Building brand equity: Strategies and tips for success

According to the American Marketing Association (AMA)⁠(opens in a new tab or window), brand equity is “the intangible value a brand holds in the minds of consumers.” This value is gained through consumers’ positive or negative perceptions of the brand and its products or services.

The key word here is “perception.” If customers perceive that their experiences with a brand have been at least satisfactory, then the brand has built positive brand equity. Consumers will then be more likely to make another purchase and share their positive experiences with other customers.

This scenario can also play in the opposite direction. Unpleasant interactions with a brand, whether through a defective product, unresponsive customer service, or highly-publicized PR crisis, can yield negative brand equity. Customers may stop trusting and supporting a business and convince others to do the same.

The history and evolution of brand equity

The term “brand equity”⁠(opens in a new tab or window) was first mentioned in marketing literature in the early 1980s. It garnered significant interest among marketing professionals, academics, and institutions, many of whom developed their respective definitions for the term and perspectives on what it covers. One of them is Peter H. Farquhar, PhD, whose 1989 description of brand equity as “the value added by the brand name to a product” has been widely cited.

Arguably, the most popular definition of brand equity comes from marketing professor emeritus David Aaker⁠(opens in a new tab or window), dubbed the “Father of Modern Branding.” In 1991, Aaker described brand equity as “the set of brand assets and liabilities linked to a brand, its name, and symbol, that add to or subtract from the value provided by a product or a service to a firm and/or to that firm's customers.”

Forty years later, the general understanding of brand equity still adheres to these foundational academic definitions. It’s also grown in scope more recently, with brand equity development no longer limited to consumer goods marketing. Services and B2B marketing are also invested in building, measuring, and managing brand equity.

While buyer-and-seller relationships in B2B commerce⁠(opens in a new tab or window) were traditionally driven by price, product, and other tangible considerations, the importance of “softer” facts, such as reputation and company associations, has become more pronounced through the years. B2B sellers who want to succeed invest in customer service as much as they do in product quality. They also go beyond being vendors but become their buyers’ “partners,” building relationships through shared interests and goals and positive interactions.

One thing to understand about brand equity is that it isn’t a mere marketing buzzword. Although it’s often used interchangeably with other terms, such as branding and brand recognition, it’s an asset that plays a critical role in a company’s bottom line. Building brand equity requires developing marketing campaigns to cultivate customer trust and market resilience.

Here are the key reasons to strengthen your brand’s equity:

To enhance brand recognition and recall

In 2011, social entrepreneur Dan Pallotta⁠(opens in a new tab or window) declared, “Brand is everything, and everything is brand.”

More than a decade later, his statement still rings true: Because of a competitive marketing landscape, any business looking to make its presence recognizable to its target market must establish and build its brand, regardless of whether it sells a product or a service. It’s an inescapable aspect of running a business. The moment a buyer learns about a product and conceptualizes it to inform future purchasing decisions, the product becomes a brand.

But it’s no longer enough just to have a brand. Ensuring it succeeds involves adapting to changing consumer behaviors and patterns so the brand remains strong and relevant.

Brand equity has become crucial in developing marketing strategies for the past few decades. It’s now a critical, intangible asset that drives a company’s long-term value and power and gives it a competitive advantage. Brand equity helps brands become recognizable and easy to recall.

To build customer trust and loyalty

Consumers expect much more from brands today beyond quality and affordable products and services. Company leaders may be surprised to discover that their brands aren’t as trusted by their audiences as they believe. According to a 2024 PwC survey⁠(opens in a new tab or window), whereas 90% of business leaders thought that customers place a high level of trust in their companies, only 30% of consumers agree with their assessment.

When working to stand out in a saturated marketplace, businesses need to bank on the trust they’ve built among their consumer base. This adds to their perceived positive value, which, in turn, raises their positive brand equity. Amidst the constant bombardment of advertising messages, brand equity helps consumers make a choice. They’re more likely to purchase a brand they’re already familiar with and are more likely to risk spending money on a brand they trust, even if it means paying more.

As such, you’ll find that many businesses dedicate a good chunk of their resources to developing strategies for building brand equity.

Since brand equity is often used interchangeably with other branding-related terms such as brand awareness, brand knowledge, and more, knowing its five core components can help dispel the prevalent confusion. Understanding these components also presents a clearer picture of how essential brand equity is to a company’s bottom line.

Aaker's model⁠(opens in a new tab or window) provides a clear brand equity framework for how these components relate to each other and the future performance of a brand.

Since brand equity was first introduced, businesses across all industries have learned its importance and the necessity of developing it. Through the decades, marketing professionals have realized that building brand equity isn’t a one-time goal. Instead, it takes long-term planning and consolidated efforts for a company to gain the considerable rewards that positive brand equity brings.

Here are the steps involved in building brand equity:

Whether your company is just beginning to develop its brand equity strategies or you have been doing brand equity management for a while already, knowing the best practices will keep you on track in fostering trust among your customers. These tips are applicable no matter what stage you are in building brand equity.