Valuation in Context

Brand Equity

1

Brand equity refers to the power of a company’s brand. It is an important aspect of business as brand associations and customer or investor loyalty add or subtract from the value of a firm.

2

When a company has positive brand equity, customers are willing to pay high prices for their products, even though they may be able to get a similar product from another company (Apple is a good example).

3

Customers are willing to pay a premium to do business with a brand that they value and respect, which allows the company to make a larger profit – which is a positive thing for shareholders.

4

It’s important for companies to be able to maintain positive brand equity, as any reduction in the value of the brand can have an impact on future sales. For instance, companies should avoid product recalls.

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