September 19, 2019

Brand Awareness vs. Brand Equity: Everything You Need to Know

by Lavender Nguyen

Many words get thrown around marketing meetings, Twitter threats, and marketing blogs that aren’t understood clearly. This is the problem with marketing jargon—words find their way into our parlance, but not all entrepreneurs, business owners, and brand managers know what they actually mean. Brand awareness and brand equity fall into this group.

Brand awareness and brand equity don’t carry the same meaning. We hear these terms used interchangeably, but each has its own meaning and its own place in a brand strategy. In this article, we’ll explain the differences between brand awareness and brand equity, plus ways in which to build and measure them.

What is Brand Awareness?

According to Kevin Lane Keller, author of the best-selling book Strategic Brand Management, brand awareness refers to “whether consumers can recall or recognize a brand, or simply whether or not consumers know about a brand.” It tells how consumers associate the brand with a particular product that they want to have.

Why Is Brand Awareness Important?

In many cases, consumers may be overly attached to tradition or affected by neophobia (avoiding trying new things). That makes it hard for brands to get their new products noticed by consumers, even when they already spend a lot of money advertising.

Studies found that consumers believed recognized brands produce better and safer products than unrecognized ones. “People prefer a brand they know over one they don’t—even when the familiar one is dangerous,” said Daniel G. Goldstein, Principal Researcher at Microsoft Research.

Achieving high brand awareness means consumers know your brand exists and recognize your products among others. The more consumers are familiar with your brand, the more likely you are to take place at the top of consumers’ minds - the first step towards brand loyalty increased sales.

Low or high brand awareness leads to low or high market performance as it affects consumers’ purchasing decisions. A known brand has a much better chance of being chosen by consumers over an unknown brand, making it likely to perform better in the marketplace.

Brand awareness is also an important choice tactic for inundated consumers to make a decision, despite quality and price differentials. A study found that consumers will choose a well-known brand even when its price is high relative to competing brands. The awareness effect is stronger than the price effect.

What is Brand Equity?

Brand equity describes a brand’s value determined by how consumers think and feel about the brand. Brand equity is why there are different outcomes resulting from marketing efforts of branded and nonbranded products.

The concept of brand equity arose in the 1980s. Until now, it has been defined in many different ways like consumer-based, sales-based, financial-based, firm-based, or employee-based brand equity. Consumer-based brand equity (CBBE) is the most widely used brand equity model.

According to Keller, CBBE is “defined as the differential effect of brand knowledge on consumer response to the marketing of the brand.”

  • Differential effect: Compare consumer response to a brand’s marketing efforts with the response to the same marketing efforts of an unnamed brand.

  • Brand knowledge: Information like brand images and awareness forms brand knowledge.

  • Consumer response to marketing: Consumer perceptions, preferences, and behaviors arise from marketing mix activities.

Consumers can react more or less favorably to the product, price, promotion, or distribution of a brand, compared with another brand. Hence, brand equity can be positive or negative.

Strong, positive brand equity stands for something important to targeted consumers. It captures and communicates what a brand wants to be known. Think about Amazon—the world’s largest online marketplace and an ecosystem of products and services. “It has successfully connected the values and positive brand associations from one business – ease of use, speed, reliability – to other areas,” says Graham Staplehurst, BrandZ’s global strategy director.

In contrast, brands with negative brand equity have an unfavorable position in certain customers’ minds. It’s crucial to understand that these unliked brands may gain popularity and recognition. The problem is consumers develop negative feelings about them, produce negative word-of-mouth, or turn their loyalty to other brands. Take Facebook as an example. Despite having over 2.7 billion active users, Facebook has experienced a perceived decline, criticism, and boycott for years.

Why Is Brand Equity Important?

Brand equity matters for both consumers and brands. It creates value for consumers by helping them interpret, process, and store vast quantities of information about products and brands. Think this way: Why do you pick an iPhone over an LG smartphone? Probably because the name “iPhone” is dominant in the cellphone category. Additionally, strong brand equity helps increase customers’ satisfaction. Knowing that a bag comes from Louis Vuitton can affect the experience of wearing it: Customers can actually feel different.

Brands with strong equity consistently increase in popularity and gain advantages in customer acquisition, retention, and profitability. They can easily introduce premium pricing, attract new customers, or recapture old ones. A promotion that provides an incentive to try a new flavor will be more effective if the brand is familiar. There is no need to combat a consumer's skepticism of brand quality.

Studies prove that strong equity helps brands achieve brand forgiveness, meaning their loyal consumers are more likely to forgive their transgressions and service failures. In 2009, Toyota recalled 3.8 million vehicles because of floor mats that trapped accelerator pedals. But did customers turn their back on the brand? They did… but not forever because their relationship with Toyota was so strong that they forgave the brand right after it showed the commitment to fix the problem.

The Relationship Between Brand Awareness and Brand Equity

Brand equity includes several dimensions—brand awareness is just one of them. The role of brand awareness in building brand equity depends on the strength of the brand’s presence in consumers’ minds. Research shows that a high level of brand awareness helps increase brand choice, produce greater consumer loyalty, and so improve brand equity.

Brand awareness is often considered a critical first step in building brand equity and the basis for marketing strategy formulation. Repeated exposure to brand communications creates familiarity, increases customer trust and willingness to purchase as consumers don’t believe in the quality of unfamiliar brands.

How to Build and Measure Brand Awareness

How to Build Brand Awareness

Brand awareness must be your top priority, but that doesn’t mean you need to spend a huge budget to achieve it. There are ways that can help you build brand awareness with little or no cost.

  1. Referral programs

A referral program is a word-of-mouth marketing tactic that motivates satisfied customers to talk about your brand, turning them into brand advocates. When a customer tells someone about your product, they’re proactive to share an actual experience with others, which is more valued than a paid advertisement. A 2014 study found that advertising doesn’t predict brand awareness, and increasing the budget doesn’t always improve awareness. The reason is that consumers hate ads, and they often don’t respond to an ad unless it shows something new.

A referral program helps brands create social proof for future customers. First, the more prospects see people referring your brand to others, the more familiar your brand and products become. If referrals come from those already in their social groups, social proof's power becomes even stronger.

Second, existing customers’ testimonies create an awareness that your brand is legitimate and worth trying, helping reduce risk perceptions and build trust with new customers. This also makes your product stand out from competitors that have few or no referrals. In fact, Nielsen reported that 92% of consumers trust their friends’ and families’ suggestions more than advertising when choosing a brand.

2. Guest posting

Another great way to get your brand known is to share valuable content on other blogs, a.k.a, guest posting. Done right, guest posts can drive organic search and referral traffic, which potentially leads to qualified prospects.Potential customers who read an article with a byline from your brand in a blog become aware of your brand. If they’re curious about you, they’ll click through to read more on your site and enter your funnel.

Case in point:

3. Freebies

Many brands offer freebies to raise awareness about their product and collect customer feedback. Consider a free gift promotion offered by Feed Me Vegan: a bundle of its new products, including desserts, key lime pie, and tiramisu. The brand asks followers to follow its Instagram account and tag a friend in its post. Such promotions are commonplace.

To increase the promotion performance, you can partner with a more recognized brand (like Feed Me Vegan teamed up with Vegan Food) and run giveaway contests on social media. Alternatively, find influencers in your niche and ask them to share your freebies with their followers. Fenty Beauty by Rihanna is a great example of influencer marketing’s power. At Fenty Beauty’s launch party, the singer encourages invitees to try out product samples and take them home, creating a lot of buzz around the brand.

4. Paid advertising

Paid advertising is a very effective way to increase brand awareness. Take Facebook ads, for instance, where you can reach millions of users, narrowing them down by demographic to target the audience most attractive to you. Facebook also enables you to brand your campaigns and has the added bonus of social sharing.

The point is, whether it be through social media or search ads, paid advertising has a positive impact not only on top-of-mind awareness, but also on unaided brand awareness.

The Canadian grocery retailer Sobeys saw this after running a brand awareness Facebook ad campaign to reach more customers. The ad helped it acquire 8% higher in-store sales on promoted categories.

The bottom line is that with targeted keywords and a focused segment, you can help your brands show up to thousands of people. Even if they don’t end up clicking through your ad, seeing your name at the top of search results or their social media feeds makes an impression. Every added piece of familiarity counts when a prospect is finally ready to make a purchase.

How to Measure Brand Awareness

Tracking brand awareness can help you understand what works and what doesn’t. Consider the following methods:

  • Use social media listening: Social listening tools help reveal what people are saying about your brand and competitors across channels. The insights will give you a bigger picture of your brand. A worthy note is that these tools may provide inaccurate data because it only discovers the perception of a tiny part of the population.

  • Use brand tracking software: A brand tracking tool can help you track overall brand health, including brand awareness, brand usage, brand consideration, brand perception, and brand associations.

  • Track brand mentions: A brand mention is a reference of a brand on the web. It describes anytime a blog or someone uses your brand name. By tracking brand mentions, you can know how many people have talked about your brand or shared your posts on a specific channel.

  • Use Google Analytics: Using this tool, you can track website traffic, traffic source, top source, keywords driving traffic, search volume, user demographics, and how engaged your audience is with your brand.

  • Collect feedback: You can display a survey form on your website or run a poll on social media asking how your audience knows about you. The insight will tell you where you succeed in your marketing efforts. Review sites are also a good source to track conversations.

How to Build and Measure Brand Equity

How to Build Brand Equity

Developing brand equity requires establishing brand awareness early on. But it also involves the initial choice of brand identities such as brand name, logo, or symbol. Research suggests that a brand name should be simple, familiar, and distinctive. It should also be easy to comprehend, pronounce, and spell. Similar criteria also apply to the brand logo and symbol.

Supporting marketing programs is another vital part of building brand equity. These programs help increase exposure to a brand, develop customer perception and desire to experience products. It’s important to note that consumer expectations are changing; hence, brands need to adapt to meet those expectations and strengthen relationships with consumers.

Consider these tips for building brand equity:

  • Build brand awareness by following the tactics mentioned above.

  • Create your brand personality by determining your logo, slogan, color palettes, font, social media presence, and product packaging.

  • Use storytelling techniques to create a story about your brand to trigger emotional responses from your target audience. Maintain your story’s authenticity and consistency across channels.

  • Communicate and build relationships with your customers through email marketing, social media platforms, or your customer support team.

How to Measure Brand Equity

To measure brand equity, brands should keep in mind the following metrics. The first six represent the brand’s customer perceptions along the four brand equity dimensions—loyalty, perceived quality, associations, and awareness. The last one involves behavior measures that represent information obtained from the market rather than directly from customers. By measuring brand equity from customer and market perspectives, brands can get an accurate and comprehensive picture of their brand values.

  • Loyalty: Brand loyalty is a core dimension of brand equity. A loyal customer base represents a barrier to entry, a basis for a price premium, and other advantages. A basic indicator of loyalty is the amount a customer will pay for your brand in comparison to other brands offering similar benefits.

  • Customer satisfaction: Customer satisfaction (CSAT) surveys can help you understand if your customers are satisfied, delighted, or dissatisfied with the product or service they bought from you. CSAT is a useful measure for service brands like rental firms or hotels, where loyalty is often the cumulative result of customer experience.

  • Perceived quality: Using surveys or focus groups, you can evaluate what customers think about your product quality. For example, is your product the best, one of the best, one of the worst, or the worst? Does your product have consistent or inconsistent quality?

  • Awareness: A brand tracking tool can be a good way to discover if customers recall your brand when they need a specific product. The data can help you paint a picture of the mental real estate your brand owns and how it’s considered against your competitors.

  • Value: Brand value can be measured by whether the brand provides good value for the money or whether customers buy its products over competitors’ for other reasons.

  • Brand personality: Brand personality can create an emotional connection with customers. For example, Nike offers a sense of confidence and the spirit of athletes, while Coca-Cola associates itself with happiness and excitement. You can measure brand personality by applying the Big Five personality test with five dimensions: Sincerity, Excitement, Competence, Sophistication, and Ruggedness.

  • Financial metrics: Look at your market share, sales revenue, the percentage of stores carrying your brand, or the percentage of people who have access to it.

Grow with Brand Awareness and Brand Equity

Brand awareness and brand equity are different concepts, but they are deeply connected with each other. Brand awareness plays a vital role in consumer decision-making, market performance, and marketing mix. It’s also one of brand equity’s core dimensions, meaning you need to create brand awareness in order to build brand equity.

Key takeaways to build and measure brand awareness:

  • Building brand awareness doesn’t always require a large investment. You can try referral programs, guest posting, freebies, or paid advertising, depending on your brand strategy and budget.

  • Consider investing in a brand tracker because it’ll give you valuable insights into brand awareness, target audience, and customer perception, helping you make better branding decisions.

Key takeaways to build and measure brand equity:

  • To build brand equity, focus on building brand awareness, brand story, and brand personality. Also, create and maintain emotional connections with customers across channels.

  • To measure brand equity, pay attention to dimensions such as brand awareness, customer loyalty, customer satisfaction, perceived quality, brand value, brand personality, and financial performance.

Developing strong brand equity has become a priority for brands, regardless of sizes, industries, and markets. After all, a valuable brand opens the doors to gain more loyal customers, more business opportunities, and greater profits. The rewards of having strong brand equity are clear.

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