A Conceptual and Measurement Model for Brand Equity Research

By Rebecca Colwell Quarles, PhD, President QSA Research & Strategy

Why Brand Equity Matters Brand equity is the essential lever of profitability because it represents the value of the brand in the marketplace, independent of added features and lower price (both of which cost the company money). Brands with strong brand equity can: Command premium prices Capture and maintain market share Support new line extensions Attract investors Fend off new competitors

Very strong brand equity can make a brand nearly impervious to competition. Some years ago a global corporation that had developed a superior technology asked QSA to find out why they too often won the sales presentation but lost the sale to an American competitor. The study showed that the American firms brand equity was so strong in the United States that the only way the global firm could hope to gain a significant position in the U.S. would be to buy it, which they did. The Brand Equity Pyramid Brand equity is based on a hierarchy of brand assets, including awareness, feelings of familiarity, brand image, interest in purchase and/or investment, and customer loyalty. Some marketers confuse brand equity with brand image, but there is an important difference: brand equity contributes directly to the bottom line, but brand image contributes to the bottom line only to the extent that it helps build brand equity.

The Brand Equity Pyramid

A Conceptual and Measurement Model
Preference Holding Price And Features Constant Price Premium the Brand Commands

Brand Equity

Customer Loyalty Purchase/Investment Interest Brand Image Awareness/Familiarity

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Measuring Brand Equity Some researchers use brand image as a surrogate for brand equity, but we believe that it is important to measure brand equity directly. QSA uses a Conjoint-based technique that provides measures of the two components of brand equity: 1. Preference over other brands with the same features and price 2. The price premium the brand commands over other brands with the same features. Conjoint Measurement and Analysis is an experimental technique that captures and quantifies the tradeoffs that customers make between product characteristics and price. Conjoint studies are often used to assess the value of different product features, as well as brand names. Respondents are given a hypothetical task to choose between several different products or services that vary by features and price, as well as brand. The task is set up so that it mimics a realistic buyer choice decision in which respondents must often make hard choices. This contrasts with the typical scaled importance ratings in which respondents can give all attributes high ratings. The array of choices constitutes a balanced experiment, in which respondents ultimately evaluate each brand against competing brands with the same features at the same price levels. This balanced experimental design allows the researcher to statistically derive utility scores for each feature, brand and price level.

Simplified Example of Brand Equity Conjoint Measurement

Brand Price Feature A Feature B Feature C Rank Order (1 to 4) A $500 Standard Standard Upgrade ___ B $600 Upgrade Standard Standard ___ C $500 Standard Upgrade Standard ___ D $600 Upgrade Upgrade Standard ___

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Analyzing Brand Equity The utility scores for each brand are then converted into scores that represent the two aspects of brand equity that is, (1) the preference for each product when price and features are held constant and (2) the price premium commanded by a brand for equivalent features. The charts below show examples of possible results for a brand equity conjoint analysis.

Brand Equity 1: Share of Preference Independent of Price and Features

45% 40% 35% 30% 25% 20% 15% 10% 5% 0% Brand A Brand B Brand C Brand D

Brand Equity 2: Price Premium Commanded Independent of Features

$50 $40 $30 $20 $10 $0 ($10) ($20) ($30) Brand A Brand B Brand C Brand D

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Understanding How to Create and Leverage Brand Equity The analysis below focuses on brand image attributes as drivers of brand equity. The attributes are generated using focus groups and/or other qualitative research and tested using survey research. This analysis of the survey research data is based on SM COMMUNICATIONS ARCHITECTURE , a type of multi-stage key driver analysis that not only identifies the key drivers of brand equity but also shows the indirect drivers that affect perceptions about the key drivers.

Brand Image Attributes as Direct and Indirect Drivers of Brand Equity

The Thicker the Arrow, the Stronger the Impact on Brand Equity Product Quality Rigid Brand Personality

Commitment To R&D

BRAND EQUITY

Poor Customer Service

? ? ? ?

Very Positive Perceptions Positive Perceptions Neutral Perceptions Negative Perceptions

Industry Leadership

Cold Brand Personality

COMMUNICATIONS ARCHITECTURE

SM

In this analysis, commitment to R&D is not a key driver of brand equity, but it is an important indirect driver. This means that messages that stress the key drivers, product quality and industry leadership, will be more believable if they also stress commitment to R&D. This type of insight would not be apparent with a conventional key driver analysis. The analysis also shows that while brand equity is buoyed by a good reputation, it is undermined by the perception that is has poor customer service and a rigid and cold brand personality. This suggests that brand management needs to audit and improve its customer service procedures, as well as to soften its image. Conclusions Conjoint-based brand equity research measures the value of brands in terms of both preference and price premium, the essential levers of profitability. The application of SM COMMUNICATIONS ARCHITECTURE makes the results truly actionable because it reveals the processes that create brand equity and identifies ways to enhance and leverage it.

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