Updated 3 months ago by Oskar Duberg
Brands with strong equity reap many rewards, so it’s important to know how yours stacks up. Learn the five best methods for measuring brand equity.
Your brand equity, or your customers’ perceived value of your brand, has an impact on your bottom line. Studies show that brands with strong equity are more profitable in the long term. They can charge a premium price for their product, and they have greater recognition, loyalty, and retention. With benefits like this, you can see why measuring brand equity is an important task for brands.
Coca-Cola is a great example of a brand with strong equity. The brand is so well-known that in some parts of the United States, all soft drinks are called cokes. The brand’s equity is why it can charge customers $2.00 for a product that costs $0.16 to make, a markup of more than 1,000%.
While positive equity makes your brand name an asset, negative equity can make your name a liability. According to Trustpilot, “just one brand blunder can alienate customers, break trust, and stop consumers from buying from your brand.”
With profits on the line, it’s important to know how your equity stacks up. But because it’s based on intangible qualities – customers’ thoughts and feelings – how do you know whether you’re measuring brand equity correctly? There’s no single, perfect solution, but a combination of these five measurement techniques will help you see whether your brand equity is moving up or heading for decline.
Keller’s Brand Equity Pyramid says that the first step in building a strong brand is to generate salience, or become noticeable. After all, customers can’t begin to form a perception of your brand if they don’t know you exist.
That’s why the first step in measuring brand equity should be gauging your brand awareness. Brand awareness surveys will quantify aided and unaided recognition of your brand and products among your target audience.
Unaided questions show how top of mind your brand is for its category. An example of an unaided question for respondents would be, “When you think of soap, what brand name comes to mind?”
You hope participants say your name, but if you’re a new or small brand, expect unaided awareness scores to be low.
Aided questions measure how recognizable your brand name, product name, or logo is among your target audience. For aided questions, survey participants would get a list of soap brands and be asked to select all the brands they’ve heard of.
The goal of these surveys is to develop a baseline of your brand’s awareness among your target audience and frequently remeasure to see whether your marketing efforts are moving the needle. Companies can create and distribute brand-awareness surveys using online tools, or they can partner with a research firm.
Back in 2011, Fiat wanted to reenter the U.S. market after a 28-year absence. The brand opted for a “creative and sophisticated” strategy using Google Search ads. Fiat placed bids on branded keywords as well as generic category keywords, such as “small car.” By partnering with Ipsos, a multinational market-research firm, Fiat was able to determine how its search ads impacted brand awareness.
The study “revealed that the presence of a search ad for Fiat increased unaided awareness from just 11% to 22.5%.”
More recently, when Quibi – a short-form streaming platform – wanted to increase awareness for its new brand that launched in April, it ran video ads in Facebook’s In-Stream reserve. Quibi was able to determine that the campaign, which ran from March 17 to April 12, increased its brand awareness 8%.
Once you’ve started increasing your brand awareness, you can move on to the next step in measuring brand equity: brand perception research. This research helps you see whether your brand aligns with your positioning in customers’ minds.
The strongest brands know that brand-building isn’t just about getting your name out there. Your marketing message can’t be, “Hey, we exist! Buy our product!” You have to create a story for your brand and a position for it in customers’ lives. Is it better, cheaper, faster? Why should customers care?
Walmart is number eight on Brand Finance’s list of strongest brands and positions itself as the retail choice for customers who want to "Save Money. Live Better." And Porsche, the 41st strongest brand, is the automobile choice for customers who want a luxury sports car.
With brand perception surveys, participants might first get open-ended questions, like, “Which three words would you use to describe Brand X?,” or list questions such as, “Which of the following words describe Brand X?”
If you find there is a disconnect between your positioning and customers’ perceptions, qualitative research such as interviews, focus groups, or even video feedback can help you get to the root of the problem.
After consulting with customers to see how they felt about the brand, Parse.ly, a full-service content analytics company, discovered a disconnect between users’ perceptions and their brand messaging.
“We were being viewed by our customers as a breath of fresh air in a very stodgy category of software,” according to Andrew Montalenti, one of Parse.ly’s cofounders. “But the way we messaged was, ‘We are a robust enterprise analytics software with a focus on audience attention and content.’ It almost felt like we were messaging what people were moving away from to come to us. That just felt totally backward.”
As a result, the company decided to rebrand last year. One of the big changes was a new logo that moved away from serious “extreme serifs” to a more playful logotype.
“The new type is more open, friendly, and confident.”
Another way of measuring brand equity is through sales growth. If more people are purchasing your product, then it’s safe to assume you’ve created awareness and carved out a niche that customers are responding to.
It’s hard to say exactly what growth rate would indicate you’re on your way to strong brand equity because it varies by industry and company size, but a general benchmark is for companies to “fall between 15% and 45% for year-over-year growth.”
A downside to using sales growth to measure brand equity is that because it takes time for equity to increase sales, it also takes time for a decrease in equity to decrease sales.
A good example of the lag between equity decline and sales is Apple in the ’90s. When Steve Jobs was ousted in the mid-1980’s, former PepsiCo president John Sculley – the brains behind the Pepsi Challenge – took the reins and pumped millions into marketing and increased sales from $800 million to $8 billion.
During this time, Apple also lost focus and introduced products that flopped, like the Newton. Brand equity was declining, but it took time to affect sales. It wasn’t until 1993 that company profits dropped from $530 million to $86 million.
If brand awareness and positioning have encouraged product consideration and increased sales, the next step in measuring brand equity is amassing loyal customers. If you find an increase in customer retention and loyalty, that means your brand has lived up to customers’ expectations.
There are a couple of ways to measure customer loyalty, and a decline in any of these numbers could indicate a decline in brand equity.
A Net Promoter Score (NPS) survey asks customers, based on a scale of 1-10, how likely they are to recommend your brand to friends. Customers who answer with a 9 or a 10 are considered brand promoters; those who give a rating of 6 or less are considered brand detractors. By subtracting the detractors from the total promoters, you’ll get your NPS.
If your brand has a loyalty program, you can calculate your engagement rate to see how many customers are regularly earning or using points. You’d calculate your engagement rate by taking the number of engaged customers and dividing it by total customers.
A customer loyalty index (CLI) is a standard method of measuring brand loyalty over time. It’s a customer survey similar to NPS that asks questions based on a scale of 1-6. Questions include, “How likely are you to buy this product in the future?” “How likely are you to try our other products?” and “How likely are you to recommend us to friends?”
The downside of a CLI is that it measures intent, not behavior.
There is a gigantic focus group happening every day for your brand online via social media. You can get the most honest opinions of your brand and see how it holds up against competitors, and all you need to do is listen through a social listening platform.
How social listening platforms help measure brand equity:
There is no perfect way to measure brand equity. These five methods are a great way to start tracking your equity, but many brands use a combination of these methods in addition to others.
Trello, a web-based visual collaboration platform serving over 50 million users, measures brand equity through Net Promoter Scores, quarterly brand awareness studies, and quarterly competitive analyses, according to Leah Ryder, Trello's brand marketing senior team lead.
Trello also monitors social media daily to see sentiment and engagement, and they view their newsletter as a measurement of equity.
“Our newsletter is a great barometer for our users' interests in topics we cover, like remote work, productivity, and team collaboration,” Leah says. “Whatever people click on and read the most, we'll make more of that. We set high expectations for engagement and strive to make everything we do delightful, useful, and inspiring for folks.”
Sylvain Giuliani, head of growth at Census, the data automation platform that syncs your data warehouse with the apps you use, says that they also measure equity through surveys and social listening.
“For me, a great brand is one that triggers a strong positive emotion,” he says. “I would take it even further and say that the most long-lasting and impactful brands are those that combine a strong vision, an engaged community, and loyal customers. Therefore, my favorite ways of measuring brand equity are around sentiment analysis on social platforms and surveys.”