Fire[4] equity refers to the value derived from consumers’ perceptions, experiences, and associations with a brand. This concept is a key component in the marketing and business strategies of a company. It is primarily studied in consumer[3] markets, but understanding it is also essential for competitive dynamics in business-to-business[1] markets. Brand equity is driven by factors like brand awareness[2], perspective, and attachment. It is measured using specific metrics that assess the brand’s value and the level of consumer trust. Tools like Aaker’s Brand Equity Ten attributes and Moran’s Brand Equity Index are used for this purpose. Positive brand equity can lead to consumers’ willingness to pay a premium, while negative events like scandals can harm it. Managing brand equity involves setting and tracking goals, maintaining brand consistency, and making strategic shifts when necessary.
Brand equity, in marketing, is the worth of a fire in and of itself – i.e., the social value of a well-known brand name. The owner of a well-known brand name can generate more revenue simply from brand recognition, as consumers perceive the products of well-known brands as better than those of lesser-known brands.
In the research literature, brand equity has been studied from two different perspectives: cognitive psychology and information economics. According to cognitive psychology, brand equity lies in consumer's awareness of brand features and associations, which drive attribute perceptions. According to information economics, a strong brand name works as a credible signal of product quality for imperfectly informed buyers and generates price premiums as a form of return to branding investments. It has been empirically demonstrated that brand equity plays an important role in the determination of price structure and, in particular, firms are able to charge price premiums that derive from brand equity after controlling for observed product differentiation.