Question

in 200 words Describe the importance of brand equity

Answer 1

In simple words, brand equity refers to the additional value which the consumers of a product derives from the brand name associated with the product. For example, the pride derived by a owner of a Rolls Royce is an example of brand equity. A consumer is willing to pay a premium price for a well-known brand over a little-known brand due to the brand equity. For example, Apple can charge a premium price for its iPhones or iPods due to its high level of brand equity.

Brand equity sets a brand apart from its competitors. Brand equity, therefore, helps in building a loyal customer base who does not easily switch to other brands. Brands equity builds a strong association between a brand and its consumers. Therefore, brand equity helps in building competitive advantage which results in higher sales, revenues and lower costs. Which a firm successfully builds brand equity; it means it is successful in differentiating itself from other brands and competitors. A firm with a strong brand equity not only earns higher revenue (because customers are ready to pay a higher price) but also retain its customers and diversify in other products and derive benefits from the brand equity. Moreover, a solid brand equity helps in reducing costs as well as the firm is already well-known in the market and it does not need to spend a lot on marketing activities.