Brand value vs. brand equity

This is the third blog in the “Debunking brand myths” series from the CMA's Brand Council. The blog series explores the importance and influence of marketing and brand myths in today's business world. Read Part 1 and Part 2.

A cautionary tale of the value of a brand

The distinction between brand value and brand equity often gets blurred—a costly mistake that has become more common following the pandemic. Let's clarify:

• Brand value: Think of it as the financial worth of a brand; it's all about numbers and measurements. Factors like company size, pricing and valuations come into play here.
  
• Brand equity: It reflects the qualitative aspects of a brand's influence and perception among consumers. It's the intangible asset that embodies a brand's reputation and trustworthiness. It’s the perceived value of a brand's worth in the eye of the consumer. As brands work to build meaningful connections with their consumers, they increase loyalty and perceived product quality. This is where the true essence of a brand lies.

When brands focus on price above all else, they risk sacrificing brand equity in favour of temporary sales boosts. Instead of fostering meaningful connections with consumers based on shared values and beliefs, they slash prices, devaluing the brand by eroding loyalty. 

Pandemic panic: A lesson in reaction

As the global economy faltered and uncertainty grew during the pandemic, many brands made this mistake. They panicked and slashed prices to stay afloat. Price reductions became commonplace as brands attempted to entice consumers.

However, this knee-jerk reaction was counterproductive, and led to a dilution of brand equity. By engaging in price wars, brands signaled to consumers that their products and services were interchangeable commodities, devoid of any distinguishing characteristics beyond their affordability. This devalued their brand, undermining years of brand-building efforts aimed at cultivating loyalty and fostering emotional connections with consumers. 

In their haste to preserve short-term profits, brands scaled back on brand-building efforts, further diminishing their presence and relevance in the market. Meanwhile, consumers sought comfort in brands that offered more than just products—they sought connection, empathy, and shared experiences.

Success stories: Brands thriving through equity

In contrast, brands that focused on building brand equity thrived. They launched purpose-driven campaigns, supported communities, and stayed true to their values.

Let's look at some examples:

• Nike: Instead of pushing products, Nike encouraged people to stay active at home with its "Play Inside, Play for the World" campaign. They also pledged millions to support COVID-19 response efforts.
• Starbucks: Despite store closures, Starbucks maintained connections through digital engagement and community support, offering free coffee to frontline workers and assisting affected employees.
• Dove: Dove's "Courage Is Beautiful" campaign honored frontline healthcare workers, aligning with their brand values of promoting self-esteem and empowerment.
• Patagonia: Patagonia stayed true to its environmental values, supporting employees and communities, and advocating for social and environmental causes.

Beyond numbers: Building connection

In essence, brands that focus solely on brand value risk losing what makes them unique. The real value of a brand lies in connecting with consumers on a deeper level, fostering trust, loyalty and shared experiences. By prioritizing brand equity, companies can build lasting relationships that stand the test of time.

While purpose-driven campaigns can generate significant goodwill and brand loyalty when executed effectively, they also carry the risk of appearing insincere or opportunistic, if not handled thoughtfully. Pursuing purpose without clear alignment with brand values or genuine commitment to social or environmental causes can result in backlash and damage to brand reputation. 

Brands must embrace purpose-driven initiatives authentically, ensuring that their actions align with their core values and resonate with their target audience to avoid undermining the very brand equity they seek to build.