Question

What are the advantages of brand equity?

Answer 1

Brand equity benefits

Brand equity is preference of potential customers towards a product or service. Image of brand is such that people when asked about a product and service category mention the name of the company that has brand equity. For example, asking about cold drinks, people instantly identify Coca-Cola and Pepsi as two brand names. These brands have gained brand equity and enjoy extreme loyal customer base. Thus, one most important benefit of brand equity is creating a preferred image in the mind of prospects and existing customers and a loyal customer’s base. Customers purchase products or services more frequently and in more quantity when the brand equity is achieved by the company. With brand equity, a company charges premium price from the customers and earns high margins. This is another advantage of brand equity. Having brand equity allows a company to expand its market share as well as achieve long term growth. With brand equity of a product or service, the company can introduce more products or services in the market. People who recognize the brand can make a positive connection with other products or services introduced by that brand and new products or services can also become successful. Brand equity also strengthens a company’s negotiation power against suppliers, distributors, retailers etc. Brand equity assists a company to earn more profit and provide less margins to wholesalers and retailers. It can also purchase materials at low price from suppliers. Thus, brand equity assists company to gain high bargaining power against suppliers, distributions and retailers. Another significant impact of the brand equity is competitive advantage. A company can beat the challenges of competitors. Thus, brand equity provides several advantages to the company.