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Brand equity is the value a company gains from its name recognition, and is usually created through marketing and advertising.  Brand equity is why companies are willing to pay millions of dollars for a 30-second advertisement during the Super Bowl or place their logo on the hood of a stock car. The idea is to imbed the company name into consumers’ minds so they select the company’s products almost out of habit.

Still, in order to ensure the customer loyalty that makes brand equity so valuable, companies must consistently produce quality products.  This creates loyal customers who are willing to pay more for a preferred brand. In a world where consumers are inundated with choices, brand loyalty provides an easy way for customers to quickly filter through the clutter and choose a product. 

All of this consumer trust can evaporate with one bad production run of inferior quality goods, or a major product recall, however.  Events like these harm consumer trust, damage the brand name and create negative brand equity.

Brand equity helps businesses expand their product lines without having to create entirely new marketing campaigns.  When Nike creates a new sports shoe or apparel, for example, it is much easier for them to sell the product when they place their name and logo on the item.  Consumers recognize that Nike makes the product, and are more likely to purchase it because of their positive associations with Nike products they’ve used in the past.  

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