By: Jenny Shi

Having a high brand equity is like having a good reputation: people tend to like you, have positive attitudes towards you, or even want to be associated with you. With that being said, brands with higher equity are usually associated with luxury, quality, or class. Brands such as Rolex, Mercedes-Benz, and Chanel (among some of the highest brand equities) are pretty much the A-list celebrities of the business realm.

You’d think market researchers would have brand equity all figured out since it’s such a critical component to making a brand or product flourish. On the contrary, brand equity is rather immeasurable, despite the many efforts to quantify and analyze it. The general definition is simply that it is the value of the brand, which might encompass consumers’ awareness and attitudes of the brand, or even its stock value.

For some companies, brand equity is what brings on the sales. We see this occur especially in high fashion and luxury brands. People buy Louis Vuitton purses because they want to feel wealthy and chic and look their best.  People also buy these products to fulfill a deeper need – perhaps they want to feel successful and superior, or they might anticipate wearing these products might get them noticed by others. Brand equity can also be an influence in decision-making of brand product purchases. For instance, you might find yourself in a supermarket trying to purchase chocolate. The selection provides Hershey, Russell Stover, and Lindt. Unless if you’re a masochist, you’ll probably go for Lindt, the most premium choice out of the three, presumably because of the name and the high quality of chocolate that it ensures.

On the other hand, brand equity might be a bit of a double-edged sword. Brands with the highest equity associated with their name often cater to wealthier segments because their prices are often much higher than brands with lower equity. This critically limits their consumer base, especially during our low economy. Consequently, it’s become more and more common for brands with high equity to stoop down a few steps from the A-list and make their services affordable for all.

The easiest example to think of is when BMW launched its much more affordable mini series in attempts to increase revenues. The German car company was experiencing lower sales and resorted to making a line of cars that were smaller and less capable of functions compared to their other cars. The result was not positive, as people complained that the coupes didn’t live up to their expectations for a BMW (Reiter, 2011). Veteran fashion house, Missoni, has a bit of a different story. The Italian company recently launched a line of their products exclusively for Target. Unlike the BMW coupes, the consumer reaction was overwhelming positive. Missoni for Target merchandise were sold out both in store and online 24 hours after the launch date (Dishman, 2011). Some of the products were even posted on eBay 3-4 times higher than retail price.

Sources:
- Dishman, L. (2011). “Target’s Missoni madness part II: Why grumpy customers won’t shred brand equity”. (Source)
- Reiter, C. (2011). “BMW struggling to enlarge mini market with smallest coupe: cars.” (Source)