Two Words: Brand Equity
January 3, 2021
Let’s connect Brand to the M.O.N.E.Y.
The term is ‘Brand Equity’.
In the simplest of terms, it is the commercial value assigned to the brand, derived from consumer perception of the brand, rather than from the product or service itself.
But what does it mean in the real world?
You have 2 identical phones, with one small difference. Phone A that has no visual identity relating to a brand. Phone B, bears a small logo – that of Apple Inc. Even when it is the exact identical product, there is a perceived value difference that consumers would associate between the two phones.
In the case of Apple Inc., the brand equity accounts for 1/3rd of the total market cap of the business. Meaning a company would pay approximately a 30% premium to acquire the business.
Young startups often spend a significant amount of time & energy creating a high-quality product/service, as they should, because there is no compromise on quality. But at the same time, they need to be aware that building a strong brand is equally important. The book value of the business directly corelates to the brand equity.
Bottom line: Invest time & effort in developing a strong brand right in the beginning of the business. And you will see the incredible returns on this investment.