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How Brand Equity can Influence Purchase Decisions

Understanding Brand Equity

Brand equity represents a brand’s value measured by its visibility, associations and the loyalty that customers feel for it. Simply, brand equity is measured by how much the customer values the brand. Brands with higher equity perform better than others as they have a loyal customer base.

The significance of brand equity lies in the fact that it can influence the customer’s purchase behaviour. By understanding the reasons that a customer chooses one brand over another, even when the other brand offers additional features, marketers can finetune brand strategy to make it more effective.  

4 Main Elements of Brand Equity

In general, brand equity comprises of four main elements, each of which plays a role in influencing a customer’s purchase decision. Marketers can gain better insights into consumer behaviour by understanding how each element affects decision-making process.

  1. Brand Awareness

When a customer is looking to buy a generic product, awareness of the brand will ensure that it is considered among the mix of choices. Brand awareness represents the ease with which the brand is remembered or identified by the consumer. Brand awareness has two components – brand recall and brand recognition.

The difference between the two components lies in the process used by the customer to identify the brand. Brand recall refers to the consumer’s ability to remember the brand in its product category even when he is not at the point of purchase.

An example of brand recall is when a consumer is shopping online for an Android phone and enters Samsung in the search box, indicating that the brand has a high degree of recall in his mind.

Brand recognition refers to the consumer’s ability to identify a brand based on visual cues such as its logo and colour, to which he has been exposed earlier. For instance, a consumer who wants to buy a soft drink at a store might be drawn to the red and white Coca Cola logo, which he has seen many times before in advertisements.

In general, the higher the brand’s ability to gain recall and recognition in the mind of the consumer, the more likely it will be purchased. Awareness earns the brand a place among the alternatives that the customer will consider before he buys a product. It’s the first step toward building brand equity.

2. Brand Association

The attributes or features that a customer associates with a brand influences the way he perceives it and goes towards creating brand association. The consumer forms an image of the brand in his mind through associations related to its functional features as well as emotional factors such as the brand’s personality. A brand with strong, positive or unique associations in the customer’s memory will have a more powerful brand image.

Apple is the ideal example of a brand that holds a strong image among customers for its unique attributes such as being innovative, user friendly with a minimalist approach to designs.

3. Brand Quality

This refers to the customer’s perception about the ability of a brand to deliver consistently in terms of quality, price, availability, differentiation factors from competing brands, and several brand or line extensions.

Brands that are perceived to be reliable in terms of quality have a higher chance of being purchased compared to the competition. Brand quality is also linked to the brand image as bad experiences regarding quality can create negative associations in the consumer’s mind, thereby decreasing brand equity.

4. Brand Loyalty

The customer shows his loyalty to a brand by committing to purchase it over the competitors’ brands, besides making repeat purchases. Usually, brand loyalty results from the positive impression or brand image that the consumer forms in his memory based on his experience with the brand.

The benefits of brand loyalty are aplenty. A company with a loyal customer base will have lower marketing costs as it needs to spend less on retaining existing customers than on acquiring new ones. Additionally, it becomes easier to attract new customers as well as to gain better leverage with its channel partners, since a loyal customer base represents a steady flow of revenue.

Study: The Impact of Brands on a Consumer's Smartphone Purchase Decision in Singapore

The objective of this study is to examine how smartphone brands can impact consumers’ purchase decisions in Singapore. Companies develop various strategies to attract new customers, retain existing customers and differentiate their products from their competitors. An effective strategy to influence consumer behavior in the product selection could be to highlight the brand name of the smartphone.

In this study, brand equity positioning of market leaders are identified, along with how these brand equity positioning have developed. 4 key factors influencing smartphone brands and purchase decisions are selected:

  1. Perception of hardware quality such as safety and solid build of the smartphone.
  2. Perception of unique functions essentially refer to the new features and specifications during new releases.
  3. Perceived positioning of the smartphone brand and each model itself.
  4. Perceived usability ranging from the smoothness and stability of using the smartphone to quality of the customer service during purchase or repair.  

Singaporean consumers value hardware quality most, followed by unique functions that come along with each new release. Positioning of the smartphone brands whether the models are premium, mid-tier or budget, and usability are of less important factors affecting their smartphone purchase decisions.

In Singapore, Apple is the most mentioned brand with 39% of conversations online regarding its newer models, the latest innovations and the design. For Apple, Samsung and Huawei, their flagship models are more frequently discussed compared to mid-tier and budget models. To Singaporean consumers, premium branding is defined by the price point, supported by powerful, innovative specifications.

When consumers are attached and loyal towards a brand, they are likely to do repeat purchases. For this reason, it has become very crucial for marketers to not only highlight the features and functional capabilities of the mobile, but also define what the brands stand for and how it affects the relationship with the consumers.

Conclusion

In today’s digital era, where customers prefer to do their shopping online, companies can rely on digital ethnography and sentiment analysis to evaluate the customer’s relationship with a brand. Based on business intelligence gathered through these techniques, marketers can tweak their strategies to improve brand image, attract new customers and solve issues based on negative sentiments that the customer displays towards the brand.

From tracking product feedback after the launch to evaluating brand loyalty resulting from repeat purchases, sentiment analysis presents an easier way for marketers to understand consumer behaviour to help them devise effective strategies that help to build brand equity.