Measuring the ROI of Brand Equity
Brand equity greatly influences the success of your company, so it’s important to understand what it means and how to measure it. Brand equity can be positive or negative, depending on how you manage and execute your brand experiences. If people already know your brand and trust your products from reputation (i.e., you have positive brand equity), you could charge higher prices, convert more customers, and grow your influence with each positive customer experience.
Brand equity is commonly confused, however, with brand awareness, brand loyalty, and brand experience because they’re all related. How you measure brand awareness can even be used to calculate your brand equity return on investment or ROI. The more people who know about you for positive reasons, the better. If your brand awareness metrics and investments are healthy, that’s also good for brand equity.
The formula for measuring the ROI of brand equity looks different for every company, but there are some commonalities everyone needs to know. Let’s start by defining brand equity, understanding its benefits, and reviewing a few ways anyone can start to measure it.
What is brand equity?
|Brand equity is the value consumers assign to a brand based on their experiences, perceptions, and associations with it. With customer experiences growing in complexity across channels in today's digital world, marketers need to have their finger on the pulse of how people feel about their brand. That’s a big reason why so many companies invest in brand management.
Diligent brand management creates the foundation for positive brand equity. It allows you to build, control, and safeguard your brand’s narrative across all customer experiences. Without a team devoted to brand management, brand equity is more likely to suffer. That’s because equity accumulates from different parts of a brand experience ranging from awareness and loyalty to customer retention and customer sentiment.
Brand equity results from every interaction someone has with your company. Each logo seen, marketing message consumed, or product used adds to their perception of you. Multiply that across every person you interact with and their corresponding reach, and you start to get a clearer picture of how complicated brand equity is in the wild.
Trade shows, storefronts, digital ads, websites, and social media channels all need to present a consistent brand front, and that’s no easy challenge. When a brand is managed well, each touchpoint builds value. With ears to the ground across all channels, you can start to build a brand that people trust, rely on, and turn to when they need their problems solved.
What is the importance of brand equity?
When customers have a positive experience with your brand, they feel comfortable with and confident about your company's products and services, which leads to increased customer loyalty. This means they might tell their friends and family about your brand, netting you free, word-of-mouth advertising.
By investing in brand equity, you also build a stronger market position among your peers. Not only will your customer’s know your name, but your industry will too. Imagine your business among the leaders on Forrester Wave™ reports, a result of brand equity that also adds to it.
Ultimately, you want to be the Energizer or lululemon of your vertical. Investing in brand equity over time is the way you move toward that. Remember, it’s a long-term investment. Brands like Johnson & Johnson and UNICEF didn’t become global names overnight. It took organizational alignment around brand equity, investing in it, and learning to measure it over years.
Wherever you’re at in your brand’s development, it’s worth investing in brand equity. And anything worth investing in must be measured so that your company can understand the ROI.
How to measure the ROI of brand equity
While there’s no one formula for measuring brand equity or its ROI, you can come up with your own collection of metrics. Some organizations combine brand awareness, brand loyalty, and conversion metrics to measure brand equity. Others lean on factors like market expansion, decreased ad spend in established markets, and higher price points.
Another important consideration is your budget allocations. If you aren’t currently investing directly into brand equity as a line item, that’s OK. As long as you’re investing in marketing, advertising, or branding, you can begin to draw lines between dollars spent and brand equity metrics.
These are the three main areas we recommend focusing on when measuring the ROI of brand equity:
1. Brand awareness
Brand awareness is a measure of how familiar consumers are with your brand. It ranges from simple name recognition to an audience’s knowledge of a brand’s products, services, reputation, and values. Brand awareness is often considered an early step in a customer’s path to conversion.
When more people are aware of your brand, you have a wider web from which to build equity. With consistent branding across all channels and positive customer experiences, you can grow brand equity quickly. That’s why we like suggest these brand awareness metrics for your formula:
- Brand impressions
- Website traffic
- Social media engagement
- SERP rankings
- Customer feedback and reviews
2. Brand loyalty
Brand loyalty refers to a consumer’s allegiance to your brand, a result of strong brand equity. If a consumer values your brand, they’re more likely to purchase its products or services regardless of convenience, price, or options because they trust your brand and what you sell. These loyal customers also tell their friends and family about your brand, which is helpful because word-of-mouth marketing drives $6 trillion of annual consumer spending.
The following brand loyalty metrics will help you understand how customers feel about the brand and whether your investments lead to positive brand equity.
- Net promoter score (NPS)
- Brand engagement
- Repurchasing levels
- Multiple product purchases
- Customer loyalty index (CLI)
- Revenue per customer
- Focus groups, research panels, or customer brand perception surveys
- Sales data
- Social media reviews and mentions
- Website search volumes on your brand
3. Marketing and Advertising
From search engine optimization (SEO) and podcast ads to TikTok videos and streaming TV commercials, your marketing and advertising initiatives are the foundation of brand equity. The majority of budget allocation and spending that you can tie back to brand equity ROI happens here, too.
Review these common marketing and advertising metrics as you continue to tinker with your own formula for measuring brand equity.
- Ad campaign performance
- Video impressions and views
- Media coverage
- Email marketing engagement
- Social media ads reach and performance
- Paid search ads reach and performance
- Organic search views and page rankings
In the end, how you define and measure brand equity is your call, but everything above can be part of your formula to measure ROI. Some of the variables may be similar to the initial list of brand awareness metrics, but that’s because brand equity, brand awareness, and marketing are all so closely related.
In the end, you have to determine which set of metrics best convey brand equity as your organization defines it. Once you know that, you can track all your investments to come up with a formula for ROI.
Our recommendation? Use this article as a framework to talk with your data analytics team about measuring brand equity and measuring ROI. If you spend money on marketing or advertising, you’re already investing in brand equity, so you might as well get better at measuring it.
You can also build positive brand experiences, increase customer trust, and widen your brand awareness by taking control of your brand management by leveraging a digital asset management (DAM) system.
What DAM means for brand equity
Trust and consistency are essential components of brand equity, and a DAM solution is a crucial tool for creating these. DAM makes it easier to build brand equity by equipping your marketing and creative teams with easy, secure access to all the digital assets they need.
Successful brand management is a seamless collaboration between teams and tools. Using a DAM system for brand management keeps workflows centralized, organized, and coordinated across projects and channels, ensuring you deliver a consistent brand experience that builds equity.
A DAM platform can also help you measure critical performance metrics for your content. You’ll get insights into your brand strengths and weaknesses with content analytics that reveal which assets collaborators use, where they appear, and how audiences engage with them. Your brand will also be protected by version control, asset expiration dates, and digital rights management to ensure only the right brand asset is used.
With greater workflow efficiency and easy sharing of approved brand assets — all of which a DAM enables — your marketing team can produce a consistent brand identity across social, web, event, and sales channels, driving to a positive ROI.