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. Calculated Intangible Value - CIV

    A method of valuing a company's intangible assets. This calculation ...
  5. Franchisee

    The party in a franchising agreement that is purchasing the right ...
  6. Intangible Asset

    An asset that is not physical in nature. Corporate intellectual ...
Related Articles
  1. Competitive Advantage Counts
    Active Trading

    Competitive Advantage Counts

  2. Advertising, Crocodiles And Moats
    Professionals

    Advertising, Crocodiles And Moats

  3. Using The Price-To-Book Ratio To Evaluate ...
    Forex Education

    Using The Price-To-Book Ratio To Evaluate ...

  4. Intangible Assets Provide Real Value ...
    Markets

    Intangible Assets Provide Real Value ...

Hot Definitions
  1. Conduit Issuer

    An organization, usually a government agency, that issues municipal securities to raise capital for revenue-generating projects ...
  2. Financing Entity

    The party in a financing arrangement that provides money, property, or another asset to an intermediate entity or financed ...
  3. Hyperinflation

    Extremely rapid or out of control inflation. There is no precise numerical definition to hyperinflation. Hyperinflation is ...
  4. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
  5. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  6. Leading Indicator

    A measurable economic factor that changes before the economy starts to follow a particular pattern or trend. Leading indicators ...
Trading Center