Editor's note: Jerry Thomas is president and chief executive of Decision Analyst Inc. He can be reached at jthomas@decisionanalyst.com.

We can think of brand equity as the accumulated reputation and goodwill of the brand or brands owned by a company. This is a greatly simplified definition but it will suffice for now. All other factors being equal, brand equity is the very best predictor of a corporation’s probability of long-term success. In well-managed corporations, senior management stays focused on building and maintaining brand equity for all of their brands among the most important target audiences (customers and prospective customers).

An important secondary reservoir of brand equity resides in the minds and hearts of a company’s employees. They must buy into, believe in and support the corporation’s brand story. A third repository of brand equity exists in the minds of the trade and distribution channels. Do they have faith in the company and will they support its brands? The last store of brand equity – at least for public companies – is the attitudes of investors, shareholders and stock analysts. 

Regardless of the target audience, brand equity exists solely in the minds and emotions of human beings. Brand equity lives in the feelings, memories and imaginations of target audiences, not in real estate, factories, equipment, inventories, retail stores or other assets.

To optimize brand equity, these three types of models can play a role:

• Diagnostic models: These help brands understand the building blocks and architecture of existing brand equity.

• Prescriptive models: These can be used to formulate optimal strategies to maximize brand equity over time.

• Tracking models. Once a sound brand strategy is in place, it’s important to track the cumulative effects through repeated surveys of target consumers, employees and other target audiences.

(Brand equity trac...