Measuring Brand Equity

Brand Equity Measurement System

• A brand equity measurement system is a set of research procedures that is designed to provide timely, accurate, and actionable information for marketers so that they can make the best possible tactical decisions in the short run and strategic decisions in the long-run.

Implementing this system involves:

• Conducting brand audits.• Brand Inventory• Brand Exploratory

• Developing tracking procedures.• Designing a brand equity management

system• Brand Equity Charters• Brand Equity Reports• Brand Equity Overseers

Conducting the Brand Audit

• A brand audit is a comprehensive examination of a brand involving activities to assess the health of the brand, uncover its sources of equity and suggest ways to improve and leverage that equity.

• A brand audit requires understanding sources of brand equity from the perspective of both the firm and the consumer.

• Specifically, the brand audit consists of two activities:• Brand Inventory• Brand Exploratory

Brand Inventory• The purpose of the brand inventory is to

provide a complete, up-to-date profile of how all the products and services sold by a company are marketed and branded.

• For each product, the relevant brand elements must be identified, as well as the supporting marketing program. This information should be summarized both visually and verbally.

• Although primarily a descriptive exercise, some useful analysis can be conducted.

Brand Exploratory• The brand exploratory is research activity designed

to identify potential sources of brand equity• The brand exploratory provides detailed information as

to what consumers think of and feel about the brand• Although reviewing past studies and interviewing

relevant personnel provides some insights, additional research is often required

• To allow a broad range of issues to be covered and also permit those issues to be pursued in-depth, qualitative research techniques are often employed first

• To provide a more specific assessment of the sources of brand equity, a follow-up quantitative phase is often necessary

Managing Brand EquityBrand Value Chain

Brand Tracking Survey

Brand Equity Management : 3 Steps

1. Formalize company position and philosophy into a Brand Equity Charter to provide relevant guidelines to marketing managers.

- Importance of brands and brand equity- History of brand- Brand positioning

- Core brand values- Core brand promise (“brand mantra”) - POP/POD

- Brand guidelines- Strategic- Tactical

Brand Equity Management : 3 Steps

2.Assemble results of tracking survey and other relevant outcome measures into a Brand Equity Report distributed to managers on regular basis

•Provides descriptive information as to what is happening with a brand as well as diagnostic information as to why

Brand Equity Management : 3 Steps

3. Establish position of VP or Director of Equity Management to oversee implementation of Brand Equity Charter and Reports

• Ensure that, as much as possible, marketing of the brand is done in way that reflects the spirit of the Charter and the substance of the Report

Brand Value Chain

Understand ROI of Marketing Investments

MarketingProgram

Investment

CustomerMindset

MarketPerformance

ShareholderValue

VALUE STAGES

- Product Communications- Trade- Other

- Awareness- Associations- Attitudes- Attachment- Activity

- Price premiums- Price elasticities- Market share- Expansion success- Cost savings- Profitability

- Stock price- P/E ratio-Market -capitalization

      

Brand Value Chain

ProgramMultiplier

MarketingProgramInvestment

CustomerMindset

MarketPerformance

ShareholderValueVALUE

STAGES

- Product- Communications- Trade- Employee- Other

- Awareness- Associations- Attitudes- Attachment- Activity

- Price premiums- Price elasticities- Market share- Expansion success- Cost structure- Profitability

- Stock price- P/E ratio- Market capitalization

ConsumerMultiplierFILTERS

- Clarity- Relevance- Distinctiveness- Consistency

- Channel support- Consumer size & profile - Competitive reactions

- Market dynamics- Growth potential- Risk profile- Brand contribution

MarketMultiplier

Interbrand

• To estimate brand value, Interbrand determines:• Projected future earnings for the brand

-- AND --• The discount rate to adjust earnings for

inflation & risk.

• Brand earnings are based on a 3-year weighted average of historical profits that exclude a number of considerations that do not relate to the brand identity.

Interbrand To adjust these earnings, an in-depth assessment of

brand strength based on seven factors is conducted:LEADERSHIP

(25%)Market ShareAwarenessPositioningCompetitor Profile

STABILITY (15%)LongevityCoherenceConsistencyBrand IdentityRisks

SUPPORT (10%)Consistency of

messageConsistency of

spendAbove vs. below

lineBranch franchise

MARKET (10%)What is the market?Nature of the market (e.g., volatility)Size of marketMarket dynamicsBarriers to entry

PROTECTION (5%)Trademark registration & registrabilityCommon lawLitigation/disputes

TREND (10%)Long term market share performanceProjected brand performanceSensibility of brand plansCompetitive actions

INTERNATIONALITY (25%)Geographical spreadInternational positioningRelative market sharePrestigeAmbition

Brand Tracking

Developing Tracking Procedures

• Tracking studies involve information collected from consumers on a routine basis over time

• Often done on a “continuous” basis

• Provide descriptive and diagnostic information

• Key decisions• What to track• Who to track• When and where to track• How to interpret tracking studies

Associations• Functional performance of the underlying

product/service• Convenience/ease of accessing the product

/service• Brand personality• Pricing & value component

Corporate Brand - GE1. How well managed in GE?2. How easy it is to do business with GE?3. How concerned is GE with its customers?4. How approachable is GE?5. How accessible is GE?6. How much to you like doing business with

GE?

Corporate Brand - Dupont1. Outstanding American companies (unaided)2. Outstanding American companies on 11

different attributes (unaided)3. Rating on those attributes4. Association with those industries5. Familiarity with product and service6. Likelihood of investing in stocks7. Feeling about friend accepting employment

Multiple Product Brand - Nike• What products come to your mind when you

think of the Nike brand• Are you aware of Nike Air Force Basketball

shoes• There are many products associated with Nike,

which ones are most important to you in formulating your opinion about the brand

WHOM TO TRACK - options• Loyal customers• Non-users• Loyal to other brand• Heavy users, light users

WHEN & WHERE to track• Continuous or intermittent• Frequency• Daily, weekly, rolling moving average

Establishing the Brand Equity System• Brand Equity Charter

• Establishes Brand concept• Scope of key brands, associated products• Actual & desired equity• Measurement, tracking• Suggestions on managing brand, strategic

guidelines• Guidelines on marketing programs, tactical

guidelines, design books, communication manuals

Brand Equity Responsibility

What are we doing today• Traditional measures of Brand Equity (Today)

• Keller and others• New model financial measure of Brand Equity

(MacInnis and Park)

The “dark side” of brand equity• The trickiest issue related to BE is how it should be

measured• We have talked about measuring:

• Awareness (free and cued recall)• Recognition• Various attitude measures• IAT/ZMET

• What is wrong with this?

The “dark side” of brand equity• While psychometric measures may be compared

• They don’t translate to financial performance easily• They are relative measures• Different types don’t compare with others

• Further, these measures do not generate a metric that links BE to financial performance

Some (not so) surprising survey results• Some companies spent up to 25% of revenue on

marketing, but cannot assess the value of this spending

• UK ad agencies• Ranked themselves high on ability to provide “good work”

(of course), but lowest on ability to measure outcomes• 40% of CMOs dissatisfied with ability to measure

CMOs are aware of measurement failings

• Lack of metrics• Prevent complete evaluation of program effectiveness• Makes evaluating branding campaign trade-offs

impossible• Hurts executive support

• Only 57% of finance directors believe that marketing investments help long-term corporate growth

• 27% believed marketing was only a short-term tactical measure

• 32% said marketing was first budget to cut in hard times

Other findings from the report

• Top 5 reasons for developing effective metrics:1. Increased effectiveness of marketing organization

and planning2. ROI tracking3. Justification for marketing programs, budgets, and

value4. Improved marketing resource allocation5. Accountability to senior management and board

Criteria for a good measure• Different people computing it should arrive at

the same measure• Quantifiable and based on readily available data

that can be monitored across brands and product categories

• Meets definition of an element of a financial statement

• A single number, to enable easy tracking and communication

Criteria continued• Intuitive and credible to senior management• It is relevant to definition of BE as worth (revenue

minus costs)• Calibrated to include market and competitive

effects• Allows for comparisons across industries• Captures future potential in terms of future

revenue stream and brand extendibility• Provides strategic guidance re: Brand Equity

Keller’s “traditional” BE metrics• According to Keller, measuring BE comes down to 2

key areas:• How consumers shop for and use products and services• What customers know, think, and feel about various

brands

So, What Do We Do?• We measure Brand Equity with a combination of

psychometric and financial components

What are some traditional measures of Brand Equity?• Valuation based on Marketing and R&D

• Aggregate cost of marketing, advertising, R&D• What do you like about this measure?

• Valuation based on Premium Pricing• Extra revenue due to price differences

• How might you observe this in the market? • How might you observe this with customer research?

• Valuation based on Future Earnings Potential• Future earnings discounted to present day values• Finance types, how do we do this? What data could we

use?

What are some traditional measures of Brand Equity?• Interbrand measure – two components

• Earnings attributed to the brand – Calculated as a two year weighted average of the earnings attributed to the brand

• Brand Strength – 7 factors• Market leadership• Brand stability• Current market prospect• Brand extension possibilities• Internationalization potential• Adaptability over time• Brand support• Legal protection

• Brand strength is correlated to some multiple, like P/E ratio, and then is linked to Brand Earnings via historical data

A general measure of Brand Equity (Motameni and Shahrokhi 1996) – The Brand Multiple

• Customer Based Potency• Brand image and loyalty

• Competitive Potency• Brand trend, support, protection, competitive strength

• Global Potency• Market factors• Promotion and personal factors• Distribution factors• Product factors• Price factors• Regulations

Creating the brand multiple

1. Decide values of each Brand Strength Factor (Customer, Competitive, and Global) for your brand versus your competitors

• This data is captured using the methods on the front page of the handout

• Can be on any scale you want, just make sure it is consistent across factors

• In this example, we will use -10 to +10

Step 1: CokeCustomer Base Potency

Brand Awareness = 10Brand Association = 9Perceived Quality = 9

(28/30)10 = 9.33

Competitive Potency

Brand Trend = 7Brand Support = 10

Brand Protection = 10Competitive Strength = 10

(37/40)10 = 9.25

Global Potency

Market Factors = 9Promotional and PS Factors = 9

Distribution Factors = 10Product Factors = 10

Price Factors = 8Regulation Factors = 9

(55/60)10 = 9.16

Step 2: create weights• Now, create weights for each factor

• Customer Base = 1.0• Competitive = 1.0• Global Potency = 1.0

• Multiply these weights with the factors that you calculated earlier, sum, and create a percentage

Customer Base9.33 x 1.0 = 9.33

Competitive9.25 x 1.0 = 9.25

Global9.16 x 1.0 = 9.16

9.33 +9.25 + 9.16 = 27.75/30 =

.925

Step 3: Calculate sales difference from generic equivalent

• Can be calculated in myriad ways• Actual price data • I chose 15% premium, consistent with previous research

• Multiply brand sales by 1 - .15 (.85) to get theoretical generic sales• Coke 2004 Net Earnings = 21.96 – 18.66 = 3.3

.92 x 3.3 = 3.033.03 X Assets (31.33b) =

95.117

So, how can we connect this to marketing expenditures?• Marketing expenditures drive Brand Equity Building

(awareness, meaning, response, relationship• To the extent that we can increase our advantages

over our competitors in the three factors, we:• Increase our brand multiple• Increase the difference between our return and the

generic return• Both of these increase the GBE

Pulling it all together: The seven steps• Selling your company on the IBM• Setting up a Brand team• A successful Brand Audit• Developing a Brand Audit report you can act on• Brand tools to stimulate thinking• Facilitating Brand meetings• Testing final Brand tools

Step 1: Selling your company on the IBM

• Branding pays off with ROI• 66% of Americans buy based on brand• 15-20% price premiums for leading brands• Higher customer retention/lower employee TO• Increase in share value, less volatility• Customers go to store with 2-3 brands in mind

• These are the data that you must use to convince others in the firm that the IBM is a worthwhile investment

Step 1: Benefits by department

• Product development• R&D not spent on products that are “off brand”

• Service and support• The customer/brand relationship increases loyalty,

decreases complaints• HR

• Clear Brand drivers help match potential employees based on personality, values, and facilitates creation of relationship with firm and employee

Step 1: Benefits by department• Marketing

• Orients marketing strategy, communications, and execution based on Brand and organizational drivers

• Facilitates analysis of effectiveness of current and future marketing communication efforts

• Maximizes potential effects of communication campaigns – staying “on brand” has a cumulative effect on customer relationship

Step 2: Who should be on the team?

• Senior management, including CEO• Reps from each department• People closest to customers

• Sales and marketing, support• One or two troublemakers/ naysayers / ”politicians”

• This group probably requires an “intro to Brand management” seminar, to get everyone on the same page, and understanding the same language

Step 3: Successful Brand audit• What you are doing now

• The fundamental elements of your brand and org drivers already exist in the company, and the audit helps you define them

• Focus both INSIDE and OUTSIDE the firm• Remember, we need good information so that we

can compare what we know about our firm to what we know about our customers

Step 4: A report you can act on• The report should outline

• Boundaries to the brand• Strengths and weaknesses• Opportunities and threats• Customer preferences• Overlaps and gaps between customer and firm perceptions

of the brand• Objectives are critical-don’t start a brand audit

without some goal in mind

Step 5: Create preliminary brand tools to stimulate team thinking• “First stabs” at Brand and org drivers

• Consider how you have done this in your group – do you think that these are the final drivers, or could they be improved on?

• Principle, personality, associations should be first focus, followed by org drivers

• Preliminary drivers facilitate the creation of final drivers later on

• Sub-group

Step 5: Create preliminary brand tools to stimulate team thinking• Brain-storming: What have we done in our group

meetings?• Looked for key benefits/differentiators• See where customer and firm beliefs/perceptions match

up or differ• Translate these into your brand drivers

• Customer info is just as important as internal info

Criteria for an effective principle (review)

• True• Useful for focusing actions• Close to the buying decision• Emotional resonance• Not to narrow or broad• Ownability, clarity, brevity

Criteria for Personality (review)• Does the personality reflect the brand?• Will the personality be liked?• Does it meet needs for customers self-expression?• Consistent with expectations of the brand?• Define the spirit with which you approach future

actions?

Criteria for associations (review)• “In your face” obvious• Memorable?• Association tie back to the brand principle and

personality?• Tie back to the company or product?

Step 6: Facilitating Brand meetings• Initial contact and scheduling

• Memos should be explicit• First group meeting

• Start by putting up the sub-group findings, and going from there

• Discussion should center around modifying initial principles, associations, and personality, not rejection

Step 7: Testing final brand tools• Run each tool by your criteria lists• “Sleep on it” for a few days• Test the tools with others in the company or with

your most-valued customers• Begin planning for employee education

• Hands-on workshops, not memos and documents

A few pitfalls to avoid…• The Brand Image trap

• Brand Image: how your customers and others perceive the Brand

• Different from your Identity (internal to the firm, defined by your Brand and Org drivers)

• Don’t let your external perception drive your Brand Identity!!!

A few pitfalls to avoid…• The External perspective trap

• Failure to realize the role that the integrated brand plays in driving activities within the firm.

• Results from the belief that the Brand is primarily external in nature, and should be managed for customers

• Brand must be managed both inside and outside the firm

A few pitfalls to avoid…• The Product-Attribute fixation trap

• Most common of all – the Brand is the attributes of the product

• Based on the erroneous notion that customers only care about attributes (we have seen how the brand can affect behavior)

Summary of Class• What is a Brand?

• How is it represented in memory• Social knowledge structure• How it affects perception and cognition• How it is related to the self-concept

• Brand equity• Brand is “value added” to the product or service• Brain space

Summary of Class• How do we maximize Brand equity?

• We used the Integrated Branding Model (IBM)• The IBM breaks down the Brand into components

• The Brand in the environment (Portfolio)• The Brand inside the firm (Drivers)• The Brand outside the firm (Marketing Research)

Summary of Class

• Drivers and criteria• Organizational (Mission, Story, Values)• Brand (Principle, Personality, Associations)• These are translated into communications by the

marketing department, and lived by the employees of the firm

• Discussion of IMC• Based on Brand audit• Every element is designed to maximize the creation of

Brand Equity

What managerial tools have you received?• Framework for organizing your Brand within your

firm• Integrated Branding Model (Organizational and

Brand Drivers• Integrated Marketing Communications

• How to perform a Brand Audit, linked to the IBM• Marketing Research Tools related to Branding

• IAT• ZMET• Brand Personality (Aaker)