The equity of brand.
“In my view, there exist numerous companies, but only a handful of true brands. A brand is not something that can simply be bought; it is a distinction that must be earned.”
But what defines the distinction, the equity of a brand? Or the equity of “brand” itself? How is it measured? How can you measure the most important metric, KPI, or OKR in your business? Is it a combination of conversion rate, repeat purchase rate, Net Promoter Score, customer satisfaction ratings, name recognition, cohort analysis, email open rates, brand awareness, LTV, sales, profit?
WHAT?
A couple of iconic founders I was fortunate to work for had similar takes on at least how they valued brand. One was Jake Burton, founder of Burton Snowboards. His comment on brand was: “If we grow the sport, we’ll grow the business.” And, just to be clear, this was a statement about brand and the equity therein. Burton’s equity was in the sport, being dedicated to the sport, to the riders. It’s why the brand was beloved. The second was Yvon Chouinard, founder of Patagonia. He famously said, “Every time I've done the right thing for the environment, I've made a profit.” This statement is particularly noteworthy because it is the principle upon which the business and the brand was built. Everything has always been about one thing.
Those are two of my personal experiences of remarkable founders that created iconic brands. But, it begs the question, how does one measure the equity of brand?
Careful. It’s not value creation alone, it’s not awareness, LTV, customer satisfaction, etc. It’s not an amalgam of all of those points of interest enumerated above. Nor is it “the perceived value of a company based on its reputation,” as some argue. It’s also not what is often taught in MBA programs, which is that “brand equity represents the sum of a brand's market shares in all segments in which it competes, weighted by each segment's proportion of that brand's total sales,” which doesn’t even make sense really. And, one more, it’s also not “the value a company gains from a product with a recognizable and admired name when compared to a generic equivalent.” That one’s from Investopedia. Ugh.
With all of that subjectivity cataloged, ‘Brand Equity’ is not subjective either. Everyone makes it complicated because they don’t have a simple understanding of how loyalty happens. It’s not complicated. The net value generation by migration of new customers holds the secret. It’s a measurement of efficiency. Whether it’s Apple or Patagonia or Burton or Angela Scott, gigantic or little, iconic, known, or not, equity, i.e. value creation, is literally maximized by the efficiency in which an individual comes to know and to love a brand and consummates the relationship with a regular buying habit. If you’re using an iPhone, the likelihood you have a MacBook, IMac, Apple Watch, iPad, AirTag, AirPods is through the roof. You (we, this was written on an iMac) don’t even think about it. We are fully faithful. This is how it’s measured. Because this is what creates value.