Brand equity, financial performance and long-term value

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.