Brand Equity

Measurement System
 Preview
• To design and implement a brand equity
measurement and management system one has
to look beyond the CBBE model
• The brand equity measurement system tries to
understand the sources and outcomes of brand
equity, and to relate the two
• An ideal brand equity measurement system
provides complete and up-to-date information on
the brand and all its competitors to all decision
makers in the organisation
 Preview
• Introducing a BE measurement
system requires 1) brand tracking
studies 2) establishing a brand equity
management system
• Key to development of such a system
is understanding how brand value
gets created
 The Brand value chain
• The brand value chain is a structured approach to
assessing the sources of brand equity and the manner
in which marketing activities create brand value
• This method recognizes that numerous individuals
within an organisation can potentially affect brand
equity and must be aware of relevant branding effect
• Basic premise – the value of the brand ultimately
resides with the customers
 The Brand value chain
Marketing
VALUE Custome Market Sharehold
STAGES Program r Performance er value
Investme
Mindset
nt
•Product •Awareness •Price Premium
•Stock Value
•Associations •Price elasticities
•Communications •P/E ratio
•Attitudes •Market share
•Trade •Market
•Attachment •Expansion success capitalization
•Employees
•Activity •Cost structures
•Others
•Profitability
Program Market
MULTIPLIE Investor
Quality Place
R Sentime
Condition
nt
s
•Clarity •Competitive reactions •Market Dynamics

•Relevance •Channel support •Growth potential

•Distinctiveness •Customer size & •Risk Profile

•Brand contribution
•Consistency profile
 The Brand Value chain
• The value created in the marketplace is most
likely to be fully reflected in shareholder
value when
– the firm is operating in a healthy industry
without serious environmental hindrances
– The brand contribute a significant portion
of firm's revenue
– has bright prospects
 Brand tracking studies
• Tracking studies involve information
collected from consumers on a routine
basis over time.
• Such studies employ quantitative
measures to provide current information
on how their brands and marketing
programs are performing on a number of
key dimensions
• Tracking studies should be customized to
address specific issues faced by the
brand
 Product –Brand tracking
• Brand awareness both general and specific.
– What brands come to mind is certain situations
– Recall of brands on product category cues
– Tests of brand recognition
• Brand associations – both performance and imagery
based that contribute to brand positioning
• All possible sources of brand equity including judgment,
feelings and resonance
 Corporate or Family brand
tracking
• Would assess measures of corporate
credibility
• Other measures of corporate brand
associations are possible
How well managed is the company
How easy is it to do business with Co.?
How concerned is the Co. with its
customers
How approachable is the company
 How to Conduct Tracking
Studies
• Brand names are always used. Sometimes
other elements such as logo/symbol can also
be probed
• Tracking current customers alone is not
enough. Distinguish between light & heavy
users
• Information from non-users and brand
switchers can also be useful
• Information sought from each of these
segments would be different.
Measuring sources of
Brand Equity
Capturing Customer Mindset
 Capturing Customer
Mindset
• Ideally marketers should be able to
construct detailed “mental maps” of
consumers to understand consumers
thoughts, feelings, perceptions,
images beliefs and attitudes towards
different brands.
• There are both qualitative and
quantitative approaches to identify
potential sources of brand equity
 Qualitative Research
techniques
• These are relatively unstructured measurement
approaches where a range of consumer responses
are permitted
– Free association –subjects asked what comes to
mind when they think of the brand.
– Coding free association in term of order of
response, can yield a rough measure of the
strength of the association
– Focus groups and in-depth interviews
 Attributes

User imagery
Western, American
Product-
Brand personality
attributes Strong, rugged, masculine
Honest, classic,
Blue denim,
contemporary, independent
shrink-to fit
cotton fabric, Levi’s
two horse patch 501

High-quality, long Feelings of self

lasting and durable Comfortable, good fit confidence/assurance
Functional benefit Experiential benefits Symbolic benefits

Benefits
 Qualitative Research
techniques
• Projective Techniques – diagnostic tools to
uncover true opinions and feelings
• Used to overcome inhibitions to reveal
feelings
• Consumers presented with incomplete
stimulus or ambiguous stimulus which they
have to complete
• In doing so they will reveal some of their
true beliefs and feelings
 Qualitative Research
techniques
• Completion and interpretation tasks –
complete a given situation, or fill in the
bubbles in a cartoon
• Comparison tasks –consumers asked to
convey their perceptions of brands by
comparing them to people, animals,
countries etc
• These techniques useful to understand
imagery and to uncover the brand
personality
 Quantitative
• Quantitative research methods provide
more confident and defensible strategic
and tactical recommendations
• Quantitative measures can be employed
to better assess the depth and breadth
of brand associations
• Quantitative measures are most often
the primary ingredient in tracking
studies that monitor brands over time
 Comparative methods
• Brand-based – involve experiments
when one group of consumers is
exposed to the brand and another is
exposed to a fictitious brand and
responses to marketing stimuli are
studied
• Market-based – test marketing in
different markets to different
marketing stimuli
 Comparative methods
• Conjoint analysis – a multivariate
technique that enables the study of
consumer decision making with
respect to product attribute and
brands
 Determining Value of a
Brand
• Three main approaches possible

• The Cost
• Market
• Income approaches
 The Cost approach
• Maintains that brand equity is the
amount of money that would be
required to reproduce or replace the
brand (including all costs for research,
test marketing advertising etc.)
• Problem with this method is that it
rewards past performance but gives
no importance to future profitability.
 The Market approach
• Is the present value of future
economic benefits to be derived by
the owner of the asset.
• It is the amount an active market
would allow the asset to be traded at
between buyer and seller
• Problem- lack of open market
transactions for brand assets.
 The Income approach
• Assumes that the brand equity is the is the
discounted future cash flow from future
earnings for the brand
• Three such approaches are
1. Capitalizing royalty earnings from a brand
2. Capitalizing premium profits that are earned
by a branded product
3. Capitalizing the actual profitability of a brand
after allowing for the cost of maintaining it
and the effects of taxation
 Interbrand valuation
method
• Premier brand valuation firm
• Wanted to devise a method
incorporating marketing, financial
and legal aspects
• Based on the assessment of what the
value is today of earnings or cash
flow that the brand is expected to
generate in the future
 Interbrand valuation
method
• To estimate brand value it is
necessary to
1. identify future earnings for the
brand
2. the discount rate to adjust the
earnings for inflation and risk
 Brand earnings
• Are calculated by computing brand sales and
subtracting the the following:
– Cost of brand sales
– Marketing costs
– Variable and fixed overheads (including
depreciation and central overhead allocation)
– Cost of capital employed in production
– Taxation
 Brand strength
• Assessing this requires a detailed
review of the brand, its positioning,
the market in which it operates,
competition, past performance,
future plans, risks to the brand etc.
 Brand strength
• Interband evaluated brands on 7 factors
• Leadership – brand’s ability to influence
market, strong market share etc
• Stability –based on customer loyalty and
survival over a period of time
• Market – brand's trading environment
• Geographic spread –ability to cross borders
• Trend- ability to remain contemporary and
relevant
 Brand strength
• Interband evaluated brands on 7 factors
• Support – the amount and consistency of
marketing and communication activity
• Protection – brand owner’s legal titles

• The scores are weighted and the resultant

total, know as brand strength score is
expressed as a percentage
 Application of Interbrands’
Brand Valuation Method
• Take the case of three brands
• Brand A –leading international toiletries brand
operating in stable market, strong no. 2 in all
markets
• Brand B –leading food brand operates in traditional
but stable mkt, where tastes are slowly changing to
convenience foods. Limited exports. Trade mark
protection based on common law not registered
rights
• Brand C –aspiring national soft drink launched 5
yrs. Market growing. Brand heavily supported.
Some registration problems
 Application of Interbrands’
Brand Valuation Method
Maximum Score Brand A Brand B Brand C
Leadership 25 18 19 9
Stability 15 11 10 7
Market 10 7 6 8
Internationality 25 17 5 2
Trend 10 6 6 7

Support 10 8 7 7
Protection 5 5 3 4
TOTAL 100 72 56 44
 Interbrands’ Valuation
• The brand strength score is expressed as a
percentage.
• This score is then converted into a earnings
multiple to be used against the brand related
profits (usually between 9-20)
• Interbrand compares the reciprocal of these
multipliers with the discount rate.
• A perfect brand strength score of 100 would
have a discount rate of 1/20 or 5%
• A weaker brand with a lower multiple would
have a higher discount rate
 Interbrands’ Valuation
• Interbrand notes that the relationship between
brand strength and brand value is represented by
a classic S curve.
– As a brand grows from nothing to no.3-4 in a national
market its value increases gradually
– As it moves to no.1-2 position in its market or
becomes international, the value grows exponentially
– Once established its value no longer increases at the
same exponential rate.
 Brand Asset Valuator
• The world’s largest database of consumer –derived
information on brands
• Worldwide research in 40 countries for 19,000
brands across 56 parameters
• BAV also been linked to financial analytics which
allows determination of brand's contribution to
company’s intangible value.
• Original measures have been updated with
measures of brand loyalty (future usage intent)
 Brand Asset Valuator
• Four key components of brand health in BAV
• Differentiation – how different it is from other
brands
• Relevance – overall breadth of a brand's appeal or
household penetration
• Esteem – how well the brand is regarded
• Knowledge – how familiar consumer’s are with the
brand. High knowledge is inversely proportional to
brand's potential
 Brand Asset Valuator
• Differentiation and Relevance are
leading indicators. The two pillars
which combine to determine brand
strength and point to the brand's
future value
• Esteem and knowledge are lagging
indicators and together create brand
stature
 Pillar Patterns
STRENGTH
BRAND

BRAND STATURE
 Pillar Patterns
• Comparison of pillar patterns between
brands in the same or different
categories permits the diagnosis of
brand's relative strengths and
weaknesses
• Tracking changes in pillar patterns
over time for the same brand gives an
idea of how the brand consumer
equity progresses during that period.
 Brand Elasticity
• The ease with which a brand can be “stretched”
into a new category
• According to BAV the probability of success of
brand extensions depends on :
– How similar is the image of the brand to the
image of brands in the target category
– Does the brand have what it takes to create
differentiation in the new category
 Brand Elasticity
• If brands imagery satisfies the cost of entry
(POP) for the new category and has the ability
to drive differentiation, then it can clearly go
ahead with the brand extension.
• When the image profile can create
differentiation but lacks cost-of-entry image
characteristics, then entry into this category
won’t be easy, but the brand may be able to
achieve “ambush” entry.
 Brand Elasticity
• If brands imagery is dissimilar and
differentiation is also difficult then chances
of extension are low and expansion into
the category is better accomplished by
acquisition of existing brand
• When the image profile meets cost-of-
entry image characteristics, but
differentiation drivers are lacking then
entry into this category would require
considerable investment
 Brand Alliances
• BAV can also look at how brand
alliances affect individual brands
• Alliances between Wal-Mart and Levi’s
improved the brand strength for Wal-
Mart but did nothing for Levi’s
• In contrast, Levi’s did benefit from an
alliance with Yahoo, growing
differentiation and brand strength.
 Brand Economics
• BAV can be used in conjunction with
Brand Economics (developed by Stern
Stewart &co.) to link the CBBE with the
company financials.
• Brand value contributes to company’s
intangible value.
• Economic value added (EVA) is a measure
of profit less cost of capital employed
 Brand Economics
• A firm’s intangible value can be
divided into EVA and future growth
value (FGV)
• Brand value eventually translates into
company value.
• The relationship between brand value
and company value in reflected in the
Power grid
 Brand Economics
• A firm’s intangible value is shown in
multiples of sales
• FGV plays a more important role in
measuring brand health
 Brand Economics
Intangible Future
Intangible Future
value
Growth Growth
value value value
2.7x 4.5 x
4.8 x
2.8 x
Current Current
STRENGTH

Performance Performance
0.1 x 0.3x
BRAND

Intangible Future Intangible

value Growth value Future
value Growth
1.1 x value
1.0 x 0.75 x 0.8 x

Current
Performance Current
- 0.1 x Performance
-0.05 x

BRAND STATURE
 BAV and CBBE
• A lot of commonality between the two
• 4 factors in BAV related to elements in
CBBE framework
• BAV provides rich description and profiles
of a number of brands
• Because the measures underlying the
four factors have to be relevant across
categories , they tend to be more
abstract in nature and do not provide less
specificity
• However comparison between a variety of
brands possible