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Let's say you're in the market for a new laptop. You compare two models and they appear to have identical specs: the same processor speed, same screen resolution, same size of hard drive, same peripheral ports. They even cost the same. The only obvious difference between the two computers is that one is sold by a brand you recognize and one is sold by an obscure company you’re unfamiliar with. Which one do you choose? Most likely you’ll choose the brand you know. This is an example of a business concept known as brand equity.



Diane von Furstenberg Teaches Building a Fashion BrandDiane von Furstenberg Teaches Building a Fashion Brand

In 17 video lessons, Diane von Furstenberg will teach you how to build and market your fashion brand.

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What Is Brand Equity?

Brand equity is the perceived value of a product, service, or company. It hinges not so much on the actual specifications of a product, but rather on the perceived quality of that product. Brand equity includes the following components:

  • Brand awareness and brand recognition among potential customers
  • Brand loyalty among existing customers
  • Consumer perception due to advertising, visibility, reviews, and word of mouth
  • Customer experience both for the existing customer base and new customers trying a product for the first time
  • A clear reason for being, also known as a unique selling proposition or USP

Why Is Building Brand Equity Important?

Positive brand equity is a good predictor of a company’s long-term success. Few products can endure for decades without strong brand equity. Here's why: Brands rely on loyal customers to sustain their businesses through repeat purchases. Getting everyone to try a new product once is great, but it isn't a sustainable brand strategy. You need a loyal customer base that actively recommends your brand through word of mouth and online reviews. If you have a high-quality product but its quality is largely unknown to the general public—or worse, you have negative brand equity—you'll have a natural cap on your brand's equity.

Diane von Furstenberg Teaches Building a Fashion Brand
Bob Woodward Teaches Investigative Journalism
Marc Jacobs Teaches Fashion Design
David Axelrod and Karl Rove Teach Campaign Strategy and Messaging

How to Build Brand Equity

The art of building and managing brand equity is essential for small business owners. One of the more popular brand equity strategies is called the Keller Brand Equity Model. Developed by Kevin Lane Keller, a professor at Dartmouth's Tuck School of Business, the model poses four key principles for small business owners involved in brand management:

  1. Know your brand identity. Who are you? How do you see your company existing in the market? Who is your target audience? How will this target audience perceive you in relation to other brands and product lines?
  2. Have a concrete brand meaning. What are you? How does a customer's brand experience with your product stack up in terms of product reliability and durability? What about style and design? Is your product customizable? What is its price point relative to the rest of the market? Do you plan to be the best-made product on the market with a price to match? Or do you perceive your particular product as suited to the low-end market?
  3. Consider brand response. How do people react to your brand? A successful brand manager is able to accurately perceive how customers perceive brand value. By closely managing the brand experience, they can cultivate specific feelings within a customer. The Keller Brand Equity Model states that there are six positive brand feelings: fun, excitement, warmth, social approval, security, and self-respect. Which of these brand associations do you want for your company? What feelings does your brand name evoke?
  4. Invest in long-term brand resonance. What relationship do customers have with your brand? Some brands are an integral part of their customers' lives. Other companies hover largely unseen in the background. Making meaningful choices about your brand identity will involve deciding how prevalent you want to be in your customer's life. Strike the right balance, and you could secure increased market share and establish a lifetime of brand loyalty.


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