The Power of Brand Equity
Leveraging brand power can create competitive advantages by: empowering your company to command premium pricing; engendering loyalty, building a perennial class of allegiant customers who buy product staples faithfully and actively promote your brand; facilitating expansion into uncharted categories and geographic markets where reputation and recognition earn your novel product an introduction; and conferring negotiating power in your distribution channel, driving down costs of goods sold and securing preferential product placement for improved marketability.
one Increased Margins
Positive brand equity signifies a level of quality or prestige attached to your product by a customer, followed by their perception that your products are worth more to them than your competitors’. If your customers are willing to pay a premium for the intangible value of your brand promise, you will no longer have to rely on promotions or find yourself in a race to the bottom of a price war in order to generate higher margins on goods and services.
The cost of manufacturing a golf shirt is not significantly higher for Lacoste than it is for a less reputable brand. Positive brand equity increases profit margin per customer by allowing a company to command premium pricing without increasing the cost of production.
two Customer Loyalty
Customers are not only willing to pay a premium for a product with strong brand equity; they’re also willing to stay loyal to the company producing it. In a highly saturated market, inundated with choice, consumers will generally opt for the brand with which they are most familiar.
Companies with positive brand equity can weather a storm much more adeptly than those without brand loyalists; customers will give them the benefit of the doubt to overcome defective products or a poor (but presumably isolated) customer experience.
three Market Expansion
Positive brand equity facilitates long-term growth. Extending a brand into new product offerings is less speculative under a familiar marquee. By leveraging the value of your brand, you can expand seamlessly into new markets and geographies where customers are significantly more likely to try a new product from a familiar source.
Consumers in emerging markets are earning an increasing volume of disposable income. When buying out of necessity for survival is no longer the singular motivating factor for purchasing, these consumers will often spend their extra cash on branded products for their perceived quality, symbolic of new wealth.
four Negotiating Power
Companies with positive brand equity can leverage their distribution channel to negotiate favorable contracts with vendors, manufacturers and distributers. Brand strength serves your entire supply chain, as they recognize the upside of market resilience, minimized risk and a contract guaranteed in perpetuity by customer demand. Since the forces generating your brand power are self-sustaining, suppliers will work to minimize cost of goods sold as well as to award you with preferential product placement to boost sales.