Customers have an association with a brand in their minds. These associations trigger a customer to purchase a particular product overlooking alternative options. The faster a brand comes to their mind, the more likely people will buy the product.
This is the brand equity a company builds that ensures that a company has a positive brand name and public perception.
But is building and measuring brand equity that simple?
Traditionally, companies don’t measure brand equity unless they hit bottom. Like your body, a brand requires regular checkups to understand how customers perceive your brand.
With nine of ten startups failing, regularly measuring your brand equity is essential for ensuring you’re not among these nine startups that fail.
In this article, we discuss some steps required to measure brand equity.
7 Steps to measure brand equity
So, how can you make the most of your brand equity? Start measuring it with no delay. To effectively do that, aggregate and follow these steps:
1. Focus on brand awareness
Everything starts with awareness! That’s why brand awareness is the most-sought after brand equity formula that a company uses to measure the customer knowledge and awareness of a product.
When ordering a soft drink in a restaurant, do you ask the waiter for a coke or cola? Have you heard people call themselves “Apple person” or “Samsung person”? These are what brand awareness can do for a product or service.
Strong brand awareness can keep your brands at the top-of minds of your customers. 77% of customers use brand names instead of the product’s actual name.
So, it’s essential to measure it.
A leading indicator of measuring brand awareness is the conversation share or the number of times a brand shows up in your everyday conversation. While there is no fixed formula for measuring brand awareness, focus on using some of these methodologies:
- Surveys and focus groups
- Local traffic to the online store
- Search volume for your brand and products
- Local media mentions
- Social media reviews and mentions
The more often a brand comes up in the conversation about specific products, the higher will be your brand awareness and equity.
2. Measure brand evaluation
Brand evaluation is an excellent way of measuring brand equity because it measures the strength of a brand. In other words, brand evaluation measures how good a brand is and its impact on stakeholders’ actions.
This metric shows your actual worth and reflects upon the brand’s contribution to your company’s success.
But how do you measure a brand’s financial value? Though there are different schools of thought, you can measure brand evaluation by measuring value in terms of:
- Market value includes the worth of your products when you put them into the market to sell.
- Cost value includes a company’s advertising, licensing, or trademarking budget.
- Income value relates to how much a company saved or earned by growing the brand.
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3. Conduct sentiment analysis
How does your customer feel about your brand and products compared to your competitor?
What sentiments drive their purchase behaviour? What emotions does the brand evoke when a customer sees them? Positive sentiments can result in substantial brand equity.
Apple or nothing! PlayStation all the way! Domino’s every time!
Are you interested in building a brand that becomes synonymous with generic names? Start by measuring the sentiments of your customers. You can do this by measuring their willingness to recommend.
Word of mouth publicity is an excellent indicator of positive customer sentiments. If customers are willing to recommend you, they probably like your products.
You can measure the willingness to recommend by calculating the Net Promoter Score or NPS.
To calculate NPS, on a scale of 1 to 10, you ask customers how likely they are to recommend a brand to others. You group their answers into promoters (those who give a score of 9 or 10), passives (score of 7 or 8), and detractors (score of less than 7).
NPS = Percentage of promoters – Percentage of detractors
4. Track preference metrics
The brand preference metric reflects the strength of a brand. It’s an essential metric for measuring brand equity because it indicates why customers prefer a particular brand over others in the same category.
It answers the question: Why do customers go to Wendy’s burger instead of Burger King?
There are some aspects of customer preference that you can measure through focus groups and surveys. These include:
- Accessibility: It’s the ability to provide the target market with the desired product. For instance, if your online store runs out of a top-selling product, check out whether customers would look for similar products from competitors or wait for your product to be back in stock.
- Brand value: It measures the willingness of a customer to pay for your products or services. You can understand this by monitoring your customer’s reaction to a price increase. If an increase in price doesn’t affect your sales volume, it implies that customers prefer your products because they deliver value.
- Emotional connection: It’s the extent of emotional connection with your customer. Customers who have an emotional connection with your brand will remain loyal.
5. Analyze purchase metric
The next step to measure brand equity is analyzing the purchase metrics. Tracking these metrics helps you understand why certain products are common among customers. It can help in identifying shopping patterns that influence future campaigns.
To understand your purchase metric, understand how you interact with your target audience. If a customer comments under a Facebook post about poor customer service, it results in negative brand equity. To solve such issues, ensure you have dedicated customer service protocols that answer consumers’ concerns and complaints.
If you notice sales are dipping after a few negative comments, revisit your customer service protocol. Negative comments might contribute to a lower brand equity and a decrease in sales.
Ensure you justify the pricing of your product and give them a chance to experience your product’s quality.
To enhance your purchase metric, offer discounts and a free trial. It might help give your company a test run before committing to becoming long-term customers.
By measuring how your marketing tactics perform among customers, you can know which marketing strategy yields the desired results.
6. Analyze the financial data
You can understand a product’s brand equity by measuring the business’s financial sales and sales performance.
Traditionally, data is essential to measure the overall performance of your brand. Knowing in-depth about profitability, revenue, price, market share, and cost to acquire and retain customers can help you measure brand equity.
Also, when you’re on the path of increasing brand equity, keep track of these metrics.
- Customer lifetime value (CLV): It measures how valuable a customer is to your company. It does not consider only the customer’s purchase but measures the value across relationships. CLV is a vital marketing statistic because it increases the value of your existing customers and is a great way to drive growth.
- Revenue growth rate: Revenue growth rate is an indicator of a company’s ability to grow its revenue or sales over a given time period. It compares the current total revenue with a previous year period.
7. Calculate the competitive metrics
Your competitor’s brand equity often affects your company’s brand equity trends. This does not have anything to do with your marketing efforts or your products. For instance, if a competitor launches a campaign declaring price reduction, your customer’s preference might dip towards your competitor.
Measuring competitive metrics can help identify where your competition does not value customers, such as pricing or poor customer experience. It also reveals what marketing tactics and campaigns customers prefer.
When calculating the competitive metrics, focus on calculating these metrics:
- Market share: Market share represents your total sales in an industry generated by a particular company. You can calculate the market share by taking a company’s sales over the period and dividing it by the total sales over a period.
- Customer acquisition rate: It is the process of bringing new customers or clients to your business. The customer acquisition rate deals with a buyer’s journey, from when they become a lead until they become a paying customer. This metric helps you understand if your marketing efforts yield results. You can calculate it by dividing the number of customers acquired over time by the time period.
Measuring brand equity
If you’re looking to create a business that thrives and survives, brand equity is of paramount importance. To make your brand an industry leader and be better than your competitors, focus on keeping track of your brand equity.
The insights you obtain from brand equity can benefit your company in several ways:
- You can improve and develop your company’s advertising and marketing strategies.
- You have a better understanding of your customers and their likes and dislikes.
Use these steps to measure customers’ perception of your business because that decides whether they would do business with you.