International Journal of Market Research Vol.

49 Issue 1

Energy: igniting brands to drive enterprise value

John Gerzema

Young & Rubicam Brands Ed Lebar

BrtllldAsset® Valuator. Worldwide Michael Sussman

Y&R. North America

Jason Gaikowski

Young & Rubicatn Brands

BrandAsset® Valuator research has demonstrated that consumer perceptions of 'Energy' offer new insight into shifts in market value - adding to the case that brand building is best viewed as a strategic corporate investment. This unified metric links marketing performance with financial performance to prepare financial managers and brand managers to make more informed decisions on how to fund and guide marketing efforts to most effectively generate sales, equity and value. Further, the Energy metric can serve as an organising principle for the creative forces found throughout an entire organisation: motivating business units to work collaboratively to bring innovation forward for the benefit of the customer, the brand and the bottom line.

Introduction

The many models used to assess the health and performance of a brand tend to take one of two forms: brand equity or brand value. Brand equity models measure consumer perceptions and brand associations (Aaker 1991; Keller 2003), or simplified measures of familiarity and favourability (Gregory & McNaughton 2004). On the other hand, brand value models use a variety of techniques - ranging from a modular index of consumer perceptions (Hupp & Powaga 2004) to a weighted scorecard of marketing directors' assessments (Stobart & Perrier 1997), and to calculating incremental pricing power versus a commodity equivalent - seeking to identify a monetary value of the brand (often for tax or financial accounting

Revised version received: 14 March 2006

e 2007 The Market Research Society

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Energy: igniting brands to drive enterprise value

purposes). Each approach has its merits and its limitations. Brand value models are generally less sensitive to the changing and fragile perceptive nature of consumer relationships, while brand equity models struggle to sufficiently quantify the financial impact resulting from brand-building investments.

The intent of this paper is to share incremental knowledge of the relationship between brand equity and brand value and use this knowledge to establish a leading indicator both of brand health and future financial performance. Leveraging over ten years of brand data from Young & Rubicam's BrandAsset® Valuator (BAV), securities data from the University of Chicago's Center for Research in Security Prices (CRSP) and accounting performance data from Standard & Poor's (S&P) COMPUSTAT, new research has isolated a previously overlooked variable that significantly enhances the BrandAsset® Valuator model's ability to explain both brand equity and brand value. The evolutionary BAV dimension, known as Energy, uses brand information - incremental to traditional financial metrics - to explain changes in market value of the firm. Further research on Energy also demonstrates the marketing opportunities carried in a brand's perceptual momentum. Thus, it encourages readers to deepen their understanding of the relationships between brand, equity and valuation.

Background

The fact that brands are valuable assets to a company is well established, and many have argued that brands are the single most valuable assets a company can possess. John Stuart, former chairman of Quaker Oats, summed it up nicely when he said 'If the businesses were split up, I would take the brands, trademarks and goodwill, and you could have all the bricks and mortar - and I would fare better than you.' This point of view has proven especially prescient in recent years, with increased recognition of the value of strong brands and other intangible assets fuelling much of the growth in corporate market values over the past decade.

As marketers, much of our understanding of brands emerges from the models originally developed by David Aaker (1991). Aaker expressed brand equity through the five key components of brand awareness, brand loyalty, brand associations, perceived quality and other proprietary brand associations. Aaker posited that enhancing these components creates value for the firm in a variety of ways, generally through the increased marketing efficiency derived from gains in brand equity.

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International Journal of Market Research Vol. 49 Issue 1

Researchers and practitioners have subsequently developed innumerable refinements and alternatives in an attempt to capture the relationship between the intangible components of brand perception, description and positioning with tangible evidence of market performance. Susan Nelson of Landor Associates maintains a collection of brand models, which she shared at the Advertising Research Foundation's (ARF) 2005 re:Think! Conference: Triangles and Pyramids, Ovals and Onions, Pies, Bulls-eyes, Keys, Pentagons, and even a Crab - all are currently being used to organise brand activities, establish a common mental map and vocabulary, and provide benchmarks for measuring success.

Each of these models has strengths, and provides a real service to the companies that use them. Yet Aaker himself understood the limitations of brand equity. Equity models are important tools for us to understand and manage the complexities of the brand-consumer relationship, but they are limited in their ability to drive growth in the asset value of the brand.

Perhaps as an attempt to fill the gap in brand equity knowledge, several researchers and consultancies have developed brand valuation models, with Interbrand's approach among the most widely cited. Useful in many ways, Interbrand cites an imputed financial value of a brand that is largely not captured by a company's balance sheet by estimating the net present value of the earnings the brand is expected to generate in the future, which must be said is no small task. In recent years we have seen the value of the brand approach often exceed the tangible assets of the corporation. For example, Intel reported tangible assets valued at $48.3 billion in 2005 according to its 2005 10K filing, while the stock market valued Intel at $113.8 billion on 3 April 2006 - more than twice its book value. What explains the difference? Interbrand's valuation of the Intel brand ($35.6 billion in 2005) goes a long way towards clarifying this discrepancy.

Hupp and Powaga have developed their own valuation technique, using proprietary 'advanced brand valuation' metrics, estimating the brand financial value by determining future consumer demand. Their method relies on 'psychological brand power' captured by GfK's Brand Potential Index, a single score that is measured within a competitive context (making it difficult to assess brand potential outside of category confines). Gregory and McNaughton use measures of favourability and familiarity to determine the Brand Premium, an approach that relies on past performance of the brand as a surrogate for future potential.

Brand value models have proven to be very useful in transaction scenarios - mergers and acquisitions, brand licensing, fundraising (collateral on loans, etc.) and resource allocation (Keller 2003). And

27

Energy: igniting brands to drive enterprise value

although these models do tend to include some measure of consumer perception, they offer limited insight on how changes in brand equity may impact future brand value. Aaker acknowledges this limitation when he writes 'the challenge is to understand better the links between brand assets and future performance' (Aaker 1991). As a result, we are armed with brand value models providing few clues that help guide marketing decisions - and brand equity models offering little guidance to help us maximise financial performance.

However, the BrandAsset® Valuator model has been somewhat unique in mission and purpose. Where many brand equity models are highly category dependent, BAV is specifically category agnostic, measuring a brand relative to all other brands and focusing on those universal dimensions that apply to all categories. Many models combine brand and customer to form brand loyalty models. These models explain how the customers move from a state of awareness to the highest levels of commitment. These models are usually category specific and diagrammed as funnels or pyramids. In contrast, BrandAsset® Valuator is a developmental model, identifying clear patterns of growth, health, decay and recovery among all brands studied. Finally, BAV has long sought to better understand those components of brands that impact both brand equity and brand value.

Commercial work with Stern Stewart and BrandEconomics had successfully demonstrated clear relationships between BAV measures of brand health and economic value added (EVA) based measures of financial performance. While this work provided a powerful foundation, we sought more completely to understand how and why stronger brands relate to stronger financials. Working with Robert Jacobson from the University of Washington School of Business, and Natalie Mizik from the Columbia Graduate School of Business, we looked to expand and deepen our understanding of the relationship between changes in the brand assets and changes in future financial performance. Using statistical regressions inclusive of ten years of brand data and ten years of financial data, Jacobson and Mizik analysed multiple brand variables to identify which combination would yield the greatest explanatory power between changes in the brand and unanticipated changes in stock price. The result of this undertaking has expanded our understanding of the relationships between consumer and brand, and brand and finance.

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International Journal of Market Research Vol. 49 Issue 1

Methodology, data sources and measures

Working with Jacobson and Mizik, we set out to revisit a common theme in brand research: to what extent does the BrandAsset® contribute to a company's financial performance?

Under the efficient markets hypothesis, stock price reflects both the current profitability of a firm and expectations of future earnings. With this information already built into the asset price, we find it more useful to restate the framework in terms of change (P + L = profit and loss):

k f { i1Current P+L }

i1Stoc price =

i1Expected future P+L

Working within the efficient market hypothesis, Mizik and Jacobson (2005) used a dynamic stock modelling approach in order to identify the financial impact of changes in brand equity measures. The modelling framework is built on the hypothesis that brand impacts stock return in two ways. First, the indirect effect, where changes in brand equity impact current profitability, which in turn generates changes in stock price. Second, the direct effect, where changes in brand equity influence expectations of future earnings - information not reflected in current profitability measures (see Figure 1).

When analysing the data from Table 1, the analysis was restricted to 'monobrands' in which a single brand represents approximately 80% of the firm's business - McDonald's, American Express, Disney, Star bucks, AT&T, etc. Restricting the analysis to mono brands closely associates the changes in business value with a single brand. This avoids the

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29

Figure 1 Dynamic stock modelling

Energy: igniting brands to drive enterprise value

Table 1 Data used in the analysis

Data type

Data source

Brand data

Accounting performance data Securities data

Young & Rubicam's BrandAsset'" Valuator, 1993-2003 Standard & Poor's COMPUSTAT, 1988-2003

University of Chicago's Center for Research in Security Prices (CRSP), 1993-2003

complication of multi-branded businesses in which market value cannot be readily apportioned to specific brands using publicly available data.

Using unanticipated change in stock price as the dependent variable, Jacobson and Mizik modelled brand data in order to understand the relative contribution of individual brand components to changes in stock price as anticipated by accounting performance data. The analysis leveraged the BrandAsset® Valuator model and 'Four Pillars' as the foundation. These Four Pillars are as follows:

1. Differentiation: this construct captures a brand's ability to stand out and create distinct meaning in the marketplace. Based on a composite of three image attributes, differentiation reflects both product and image equities that contribute to a brand's capacity for prominence in its arena, resulting in greater consideration, loyalty and pricing power.

2. Relevance: this scalar measures a brand's ability to be meaningful and have personal appropriateness in the lives of consumers. In a sense, it is cost-of-entry to usage of a brand. Relevance is highly related to market penetration and staying power.

3. Esteem: this construct measures the extent to which consumers like a brand and hold it in high regard. Esteem captures how well a brand fulfils its implied or overtly stated consumer promise, resulting in repeated usage.

4. Knowledge: this scalar evaluates the level that consumers understand and have internalised what a brand stands for. It represents the end result of all the marketing and communications efforts and experiences consumers have had with a brand.

In addition to the Four Pillars, we looked to identify other variables captured within the BAV study to determine aspects of the brand asset that contributed incrementally to explaining changes in stock price. In doing so, we uncovered an additional dimension of the BrandAsset® that bears an important statistical contribution to understanding changes in financial performance. This dimension, Energy, captures consumer perceptions that

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International Journal of Market Research Vol. 49 Issue 1

reflect brand dynamism and invention, dimensions that help brands to attract the attention of consumers and reflects perceptions of a brand's ability to anticipate, adapt, evolve and invent, to meet and even to create future needs.

Findings

This 'Fifth Pillar', Energy, significantly adds to BrandAsset® Valuator's explanatory power to account both for changes in brand equity and changes in brand value. Building on our work with Jacobson and Mizik, continued investigation of Energy and brand equity has led us to evolve the BAV model of brand building. Traditionally, we worked with differentiation and relevance as the components of brand strength, a leading indicator of brand health. Brand strength builds first in the life cycle of a developing brand, and is the first element to erode when a brand is in decline. Similarly, esteem and knowledge taken together represent brand stature. Brand stature reflects the summation of past marketing efforts, resulting in a perceptual snapshot of the current position of a brand in the market. Brand stature levels often remain high even when Brand Strength begins to wane, indicative of a brand in decline. Brands in this position begin to lose loyalty and pricing power, and must often resort to promotions and discounting to keep their revenues up. At this point, high levels of knowledge may even become a hurdle, where marketers now have to work even harder to disrupt what consumers think they already know about a brand.

While brands with well-developed brand strength are in a position of power, they are not infallible. Their greatest challenge is keeping themselves strong, and preventing decay. Leaders are constantly dethroned as new players redefine a market, as iPod did to Sony Walkman. Over time, many brands have been able to hold their position in the leadership territory, e.g. Nike, while others, such as Levi's, have lost that special something that keeps them on the must-have list for consumers.

Our ongoing research with Energy demonstrates that it is a key ingredient in creating and maintaining that 'special something'. With critical levels of Energy, a brand can boost the effect of its relevant differentiation and create greater marketplace momentum. This catalytic role that Energy plays in synergy with brand strength led us to a more complete way to measure the future potential of brand, one that measures the 'Energised Brand Strength' to drive future growth. We have found this new metric to be significantly more robust in relating brand performance

31

Energy: igniting brands to drive enterprise value

measures to financial performance measures such as earnings and stock market value to sales ratios.

Quantifying Energised Brand Strength (EBS)

We define Energised Brand Strength as the active or moving force of a brand, its direction and vitality; a quantifiable metric of a brand's potential to impact market value through expectation of growth in operating future earnings. We measure this potential to generate and maintain momentum through a composite of three brand pillars:

Energised Brand Strength = f (differentiation x energy x relevance)

We then percentile rank the raw score against the scores of approximately 2500 other US brands measured quarterly on consumer perceptions and brand associations. The resulting Energised Brand Strength rank score identifies each brand's EBS level vis-a-vis all other brands in our study (see Figure 2).

Compared to our previous measure of strength this metric reveals a more active trajectory of where a brand is heading. If a brand was declining in the old strength metric, the decline is accelerated in the new Energised Brand Strength. Conversely, if the old metric demonstrated a brand was growing, this growth is more clearly and overtly demonstrated.

BrandAssetO Valuator

D ERE K

Current

Stature·

Future potential

Past performance

Figure 2 Energised Brand Strength is the leading indicator of brand momentum; brand stature captures a brand's current market presence

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International Journal of Market Research Vol. 49 Issue 1

Thus, we improve our ability to predict future changes in the consumer attitudes towards brands that impact brands' marketplace performance.

Looking across a ten-year period, our efforts reveal that our measure of Energised Brand Strength demonstrates a significant and impressive relationship with market value and can quantify a brand's leverage on financial performance. Our equity-based measure of brand can be compared with traditional accounting performance measures, including sales growth and earnings to assets ratios. BAV's Energised Brand Strength is 81 % as effective as sales growth and 53% as powerful as earnings/assets in explaining changes in market value. Energised Brand Strength also adds an incremental 64% to sales growth alone; and 61 % to earnings/assets alone in understanding changes in stock price.

Moreover, our studies show that only one-third of a brand's impact is realised in current sales and operating earnings, while two-thirds of its influence is felt via future financial performance.

We believe that this discovery has implications for the current focus on return on investment (ROI) analyses. While ROI analyses are useful in understanding the relative contribution of the marketing mix to overall sales goals, they may capture only one-third of the total value creation of the marketing programme as the dependent variable is likely to be some measure based in current term sales (see Figure 3).

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Figure 3 Energised Brand Strength identifies a new, tangible measure of financial performance

Energy: igniting brands to drive enterprise value

Energised Brand Strength and marketing measures

Armed with a new understanding of the relationships between brand equity and brand value, we wanted to expand our knowledge of how the evolved BrandAsset® Valuator model would explain brand performance through marketing measures. Adding Energy enhances our ability to explain changes in financial performance, but we felt it was critical to understand the underlying shifts in consumer attitudes and behaviours on key marketing measures such as consideration, use and loyalty.

Energised Brand Strength ratios are highly predictive of usage and preference

Vast amounts of brand tracking research are used to evaluate the magnitude of a brand's equity by measuring awareness and regard. From this information, managers can see how 'big' their brand is versus its competition. They can see if it has improved from a previous point in time. While this type of measure of the magnitude of a brand's equity is useful in understanding how successful past marketing efforts have been, this type of equity does not tell us where a brand is heading, just where it is at the time of the measurement.

Understanding Energised Brand Strength relative to a brand's stature is highly predictive of future market success. We found that a brand's ratio of Energised Brand Strength in one period is significantly predictive of preference and usage in the following period (see Figure 4). We analysed

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Figure 4 Brands with high ratios of Energised Brand Strength grew at more than 3x the rate in usage and preference the following year than those with lower ratios

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International Journal of Market Research Vol. 49 Issue 1

over 2000 brands in BAY® over a two-year period from 2003 to 2004. Brands with above-average Energised Brand Strength ratios in 2003 grew by 10% in top box usage and 4% in top box preference over the next year, compared to brands with below-average ratios, whose top box usage and preference grew by only 3% and 1 %, respectively. (Note: for this analysis, brand equity was measured with BAY® measures of esteem and knowledge for each brand, percentile ranked vs all other brands in the US market.)

Energised Brand Strength contributes to pricing power

We have been investigating the impact of the components of Energised Strength on a brand's ability to command a premium price relative to the competition. Why is it that consumers are willing to pay a 20% higher 'dollar per gigabyte' rate for an iPod than its nearest portable music player competitor? Perhaps it has something to do with iPod's Energized Strength - 96.7% - while Sony Walkman's sits substantially lower, at 77.2%.

Within the BAY study we evaluate brands on several variables related to pricing power. We can plot brands on a five-point pricing continuum from 'Worth a premium' down to 'Would only buy on sale'. Relevance has a strong relationship to consideration, but it does not relate to premium pricing. Many highly commoditised brands have very strong relevance but lack what is required to entice consumers to pay more for their brand. Via regression modelling, we looked at how our key brand metrics related to where a brand fell on this pricing continuum. We found that while differentiation significantly impacted a brand's pricing power, our Energy construct explained an incremental 39% of the variance in where a brand fell on the pricing continuum, above the contribution of differentiation alone. Together, differentiation and Energy can explain 25% of the movement of a brand up this pricing continuum.

35

Energised Brand Strength helps overcome price barriers

Looking across categories in our study we have seen that use does not .ilways follow preference. In many categories, consumers use what they prefer, but in others they prefer one brand while using another. Price is one variable that strongly affects conversion from preference to usage. In lower price point categories, such as soup, where there is not substantial variance in price between brands, brand preference explains approximately 99% of the variance in brand usage. Compare this to higher price point categories with greater variances in prices between brands, e.g. in fashion and

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Energy: igniting brands to drive enterprise value

automobiles, where consumers do not always use what they prefer. In fashion only 52 % of brand preference translates to usage, while in automobiles this drops to a 41 % conversion rate.

We explored this relationship further in the automobile sector in order to understand how Energised Strength affected this pricing paradigm. In our BAV 2005 database we looked at 45 unique car brands, specific to make and model. We then went to the Kelley Blue Book and collected its 2005 new car Blue Book values to represent price. Not surprisingly, consistent with the law of demand, price had a negative relationship with usage. Our hypothesis was that a brand's level of Energised Strength could help to disrupt the hurdle that price creates on usage. A log-linear regression was used to determine the impact a brand's Energised Strength relative to price had on its usage. The ratio of Energised Strength to price was used as the independent variable and usage was our dependent. With this simple model, an automobile brand's ratio of Energised Strength relative to its price explained 22.8% of the variation in brand usage. This relation was statistically significant at a 99% confidence level (p-value = 0.010). Since all variables are expressed in natural log form, the Energised Strength/Price coefficient reflects the elasticity of usage with respect to this ratio. So, given this, the model estimated that for a 10% change in Energised Strength to price ratio, usage should increase by 9.3%.

Economic theory defines the demand curve as the quantities of goods or services that consumers are willing to buy at a range of different prices, holding all other factors constant. Marketing has long established that brand is an important influence on consumer demand, and therefore has the ability to shift, increase or decrease the curve. Through our research, we have observed that relevance influences market penetration while differentiation and Energy are strongly associated with pricing power. Our research to this point demonstrates that we have isolated a brand's key components, which we express with our aggregate Energised Strength metric, that most impact consumer demand.

Energised Brand Strength relates to loyalty

Brand loyalty captures the level of emotional and behavioural commitment a consumer has for a brand. The stronger the brand loyalty, the less acceptable competitive options become. Within the BAV data we can isolate users of a brand. Then, based on a set of attitudinal and behavioural variables, we evaluate the depth of the relationship that these users have with the brand. With this information we can quantify the

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International Journal of Market Research Vol. 49 Issue 1

percentage of users for whom a brand resonates. We find these people to be the most loyal to the brand, willing to pay a premium, and less willing to switch to competitive offerings. Across the US brandscape, we have found a significant link between Energised Strength and brand loyalty. (Across the US brandscape of more than 2500 brands, Energised Strength has a statistically significant correlation with loyalty (r = 0040), as quantitatively measured in BAV®.)

The inclusion of our Energy construct adds an incremental 65% to the explanatory power of differentiation alone in driving brand loyalty.

The airline sector is highly commoditised and has generally low loyalty.

The category is driven by price, convenience and availability. Because of commodity perceptions and the high parity of offerings, airlines were early players in the rewards game, creating frequent-flyer programmes in the hope of creating stronger behavioural loyalty from travellers. The emergence of the internet and increasing ease with which consumers had the ability to price shop only exasperated the lack of consumers' brand commitment. While overall weak levels of Energised Strength among airline brands corresponds to low levels of emotional and behavioural commitment from consumers, a few brands have found ways to disrupt the ailments of the category and establish relatively high levels of Energised Strength; jetBlue, Virgin and Southwest all practise innovative marketing and product and service delivery. They do things differently to give the consumer a unique brand experience, which creates advocacy. Their greater Energised Strength is translating to brand loyalty that is approximately twice as high as the rest of the airline category, helping to transcend the cycle of commoditisation that other airlines play in (see Figure 5).

Energised Brand Strength and the S&P 500

Because we have found that Energised Brand Strength is a leading indicator of brand health - related both to measures of marketing performance and of financial performance - we thought it would be interesting to see how this measure would perform in a 'real world' experiment compared to the S&P 500. Since Energised Brand Strength has been demonstrated to relate to higher levels of consideration, use, loyalty and future financial performance, we believe that healthy brands and highmomentum brands (with higher levels of EBS) would have higher expectations for future performance - i.e. they would tend to outperform average brands financially.

37

Energy: igniting brands to drive enterprise value

Airline category: brand loyalty x brand energy

High 18

2

16

14

12

10

British Airways

• American Airlines

• Delta Airlines

• United Airlines

8

• Continental Airlines

6

4

Low 01...------------------------

o 10 20 30 40 SO 60 70 80

High

Low

Energised Brand Strength

Based on BAV' Brand loyalty Model; 'Ib brand resonance

Figure 5 Energy significantly impacts brand loyalty, even in a highly commoditised category

For the purposes of this experiment, we invented a prototype fund based solely on Energised Brand Strength. We invested a hypothetical $10,000 in the top 50 Energy gainers and compared it to an equal investment in the S&P 500 index fund across varying market situations between 31 December 2001 and 30 June 2005, encompassing high, modest and low-growth periods in the S&P 500. (Please see the Appendix for a complete list of brands included in each of the periods that comprise the Energy fund analysis.)

Looking at same-period performance, the Energy fund significantly outperformed the growth of the S&P 500 over the duration of the experiment and in each individual period (see Figure 6). We performed the experiment both on a weighted and unweighted basis, with nearly identical results.

• Overall, the Energy fund outperformed the S&P 500 by more than seven times: the Energy fund netted a 64.2% return vs 8.7% for the S&P 500.

• In a slow-growth period (first half of 2004), the Energy fund did four times better: 10.9% compared to 2.6%.

• In a modest-growth phase (second half of 2004), the Energy fund outperformed the S&P 500 by 45%: 8.97% vs 6.2%.

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International Journal of Market Research Vol. 49 Issue 1

$20,000

$15,000

• S&P 500

o BEX Top 50 Weighted Index

o

o

o

o

o

$10,000

30 Dec 30 June 30 Dec 30 Jun 30 Dec 30 Jun 30 Dec 30 Jun 31 Dec

2001 2002 2002 2003 2003 2004 2004 2005 2005

39

Based on $10.000 Investment: Energy Index portfolio updated each half with top so Energy gainers, portfolio weighted by relative Energy changes, transaction costs ignored

Figure 6 Energy fund outperforms S&P 500 across varying market conditions

Implications and considerations for future research

Energy is a significant addition to our body of knowledge on brands and brand management, adding to the case that brand building is a long-term strategic investment that should not be so easily subject to short-term financial pressures. Linking marketing performance with financial performance measures through a single metric better prepares financial managers to make informed decisions on how to invest in a significant corporate asset. Likewise, brand managers are better prepared to guide marketing efforts to most effectively generate sales, equity and value.

We are continuing to explore several other research areas in regards to understanding Energy and its implementation for a brand or portfolio of brands. One such area is the efficiency of Energy. While the impact of creating Energy for a brand has a significant, positive impact on a brand's performance, we do find varying levels of its effectiveness. Is all Energy created equal? Why is it that the Energy that some brands create only drives a quick bump in market performance while, for others, Energy has

Energy: igniting brands to drive enterprise value

a more profound, long-term impact on the brand's position in the marketplace. The answer to this may have to do with the way Energy converts to stature. Energy that is not directed and harnessed properly or is inconsistent with the DNA of a brand may be less effective at converting to a more sustaining marketplace advantage.

Another area of research has demonstrated that Energised Strength can be transferred. Brands are constantly turning to partnerships and sponsorships to help drive their own businesses. But while jumping into the latest movie sponsorship deal may give a brand a short-term boost, does this effort truly build the brand's deeper equity? Can a partnership deal do more for a brand than drive consumers to 'buy one get one free'? We have found that if you leverage the right partners, ones that deliver high Energised Strength among your target market, the results can be dramatic. In one such partnership, between Southwest Airlines and the National Football League (NFL), we looked at the impact of the partnership over a five-year period and found that Southwest Airlines showed a 72 % gain in Energised Strength among avid NFL football fans (one-third of the US population), a 36% gain among casual NFL fans (a further third), while registering no gains in Energised Strength among those who were not fans of the NFL. These results help to drive substantially greater brand loyalty for Southwest Airlines than airline brands typically attract from consumers.

Another example is the Bose partnership with iPod. Although Bose has a full range of stereo and home theatre equipment, it has more recently begun designing higher-end speaker systems specifically for iPods. Bose's Energised Strength has increased by 20% from 2004 to 2005 among iPod users. Not only did this energy gain shift Bose's brand position, directly increasing its overall Energised Strength and stature ranking, it also helped drive brand usage of Bose by a compelling 44% among iPod users.

Sub-brands and line extensions also have the potential to boost the parent brand if they generate high Energised Brand Strength. In 1998 Colgate channelled its efforts on innovation and launched the Colgate Total sub-brand, focusing on its proprietary 24-hour plaque-fighting proposition. The successful launch of this new Total product line created a sub-brand with high Energised Brand Strength. Not only did the sub-brand become a marketing success, but it also managed to help reinvigorate the Colgate parent brand, driving a 24%' boost in its Energised Brand Strength.

We have substantial evidence that Energised Strength can transfer from one brand to another, but not all partnerships and sponsorships are

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International Journal of Market Research Vol. 49 Issue 1

created equal. We have begun to develop a quantitative process to help evaluate which partnerships should be successful in driving a brand's future equity and momentum compared to those that will offer just another short-term promotional spurt. Obviously, how the partnership is activated is essential, but we are certain that when a brand with high Energised Brand Strength is involved, the odds of success are increased.

We believe that the Energy metric can serve as an organising principle for the creative forces found throughout an entire organisation: motivating business units to work collaboratively to bring innovation forward, rewriting rules and changing behaviour, to align product and service innovation, company culture and practices, customer relationships and industrial design to the benefit of the customer, the brand and the bottom line. This may ultimately be what consumers identify with - and what ultimately is transmitted to the market value. To apply our learnings to managing clients' brands, we have begun to develop a strategic planning framework to more accurately identify how multiple sources of interaction with the brand influence Energy. Through a statistical analysis of the battery of image, product and personality attributes that correlate with Energy across the BAV brand database, we have mapped perceptual territories that consistently influence a brand's Energy.

Because brand interactions are not limited to the domain of marketing, we have named three primary domains that address a majority of brand interactions and also relate to primary areas of company focus: Vision (thought leadership, often originating from corporate leadership, company culture or brand vision), Invention (product innovation and service offerings) and Dynamism (emotion, imagery advocacy and cultural 'buzz' created through marketing and advertising, design, PR, interactive brand experience). The framework is as much art as science, but we are finding that this construct is useful to guide brand managers to effectively align key marketing objectives and inspire planners to think across the enterprise when crafting brand-building strategies.

As Richard Florida and Jim Goodnight (2005) put it in the Harvard Business Review, 'A company's most important asset isn't raw materials, transportation systems, or political influence. It's creative capital- simply put, an ability of an organisation to harness its arsenal of creative thinkers and their ideas into valuable products and services.' Building on this thought, we have come to believe that brands have customers, while hrands with Energy have followers. The idea is not so outlandish. After all, a brand, irrespective of its balance sheet value, is only ever worth something if consumers want to buy it - and buy it again.

41

Energy: igniting brands to drive enterprise value

Appendix: brands included in Brand Energy Fund, by period
2001 FIRST HALF- NCR Corp. Royal Caribbean Toyota Motor ADR
2001 SECOND HALF California Pizza Cruises Mellon Financial Corp.
General Dynamics Novartis AG ADR Revlon Inc. Barnes & Noble
Palm,lnc. Newell Rubbermaid Lowe's Cos. Colgate-Palmolive
eBay Inc. Procter & Gamble McDonald's Corp. Home Depot
General Electric Nokia Corp. ADR Schering-Plough Honeywell
Dell Computer Staples, Inc. International
WebMDCorp. Carnival Corp. Goodyear TIre
Coca-Cola 2001 SECOND HALF Outback Steakhouse Anheuser-Busch
Coach Inc. - 2002 FIRST HALF 7-Eleven,lnc. Nordstrom, Inc.
Barnes & Noble Disney (Walt) AutoZone Inc. Polo Ralph Lauren 'A'
Hewlett-Packard Wal-Mart Stores Delta Air Lines Cad bury Schweppes
NEC Corp. ADR Target Corp. Energizer Holdings Callaway Golf
Cisco Systems Harman International CNET Networks Marriott Int'l
priceline.com Krispy Kreme Six Flags, Inc. Motorola, Inc.
Maytag Corp. Intel Corp. U.S. Steel Corp.
Toyota Motor ADR Fossil Inc. Foot Locker
3ComCorp. MGMMirage 2002 FIRST HALF - FedEx Corp.
Columbia Sportswear Gap (The), Inc. 2002 SECOND HALF Hitachi, Ltd. ADR
Whirlpool Corp. Playboy Enterprises Sharper Image KeyCorp
Tootsie Roll Ind. Nautilus Group Six Flags, Inc. Unisys Corp.
Toys'R'Us Wrigley (Wm.) Jr. Newell Rubbermaid BellSouth Corp.
Pfizer,lnc. Oakley Inc. Monster Worldwide Nissan Motor ADR
Hershey Foods NIKE,lnc. Lockheed Martin
Merck & Co. Kenneth Cole Williams-Sonoma
New York Times Southwest Airlines Reader's Digest 2002 SECOND HALF
Cablevision Sys. Visteon Corp. Johnson & Johnson - 2003 FIRST HALF
Texas Instruments Symantec Corp. Kraft Foods Adobe Systems
Sun Microsystems Reebok International 3M Company Krispy Kreme
Honeywell Wendy's International Ford Motor Microsoft Corp.
International Dow Chemical Gen'l Motors JetBlue Airways
Johnson & Johnson Amer. Standard Coach Inc. Best Buy Co.
Martha Stewart Gillette Ryder System United Parcel Servo
RadioShack Corp. ITT Industries Tiffany & Co. Neiman Marcus
General Mills Kroger Co. Caterpillar Inc. Harman International
Kellogg Neiman Marcus Bristol-Myers Squibb NEC Corp. ADR
Blockbuster Inc. Sony Corp. ADR Boeing Weight Watchers
Honda Motor ADR Whirlpool Corp. Advanced Micro Dev. Amer. Eagle Outfitters
E*Trade Group GlaxoSmithKline ADR Volvo ABADR Goldman Sachs
TImberland Co. Tommy Hilfiger Oracle Corp. SBC Communications
Sara Lee Corp. JetBlue Airways United Parcel Servo Energizer Holdings
U.S. Steel Corp. Electronic Data Sys. Northrop Grumman MGMMirage
Eastman Kodak Xerox Corp. Eastman Kodak Honda Motor ADR
Schwab (Charles) Lexmark International PETCO Animal Pfizer, Inc.
Intel Corp. 'A' DuPont Kimberly-Clark
AnnTaylor Stores Apple Computer Circuit City Stores WebMDCorp.
Citigroup Inc. Hughes Supply CDWCorp. Circuit City Stores 42

International Journal of Market Research Vol. 49 Issue 1

Tupperware Corp. Anheuser-Busch Papa John's Int'l JetBlue Airways
eBaylnc. Smucker (J.M.) McCormick & Co. Briggs & Stratton
Sony Corp. ADR Northrop Grumman Goodyear Tire Texas Instruments
Avon Products Guess Inc. Penney (J.c.) Southwest Airlines
PETsMART Inc. EchoStar Comm. Kraft Foods California Pizza
Kellogg AutoZone Inc. Repsol-YPF ADR Williams-Sonoma
OfficeMax Bed Bath & Beyond Playboy Enterprises Gen'l Mills
priceline.com Lowe's Cos. Costco Wholesale NEC Corp. ADR
Dreyer's Grand Motorola, Inc. Dow Chemical Martha Stewart
Scotts Co. Nokia Corp. ADR Motorola, Inc. Marriott I nt'l
Liz Claiborne Lauder (Estee) Tiffany & Co. Gap (The), Inc.
Wyeth Harman International Procter & Gamble Palm,lnc.
Briggs & Stratton Black & Decker Starbucks Corp. Wyeth
Midwest Express Johnson & Johnson Jones Apparel Group BP PLCADR
Penney (J.c.) Com cast Corp. Johnson & Johnson Weight Watcher's
Unocal Corp. Amazon.com Comcast Corp. Jack in the Box
BPPLCADR Lucent Technologies Nordstrom, Inc. 3M Company
Novell, Inc. Columbia Sportswear Fuji Photo ADR FedExCorp.
Oshkosh B'Gosh Saks Inc. Staples, Inc. lockheed Martin
Exxon Mobil Corp. Tiffany & Co. Capital One Fin'l Walgreen Co.
ConAgra Foods Accenture Ltd. AnnTaylor Stores General Dynamics
AnnTaylor Stores Kenneth Cole Guess Inc. Eastman Kodak
Amer. Standard Raytheon Co. EarthLink, Inc. OfficeMax
Morgan (J.P.) Chase VeriSign Inc. Sony Corp. ADR Kellogg
Jones Apparel Group Bank of America Gap (The), Inc. Microsoft Corp.
Monsanto Co. Whirlpool Corp. priceline.com Canon Inc. ADR
Texas Instruments PhillipS-Van Heusen Yahoo! Inc. Lowe'sCos.
Lowe's Cos. Unisys Corp. Georgia-Pacific Group Heinz (HJ.)
Ilughes Supply Maytag Corp. Oakley Inc. Unilever PLC ADR
Applebee's McCormick & Co. Caterpillar Inc. Merrill Lynch & Co.
International Skechers U.S.A. Bausch & Lomb Taro Co.
Kohl's Corp. Lauder (Estee) Alcoa Inc.
Nordstrom, Inc. Kenneth Cole Colgate-Palmolive
2003 FIRST HALF - Abercrombie & Fitch Home Depot Altria Group
2003 SECOND HALF Viacom Inc. Ethan Allen Interiors priceline.com
Disney (Walt) Advanced Micro Dev. Energizer Holdings Payless ShoeSource
MGM Mirage Carnival Corp. Playtex Products
IloIrley-Davidson Kohl's Corp. U.S. Steel Corp.
California Pizza 2003 SECOND HALF Taro Co. Sears, Roebuck
KomCorp. - 2004 FIRST HALF Polo Ralph Lauren 'A' Callaway Golf
Oakley Inc. Coca-Cola NEC Corp. ADR Gen'l Motors
Unllever PLC ADR eBay Inc. Ethan Allen Interiors
Gl,lxoSmithKline ADR Microsoft Corp. EarthLink, Inc.
Goodyear Tire Du Pont 2004 FIRST HALF - Dreyer's Grand
1I.!rnes & Noble Columbia Sportswear 2004 SECOND HALF Tupperware Corp.
Ilctlder'~ Digest Alcatel ADR PepsiCo, Inc. Office Depot
Deere & Co. Eastman Kodak Six Flags, Inc.
Vlslcon Corp. Gen'l Electric Nissan Motor ADR
~ymanlec Corp. United Parcel Servo Toys'R'Us 43

Energy: igniting brands to drive enterprise value

References

Aaker, D. (1991) Managing Brand Equity: Capitalizing 011 the Value of a Brand Name. New York: Free Press, pp. 17,271.

Florida, R. & Goodnight, J. (200S) Managing for creativity. Harvard Business Review, 83, 7.

Gregory, ].R. & McNaughton, L. (2004) Brand logic: a business case for communications. Journal of Advertising Research, 44, 3.

Hupp, O. & Powaga, K. (2004) Using consumer attitudes to value brands: evaluation of the financial value of brands. Journal of Advertising Research, 44, 3.

Jacobson, R. & Mizik, N. (200S) Valuing the brand asset and its components.

Report to Y &R, 14 March.

Keller, K.L. (2003) Strategic Brand Management: Building, Measuring, and Managing Brand Equity (2nd edn). New Jersey: Prentice Hall, p. 492.

Mizik, N. & Jacobson, R. (200S) How brand attributes drive financial performance.

Marketing Science Institute, Working Paper Series, 3, 05-003.

Stobart, P. & Perrier, R. (1997) Brand Valuation. Premier Books.

Acknowledgements

We thank Natalie Mizik, Professor of the Columbia University Graduate School of Business, and Professor Robert Jacobson of the University of Washington School of Business for their collaboration in this work. The views stated in this paper are ours and do not necessarily reflect those of either Natalie Mizik or Robert Jacobson.

About the authors

John Gerzema is the Chief Insights Officer for Y&R Brands. He is charged with leading strategy and insights for the Young & Rubicam Brands companies globally, including its account planning, research and brand strategy division, Brand Asset Valuator®, the largest database of brands in the world. He earned his Master's Degree from the Medill School of Journalism at Northwestern University.

Ed Lebar is EVP, Managing Director of BrandAsset® Valuator, Worldwide. Before his career in marketing and advertising, Ed was a Professor of Economics at CCNY and Finch College. He now oversees the implementation of BrandAsset® Valuator consulting across all lines of business and worldwide accounts within Y &R. He holds advanced degrees in economics from NYU and the University of Denver, and a BA from Syracuse University.

Michael Sussman is Senior Vice President and Director of Analytic Planning and Insights for Y&R North America. A key focus of his current

44

International Journal of Market Research Vol. 49 Issue 1

role is to seamlessly integrate BrandAsset® Valuator and other quantitative driven tools into the brand planning process at Y&R. He holds a Ph.D. in Applied Research and Evaluation in Psychology from Hofstra University.

Jason Gaikowski is Vice President, Director of Brand Strategy at the Knowledge Group at Y&R. He leads a team of brand analysts, researchers and integrated specialists using BrandAsset® Valuator to create strategic plans for clients like Miller, Sports Illustrated, Intel, Samsung, and EM!. Jason holds a BA in English Literature from the University of Minnesota.

Address correspondence to: John Gerzema, Y&R, 285 Madison Avenue, New York, NY 10017, USA

Email: John.Gerzema@yrbrands.com

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