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Brand equity refers to a value premium that a company generates from a product with a distinctive name. Brand management systems can build brand equity by making their products distinctive, easily recognizable, and superior quality and reliability. Mass marketing campaigns also aid brand equity. Brand equity building measures a brand’s worth based on factors such as loyalty, awareness, associations, and perceived quality.

How to build brand equity?Positive consumer impressions, experiences, and affiliations contribute to positive brand equity, whereas negative customer perceptions, experiences, and associations lead to negative equity. When considering a brand equity definition, consider that brand equity is not the same as brand value, which is a brand’s financial worth. Although the two are closely related, a positive brand equity management system does not always imply positive brand equity.

Customers happily pay a high price for a company’s products with favorable brand equity, even if they could buy the same thing for less from a competitor. Customers, in effect, pay a higher price to do business with a company they recognize and respect. Because the company with brand equity does not have to pay more to create and sell the goods than its competitors, the difference in price goes to their profit margin. Because of the company’s brand equity, it may earn a higher profit on each transaction.