Brand equity is a marketing phrase that gets tossed about in business circles. What exactly is it? Like any business valuation process, it is the worth of your brand from the perspective of your customer. Do a great job for your customer and they will likely put a high value on your brand. Do a poor job and they will devalue your brand. Let me give you an example.

My neighbors down the street had their house painted this summer. Since they have purchased their house three years ago, they have made an ordinary house really look nice. The wife is an interior designer, so she, in particular, has a flair for changing aesthetics for the better. They had a red-brick, two-story home painted two colors of gray and trimmed in white. It looks like an entirely different house. They made a 20 year old home look like it was built this summer. The painter did a great job for them. Now I know that the painter just applied the colors he was told to by the wife, but it was so distinct of a change, that other people in neighborhood started inquiring about the same painter. Earlier this week, my next door neighbor told me they were also getting their house painted by the same painter in the same colors as the house down the street. Why? They liked his work! That is brand equity.

How do you build brand equity? First, get a distinctive logo for your brand. Make sure it stands out from other logos, especially those of your competition. Next, put it on everything. Get it in front of the eyes you want to be purchasing from you. But brand awareness is more than just putting a logo in front of people. It also is getting them to understand what it stands for. I have posted several famous brand logos, but have taken out the names. Can you tell me the brand names without the actual name being shown? Better yet, can you tell me what those logos represent in terms of a product or industry? That is also part of brand equity.

Beyond brand awareness and recognition for the product or service provided, brand equity helps you build a loyal customer base. Think about the brands you purchase. Why do you prefer them over their competition? Maybe it is the quality of the product, a better experience than you have had with another brand that you perceive to be of lesser value, or you may have just always purchased it and it is familiar to you. Brand equity takes all of this into account.

Why is brand equity so important? First of all, brands with a higher perceived value can do two things: they can charge more than a brand of a lesser value and they can expand their service offerings beyond their initial products or services. For instance,

General Electric started as a light bulb company in the early days of electricity. It was part of the Edison Light and Power Company. But as the GE brand grew, so did their business offerings, including aviation, health, digital, appliances, renewable energy and more. Brand equity helps you expand.

How is your brand equity? Take this little test.

1. Ask a set of random people if they recognize your logo without the words.

2. Also ask them if they know what you produce from your logo.

3. This is a bit more subjective, but ask your clients who they think of when something goes wrong and your brand would fix the problem.

4. Ask them what you could be doing better.

When you get the results, you will get a good idea of your brand’s equity.

Answers to logos.

1. Ikea

2. Pizza Hut

3. Ralph Lauren

4. Mazda

5. General Electric

6. Chef Boyardee

7. Walmart

8. Dove Soap

9. Bic Pens

10. Home Depot

11. Goodyear Tires

12. Clif Bar