Brand equity is a marketing term that denotes the perceived, inherent value of a brand. It is not the brand’s monetary value, but rather its social value among the wider public and consumer audience. Although brand equity is not a financial term, it can have a strong impact on revenue. A brand with higher equity is more recognized and favorably perceived by potential customers, leading to increased sales.
There are several theories of how to build brand equity, with a popular methodology being the brand equity pyramid, otherwise known as the Customer Based Brand Equity (CBBE) pyramid, or Keller’s brand equity pyramid, named for Professor Kevin L Keller who created it. The brand equity pyramid focuses on four areas – Identity, Meaning, Response, and Relations – in which brands can build positive experiences, increasing positive sentiment and goodwill towards the brand among customers and increasing brand equity.
Brand equity vs brand value
Brand equity measures a brand’s perceived inherent value, while brand value is a measure of a company’s monetary worth if it were to be sold today. Brand value does not just take into account the worth of a brand’s physical assets yet also includes the value of the goodwill and perception associated with the brand among consumers. Brands that have higher equity (perceived value) will naturally have a higher brand value (monetary worth).