Brand Equity
The commercial value derived from consumer perception of a brand name rather than the product itself.
Definition
Brand equity is the premium value a brand commands based on its reputation, recognition, and customer loyalty. It's why consumers pay more for Nike shoes than identical unbranded alternatives.
This intangible asset comprises brand awareness, perceived quality, brand associations, and customer loyalty—all building a competitive moat that's difficult for rivals to replicate.
Why It Matters
Strong brand equity enables premium pricing, reduces customer acquisition costs, and provides resilience during market downturns. Customers choose trusted brands even when cheaper alternatives exist.
Companies with high brand equity also attract better talent, command better retail placement, and have more negotiating leverage with partners.
Examples in Practice
Apple commands a 20-40% price premium over comparable Android devices purely through brand equity. Customers pay for the Apple experience and status, not superior specs.
When Coca-Cola briefly changed its formula in 1985, brand equity drove massive backlash—proving customers valued the brand's heritage more than taste optimization.