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.

VIDEO

Loading the player...
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. Tangible Asset

    Assets that have a physical form. Tangible assets include both ...
  6. Trademark

    A symbol, word, phrase, logo, or combination of these that legally ...
RELATED FAQS
  1. Why is brand equity considered an intangible asset?

    Brand equity is considered to be an intangible asset because the value of a brand is not a physical asset and is ultimately ... Read Full Answer >>
  2. 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 >>
  3. 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 >>
  4. 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 >>
  5. 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 >>
  6. What is the difference between a value chain and a supply chain?

    The difference between a value chain and a supply chain is that a supply chain is the process of all parties involved in ... Read Full Answer >>
Related Articles
  1. Economics

    Explaining Brand Equity

    The value premium that a company realizes from a product with a recognizable name as compared to its generic equivalent.
  2. Active Trading

    Competitive Advantage Counts

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

    Advertising, Crocodiles And Moats

    Memorable advertising is a brick in the fortress that keeps competitors at bay.
  4. 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!
  5. 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.
  6. Investing

    3 Secrets Of Successful Companies

    Make smart investments by spotting up-and-coming success stories early.
  7. Economics

    Understanding Marketing

    Marketing includes all of the activities of a company associated with buying and selling a product or service.
  8. Economics

    How Big Data Has Changed Marketing

    Big data has enabled marketers to enhance their customer engagement and customer retention strategies by providing insight into behavior and thoughts.
  9. Investing News

    Cost-Free Connection Of Target Groups To Marketers

    ZipDial spotted a niche marketing opportunity in the area of “missed calls” and developed a business around it. Here is how ZipDial works and its benefits.
  10. Personal Finance

    How WhatsApp Makes Money

    In short, WhatsApp makes money just $1 at a time.

You May Also Like

Hot Definitions
  1. Capital Stock

    The common and preferred stock a company is authorized to issue, according to their corporate charter. Capital stock represents ...
  2. Unearned Revenue

    When an individual or company receives money for a service or product that has yet to be fulfilled. Unearned revenue can ...
  3. Trailing Twelve Months - TTM

    The timeframe of the past 12 months used for reporting financial figures. A company's trailing 12 months is a representation ...
  4. Subordinated Debt

    A loan (or security) that ranks below other loans (or securities) with regard to claims on assets or earnings. Also known ...
  5. International Financial Reporting Standards - IFRS

    A set of international accounting standards stating how particular types of transactions and other events should be reported ...
  6. Geometric Mean

    The average of a set of products, the calculation of which is commonly used to determine the performance results of an investment ...
Trading Center