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  • Brand Equity

    Game Plan

    In-Depth

    Advantages of Strong Brand Equity

    While brand equity is largely intangible, its advantages are anything but. The value that a strong brand identity can bring to your company translates to very real and measurable business benefits. Among them:

    • Increased margins. Let’s get to the bottom line first: Positive brand equity allows you to charge more for your product or service, because people will be willing to pay a premium for your name—just as they pay a premium for jewelry that comes in a little blue box or electronic equipment with an apple on top. Is the quality of those products significantly superior to competitors’ offerings? Maybe, maybe not. But the perception is that it is. And when customers are willing to pay extra for a name they trust and/or value, that boosts your profit margins.

      Question to ask yourself: In your market or region, is there a catch to working with you, or does your local reputation make you more easily trusted than the competition?
       
    • Customer loyalty. Customers are not only willing to pay more for a product with strong brand equity; they’re also willing to stay loyal to a company over years and years, coming back to buy there again and again. In fact, some companies have built such strong brand loyalty that even when they hit a bump in the road—a defective product or a bad customer experience—their customers are willing to stick with them.

      Question to ask yourself: Do you have long-term customers/clients who will stick by you if you make a misstep?
       
    • Expansion opportunities. Positive brand equity can facilitate a company’s long-term growth. By leveraging the value of your brand, you can more easily add new products to your line and people will more willingly try your new product. You can expand into new markets and geographies, and people there will recognize your brand, make an instant positive connection, and follow you.

      Question to ask yourself: If you’re planning a geographic or product line expansion, can you leverage your company’s reputation as a positive influence?
       
    • Negotiating power. Positive brand equity can give you a considerable advantage in negotiating with vendors, manufacturers and distributors. When suppliers recognize that consumers are enthusiastically seeking and buying products that bear your name, they’ll want to work with you. And that, of course, puts you in an enviable bargaining position that can lower your cost of goods sold.

      Question to ask yourself: Do you believe your company’s brand equity (its reputation) gives you more negotiating power with vendors?
       
    • Competitive advantage. Do you know who won’t be too happy about your company’s strong brand equity? Your competitors. When customers are willing to pay a premium price for your products or services…when customers will try your new product sight unseen, just because it has your logo on it…when customers in a new market flock to you simply because of the reputation you’ve built elsewhere…when you can get better pricing from the same vendors your competition is using (and thus undersell your competition)… that can mean very good things for your business and not-so-good things for your competition.

      Question to ask yourself: How does your company’s brand equity compare with your competition’s?
    Game PlanGame Plan

    Game Plan

    Start by asking yourself those key brand equity questions:

    • In your market or region, is there a caché to working with you, or does your local reputation make you more easily trusted than the competition?
    • Do you have long-term customers/clients who will stick by you if you make a misstep?
    • If you’re planning a geographic or product line expansion, can you leverage your company’s reputation as a positive influence?
    • Do you believe your company’s brand equity (its reputation) gives you more negotiating power?
    • How does your company’s brand equity compare with your competition’s?

    Here are a few sources that offer more detail on the advantages that strong brand equity can bring to your company: