In an increasingly competitive market, brands must find ways to keep customers loyal and increase their market share. Building brand equity is key to staying competitive and growing a successful business.

This guide will answer the following questions:

  • What is brand equity?
  • Why is brand equity important for a small business?
  • How do I build brand equity for my small business?
  • How do I measure brand equity?

What is brand equity?

Brand equity refers to a brand’s value in and of itself that stems from consumer perception of the brand name rather than from the actual product or service. You establish brand equity by creating positive experiences that entice people to buy from you over and over again. 

Put simply, brand equity represents how much a brand is worth. Brand equity is the difference in value between a branded product and the same product without that brand name attached to it.

Why is brand equity important for a small business?

Building brand equity makes your brand more valuable and enables you to earn more money than competitors while spending less to promote yourself. Because people already know and trust your brand, they’ll need little persuasion to buy from you.

Another way that brand equity helps you make more money is that it gives you the power to charge premium prices for your products or services. When consumers believe in your brand and the quality of your products or services, they will pay more to buy from you. Think Gucci, Ferrari, or Apple. These are all brands whose products people will happily pay a lot of money for. 

In addition, if you ever want to add new products or services to your offerings, marketing them under the same brands will help the sales take off more quickly since people already trust the brand. 

Since roughly 80% now refuse to buy from a brand they don’t trust, and nearly 90% intend to abandon a brand that breaches their trust, building brand equity is vital.

How do I build brand equity for my small business?

Building strong brand equity is the key to a company’s long-term success. You can boost your brand equity by investing in the different parts that contribute to a brand’s value. 

Build brand awareness

Building brand awareness is crucial to creating a solid brand because people need to know about you to be loyal to your brand. You can do this by creating positive, unique and memorable brand qualities. 

The best way to build brand awareness is to promote your brand on different platforms and types of media. You can also build brand awareness by creating a community for your followers. Engaging with various communities on social media will also make you appear more approachable and relatable. You can learn more about how to build a brand here.

Be consistent

Once you’ve established a brand and begun building brand awareness, you need to stay consistent, so customers aren’t left confused about what your brand stands for. 

You can still make tactical changes to keep up with changing customer needs, market changes, or other external factors. Examples of such changes might be introducing new packaging or rewriting your slogans. 

Focus on customer experience

The rise of social media and the individual consumer’s voice means that brands are defined by what consumers discuss or perceive. So putting your customers in the centre of your company will help advance your overall brand. 

Since it’s your customers who determine your company’s worth, focus on building and maintaining positive relationships with your target audience. Only then can you inspire them to become loyal customers.

Build loyalty with customers

This is the most powerful and difficult aspect of building brand equity. Loyal customers have an emotional and psychological connection with your brand that drives them to make repeat purchases. These customers might also be part of a community you built, which solidifies their loyalty to you. 

Loyal customers will act as your brand ambassadors, meaning they’ll promote your brand to people they know through social media, online forums, or in person. It takes hard work, but once you develop a loyal following, you’ll quickly see the value of it.

How do I measure brand equity?

You can measure your brand equity by looking at the following metrics:

Financial metrics 

You want to see a positive balance sheet to confirm that your brand is healthy. Look at how your brand is doing in terms of:

  • Market share
  • Profitability
  • Revenue
  • Price
  • Growth rate
  • Cost to retain customers
  • Cost to acquire new customers
  • Branding investment

These financial metrics can demonstrate your brand’s importance to the business and what you get back from your investments (known as return on investment or ROI). The higher your ROI, the higher your brand equity is.

Strength metrics

Tracking strength metrics will help you understand how likely your brand is to survive despite changes in the marketplace. Metrics you’ll want to track include:

  • Brand awareness and accessibility
  • Customer loyalty
  • Customer retention
  • Licensing potential
  • Conversation or “buzz” about the brand

You also want to monitor social media and survey the public to get a good picture of how people know your brand and why they love it.

Consumer metrics

Your customers or clients are the ones who build your brand. Without their loyalty, you can create a successful brand or business. For consumer metrics, you’ll want to track and measure: 

  • Brand relevance
  • Emotional connection
  • Brand value to consumers
  • Brand perception 

The best way to track these metrics is through surveys and social media monitoring. Finding out how customers see your brand helps you determine where you need to make changes to increase your brand equity.