Brand equity refers to the 

intangible value that accrues to a company as a result of its successful

efforts to establish a strong brand. A brand is a name, symbol, or other feature that distinguishes the
company's goods or services in the marketplace. Consumers often rely upon brands to guide their
purchase decisions. The positive feelings consumers accumulate about a particular brand are what
makes the brand a valuable asset for the company that owns it. Alan Mitchell of Marketing
Week described brand equity as "the storehouse of future profits which result from past marketing
activities."

Many companies structure their marketing programs around building and preserving their brand
equity. "To be a strong brand, a company must instill a clear, unwavering consumer perception of the
distinctive emotional or functional benefits of its products and services," Duane E. Knapp explained in
an article for Risk Management. "At the end of the day, the brand is the sum total of the consumer's
impressions about the product and service. The less distinctive these impressions, the greater the risk
that a competitor's products or services may gain a stronger perception—and competitive advantage."

Building Brand Equity

The basis of brand equity lies in the relationship that develops between a consumer and the company
selling the products or services under the brand name. A consumer who prefers a particular brand
basically agrees to select that brand over others based primarily on his or her perception of the brand
and its value. The consumer will reward the brand owner with dollars, almost assuring future cash
flows to the company, as long as his or her brand preference remains intact. The buyer may even pay
a higher price for the company's goods or services because of his commitment, or passive agreement,
to buy the brand. In return for the buyer's brand loyalty, the company essentially assures the buyer
that the product will confer the benefits associated with, and expected from, the brand.

In order to benefit from the consumer relationship allowed by branding, a company must
painstakingly strive to earn and maintain brand loyalty. Building a brand requires the company to gain
name recognition for its product, get the consumer to actually try its brand, and then convince the
buyer that the brand is acceptable. Only after those triumphs can the company hope to secure some
degree of preference for its brand.

Name awareness is a critical factor in achieving brand success. Companies may spend vast sums of
money and effort just to attain recognition of a new brand. But getting consumers to recognize a
brand name is only half the battle in building brand equity. It is also important for the company to
establish strong, positive associations with the brand and its use in the minds of consumers. The first
step in building brand equity is for the company to define itself and what it hopes to represent for
consumers. The next step is to make sure that all aspects of the company's operations support this
image, from its product and service offerings to its marketing programs to its customer service
policies. When all of these elements support a distinctive image of the company and its products in the
minds of consumers, the company has established brand equity.