Brand equity is a marketing term that describes a brand’s value. That value is determined by consumer perception of and experiences with the brand. If people think highly of a brand, it has positive brand equity. When a brand consistently under-delivers and disappoints to the point where people recommend that others avoid it, it has negative brand equity.
Positive brand equity has value:
Brand equity develops and grows as a result of a customer’s experiences with the brand. The process typically involves that customer or consumer’s natural relationship with the brand that unfolds following a predictable model:
Apple, ranked by one organization as “the world’s most popular brand” in 2015, is a classic example of a brand with positive equity. The company built its positive reputation with Mac computers before extending the brand to iPhones, which deliver on the brand promise expected by Apple’s computer customers.
On a smaller scale, regional supermarket chain Wegmans has so much brand equity that when stores open in new territories, the brand reputation generates crowds so large that police have to direct traffic in and out of store parking lots.
Financial brand Goldman Sachs lost brand value when the public learned of its role in the 2008 financial crisis, automaker Toyota suffered in 2009 when it had to recall more than 8 million vehicles because of unintended acceleration, and oil and gas company BP lost significant brand equity after the U.S. Gulf of Mexico oil spill in 2010.
Achieving positive brand equity is half the job; maintaining it consistently is the other half. As Chipotle’s 2015 food poisoning crisis indicates, one negative incident can nearly eliminate years of favorable brand equity.