Understanding the Brand Value Chain

Donald R. Lehmann
Columbia University
February, 2006
Company Actions Competitor Actions

Channel Behavior

Customer Mind Set

Customer Behavior

Product Market Results

Financial Results

Stock Market Behavior/

Shareholder Value 2
 The Brand Value Chain
Marketing
Customer Brand Shareholder
Program
Mindset Performance Value
Investment
•Awareness •Price premiums •Stock price
•Product •Associations •Price elasticities •P/E ratio
•Trade •Attitudes •Market share •Market cap
•Employee •Attachment •Expansion success
•Other •Activity •Cost structure
•Communications •Profitability

Program Marketplace Investor

Quality Conditions Sentiment
Multipliers
•Clarity •Competitive reactions •Market dynamics
•Relevance •Channel support •Growth potential
•Distinctiveness •Customer size & profile •Risk profile
•Consistency •Brand contributions

Source: Keller and Lehmann (2003), How Do Brands Create Value, Marketing Management, May-June, 27-31
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 Customer Mind-Set
Awareness

Associations (Image)

Attitude (Intention; Acceptability)

Attachment(Loyalty; Addiction)

Activity (WOM)
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 Brand Equity Measurement within
Category and Across Countries
Lehmann, Keller, Farley, Ma
• Identify 27 constructs

• Study 1
US Coke, Pepsi, Dr. Pepper
China Coke, Pepsi, Sprite

 Study 2 (US and China)

Coke, Pepsi
McDonalds, KFC
Colgate, Crest
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Factors Construct
Comprehension Presence, Awareness, Knowledge
Product Advantage Relevance, Difference, Esteem,
Performance, Advantage
Social Caring, Prestige, Service
History History, Nostalgia
Attitude Bonding, Intention, Value for Money
Activity Persistence, Activity

“Other” Loyalty, Trust, Innovation,

Endorsement, Quality
Ambiance, Extension Potential,
Acceptability
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 Comprehension

.74
.63 .68

Product Advantage Social History

.29 .06
.62
Attitude

.76

Activity

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DOLLAR-METRIC STRENGTH OF PREFERENCE

Question: “How much more are you willing to pay for Brand X
compared to a no-name clone?”

Brand 1993 1995

IBM $364 $339
Compaq 301 318
Apple 264 182

DEC 198 10
AST 176 17
Dell 161 230
Hewlett-Packard 145 260

Source: The Wall Street Journal, © 1995 Dow Jones & Company, Inc.

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 Quaker Oats Brand Equity
Hot Cereal Market
IRI Factbook (Grocery Stores), 1993

Volume % of Vol/ Price/ Share of

Share Household Purch Vol Category
Buying Requirements
Regular 49.9% 39.7 1.7 1.17 68
Curtis- 1.1% 1.5 1.4 1.23 36
Bruns
(3-min.)
Quaker 36.6% 32.2 1.7 1.26 60
Private 10.3% 9.1 2.0 0.88 49
Label
Generic 1.2% 0.9 2.5 0.71 47
Instant 30.8% 30.5 1.1 2.72 61
Great 0.2% 0.6 0.9 2.34 24
Foods
America
Quaker 26.2% 27.3 1.1 2.82 57
Private 3.8% 5.6 1.0 2.26 34
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Volume / HH = 3.28
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 THE REVENUE PREMIUM MEASURE

Sales

SB  Brand

SG  
Generic

!
VCB
! ! Price
PG PB

Ailawadi, Lehmann, and Neslin, Journal of Marketing, 2003

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Financial Impact
Tobin’s q
Difference in P/E Ratio
a) Basic Growth
b) Option Value

Market Capitalization

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 Link to Customer Equity:
Brand
Customer 1 2 3 …
1
2
3

Cell 1, 1: Brand Equity + “Normal” (Generic)

Profit to Customer 1

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Issues

Heterogeneity and Aggregation

Channel, Category Equity

Assessing Option Value

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