The Bottom Line For An UpMarket Brand: Equity

According to John Dalla Costa, author of New Equities for a New Economy, brand equity is most accurately defined as "the sum total of impressions derived from every single source of brand information." From a financial perspective, the existence of brand equity is most apparent as the difference between how the market values your upmarket brand and how they would value a generic or commodity product or service competing in the same category.

This value is in a constant state of fluctuation because of the influences exerted by both internal (controllable) and external (sometimes uncontrollable) forces. As a result, accurately measuring your brand’s equity can be anything but simple. This, however, should not deter you from the pursuit of brand equity.

In addition to increasing the number of people who desire your brand, building upmarket brand equity also increases the amount of business generated by existing customers. Further, both existing and new customers will perceive a greater value in their relationship with your upmarket brand versus their relationship with your competitors’ brands – resulting in more purchases of your brand.

To illustrate this point, a long-term study of over 130 US brands has shown a strong relationship between brand equity (with the key brand equity measure being perceived quality) and stock return. This relationship is based upon two-way casual flow – a strong brand commands demand and demand is an important quality clue. When a high level of perceived quality has been (or can be) created, raising the price not only provides greater sales but also aids perceptions. While this relationship between brand equity and financial performance has existed since the very first brand was introduced, understanding this relationship has never been more important.

Brand equity is just one of the many goals businesses have chosen to build markets. Other successful strategic goals have included dominant distribution, competitive pricing, features or benefits. This was very much the same throughout the 1990s, a time of incredible double-digit growth fostered by strong economic times. While some companies with strong brands experienced outstanding growth and success, many grew despite the absence of a strong brand.

There are, however, a number of factors that have evolved over the past several decades which, in combination, are bringing into question a company’s ability to remain competitive in the coming years without a strong brand. Improvements in manufacturing, distribution, speed to market, category clutter, consumer access to information and misinformation, price erosion, entrepreneurial spirit, expansions, consolidations and others have substantially leveled the competitive field.

While it is unlikely for an upstart to dislodge the category leader, it is now possible for virtually anyone who wants to and has the wherewithal to gain distribution, beat your price and match or better your attributes and benefits, to take away your customers. In the absence of upmarket brand equity, the thing you are trying to sell is likely to become a commodity and your competitiveness adversely and permanently diminished under this scenario.

The core of our philosophy toward building brand equity lies in determining what combination of marketing actions will most effectively and efficiently drive brand assets (while minimizing liabilities) for a specific brand at any given moment in its life cycle. Since every brand and every situation is unique, each will require its own distinct combination of drivers.

Should you consciously and deliberately make upmarket brand equity your primary goal, by employing the right combination of drivers including distribution, pricing and like branding strategies in support of that goal, you will achieve stronger, lasting and more profitable relationships between your brand and its existing and new consumers, in turn selling more stuff to more people. You will indeed build brand equity…and that is the bottom line.