Brand equity can come from financial, brand extension, or consumer-based sources. It can improve revenue and cash flow, and can be converted into goodwill. Measuring brand equity involves looking at price premiums, brand extensions, and consumer loyalty. Protecting brand equity is important to prevent competitors from stealing it.
Sources of brand equity are typically financial, brand extensions, or consumer-based perceptions. Identifying and measuring brand equity allows you to improve revenue and cash flow or convert brand equity into goodwill. Goodwill is an asset that a business reports on its financial statements, often when buying another business.
Brand equity financial sources attempt to determine a product’s price premium over other products. For example, a consumer might prefer to purchase a branded electronic item. Even if this item costs more money than an acceptable generic product, brand equity indicates that a consumer will pay the higher price for the branded product. This fairness comes from the ability of the business to promote its products over others in the market. Measuring brand equity often comes from looking at the money consumers spend on these purchases.
Brand Extensions are another source of brand equity. To achieve this type of brand equity, a company usually needs to establish a source of financial brand equity. After a company establishes financial brand equity, it can use brand extensions when bringing new products to market. For example, a company that sells hair dryers and has experience with the brand’s financial assets may also want to start selling curling irons. Brand extension equity indicates that curling irons should sell as well as hair dryers due to the company’s brand equity.
Consumer-based sources of brand equity are the final category. This type of brand equity is often the most difficult to measure appropriately. Consumers may have intangible feelings, beliefs or other attitudes towards a product. Regardless of the products available, consumers will often tend to purchase a specific brand. Strong brand equity often leads to brand loyalty, meaning that a company will buy any asset from a given company.
Different types of brand equity are often present in the market. These include the equity of a single product, multiple products from a single company, multiple product brands, or products with different names from the same company. Companies often need to identify what types of brand actions affect their products. Measures must also exist for a company to protect its brand equity. These measures prevent other companies from stealing brand equity or attempting to alienate a company’s customers.
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