7 proven ways to measure brand equity

What is brand equity and why does it matter?

It’s well-known that customers will tend to buy a product they recognize and trust. The concept of brand equity takes advantage of this customer behavioral tendency to maximize profitable sales over time.

Brand equity is the added value a company has when they have a strong and positive brand name and public perception. This creates:

• A marketplace that favors the company with the strongest brand equity.
• Increased revenue and profits when customers choose your brand over another, even if it’s more expensive to buy.
• A better hold on customers at future buying opportunities, because greater brand equity leads to more goodwill and brand awareness.

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Two broad approaches to measuring brand equity

Whether you’re just starting out, or you’ve been working on building your brand for a while, measuring your progress lets you know the strength of your brand in the market, and how it has developed over time.

Try out these two broad approaches on the data types to measure:

1. Economical (O data)

This is operational data like sales data, finance data and HR data. As it can be quantified into numerical values, it can be measured over and over, providing datasets.This data-driven approach to measuring brand equity would use the results to provide proof and insights on current performance, and predictions based on historical trends.This sort of data can be measured more easily than emotions and feelings. But it can only tell you about past activities and what happened. It can’t tell you what will happen in the future and why things will happen. This is where the second approach comes in.

2. Emotional (X data)

This approach to measuring brand equity uses experience data. In particular, it seeks to find qualitative reasons to explain emotional decisions and how brands ‘sit’ in people’s minds.

Brands that invest in their brand equity get a ‘mental advantage’ over other brands. This advantage results in a bias towards buying the brand’s product, even if it's sold at a premium.

It comes from the customer attaching their ‘self-image’ to the brand’s messaging. By buying the product, they’re buying into brand values, which they identify with. In this way, the product has the power to represent the customer’s future prospects, inspire them or help their self-esteem.

A strong brand also finds it relatively easier to attract the ‘elite’ and motivate its workforce, meaning they’ll be more likely to stay with the company longer, too.

For brand equity to be measured properly, to account for both operational data and experience data, it’s recommended that you choose metric groups that measure both sides. This will give you the full picture - the what and the why.

7 ways to measure brand equity

Here are 7 ways to evaluate brand equity, including some examples of metrics you can use to collect operational and experience data:

1. Brand evaluation

One way of measuring brand equity is by trying to understand the total value of the brand as a separate monetary asset, which can be included on a business’s balance sheet. This metric shows the worth of the brand, reflecting the brand’s contribution to the company’s success.

How can we measure a brand’s financial value? There are differing schools of thought on this, where results produce divergent estimates of brand value or agreement on the direction of change, differing from one year to the next.

It’s worth considering the value in terms of:

• Cost-value to create and build the brand - this could include budget spend on advertising, trademarking or licensing.
• Market-value of what it’s worth when put into the market to sell, when looking at similar companies and brands
• Income-value of what it brought into the company, or how much the company saved by growing the brand.

2. Brand strength

Brand strength, or the power of the brand, can be measured by emotional data - the differential value the brand has acquired in someone’s mind, as a result of multiple interactions over time.

Equity is almost synonymous with ‘attitudinal strength’ or ‘strength in the mind’ and is a proxy measure for the relative consumer demand for the brand.

You can capture this data using consumer surveys, and a series of evaluative questions that assess the relative preference, or ‘wantability’ the consumer has for the brand.

Review these common models for establishing brand strength:

• Millward Brown’s MDF framework
• Ipsos’ Brand Value Creator (BVC)
• TNS’ Conversion Model (CM)

3. Brand awareness

Brand awareness is how well your brand is known by your target customers, the market and by key stakeholders.

Since brand awareness is an emotional-based metric, it can be measured with questions asking about:

• A customer’s future intent to buy.
• A customer’s current brand awareness now and over time
• The purchase history of target customers
• How much ‘conversation share’ there is - A measure of the customer’s time that is passed speaking about your brand in everyday conversations.

Key methodologies to use include:

• Focus groups, research panels or customer brand perception surveys
• Sales data
• Customer feedback routes like using social media reviews and mentions
• Website search volumes on your brand

4. Brand relevance

This is connected to customer satisfaction, but focuses on whether your customers agree that the brand provides unique value. This can increase your brand equity level as the brand is perceived to be more valuable and relevant to a target market or to fulfill a specific purpose.

Some ways you can measure this include:

• Customer satisfaction (CSAT) surveys can help you understand your customer’s satisfaction levels with your company’s brands, products, services, or experiences.
• A Net Promoter Score (NPS) can provide insight on the customer’s emotional connection to a brand, which is a key driver for increasing brand loyalty.
• Using a survey-based statistical technique called Conjoint Analysis to reveal key consumer decision-making processes and the value customers place on a brand’s features.

5. Output metrics

You can determine brand equity through outputs like email marketing or social media messaging about the brand.

It relates to ROI operational data that tells you if your effort (e.g. number of communications out) was worth the investment. Email marketing won’t singularly determine your brand equity, but it will improve your brand awareness and perception, and as awareness grows, revenue should improve too.

This information can be gained from sales transactions about promoted brand products. The pricing power, or the brand’s ability to command a premium without losing business to a competitor is often associated with “brand equity” in consumer and service markets.

Other methodologies for investigating outputs are:

• Analysis of variance testing (ANOVA) to understand how different groups respond to variations to a brand’s messaging or development version
• Cost-comparison of pricing valuations
• Customer responses back to communication call to actions - for example, signing up to an email list, joining a loyalty program

6. Financial data

You can understand a product or services’ brand equity by looking at the financial results and sales performance of the business.

Historical data is necessary to assess brand performance, like the market share, profitability, revenue, price, growth rate, cost to retain customers, cost to acquire new customers and branding investment.

Also, don’t neglect some key indicators of good brand equity, which should all be increasing if you’re on the right path:

• The value of a customer over their lifetime
• The price premium in comparison with your competition
• The revenue growth rate

7. Competitive Metrics

If your competitors are doing badly, or if they are giving you a run for your money and creating great marketing campaigns, their activities will have an impact on your brand.

You can see how your brand equity performs within a competitive market, but in particular, you can conduct Competitor analysis to evaluate your competitors’ strengths and weaknesses, how their brand compares to yours.

If their brands are performing well, you’ll see variances in:

• Your acquisition rate against their rates
• Your dominance position in the market - including sales, social media engagement and following
• Revenue generated through certain channels that are being used by other competitors

Start measuring brand equity today

We know it’s not easy to build up brand equity -- the best brands in the world have dedicated years to creating a brand experience with the objective of doing exactly that. It can be especially harder to track, which is why we’ve created a guide to creating your own brand tracking study.