Both parallels measures the estimate of how much the brand is worth. Brand equity reflects on the importance and value in the eyes of the customer and brand value is the financial magnitude the brand has. There is often confusion between the two as there are very few differences so let’s break it down to understand the significance.
The Prophet defines it as “Brand equity is a set of assets or liabilities in the form of brand visibility, brand associations and customer loyalty that add or subtract from the value of a current or potential product or service driven by the brand. It is a key construct in the management of not only marketing, but also business strategy.” Any organization’s need to develop its brand equity over a period of time in the mind of the customer before it starts being effective. There are high chances that the buyer has already seen the advertisements through multiple media platforms and even bought the product before registering the brand. This can create complications in the estimation of brand equity.
To understand the value of the brand, companies need to make an estimation of how much is the brand worth in the current market. In simple terms it could be concluded in a simple question; if someone would be purchasing the brand today, how much will they pay? There is always a chance that a company has high value and low equity. This can happen when a company is in the process of coming up with a product or service and is paying the employees but the market is not aware about it yet. The company has to keep track of these developments and costs to cement value before equity.
Brand Equity vs Brand Value
Brand equity increases brand value. Even though calculating value is really simple, getting a hold of the equity value is much more complex. There are assets and liabilities involved, there are factors like brand visibility, associations, loyalty that plays a major role in determining the value. Let’s contemplate these factors in detail:
Visibility and association:
Brand visibility is pretty self-explanatory but its association entails that brand awareness and its reliability is in direct relation to customer need. If a customer is looking for a product and the brand name is not a part of the process when the customer is digging for options, it means that there is an issue with the visibility. If there is any reaction towards the brand, it involves in brand association. This reaction can be positive or negative.
Big brands stay in the market due to the customers loyalty. The brands have faith that whatever new products/services they have to offer, there is already a market for it with a handful of dedicated shoppers. These shoppers will buy only because of the brand name.
If the brand wants to build a long-term value in the market then it only makes sense to start building equities. If brands keep on focusing on sales and profits (which is the driving force of the company), you cannot make any plans for the long term. There are multiple steps that companies can take like make an estimation about the impact the brand will cause in generating business or observe closely what investments in brand equity worked for similar business models.
There are a lot of new measures taken by small scale companies which are planning to stay in the market for long term. There can be a debacle about the ROI (return of investment), in hindsight it is observed that advertising does not contribute to brand equity even though its expenditure and budget has always been high. So if you have short term goals for your company, you can focus on brand value, but if you have plans to stay in the market then you have to observe the assets and liabilities and build them for the perpetual growth of your company.
Aaker, D. A. (1992). The value of brand equity. Journal of Business Strategy, 13(4), 27-32.
Keller, K. L. (1993). Conceptualizing, measuring, and managing customer-based brand equity. the Journal of Marketing, 57(1) 1-22.