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Why You Need to Measure Brand Equity – and How to Do It

February 14, 2017

By Today’s Industry Insider


Before we get started, let’s get one thing straight:

If the product or service your company offers doesn’t live up to your customers’ expectations, your business isn’t going to get very far.

That being said, it’s important to note that the quality of your product or service isn’t the only factor that determines the level of success your company will achieve.

You also need to worry about how your company’s brand is perceived by your customers and prospects.

Think about some of the most famous companies in the world – and what their brands represent:

Apple is known for its innovative technology and for always looking to the next big thing.

Mercedes-Benz consistently develops high-end luxury vehicles that exude class.

IKEA sells durable furniture at a price even college students can afford.

When you think of a product from one of these companies, you don’t even need to know what the item is. If it’s from Apple, it’ll be innovative. If it’s from Mercedes, it’ll be classy. If it’s from IKEA, it’ll be sturdy.

Such a universally-held perception of a brand’s products or services provides an incredible amount of value to a company.

This value is a company’s brand equity.

Brand equity can be broken down into three components:

  • Consumer perception
  • The effect this perception has on your company
  • The value of this effect

This value can be broken down even further, into tangible and intangible factors.

Tangible factors are quantitative values, such as revenue, profit (or loss), and sales numbers.

Intangible factors are qualitative values, such as consumer awareness of your brand, and goodwill.

Because brand equity involves tangible and intangible factors, determining brand equity from an objective standpoint can prove to be difficult. In the next section, we’ll take a look at the important metrics and factors to focus on when attempting to come to a consensus on your brand’s equity.

Which Brand Equity Metrics Should You Measure?

According to Branding Strategy Insider, measuring brand equity requires you consider three metrics:

  • Knowledge Metrics
  • Preference Metrics
  • Financial Metrics

Each metric is equally important to your company’s overall brand equity. (Image Source)

As we describe each of these metrics in greater detail, you’ll learn how they relate to the components of brand equity mentioned above. You’ll also get a better idea of how tangible and intangible metrics can be analyzed and assessed not just in isolation, but as cohesive parts of a greater whole.

Knowledge Metrics

Put simply, knowledge metrics measure the popularity of your brand.

But knowledge metrics go much deeper than a simple “yea” or “nay” with regard to your brand’s popularity.

According to a 2011 article published in the Asian Journal of Business Management, these metrics assess the consumer’s awareness of and association with your brand throughout various stages of aided, unaided, and top-of-mind recognition and recall.

This awareness can then be classified into one of two groups.

Functional associations relate to the use of your product or service.

To best illustrate what a functional association is, consider the following scenarios: