How to Measure Brand Equity

Sideview of olorful darts in dartboard
••• Nicolevanf/ GettyImages

A brand is a logo, symbol, or name associated with a product. The impact that a brand has on consumer purchases or perceptions about a product is known as brand equity. The word equity indicates that the brand serves as an asset that holds some type of value.

When considering brand equity, the asset is considered intangible, since that you can't really touch or hold brand equity, and its value is measured in terms of the amount of recognition attributed by a consumer or potential consumer of the product or service.

Brand equity translates into consumer goodwill or a propensity to prefer or buy this particular branded product or service versus a different or generic version of the same product. 

How to Measure Brand Equity: Getting Started

How does one go about measuring this intangible known as brand equity? Take a look at the following considerations and action steps. You may need to commit several months and be prepared for long periods of market research, but by being aware of the following six considerations, you can begin to measure brand equity.

Clarify Brand Equity Perspective

Brand equity can be viewed from several different perspectives. The hard-line perspective is that of financial outcomes which look at price premiums. That is, how much more will a consumer pay for a product or service that is branded over a product or service that is generic?

A softer perspective looks at brand extension and the value that a brand leads to the introduction of other products. This approach also considers the reverse dynamic of the impact of a new product or service on the existing brand.

There is also a third perspective, customer-based brand equity, which looks at how consumers think, feel, and act with respect to the brand.

It can be helpful if you first clarify which perspective you would like to adopt by pinpointing what outcome you wish to achieve.

Determine Brand Equity Research Goals

Brand equity market research falls into one of three camps: Tracking, exploring change, and/or extending brand power. Market research that focuses on tracking makes comparison among competitive brands or products against a benchmark.

When exploring change is the research goal, customer brand attitude is tapped regarding branding decisions that might result in repositioning or renaming products or services. A deeper examination of extending brand power is carried out when substantive additions to a brand are considered. Each research goal requires a different tact.

Understand Customer Brand Attitude

A customer-based perspective in the measurement of brand equity focuses on the experiences that consumers have with a brand. The stronger the brand, the stronger the customer's attitude toward the products or services associated with the brand.

When customers experience a product or service, they gauge the overall brand quality and tend to infer certain brand attributes. If these experience measures are positive and endure over time, brand loyalty typically results. Today, customers can — and do — easily communicate the strength of their brand attitude to others via customer reviews and social sharing.

Identify Brand Equity Components to Measure

Awareness, reach, and image association are all aspects of brand equity that may not be closely associated with consumer experience. These measures of brand equity may reflect the impact of traditional advertising campaigns, and the influence of social or interactive media.

Brand awareness is an indicator of how branding efforts spotlight a product or service. Reach indicates how far and wide that spotlight shines. And image association reveals what the brand promises and what it stands for in the eyes of consumers.

Measure Perceived Brand Differentiation

Product differentiation is a lynchpin for brand loyalty, confidence in a brand, and the potential for brand switching. Customer perceptions about brand differentiation tend to be strongest when an actual product or service experience has occurred, but brand differentiation is not immune to the influence of advertising.

Differentiation may float on product or brand recommendations in social media rather than any personal experiences with a brand. Because differentiation is so susceptible to social influence, it lends itself to measurement across multiple media channels.

Use Both Qualitative and Quantitative Approaches

Ideally, brand equity measurement will include both qualitative and quantitative approaches. Qualitative examples include focus groups, which can provide a good forum for exploring customer perceptions and motivation. On the quantitative side, a numerical type of method such as the survey-based statistical technique called conjoint analysis can reveal key consumer decision-making processes. 

Effective measurement of brand equity is critical to the development of brand strategy and works well as support to return-on-investment analysis. This brings you full circle, back to the financial outcomes perspective on brand equity.