.
If you want to build a strong marketing strategy, you need to start with a brand strategy. That ensures everything from content marketing and social media to ads and in-person events is aligned to support the right things. (For more on this, see our guide to build a brand strategy.)
Managing Brand Equity Over the Customer Journey
With a strong brand strategy in place, you can tailor your efforts to build brand equity at every stage of the buying process. Remember: First impressions shape awareness. The sales experience influences trust. Support and follow-ups show if promises stick. To create a cohesive and consistent ecosystem, you need to think about how your brand shows up across:
- Website and digital
- Customer service calls
- Packaging and unboxing
- Returns and problem resolution
Positive moments will create new loyalists. Frustrating ones will lose them before they even get started. Noticing where people get stuck helps fix problems and strengthen their experience. And even when people do experience frustrations, responding in the right way helps build equity. Some of the best stories of strong brand equity come from the way companies turn post-sales service into advocacy. Happy customers talk, and those stories help others see the value quickly and clearly.
So audit your journey thoughtfully to look for opportunities to improve that experience.
Reinforcing Brand Equity
Growing brand equity is steady, ongoing work. Markets change, people’s expectations evolve, and new competition pops up. The key is staying true to what your brand stands for and keeping every promise, big or small.
Focus on:
- Protecting brand assets like names, logos, and unique design elements
- Delivering quality consistently in every product/service and interaction
- Listening to feedback from customers on social media and in reviews
- Making sure your brand stands for something that matters to its customers
It isn’t easy, but building real equity creates both long-term profit and resilience in tough times.
Capitalizing on Business Strategy for Managing Brand Equity
Brand equity isn’t just about marketing. It lives at the center of the business strategy, too.
- If pushing into new markets, make the brand relevant to fresh groups of people.
- If aiming higher, communicate real quality.
- If becoming a service hub, remind people why trust matters.
Remember: Everything from new product features to partnerships affects how people see your brand. It’s smart to start with what brings people genuine value and why they stick around. That’s what keeps equity growing and competition at arm’s length.
Frequently Asked Questions
How long does it take to see results from brand-equity work?
Expect early shifts within 2–3 months if you’re consistent. Awareness starts to climb. Sentiment improves. People remember you when they need what you sell. The bigger payoffs—pricing power, loyalty, people telling their friends about you—usually show up over 6–12 months as experiences stack and trust compounds.
Do small or early-stage brands really need to invest in brand equity?
Yes, especially early on. Clear positioning, consistent identity, and reliable delivery shorten sales cycles. They lower acquisition costs. Every marketing dollar works harder because people already know what you stand for. Skip the groundwork and you’ll spend twice as much convincing people to take a chance on you.
What’s the simplest way to quantify brand equity in dollars?
Track the “brand premium.” Compare your average selling price and conversion rate to a comparable no-name or house-brand alternative. The gap—multiplied by volume—shows the value your brand name adds over function alone. If you charge $45 for something a generic version sells for $30, and you move 10,000 units, that’s $150,000 in brand value.
What should we do first after a reputation hit or negative press?
Acknowledge it quickly, show the fix, then over-communicate progress. Pair a visible “make-it-right” action with consistent, transparent updates. That means refunds, policy changes, product updates—whatever actually solves the problem. Then talk about it across support, social, and email. People forgive mistakes. They don’t forgive silence or spin.
Making the Most of Your Brand Equity Journey
The truth is, building brand equity is a never-ending project. Every decision—from how new hires are trained to how products are returned—builds or breaks down equity.
A good first step is a candid assessment: Are people noticing your brand? What pops into their minds when they see it? Is quality holding up? Are customers sticking around? This snapshot helps map out your next moves so you can focus on:
- Sticking to promises and keeping quality high
- Speaking clearly, honestly, and authentically in every channel
- Listening to what’s said in reviews and social posts
- Making moves based on feedback, not guesswork
Yes, building equity takes time. But equity can slip away quickly, so it’s important to stay vigilant, keep investing, and work toward the long-term. And if you need support to help you do it, let’s chat about how we can define your brand strategy, keep messaging on target, and tell stories that cut through the noise. (If you’re curious to see how we work, find out how we helped Dropbox increase brand perception 19%.)
