What is Brand Equity? Definition, Value, Process, and Types

What is Brand Equity?

In marketing, brand equity is the totality of the perceived (qualitative) value of a brand. The total value of a brand is determined by the positive perceptions and experiences of consumers that a brand offers.

Brand equity is the set of assets and liabilities linked to a brand, differential attributes, features, and other actors of a brand that gives an increased value to the firm’s offerings. Most companies create brand equity by giving products awareness to consumers, attracting, delivering promises, (or offering superior to competitors), and making loyal consumers.

You can see a number of brands in the marketplace used by firms to differentiate and represent their offerings. However, all the brands are not equally valued or equally important to the market.

Some of them are stronger whereas others are not, consumers primarily remember such stronger brands and seek to make purchases in favor of them. Every consumer perceives strong brands differently. These strong brands can make sufficient cash flow for the company while weaker ones are not.

In marketing, strong brands are valued by both customers and marketers as compared to the rest of the brands. Here, brand equity is viewed as the brand value-added to the marketer and the customers. Actually, a good brand is a valuable asset of the company, which only not creates revenue for the company, but also promotes a positive and powerful image to the market.

It also indicates those attributes and associations, which make the difference the brand from one another, or which make one brand’s products superior to others.

Most importantly, the study of brand equity is concerned with how and what makes brands more valuable, stronger, and receptive to the consumers in the marketplace.

Types of Brand Equity

Basically, brand equity is classified into two types – positive and negative as mentioned below:

Positive Brand Equity

When consumers are treated well, received what they expected from a brand, and even more, a good experience is created, consumers, give a very affirmative perception about a brand, creating positive brand equity. In simple words, is an overall positive view of the consumers towards business products or services.

Positive brand equity is a most valuable asset of a business that increases its sales, and profits, sprays a good image in the marketplace, increases customers retention, and also secures the future of the business firm.

Negative Brand Equity

When consumers are treated not so well and experience the poorer performance of a brand, customers have a very unfavorable impression of the firm, creating negative brand equity. Simply, it is the negative perception and experience of the consumers towards business offerings.

A negative one, as its name speaks itself, is very bad for the business. It may drastically decrease the trust of the consumers, reduces the number of customers, customers retention also, and profits also, and the worst thing is it unsecured the firm’s future.

Advantages or Value of Brand Equity

After understanding its definition, the most relevant question is what makes the brand strong? And what does it do to the customers and marketers? Actually, it is the brand equity that makes the brand strong and provides plenty of advantages to them.

The advantages or value of the brand equity can be seen through customers’ perspectives and firms’ perspectives:

Brand Value To The Customers:

A good or strong brand provides the following value or advantages to the customers:

  • Good or strong brands are the package of the information and help customers in information processing i.e. interpreting, processing, and storing information about the product and brands.
  • Strong brands enhance customers’ confidence in the purchase decision by removing confusion regarding prodcut selection because they perceive a strong brand as the symbol of quality.
  • Strong brands provide customer usage satisfaction, which the unbranded or unpopular brands can not provide to customers because a strong brand assures customers of product performance.
  • A good brand delivers the promises to the consumers as it was promised, at the same time, provides customers what they expect from it, thus customers become satisfied and loyal too.

Brand Value To The Firm:

A good or strong brand provides the following values or advantages to the firm:

  • A brand is an asset that yields adequate revenue to the company for a longer period.
  • It makes a firm’s marketing programs more effective and efficient.
  • It allows a firm to have greater customers loyalty.
  • It allows the firm to charge a premium price for its products because customers are willing to pay a high price for a good or strong brand.
  • It provides greater opportunities for growth to the firm within a limited time.
  • It provides a competitive advantage to the firm.
  • It adds promotional value to the firm and makes marketing communication more efficient.
  • It is an excellent source of achieving leverage (ability to influence) in distribution channels because trade partners give priority to distributing strong brands than others.
  • It also reduces the advertising and promotional activities of the firm as most of the loyal customers themselves positively influence others about the brand.
  • It allows additional brands extension opportunities.

Process of Brand Equity

How to make brand equity? Actually, developing brand equity means developing positive brand equity. A positive one has lots of benefits a firm can enjoy.

The journey of developing brand equity begins with creating awareness, satisfying, and ultimately, gaining loyal customers or a product’s positive brand value in the customer’s mind. The necessary steps are:


In the first step, the firm seeks to introduce products or services in the market. It is the first task of the marketer to distribute his offerings information to the market.

The task of the marketer is to make aware and informed about his offerings to as many as potential customers. The most appropriate tools he can apply are marketing and promotional tools such as advertising, publicity, personal selling techniques, etc. Moreover, he can take support from his firm’s employees as they might personally communicate with their near ones.

While spreading the products in the market, the marketer should use an informative promotional strategy rather than persuasive because it is a human tendency to seek information about new things before using and purchasing them.


Once the various awareness tools and strategies are applied the next task of the marketer is to engage with the target customers to build recognition.

Only introducing a brand in the market and making customers know say-XYZ brand exists in the market does not make the company’s sales or say makes a small number of sales. The marketer should try to make consumers recognizable the brand he is offering.

The main purpose of this stage is to make the target consumers familiar with the brand – so that whenever they see the firm’s offerings products or services or its slogan they should recognize them.


Here, the trial means trying the firm’s products or services. After being familiar with the firm’s brands here the first time consumers interact and try the products or services.

Now the firm’s products and services are recognized and started selling in the market. Most of the customers come and try the firm’s brand.

As such, customers have tried they may again remember what was written in the promotion activity and somehow compares does the actual products meets the slogan.


Since consumers are tested the products of the firm, positive and negative brand equity start to appear. They may now actually compares the firm’s slogan with its products or services taste.

If the firm’s offerings perform well as it is intended the consumers will have positive, very favorable perceptions, feeling, or impressions about the firm’s brand. And, if it does not perform well the consumers will have unfavorable perceptions and which is a negative result.

Mostly posiitve perceptions have to appear, now consumers start giving favor to the firm’s offerings over others. Even, if the firm gives more choices they might also opt out of the firm’s offerings over others.

Loyalty (Customer)

The last step and ultimate goal of the brand equity process are to gain loyal customers. Since the positive impressions and experiences of the consumers continued about the firm’s offerings they may now convert to the loyal ones.

It is said that loyal customers always stick with one brand. No matter, how many brands are available in the market the loyal customers always choose to have products of their favorite brand.

Loyal customers are positive brand equity for the firm. However, they are more than that. When loyal customers are created the firm’s numbers of customers, sales, and profits go on increasing. Similarly, the cost of advertising and promotional activities decreases because loyal customers themselves start to act as the brand ambassador of the firm.

As such, they may communicate the firm’s offerings to their friends, family, colleagues, and others which significantly increases the sales leads of the firm even without doing marketing activities.

Once the loyal customers are made, the tasks of the marketer almost end. In fact, the task of the marketer never ends, as branding is a continuous activity, to make the prodcut brand stable in the market the marketer needs to adopt different marketing strategies to meet changed customers’ tastes, preferences, and marketplace situations.


Brand equity means the totality of the perceived yet posiitve value of the brand. In today’s business world, building a posiitve perception about the products in customers’ minds actually provides an unlimited amount of benefits in both ways financially and non financially. Thus, it is advised that the company should strive to cultivate positive brand equity than negative ones.

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