6 Benefits of Brand Equity

6 Benefits of Brand Equity

6 Benefits of Brand Equity

Opinions expressed by Entrepreneur contributors are their own.

We live in a world where brands are becoming household names. You can Google stuff to learn, Photoshop pictures to make them better (or worse) and don’t even start about the infamous Netflix and chill. If you want to become the next Sharpie or Kleenex, you need to build your brand equity early.

Before telling you “why,” let’s handle the “what.” Brand equity is a somewhat intangible measurement of your brand’s recognition, trust and goodwill. However, despite its ephemeral nature, it has a direct impact on your sales, as consistent branding can increase your revenue by 23%.

You can use many metrics to measure your brand equity, including brand awareness, associations and loyalty, customer lifetime value (CLV), marketing ROI and even the general sentiment of the audience.

With the semantics out of the way, let’s examine the six reasons to grow your brand equity early.

1. Establishes recognition and differentiation

If you’ve not been living under a rock, you’ve probably heard of Coca-Cola, a soft-drink mastodon that is ingrained not just in our everyday lives but has even become the unofficial symbol of Christmas. It’s easily recognizable, googleable and has a generally good reputation.

Compare that to something like DRY, which boasts an 18% recognition in its homeland, the U.S., and has no presence elsewhere. It is not easily googleable because of its name and the existence of Canada Dry, a brand of root beer from 120 years ago (still alive and kicking). It might be a good product, but it’s fighting an uphill battle against its own brand.

No matter how good your product is, 59% of people will default to something they’re familiar with over trying unknown brands, so making an exceptional product is not enough — you also need to make it stand out from all the competitors.

Related: Creating a Brand: How To Build a Brand From Scratch

2. Builds trust

However, pure recognition is not enough — although everyone knows them, you don’t see people lining up to buy ISIS’s latest summer collection.

While word of mouth is important for gaining an initial sale, your commitment to upholding the trust given to you will earn you continuous patronage. 67% of customers admit that a good reputation will get them to try your product. But they will not continue using it if you don’t gain their trust.

Related: ‘Brand Equity’ Is an Intangible That’s Worth Real Money

3. Increases brand value

While brand value is usually calculated from concrete metrics, such as the value of its assets, some more ephemeral metrics, like brand equity, significantly impact its cost.

Establishing positive brand equity is a lengthy process. As Warren Buffett famously said, “No matter how great the talent or efforts, some things just take time. You can’t produce a baby in one month by getting nine women pregnant.”

Throwing more money at marketing does not guarantee an instant sensation. Moreover, there have been many cases where teams with limited marketing budgets, like Cards Against Humanity or Dollar Shave Club, managed to go viral almost overnight. So, the earlier you start investing in marketing, the higher your chances are of breaking through the noise.

Related: Are You Acquiring a Brand? This Is The Secret Formula for Calculating Its Real-Dollar Value

4. Commands higher prices

Conversely, if you want to profit from your established brand, high equity allows you to command a higher price point for your products or services. Customers would not bet an eye to pay more for a perceivably higher quality product.

Incredible equity allows Balenciaga to sell seemingly nonsensical products like $1,850 trash bags or $4,400 tape bracelets (along with the shock value and viral PR, but that’s beside the point).

5. Reduces marketing costs

Ok, bear with me on this one. Growing your brand from zero takes a lot of time, money and creativity, period. However, once you’ve gotten the ball rolling, you will start to see higher returns from your marketing efforts.

On average, it takes the client eight touches (this number can vary based on your industry) with the brand to make a purchase, meaning they need to hear or see your ads eight times before they actually commit. However, user-generated content helps reduce this number and is, in a way, free “touches.”

The math is simple: the fewer contacts it takes for the client to convert, the fewer resources you need to spend, even if the initial investment is hefty.

Related: Why Successful Entrepreneurs Understand the Power of Brand Equity

6. Improves crisis resistance

Crisis resistance is a two-way street.

On the one hand, when your brand faces a crisis, good equity will help you stay afloat, as you will have a stable flow of loyal customers.

On the other hand, when the crisis is more global and affects the customers’ buying power, positive equity will make you the primary candidate for purchase. After all, why would people try something new if they know your brand provides quality products for good prices?

Naturally, the way crises impact different industries varies wildly. For example, Chanel felt neither the recession nor the COVID-19 pandemic, showing a revenue surge of 23%.

Related: If You’re Not Thinking About Brand Equity, You Should Be. Here’s Why.


Establishing brand equity is a lengthy process. Ultimately, the earlier you start fostering trust, loyalty and recognition among your customers, the better. A well-established brand brings more revenue, has more competitive advantages, and can weather any storm, making it easier to run your business and experiment with new tactics.

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