Brand Equity

AAA

DEFINITION of 'Brand Equity'

The value premium that a company realizes from a product with a recognizable name as compared to its generic equivalent. Companies can create brand equity for their products by making them memorable, easily recognizable and superior in quality and reliability. Mass marketing campaigns can also help to create brand equity. If consumers are willing to pay more for a generic product than for a branded one, however, the brand is said to have negative brand equity. This might happen if a company had a major product recall or caused a widely publicized environmental disaster.

INVESTOPEDIA EXPLAINS 'Brand Equity'

The additional money that consumers are willing to spend to buy Coca Cola rather than the store brand of soda is an example of brand equity.

One situation when brand equity is important is when a company wants to expand its product line. If the brand's equity is positive, the company can increase the likelihood that customers will buy its new product by associating the new product with an existing, successful brand. For example, if Campbell's releases a new soup, it would likely keep it under the same brand name, rather than inventing a new brand. The positive associations customers already have with Campbell's would make the new product more enticing than if the soup had an unfamiliar brand name.

RELATED TERMS
  1. Cult Brand

    A product or service that has an energetic and loyal customer ...
  2. Advertising Allowance

    Money that a product manufacturer or service provider pays to ...
  3. Relationship Manager

    A professional who works to improve a firm's relationships with ...
  4. Brand

    A distinguishing symbol, mark, logo, name, word, sentence or ...
  5. Brand Awareness

    The likelihood that consumers recognize the existence and availability ...
  6. Trademark

    A symbol, word, phrase, logo, or combination of these that legally ...
RELATED FAQS
  1. How are Richard Branson's holdings distributed?

    The Virgin brand name and the holdings of Virgin founder, entrepreneur and multi-billionaire Sir Richard C. N. Branson are ... Read Full Answer >>
  2. What impact does brand equity have on profit margins?

    Brand equity refers to the value of a brand name. If customers are willing to pay more for a product from a particular company ... Read Full Answer >>
  3. What are some examples of companies or products that have outstanding brand equity?

    While many companies and products have established brand equity, a few of the most recognized are Tylenol, Kirkland Signature ... Read Full Answer >>
  4. What is an economic moat?

    The term economic moat, coined and popularized by Warren Buffett, refers to a business' ability to maintain competitive advantages ... Read Full Answer >>
Related Articles
  1. Active Trading

    Competitive Advantage Counts

    What's the best indicator of a company's future success? Its ability to succeed when others fail.
  2. Professionals

    Advertising, Crocodiles And Moats

    Memorable advertising is a brick in the fortress that keeps competitors at bay.
  3. Forex Education

    Using The Price-To-Book Ratio To Evaluate Companies

    The P/B ratio can be an easy way to determine a company's value, but it isn't magic!
  4. Markets

    Intangible Assets Provide Real Value To Stocks

    Intangible assets don't appear on balance sheets, but they're crucial to judging a company's value.
  5. Investing

    3 Secrets Of Successful Companies

    Make smart investments by spotting up-and-coming success stories early.
  6. Personal Finance

    How Youtube Ad Revenue Works

    Many people make money off of their YouTube videos through ad revenue, but just exactly how does Youtube Ad Revenue work? Quite simply, it turns out.
  7. Personal Finance

    How Instagram Makes Money

    Like many big names in social media, Instagram started as a fun idea without a clear path to profit.
  8. Stock Analysis

    Is SodaStream Ready For A Come Back?

    It's not easy to be a SodaStream investor. The once-fizzy market has gone flat, shedding roughly three-quarters of its value since peaking two summers ago.
  9. Investing

    Multiple Myeloma: A Growing Market For Treatment

    American and European regulators have given Celgene Corporation the OK to begin marketing its top-selling myeloma drug Revlimid as a first-line therapy.
  10. Investing

    Advertising From TV To Internet: An Industry History

    Changes in television consumption habits have forced advertising to target audiences through new means, namely Internet advertising.

You May Also Like

Hot Definitions
  1. Price-To-Sales Ratio - PSR

    A valuation ratio that compares a company’s stock price to its revenues. The price-to-sales ratio is an indicator of the ...
  2. Hurdle Rate

    The minimum rate of return on a project or investment required by a manager or investor. In order to compensate for risk, ...
  3. Market Value

    The price an asset would fetch in the marketplace. Market value is also commonly used to refer to the market capitalization ...
  4. Preference Shares

    Company stock with dividends that are paid to shareholders before common stock dividends are paid out. In the event of a ...
  5. Accrued Interest

    1. A term used to describe an accrual accounting method when interest that is either payable or receivable has been recognized, ...
  6. Absorption Costing

    A managerial accounting cost method of expensing all costs associated with manufacturing a particular product. Absorption ...
Trading Center