Brand equity and advertising are interconnected as advertising can strengthen brand equity. Companies use brand extensions and consumer-based approaches to improve brand loyalty and perception. Strong brand equity can lead to reduced advertising spend and increased profits through word-of-mouth advertising.
The means a company uses to help individuals and other companies identify its products is called brand equity. Brand equity and advertising have a relationship, because many companies use the latter to strengthen the former. Advertising, for example, may include franchise advertisements or specific product or store advertisements. These advertisements help inform external stakeholders about the company’s product brands. Brand equity and advertising also have a connection because companies often use these two items to create an inseparable link with consumer and company perception.
The two most common brand equity strategies a company uses with advertising are brand extensions and consumer-based approaches. Brand extensions allow a company to launch new products using currently successful channels. For example, brand equity and advertising allow a company to use current advertisements to introduce new products. In this sense, current consumers who have loyalty to the company have the opportunity to buy new products. Unfortunately, companies can 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 perceptions. For example, poor product quality or customer service in the past may result in poor consumer perception. Advertising helps the company to improve consumer awareness of new products, product quality and improved operations. Essentially, the company needs to increase brand loyalty through these measures. When compared to brand extension equity activities, companies may find it easier to track consumer-based brand equity advertising.
Advertising is a common way for companies to seek 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 intentionally want to use advertising just to strengthen brand equity. Instead, the company seeks to increase profits, which can sometimes lead to improved brand equity. The goal here is not to let customers see the company’s number one goal of increasing profits.
Brand loyalty and increased brand equity can lead to reductions in advertising spend. Less advertising is required because the company already has its strong consumer base and loyal customers. When this occurs, advertising is more of a maintenance process than an activity to generate new customers. Indeed, a company can achieve strong brand equity through word of mouth, which naturally occurs when a company sells quality products. The company increases its profits with lower costs and increased sales from word-of-mouth advertising.
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