The importance of brand equity in understanding sales

Brand metrics can help quantify the effects of advertising over the long term. But how might you explain an inverse relationship between brand equity and sales?

At the beginning of the COVID-19 pandemic, our local supermarket only had own-brand pasta sauce in stock. We bought some, ate it with pasta and, while I couldn’t really tell the difference, my wife insisted I never buy that brand again. We were able to purchase our favourite brand on our next purchase, and we continue to do so.

“Repeat purchase” (as in the pasta sauce example) comes from consumers who will seek your brand out; they like it and will continue to buy it.

On the other hand, “advertising retention” is when potential customers remember past advertising, and buy the brand when they are in the market to do so.

“Repeat purchase” and “advertising retention” play a crucial part in understanding the long-term effects of advertising.

We know advertising drives sales in both the short and long term. While short-term sales are relatively easy to measure, quantifying long-term sales is trickier. There are numerous reasons for this: advertising memory can last for years, for example, so an ad could be leading to sales for decades after your campaign finished. But a big problem is not including brand equity as part of your analysis. Of course, the relationship between brand equity and sales is complex.

We have seen from work we’ve done at Kantar that brand equity metrics are a great surrogate for understanding and quantifying long-term sales driven by advertising.

This article first appeared in on January 20, 2021.