How to Build Brand Equity: The Guide for Ecommerce Brands
April 6, 2022
Think of the last time you purchased something from an online retailer.
Chances are, you could have found it cheaper elsewhere. But you bought into the brand as much as the product.
That’s the foundation of brand equity: the premium a business is able to charge for its products by changing the way people perceive it.
As Stephen Light, co-owner and CMO of Nolah Mattress, explains:
“Slap the Disney logo on a product and you are leveraging their brand equity, as there is an existing relationship between that brand and customer perception. That product instantly has higher value, both emotionally and in terms of profit.”
In a world of oversaturation, customers can get comparable products from hundreds of retailers. This is why Danavir Sarria, founder of SupplyDrop Media, argues that “for DTC brands, brand equity is the difference between building a great business or crashing within two years.”
In this guide, we’ll cover:
- What is brand equity, exactly?
- Brand equity vs. reputation
- How to build brand equity in ecommerce
- How to measure brand equity
Brand equity is the perceived value of a company’s brand.
Established brands with positive brand equity means customers have a great perception of the brand, with many paying a premium for the brand’s products, instead of comparable (and often cheaper) options.
As Stephen Light explains:
“Two white t-shirts can be made with the same materials in the same factory, but the one with the Chanel label will sell for more because of brand equity. There is a reputation of luxury, and the branding evokes a luxurious, exclusive lifestyle.”
On the flip side, brands can experience negative brand equity. When customers build a negative association with a brand, they’ll come to expect its products to be sold at a cheaper price.
Brand equity is the premium a business achieves when its products become valuable in the eyes of its consumers. Also referred to as the “level of sway” a brand has over its potential customers, a brand’s perceived quality directly impacts the price and desire of its product.
Brand reputation on the other hand, simply relates to how others perceive the brand. For example, you might know that a DTC business has a good reputation for being socially responsible. But only when your perception of the brand increases—or you personally build a positive brand equity—will you willingly pay a premium for its products.
“In essence, brand equity is in relation to one key group, your customers, while brand reputation is in relation to multiple stakeholders and their perception of your business.” — Farnam Elyasof, CEO and Founder of Flex Suits
The importance of brand equity in DTC
There’s more to a DTC marketing strategy than social media campaigns that push people through the sales funnel. The foundational element of ecommerce success is trust. Without it, you’ll have a hard time convincing potential customers to take the next step.
“When your brand is equitable, you’re known as a trusted authority on your product or service,” — Melanie Bedwell, ecommerce manager at OLIPOP.
“Customers are willing to pay more for your product over a competitor due to the strength of your brand. They then will become loyal customers because they have a trusted relationship with you.”
This foundational trust serves you well in other areas of selling online, including:
- Inflated profit margins. Customers rate brands they trust as more important than brands they love, the convenience of buying it, and the company’s reputation. It’s for this reason that DTC brands with strong brand equity can demand higher prices for their products.
- Increased customer loyalty.Studies suggest that brand equity and trust are the two most important factors in brand loyalty. Repeat purchases form up to 65% of a brand’s total revenue, with loyal customers spending 67% more than a new customer base.
- Higher stock or IPO valuation. Brand equity is a long-term play. Take Jaime Schmidt, founder of Schmidt’s Naturals, who said, “When my company was acquired by Unilever, I learned they’d been closely watching the brand for years. They could’ve spent those years building their own competing product. But brand equity can’t be recreated in a lab.”
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Positive brand equity has clear upsides for a DTC brand. From customer loyalty to pricing at a premium, let’s look at how to build positive brand equity for your ecommerce brand.
1. Have strong core values
Core values are the things you want your brand to be known for.
As Lisa Odenweller, founder and CEO of Kroma Wellness, explains:
“Having brand equity means your customers are invested in the overall brand mission and how the brand carries itself across its product line and how it treats customers.
“That means each product aligns with certain needs and values and doesn’t compromise on quality.”
Determine which core values underpin your business. Daring, for example, is big on sustainability. Its mission to change the way we consume chicken is clear on its website, which builds positive brand equity in customers who share the same values—and therefore, pay a premium for its products.
“Brand equity compels customers to subliminally associate a brand with a particular trait/characteristic, such as “premium,” “top-grade,” and “luxury.” The customer will then use these associations to determine the value they place on a particular brand, and how much they are willing to pay for its products.” — Sam Speller, founder of Kenko Matcha
If you’re unsure on what your brand values should be, get a head start by consulting your existing customers:
- What words or phrases do they use to describe the brand?
- Why do they purchase your products over a competitor’s?
Customers of a coffee brand, for example, might say they’re willing to pay a premium for its products because they know the workers who harvest the coffee beans are being treated and paid fairly.
Play on that messaging wherever possible to plant the seeds of a strong brand identity.
2. Increase brand awareness
Once you’ve identified your core values, work to expand your reach and build brand recognition.
Remember: the goal is to build positive brand associations at scale. Only once people begin to recognize your brand name and image do you benefit from a higher perceived value that impacts retail pricing.
Free ways to build your brand image include:
- Sponsoring events. Whether it’s in your local community or online, sponsoring community events exposes your brand to people who share similar traits, values, or interests.
- Collaborating with influencers. Partner with popular social media influencers that share the same values as your brand. Given the fact that 92% of people trust influencer recommendations, endorsements can go a long way in building positive brand awareness.
- Sharing user-generated content (UGC). The most unbiased source of reviews come from your customers, especially if they’re not incentivized to leave one. A consistent stream of UGC can build trust—and therefore brand equity—over time, like this example from TULA Skincare:
Got some cash to spare? Invest as little as $5 per day into performance marketing campaigns on Facebook or TikTok—the latter of which has been praised for helping DTC brands reach their target audience for a fraction of the cost.
Set the campaign objective as brand awareness and plant the seed in the minds of your potential customers. It’s why DTC operator Nik Sharma advises to “use your working paid media dollars to build brand equity as a bi-product.”
3. Have a truly great product
It’s impossible to build brand equity if customers don’t enjoy the products you’re selling. As Marc Bromhall, founder of Surf Gear Lab says, to build brand equity, “You have to start with your product. Be sure to offer the very best products in the market.”
Differentiation is key in an oversaturated market. Ecommerce allows brands to sell anything to anyone, regardless of where they’re located. Customers get the pick of the bunch.
“If you can’t build a brand that people love organically and they only come to you for the latest promotion, your only competitive advantage is your balance sheet and how much promotion you can give people.” — Steven Salz, CEO of Rivalry
Identify your unique selling points—reasons for customers to choose your product over a comparable alternative. Make sure these points are all over your website, helping you differentiate.
Take the most valuable brand in the US, Apple, as an example. It earned its gigantic market share by being innovative and creative, with iOS products that truly disrupted the technology industry.
Apple built a positive consumer perception. The end result? So-called “Apple tax” in which consumers consistently pay over the odds for iPhones, iPads, and Macs—a clear sign of its immense brand equity.
4. Deliver excellent customer experiences
When building a positive brand equity, customer experience is everything.
You can have the best designed products in the world and set of core values you share with your target audience. But if you’re not making it easy for them to engage or purchase, brand equity is almost impossible to build.
Consumers no longer have linear purchasing paths. Studies have shown that shoppers who engage across several channels and platforms purchase more often.
“The cross-channel experience that my brand delivers is also optimized, allowing them to effortlessly move from one channel to the next, without having to repeat any steps in their customer journey.” — Farnam Elyasof, CEO and Founder of Flex Suits
An omnichannel strategy gives customers the means to purchase products wherever they are—from social media, in-store, to your website.
5. Master customer retention
Many DTC brands fall into the trap of only focusing on prospective customers. They’re the people who will drive revenue for your business, right?
Yet a key component of building brand equity is having a community of people who support your brand to the point they’d pay a premium to buy your products. Focus on delighting them to the point they buy into your brand vision.
“Your customers should come first no matter what if you want your business to truly succeed. Build relationships with them both in-person and online,” says Melanie Bedwell, ecommerce manager at OLIPOP.
“Engage with them on social media, have an interactive newsletter, and ask for their feedback. Companies who engage with their customers one-on-one are able to build brand equity easily.”
6. Expand into marketplace selling
An ecommerce marketplace is a platform where shoppers can buy products from a selection of brands.
Despite the fact that platforms like Amazon and Facebook Marketplace account for 63% of all online transactions, the traditional DTC business model excludes marketplace selling.
Sometimes, that’s for good reason: Marketplaces claim a cut of all product sales you make through their platform; customer data collection is limited; and you’re in little control over the experience you give to shoppers purchasing through one.
That’s not to say marketplaces don’t assist with building brand equity. You need to meet customers where they are. For half of all online shoppers, that’s a marketplace.
“For the longest time, traditional brand marketers were scared of Amazon, thinking it would harm brand equity for a D2C business. Now that perception has started to shift as D2C owners and operators are starting to acknowledge real life customer behavior.” — Tim Masek, founder of 1-800-D2C
Before expanding into marketplace selling, get a thorough understanding of the platforms your target customers use. Amazon is the most popular of all, but if you’re selling handmade goods, Etsy is likely the better option.
Next, showcase your brand values front and center of your marketplace profile. That includes product titles, descriptions, and reviews. The more you can associate your brand with those values, the easier it will be to build brand equity.
A brand strategy is notoriously hard to measure since brand building can take years to pay off.
Think about the sheer volume of Coca-Cola campaigns you’ve seen over your lifetime. Could you determine the single positive experience in which you decided to favor Coke over Pepsi? Probably not—its brand marketing strategy was a long-term play.
While brand awareness is hard to measure, you can understand whether you’re building positive brand equity by tracking metrics like:
- Direct traffic. Benchmark this against conversion rates from other traffic sources. Brand equity is likely increasing if people who visit your site not only visit direct thanks to word of mouth, but also have a higher conversion rate. Chances are, these visits came off the back of your brand reputation.
- Sentiment analysis. Use social listening tools like Mention and Talkwalker to create word clouds containing the most common words people use when talking about your brand. If you see positive phrases like “luxury” or “high-quality,” it’s a positive sign you’re building brand equity.
- Branded search volume. An estimated 140 people search for the term “how to apply a Band-Aid” each month, instead of the generic version, “how to apply a bandage.” That branded search volume indicates Band-Aid has a positive brand equity. There’s such a close link between the product and brand name.
With brand equity, consistency is key
Brand equity should be high on your business’ priority list if generating more revenue is the end goal. With positive brand equity, you’ll be able to charge a premium for your products and build brand awareness simultaneously.
There’s one important thing to remember: Consistency is key. You’ll lose brand trust and recognition if people are confused about your brand.
From creating a great product to expanding into other sales channels, make sure the experience someone has with your brand is top notch across every touch point. Only then will you build brand equity that pays dividends in the long run.
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Elise Dopson is a freelance writer for B2B commerce and martech companies. When she's not writing, you'll find her in the Peak Freelance community or on Twitter.