What is Brand Equity and Why It’s Important
We can agree that Apple products generally are much more expensive compared to Android products with similar functionality or even with outdated features. For example, in 2020 Apple released iOS 14 with picture-in-picture feature that allows users to watch a video while doing other tasks. The feature that already exist in Android, since Android Oreo in 2018.
But…
However, with expensive price, Apple still has strong customer base that tied to their ecosystem. So why does Apple still have so many customers base?
Apple is the most valuable and well-known company in the world. In 2021, Apple has the biggest market capitalization in the world with USD 2,252 billion. Just comparing, if Apple is a country, it will position at 8th rank of biggest GDP in the world above Italy or Russia. In addition, Apple is the number one most successful company in 2020 by Interbrand. Interbrand calculated the brand value of Apple is USD 323 million or increase 38% compared to 2019.
Apple brand is great because Apple has built up its brand equity over time. So, what is brand equity?
Brand Equity: the value of brand
From business school definition, the popular one of how to define brand equity is according to David Aaker, the Father of Modern Branding, in his book, “Managing Brand Equity”. Brand equity is a 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 service to a firm and/or to that firm’s customers.
In simple words, brand equity is a collection of assets that can be seen from both the business and consumer perspectives. It is the value a customer would pay to purchase a product from a company. A positive brand equity company can get higher margins by allowing for both premium prices and less emphasis on promotions. Customers are willing to pay a high price for its products, even though they could get the same thing from a competitor for less. In the long term, brand equity offers a competitive advantage that is also a real impediment to competitors.
A brand with positive brand equity also has the higher possibility to draw new customers or re-engage existing ones. Starbucks do a regular marketing campaign by releasing new flavor in every season. This campaign is success because it is conducted by Starbucks, which has positive brand equity. Customers do not wary of its quality even though they experiment with many variant flavors (such as The Cherry Blossom Frappuccino…).
Brand Equity elements
Aaker has provided the most comprehensive brand equity model which consists of five different assets. These assets included: brand awareness, brand loyalty, brand association, perceived quality, and other proprietary brand assets — e.g., patents, trademarks, and channel relationships.
1. Brand Awareness
Brand awareness is the ability of a potential buyer to recognize or recall that a brand is a member of a certain product category. A recognized brand will thus often be selected over an unknown brand. Brand awareness can generate more sales because people will often buy a familiar brand because they are comfortable with the familiar brand.
2. Brand loyalty
Brand loyalty of the customer base is often the core of a brand’s equity. It represents how likely a customer is to turn to another brand, particularly when that brand changes its price or product features. As brand loyalty increases, the customer base becomes less vulnerable to competitive action from other competitors such as more features or less price.
3. Brand Association
A brand association is anything “connected” in memory to a brand, or remembered as being associated with a brand. A connection to a brand will be stronger when it is built on multiple interactions or exposures to communications, rather than only a few. It will also be stronger when it is supported by a network of other connection. The numerous associations are product attributes, consumer benefits, use/application, user/customer, celebrity/person, lifestyle/personality, product class, competitors, and country/geographic region.
4. Perceived Quality
Perceived quality can be defined as the customer’s perception of the overall quality or superiority of a product or service to its intended purpose, compare to competitors. Perceived quality is a perception by customers and an intangible, overall feeling about a brand.
Let’s see the example in Apple Brand
Let’s take a look back Apple as mentioned in the beginning of this article. How each element of brand equity contributes to Apple brand.
First from brand awareness. Who doesn’t recognize Apple brand? In a 2018 study by GraphicSprings from 24,000 respondents around the world, it found that 100% of millennials worldwide recognize Apple’s logo. It is clear that Apple brand has achieved top-of-mind awareness, a special position in brand awareness level. It is the first-named brand in an unaided recall task. Having a dominant brand provides a strong competitive advantage. In many purchase situations it means that no other brand will even be considered.
Second, from brand loyalty. In 2021, SellCell conducted a brand loyalty survey included more than 5000 US-based smartphone users. According to the report, brand loyalty for Apple is at an all-time high of nearly 92% (up from 90% in 2019). Meanwhile, the closest competitor, Samsung loyalty has dropped from 86% in 2019 to 74% in 2021. The high Apple’ brand loyalty means its customers have a pride being Apple users and Apple brand is very important to them either functionally or as an expression of who they are. Since the brand’s inception in 1976, Apple’s branding strategy has always focused on emotion, that put a priority on building a community of dedicated fans.
Third, brand association aspect. If you are asked what comes in mind about Apple, there are some attributes, lifestyle or person that Apple is associated with. Apple can be associated to luxury, innovative, simplicity, or Steve Jobs. I take the brand map from Perceptual Maps. From this study, Apple is strongly associated with “innovation” and “high-tech” as they are the closest to the Apple circle.
And last, from perceived quality aspect. Apple’s CEO said the company always chooses quality over price, then it became a major reason why Apple products have higher price than their competitors. In addition, with its huge R & D budget, Apple can consistently release new innovation products that often become the trendsetter in the industry. Apple’s customer base may say that this perceived quality is something that obvious and equal with its high price. But others may refer Apple’s perceived quality as the Apple Tax, meaning users pay more for a product simply because of the Apple logo.
But in the end, with overall brand equity elements above, Apple has built its very positive brand equity. It has already transforming to user pride and user personality when he or she purchase an Apple product.
It’s clear enough by building strong and positive brand equity, company can achieve higher margin by allowing both premium prices and less emphasis on promotions, while also still having a competitive advantage that is a real impediment to competitors.
