Financing for projects and company development is always sought after. Essentially, there are 2 sorts of financing: debt and equity. Debt must be paid back, but it is often cheaper than raising capital due to tax considerations. Equity does not need to be paid back, but it relinquishes ownership to the shareholder. Businesses usually use a combination of both because they both have advantages and disadvantages.
To have access to either type of financing, you have to have a brand or an idea that resonates with the public. As it goes without saying that a business without customers is a dead one. If you don’t have customers, you won’t be able to get financing. This is why companies often focus on their brand equity. It is a critical part of building a business, and companies that successfully build one understand just how important it is to the bottom line.
What Is Brand Equity
“The tangible and intangible value that a brand provides positively or negatively to an organization, its products, its services, and its bottom-line derived from consumer knowledge, perceptions, and experiences with the brand.”— Susan Gunelius
Brand equity refers to a value premium that a company generates from a product with a recognizable name, when compared to a generic equivalent. It is the degree to which your brand generates positive thoughts and feelings Companies can create brand equity for their products by making them memorable, easily recognizable, and superior in quality and reliability.
The Advantages of Brand Equity
A great brand equity can help a company in many ways: Save on advertising costs, give basis for financing approval for expansions and extensions, etc… The most common is the increase in revenues. A positive brand enables a company to charge a price premium for that brand. For example, the Apple brand has enough equity that a price premium isn’t just accepted, it’s expected.
- A customer that is satisfied with your product or service.
- A satisfied customer who pays a fair price for your service
- A satisfied customer who sends you friends and close acquaintances who will do the same as he/she (pay a fair price for good services and products). – Build on top of #2
- A customer that appreciates your over the top level of great service. – Referrals, create a new business and income source
- A customer that continues to return for your great products and services.
When David Aaker, one of the fathers of modern branding, first connected “brand” to “equity” in the early 1990s, he was effectively saying that your brand is a valuable company asset to be created and meticulously nurtured. He has since been validated. You can think of brand equity as your company’s reputation. There are 5 steps to building a strong one:
- Brand awareness: Customers discover the brand.
- Brand recognition: Customers recognize the brand and know what it offers versus competitors.
- Brand trial: Customers test it out.
- Brand preference: Customers like the brand and become repeat purchasers. They begin to develop emotional connections to the brand.
- Brand loyalty: Customers demand the brand and will travel distances to find it. As loyalty increases so do emotional connections until there is no adequate substitute for the brand in the consumer’s mind.
The challenge is not only building brand equity to reach widespread loyalty, but also to sustain that loyalty and positive brand equity for years to come.
Learn From What I Missed
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― Maya Angelou
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