Professional Documents
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Brand Equity
Brand Equity
Brand Management by YLR Moorthy, IIMB, Vikas Publishing House, 2010 Brand Management by Harsh V Verma FMS Delhi, Excel Books 2010
Cost based
Historical Cost Replacement Cost Market Value Method Discounting Cash Flow Method Brand Contribution Inter-Brand
Price Based
Price Premium Method Market Share Equalisation Method
2.6
SALIENCE
2.7
1. IDENTITY =
PRIMARY CHARACTERISTICS & SECONDARY FEATURES PRODUCT RELIABILITY, DURABILITY & SERVICEABILITY SERVICE EFFECTIVENESS, EFFICIENCY & EMPATHY STYLE AND DESIGN PRICE
USER PROFILES PURCHASE & USAGE SITUATIONS PERSONALITY & VALUES HISTORY, HERITAGE & EXPERIENCES
Similarly
Score for brand recognition, Score for favorability Score for strength of brand associations can be measured.
Score needs extensive validation. Needs to be several groups as representative of population. Difficulty in getting inter-category comparison of equity.
Lux international : 7.5 Cinthol : 7.03 Dettol : 5.71 Nirma Beauty : 4.77
Attribute-oriented approach
Take a brand PONDS List all its attributes Get ratings for each of these attributes on a 0-10 scale from consumers. Sum up the scores. Convert the scores to scale of 100. This represents the equity of brand scale. Brand equity is more than what the attributes bestow on the brand. This is the limitation.
Hypothetical exhibit
PONDS Freshness Fragrance Long-lasting Appearance Desirability Sum of scores Brand Equity (on a scale of 100) 8 7 9 8 8 40 80 CINTHOL 7 7 9 7 6 36 72 LIRIL 8 7 8 6 7 36 72 GOKUL 6 8 6 5 6 31 62
Blind Test
Brand equity is defined as the difference between the overall performance of a brand and the sum of scores it obtains on objective parameters.
Ratings
Pick Up
Load Carrying capacity Out of 30 Out of 100
6
7 19 63
6
6 21 70
7
6 21 70
Brand equity of Shaolin = 82-63= 19 Brand equity of Shaolin = 85-70= 15 Brand equity of Yamaha = 78-70= 08
Problems
Identification of subjective and objective parameters.
Historical cost
This is the money that has been spent on the brand till date.
Suppose Rs. 100million has been spent on the brand X till date
The value at which the brand can be sold should be Rs. 100 million.
Thus the cost incurred in brands are no measure of the efficiency with which the money was spent.
Replacement cost
Consider Colgate, How much would it cost to create a brand with similar turnover, profitability, distribution reach, brand loyalty etc?
Replacement cost
Launch cost + Production and administrative costs incurred over the years + Brand premium acquired over the years due to brand loyalty + Distribution
Close Up
If Rs.200cr has been spent on production and marketing over the years to achieve the present turnover. Rs. 50cr accounts for distribution and loyalty. The brand value stands for Rs.255cr.
What is the guarantee that if a brand is created with a cost of Rs. 255 crores today it will obtain a market share of about 17% as Close Up?
The brand value is the value realised in a comparable current merger or acquisition.
Brand Contribution
This method tries to identify the value that is added by the Brand to the product. It compares the profits earned by the brand with the profits earned by an unbranded or generic product in the same category.
Brand Equity = K (profits from the brand- profits from an unbranded product in the same category)
Inter-Brand Method
The weighted average of the last three years profits of the brand is computed. Consider Brand X Year 1993 15 million profit- 1 weight Year 1994 20 million profit 2 weight Year 1995 30 million profit 3 weight Average Profit = (15 *1)+(20*2)+(30*3)/ 1+2+3 = 24.2 million
Step 2
Multiply this figure with a number to arrive at value of brand equity. The number is arrived at by multiplying the price/earning(P/E)of the company or industry in which the brand operates. This is further multiplied with brand strength to arrive at Brand Equity.
internationality Support
15 15
1 8
5 5 20 100
2 2 10 43
http://www.interbrand.com/en/kno wledge/best-global-brands/bestglobal-brands-2008/best-globalbrands-2010.aspx
Price-Based Methods
Price-Premium method Market share equalisation method
Issues
Brands can be placed at varied price points.(premium and penetrative) Low priced brands Nirma and lifebouy may indicate low equity. Difficult to compare for brand extensions.
Exhibit : find prices at which market share of each brand will be equal.
BRAND COLGATE CLOSE-UP PROMISE BABOOL PRICES 17.40 22.50 17.40 14.60 NO. OF PEOPLE USING 65 20 5 10
Prices at which the market share for each of these brands is equal.
BRAND COLGATE CLOSE-UP PROMISE BABOOL PRICES 24.50 23.00 17.40 14.60 NO. OF PEOPLE USING 25 25 25 25
We have forced a situation where market shares are equal. This indicates a price premium that the brand commands. Prices give a straight indication of equity. Babool 146 Promise 175 Close Up 235 Colgate 245
Description of 10 Best global Brands. Adoption of any of the model for calculating brand equity.
Price premium Market share equalisation Brand Knowledge Method: Awareness ,Image Attribute Oriented Approach: score on attributes Blind Test: Objective and subjective comparison Market Value Method Brand Contribution