A brand refers to a logo, name, design, term or any other feature that distinguishes a product from other products in the market. It is also considered as a promise made by the company to its customers. The two measures used to determine the worth of a brand are brand equity and brand value. The two terms seem to be similar to each other on the surface; however, on a deeper level, they are quite distinct from one another.
Brand value is different from brand equity in that it signifies the financial asset that is recorded on the balance sheet of the company. It is the value used to determine the monetary worth that the brand generates for the company. On the other hand, brand equity signifies how significant the brand is from the perspective of the customers of the company. The value of brand equity is determined from the perspectives, experiences and relationships of the consumers with respect to the brand; hence, it is said to be consumer-focused.
Definitions and explanations
Brand value refers to the financial value of the brand. It is net present value of the future cash flows that may be generated by the brand. To determine the brand value, companies need to determine the worth of the brand in the market, i.e. how much an individual is willing to pay to buy the brand. This value is determined by performing marketing and financial analysis.
Brand value signifies the premium that the customers assign to the brand, who are willing to pay an extra price to acquire it. Companies can achieve this by offering quality products at a competitive price, by employing state-of-the-art technology for generating the product, offering good customer service, and also exhibiting social and environmental responsibility.
Brand value is essentially created by:
- determining what is important for customers
- recognizing customers and competitors
- determining values and what the business stand for
- remaining stable over time
Brand equity refers to the recall value assigned by a consumer to the product or service of the brand, which is different from other brands offered for sale in the market. It represents a combination of customer preference, loyalty, awareness and recall value. Brand equity can be determined by assessing customer behavior, perception and experiences. It is formulated over time, and is increased when the company fulfills the promises it has made to its target market. This means that brand equity occurs when the customer has had an extremely satisfactory and unique association with the brand.
There is a positive brand equity when the customers show some level of satisfaction with the product or service being provided under the brand name, and in such a way that the brand name becomes synonymous for them to the product itself, or such that the brand image comes to their mind when they think of a certain product, such as Surf for detergent powder, Dettol for antiseptic liquid, and so on. In contrast, when customers are not satisfied with the product or service, or when it does not fulfill what it has promised, brand equity is believed to be negative. In such situations, customers do not recommend the brand to others, and instead, they actually recommend others against buying the product as they believe that the product does not provide value for money. Hence, a high brand equity suggests that customers will continue to buy the product even when the price of the product is higher as compared to other brands in the market.
Difference between brand value and brand equity
The differences between brand value and brand equity are presented below:
Brand value is the financial worth of the brand, i.e. the money people are willing to pay to acquire it. On the other hand, brand equity is consumer-focused, and it determines the worth of the brand while keeping in view perceptions, memories, experiences and relationships of the consumer with the brand.
Brand value includes all value-adding activities carried out by a company. For example, offering quality products at a competitive price, employing state-of-the-art technology for generating products, offering good customer service, and exhibiting social and environmental responsibility. Brand equity, on the other hand, starts with the customer. It considers loyalty, trust, feelings and perceptions of consumers; hence, it is based on the strong customer relationships that have been developed over a long period of time.
Brand value offers a comprehensive worth of the brand because it takes into account all values like revenues and cost-savings. Brand equity, on the other hand, solely offers a customer-oriented value of brand.
Brand value is representative of the profits and benefits generated from all sources, and not only from the customers. Brand equity, in contrast, represents the profits attributed to direct as well as indirect factors related to customers.
Brand value represents the brand’s overall financial value, while brand equity is an indicator of the brand’s success.
Brand value vs brand equity – tabular comparison
A tabular comparison of brand value and brand equity is given below:
|The value of the brand in financial terms, i.e. how much a person is willing to pay to acquire the product that belongs to the brand?||A customer-focused value of the brand that is determined by customers experiences and relationships with the brand|
|All those activities that add value to the brand||Originates from the customer, and is based on loyalty and trust of customers|
|Provides a comprehensive value of the brand||The value of the brand from the customers’ perspective|
|Represents earnings from all sources||Represents earnings only from customer-related factors, direct as well as indirect|
|Overall financial worth of the brand||Success or failure of the brand in terms of customers’ trends and satisfaction|
Conclusion – brand value vs brand equity
It can be concluded that brand value is the final outcome of brand equity because brand equity plays an important part in enhancing the worth of the brand in the market. Brand equity actually represents the difference between the brand value to the customer and the product value when the brand name is not used.