Brand equity and advertising are linked as companies use advertising to strengthen brand equity and create a link between consumer perception and the company. Two common strategies are brand extensions and consumer-based approaches, with the latter focusing on changing consumer perception. Successful brand retention can lead to lower advertising costs and word-of-mouth advertising.
The means a company uses to help people and other companies identify their products is called brand equity. Brand equity and advertising have a relationship because many companies use the latter to strengthen the former. Advertisements, for example, may include franchise ads or specific product or store ads. These advertisements help inform external stakeholders about the company’s product brands. Brand equity and advertising also have a link because companies often use these two elements to create an inextricable link between consumer perception and the company.
The two most common brand equity strategies that a business uses with advertising are brand extensions and consumer-based approaches. Brand extensions allow a company to launch new products using successful channels. For example, brand equity and advertising allow a company to use current advertisements to introduce new products. In this regard, current consumers who have loyalty to the company have the opportunity to purchase new products. Unfortunately, companies may find it difficult to quantify brand extensions as advertising is often a qualitative tool used by companies.
Consumer-based brand equity and advertising techniques focus specifically on changing consumer perception. For example, poor product quality or customer service in the past may result in poor consumer perception. Advertising helps a business improve consumer awareness of new products, product quality, and improved operations. In essence, the company must increase brand loyalty through these measures. Compared to brand extension equity activities, companies may find it easier to track consumer-based brand equity advertising.
Advertising is a common way companies try to improve their market share and bottom line. In some cases, brand equity and advertising may have an indirect relationship. For example, a company may not want to intentionally use advertising solely to strengthen brand equity. Instead, the company seeks to increase profits, which can sometimes lead to improved brand value. The point here is not to let customers see the company’s number one goal of increasing profits.
Successful brand retention and increased brand equity can lead to lower advertising costs. Less advertising is needed because the business already has a strong consumer base and loyal customers. In this case, advertising is more of a maintenance process than an activity to generate new customers. In fact, a company can achieve strong brand equity through word of mouth, which occurs naturally when a company sells quality products. The company then increases its profits through lower costs and higher sales from word-of-mouth advertising.
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