What is meant by 'brand equity'?

Brand equity refers to the value that a brand adds to a product as perceived by consumers. This value is primarily influenced by factors such as consumer perception, recognition, and loyalty. When consumers associate positive attributes with a brand—such as quality, reliability, or trustworthiness—they often develop a preference for that brand over competitors. This can lead to repeat purchases and can allow the brand to command higher prices compared to similar, less-known products.

The concept of brand equity is crucial in marketing because it directly affects consumer behavior and can significantly impact a company's profitability. Brands that have strong equity enjoy a loyal customer base, which can create a competitive advantage in the marketplace. Consumers are often willing to pay a premium for brands they trust, thus enhancing the brand’s overall financial performance.

Understanding brand equity also helps businesses strategize on branding and marketing efforts, as enhancing brand perception can lead to greater customer engagement and improved sales performance.