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How to Build Consumer Loyalty - The Four Stages of Brand Equity

Updated on July 6, 2012

One of the primary goals of any marketing campaign is to create equity for your brand. Brand equity can be defined as:

The total marketing and financial value of a brand over time.

Essentially, it is how much your brand is worth in the mind of the consumer, and building it consists of four distinct steps:

1. Brand Awareness – The first step simply describes the level of consciousness a consumer has for your brand. This makes sense because before your brand develops any equity with a consumer, the consumer must know that it exists. Therefore, your brand must be known to your consumer before it can progress to a valuable position in their mind. While this step is easy to accomplish with a large marketing budget (think of new companies that inundate consumers with repetitive television commercials), it can also be the first opportunity for your consumer to reject your brand, which leads us to the second step.

2. Brand Associations – In this step, the consumer has elevated your brand from simple awareness by assigning various associations to it. The brand is still fragile here, so these associations can be both positive and negative. Go back to the company from step one that inundated their customers with television commercials. Because the commercials were so pervasive, the customers are likely to attach negative associations to their brand. This is why it is important to have a strong brand strategy and knowledge of your consumers so that you can take advantage of these first two critical steps.

3. Perceived Quality – Once a consumer becomes aware of your brand and (if your strategy is successful) assigns positive associations to it based on your marketing campaign, they will begin to perceive your brand as one of quality. This stage is where your brand starts to really differentiate itself from competitors in the mind of the consumer because the consumer will be testing its performance by weighing the various attributes and benefits of your brand against competing brands based on their personal needs.

4. Brand Loyalty – The final stage is the most difficult to achieve but represents the highest and most valuable form of brand equity: loyalty. Brand loyalty occurs when your customer places so much value on your brand that you are effectively immune from competition in their minds and they actually seek out your brand in spite of all obstacles that might exist. It is at this stage where consumers join loyalty programs, tell their friends about your brand, and even get tattoos of your logo on their arm.

A consumer’s loyalty to a brand may also be measured by “share of customer.” To use terms loosely, share of customer describes the amount of property a brand owns in the mind of a consumer relative to other brands in a given category. For example, Coca-Cola might own complete share of customer for one person in Denver, Colorado, meaning that customer will always seek out Coke to fulfill his or her soda needs regardless of circumstance. Coke might also own only 50% share of another customer in Atlanta, Georgia, meaning that customer prefers Coke, but will settle for Pepsi (maybe due to a discount or some other scenario). While difficult, the ultimate goal of any brand is to achieve absolute share of customer.

Another quick note on the stages of brand equity. While there are only four stages, building equity for your brand takes time (around a decade in most cases, but potentially longer) and is highly volatile, which is why companies are willing to pay millions of dollars for companies with great equity, so plan carefully.

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