Brand equity: how to measure brand value and connect it to business results

Brand equity is the value a brand adds to a product, service or company because of what people know, think and feel about it. In practice, it shows up in behavior: the brand is remembered at the moment of purchase, chosen among similar alternatives, bought again and accepted at a higher price. The term is often used interchangeably with brand value, which creates a confusion worth clearing up right at the start.

In large companies, the brand equity discussion happens at the budget table. The CMO has to justify investments whose effect appears over years, in front of a CFO who compares every R$ spent with alternatives that offer a more visible return. Without a consistent way to measure the brand and link it to revenue, margin and acquisition cost, brand investment becomes the first cut in a difficult quarter.

Brand equity and brand valuation: perception, behavior and financial value

There are two different questions under the same name. Brand equity, in the marketing sense, is the strength of the brand in the memory and behavior of its audiences. Brand valuation is the estimate of the brand's monetary value as an asset, used in acquisitions, licensing and corporate decisions. The first guides brand management. The second answers how much the brand would be worth in a transaction.

There is an international standard for monetary valuation. ISO 10668 specifies requirements for the procedures and methods used to measure the monetary value of a brand, including valuation objectives, bases and approaches, data quality and assumptions, and how to report the result. ISO 20671-1, published in 2021, addresses brand evaluation more broadly, with principles and a framework of input elements, output dimensions and example indicators.

For the CFO, there is a relevant accounting detail. Under CPC 04 (R1), the pronouncement on intangible assets issued by Brazil's Comitê de Pronunciamentos Contábeis (Accounting Pronouncements Committee) and made mandatory for publicly held companies by the CVM (Brazil's securities regulator) through CVM Resolution No. 93/2022, internally generated brands are not recognized as intangible assets, and subsequent expenditure on brands is expensed as incurred. A brand built by the company itself does not appear on the balance sheet. A brand bought in a business combination is recorded at fair value on the acquisition date. That is why the brand needs its own management metrics: the accounting will not show what has been built.

The dimensions of brand equity

Academic and industry models organize brand equity in different ways, but they converge on dimensions that run from memory to behavior. For management purposes, six of them cover the essentials.

• Awareness: whether the brand is recalled unprompted in the category and recognized when shown. Unprompted recall matters more in decisions made from memory. Recognition matters more in decisions made in front of the shelf or the screen.
• Associations: what comes to mind when people think of the brand. What matters are the associations that are distinctive and relevant to the purchase, not just any positive attribute.
• Perceived quality: the audience's judgment of the quality of the offer relative to the alternatives, which may differ from technical quality.
• Consideration and preference: whether the brand enters the set the person evaluates and whether it is the one chosen when conditions are similar.
• Loyalty: repurchase, continued use and recommendation, kept separate from retention caused by contracts or switching costs.
• Pricing power: the ability to sell above comparable alternatives, or to reduce discounts without losing volume.

The first dimensions are measured through research. The last ones show up in behavioral and sales data. A useful measurement program connects both ends.

How to measure brand equity with brand tracking

Brand tracking is brand research carried out in periodic waves, with the same design, to follow how the brand's dimensions evolve over time and against competitors. The value lies in the time series, and the series only exists if the design stays the same.

• Audience and sample: define who matters to the business, such as category buyers in the last 12 months, and keep recruitment criteria and quotas stable. The sample should allow reading the cuts used in decisions, such as region or segment.
• Frequency: it follows the speed of the category and of the investment. Continuous fieldwork, read as moving averages, reduces noise and shows the trend without depending on a single reading.
• Competitive set: include the brands the customer considers, not the ones the company would choose as rivals.
• Consistent questionnaire: the same questions, order and scales in every wave. Changing the wording of a question breaks the comparison with the past.
• Associations tied to strategy: measure the attributes the positioning aims to build and the ones the category uses to decide.
• Reading with the margin of error: small differences between waves may be sampling noise. Report intervals alongside the point estimate.

In groups with several brands, tracking follows the architecture. The corporate brand and the business brands can be measured in the same study, with different audiences, to understand whether the group's endorsement helps each brand.

Behavioral signals: branded search, direct traffic and share of search

Research measures what people say. Behavioral data shows what they do, more frequently and at a lower cost. Three signals tend to track brand strength.

• Branded search: the volume of searches that contain the brand name, read for trend and seasonality. Active media inflates search in the short term, so the reading should separate campaign periods.
• Direct and organic branded traffic: visits that reach the website through the brand name or by typing the address. Changes in tracking and consent alter this number, so the series needs methodological notes.
• Share of search: the brand's share of searches out of the total searches for brands in the category. Because it is relative, it corrects part of the category's seasonality.

An accessible source for share of search is Google Trends. According to Google's documentation, the data comes from a sample of searches, is normalized by the total searches in the region and period, and is presented on a scale from 0 to 100. These are comparative values, not absolute volumes, and the safest reading compares brands queried together, with the same filters.

Price premium: the signal closest to the financial result

Pricing power is where brand equity comes closest to the CFO's language. The question is how much the brand can charge above comparable alternatives without losing volume, or how much discounting it no longer needs to maintain share.

• Compared realized price: the average price actually charged against equivalent competitors, by channel and region, net of promotions.
• Promotion dependence: the share of sales made at a discount over time.
• Choice research: exercises in which brand and price vary across alternatives, such as conjoint analysis, to estimate how much of the perceived value is due to the brand.
• Elasticity in models: how much volume reacts to price changes, comparing periods or markets.

How to connect brand to results: MMM and long-term effects

Showing that the brand is stronger is not enough. The CFO wants to know what it produced. The most widely used bridge is marketing mix modeling, which estimates the contribution of media, price, distribution and other factors to sales over time. When well specified, the model separates the short-term effect of campaigns from the cumulative effect that persists after the media goes off the air.

There are two common ways to include the brand. The first uses tracking or share of search indicators as model variables, to estimate how much baseline sales respond to brand strength. The second models in two stages: communication explains how brand metrics evolve, and brand metrics help explain sales. Both require long, consistent series with enough variation.

Experiments complete the picture. Incrementality tests, described in the article on incremental media measurement, measure the causal effect of an action over a defined period and serve to calibrate the model. They capture the short term better. The long term calls for combining the model, tracking and price series.

In a hypothetical, illustrative example, a brand sells 1 million units a year at R$ 50, while the comparable alternative costs R$ 45. The R$ 5 premium per unit represents R$ 5 million in annual revenue. If the model indicates that, without the brand investment, the premium would fall to R$ 3 within two years at the same volume, the brand protects R$ 2 million in revenue per year compared with that scenario. That number, together with the assumptions and the uncertainty interval, is what goes into the conversation with the CFO.

How to present brand equity to the board

• Start with the business question: growth, margin, acquisition cost or price protection.
• Show a few brand metrics, always with the time series and competitors, and explain how each one relates to the result.
• Separate what is measured from what is estimated. Research and sales are measured. The brand's contribution in a model is an estimate with an interval.
• Use the same dashboard at every meeting, so the conversation is about the trend, not about methodology.
• Present investment scenarios with explicit assumptions: what you expect to see in research, behavior and sales, and over what time frame.
• State the reading risks: deep changes, such as a corporate rebranding, alter the series and require careful interpretation.

Brand consistency is also an input to measurement. Associations accumulate when the brand appears in a recognizable way at every touchpoint, which depends on brand governance at scale.

Common mistakes in measuring brand equity

• Confusing brand equity with brand valuation and taking a monetary value to the board without a stated method.
• Changing the tracking questionnaire every year and losing the series.
• Reading variations within the margin of error as a gain or a loss.
• Measuring recall without measuring associations and preference.
• Attributing any change in sales to the brand, without controlling for price, distribution and media.
• Evaluating brand investment over windows of weeks, when the effect accumulates over years.
• Comparing the brand with competitors chosen by the company rather than by the customer.

Frequently asked questions about brand equity

What is brand equity?

Brand equity is the value a brand adds to a product or company through what people know, think and feel about it. It shows up in recall, preference, loyalty and the ability to charge more than comparable alternatives. It is measured with brand research and with behavioral and sales data.

What is the difference between brand equity and brand value?

Brand value is often used for both things. Brand equity describes the strength of the brand in the perception and behavior of its audiences. Brand valuation estimates the brand's monetary value as an asset, with methods such as those described in ISO 10668. The first guides management; the second serves transactions and corporate decisions.

How do you conduct brand research?

Define the relevant audience, the set of competitors the customer considers and the dimensions to measure, such as recall, associations, consideration and preference. Use a stable questionnaire and a sample that allows reading the decision cuts. Repeat the research in waves with the same design to build a time series.

What is brand tracking and how often should you do it?

Brand tracking is brand research repeated in waves to follow how the brand and its competitors evolve. The frequency depends on the speed of the category and the level of investment. Continuous fieldwork, read as moving averages, helps separate trend from noise.

How do you prove the return on brand investment?

Combine three types of evidence: the evolution of brand metrics in tracking, behavioral signals such as share of search and price premium, and the estimated contribution in marketing mix modeling, calibrated by incrementality tests. Present scenarios with explicit assumptions and uncertainty intervals, not a single number.

To bring brand measurement into planning, learn about the Brand practice and read about marketing mix modeling.