Brand equity is an essential concept in the world of business because it enables companies to differentiate their product or service offerings and thus build a competitive advantage. It is created through a process that combines various marketing activities, including segmentation, positioning, and communications. As such, building brand equity requires a long-term commitment to developing a unique and consistent brand identity that resonates with a target consumer base. By actively managing their brand equity, companies are better able to control customer perceptions, increase customer loyalty, and drive increased revenue.

One of the key benefits of building brand equity is that it creates customer loyalty. When customers develop a positive image of a brand, they are more likely to purchase products and services from the same company. This loyalty is particularly strong among customers who relate personal experiences and memories to the company's offerings. Additionally, customer loyalty has a ‘snowball effect’ in that satisfied customers often become the company's most effective sales and marketing tool through word-of-mouth advertising. Reduced advertising costs often result from this type of natural marketing.

When it comes to financial matters, brand equity also influences a company's value and market capitalization. As mentioned, enhanced brand equity generates increased sales and greater market share which, among other things, leads to higher profits. High profits permit companies to further reinvest in advertising and marketing efforts to solidify the relationship between their brand and a customer base. Furthermore, studies have indicated that companies with high brand equity have a higher stock value and market capitalization than their competitors with lower brand equity.

A company's brand equity is constantly in flux and must be actively managed and nurtured. Investment in marketing and advertising programs is critical to sustaining and growing brand equity. Companies must also focus on customer service and product quality initiatives. In doing so, firms can build a strong and recognizable brand in the minds of consumers and actively manage their company's brand equity.