October 14th, 2015

“[Brand equity is] the value of a brand. From a consumer perspective, brand equity is based on consumer attitudes about positive brand attributes and favorable consequences of brand use.” — defined by the American Marketing Association

Brand equity is more than the look and feel that a brand presents – it’s the tangible and intangible value perceived by its consumers. When consumers become loyal to a brand, marketing costs are reduced, consumer loyalty increases, and sales thrive, based on consumer visibility, commitment, and familiarity. Once established, the customer will perceive quality, reasons to buy, and a positive attitude toward the company as a whole.

The importance of strong brand equity goes beyond positive sales; it can protect a brand from mistakes made by its employees, or even the company itself. For example, Jared Fogle, Subway’s famed spokesman, brought a lot of negative attention to the brand when a personal scandal was uncovered earlier this year. A situation like this could severely cripple a brand, if not taint it forever. Even though Fogle has established himself as the public face of the company, Subway was able to leverage its trusted market position and turn the negative press into positive support. The brand equity that Subway had built up since 1965 assisted in the immediate clean up, and incidentally, the rapid separation of Fogle and Subway. The company acted quickly, addressing the issue hours after news broke, severing all ties with the embattled spokesman and publicly rebuffing his actions. Now, months after the news story hit, Subway has worked hard to curb the sales slump, and have announced that they do see a full recovery in sight.

As you’ve probably heard by now, Volkswagen was recently caught cheating emissions tests on their cars. In terms of immediate recovery, this crisis is proving worse than Subway’s, because VW must fire C-level leaders, investigate employees, and take action against those who conspired to do wrong by their customers. On top of that, they must recall up to 11 million faulty vehicles to fix their mistake. While the potential financial loss is hard to fathom, the loss of brand equity and trust that the company may experience in the coming years can be far more damaging. The results could mean an existential threat for VW, or if handled well, they may very well bounce back. Knowing that VW has historically had a favorable and vocal fan base, their brand equity may be the element that saves them in the end. The situation goes deeper than what Volkswagen is currently experiencing, as the scandal has been felt dramatically by many German companies; said to have undone ‘decades of accumulated goodwill’ to Germany’s brand.

Whether dealing with organic business growth or handling a crisis, it’s important to remember that your brand can help you combat unforeseen challenges along the way. So, where does your brand stand? If you aren’t certain, talking with a marketing or PR firm is a great first step in helping you gain an honest appraisal of your brand equity. Of course, when it comes to a brand as large as Subway’s, there is a large group of marketing executives and PR specialists working behind the scenes to make sure their reputation remains fully intact. However, no matter how large or small your company is, managing the character of your brand matters to the ones you serve. By building trust over time and acting with urgency and authenticity when the situation demands it, you will be better positioned to leverage your strength and come out on top.