Brand equity is the additional value a product receives from having a well known brand, or high level of brand awareness. It is the difference in price that a consumer pays when they purchase a recognized brand's product over a lesser known, generic version of the same product.
Brand equity is a competitive advantage that results in higher sales, higher revenues, and lower costs.
Why is brand equity important in marketing?
Having brand equity means that a company has successfully differentiated itself from its competitors in some way. Whether it is superior product quality, excellent customer service, or an effective marketing campaign, some aspect of the business has garnered enough recognition and respect from consumers to warrant them spending more on its product than other similar products.
Establishing brand equity can have numerous advantages for a company. Brands with this competitive advantage might enjoy higher revenues as customers pay more for their product than others, as well as having a larger customer base. Additionally, it is generally easier for companies with strong branding to expand into different product lines, since the consumer trust of the brand will follow any new product a company creates.
Solid brand equity not only increases sales and revenues for a company, it lowers costs as well. Marketing costs for recognized brands are lower since many consumers already know about the companies. They do not have to endure the hassle of educating the public about their companies products.