Definition

Brand Equity

Brand equity is the differential effect that knowing the brand name has on customer response to the product and its marketing. It’s a measure of the brand’s ability to capture consumer preference and loyalty. A brand has positive brand equity when consumers react more favorably to it than to a generic or unbranded version of the same product. It has negative brand equity if consumers react less favorably than to an unbranded version.

Brand equity is the term that denotes the set of assets and liabilities that are linked to a brand and enable it to raise a firm’s valuation. It is important for firms to understand brand equity and how to use it to create value.

Although the assets and liabilities that make up a firm’s brand equity will vary from context to context, they usually are grouped into the following five categories:

  • Brand loyalty
  • Name recognition
  • Perceived quality (of firm’s products and services)
  • Brand associations in addition to quality (e.g., good service)
  • Other proprietary assets, such as patents, trademarks, and high-quality partnerships.

Brand equity is the added value that a respected and successful name gives to a product.

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