Measuring Brand Equity

May 2010

BrandAmplitude, LLC All Rights Reserved

Brand Strategy Process

Brand Audit
Target & Insight Competitive Assessment Brand Inventory

Points of Parity and Difference

Equity Pyramid

Positioning
Objectives & Metrics

Personality

Brand Execution
Brand Elements Communications Strategy Brand Experience Map CRM & Community Building

Equity Makes a Brand Strong

Brand equity is a set of assets (and liabilities) linked to a brands name and symbol that adds to (or subtracts from) the value provided by a product or service to a firm and/or that firms customers. ---David Aaker, 1996

Customer Based Brand Equity (CBBE)

Differential effect of knowledge on response to marketing

Perceptions Impact Behavior Perceptions Impact Behavior

$5

$50

$500

$5,000

Now which box would you choose?

Kellers Brand Equity Framework: Sources of Brand Equity

Brand Awareness

Brand Recall

Brand Recognition

Brand Knowledge

Types of brand associations

Favorability of associations

Building Blocks

Relevance Believability

Brand Image
(Familiarity)

Strength of associations
Uniqueness of associations

Personal relevance

Points of parity Points of difference

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Perceptions Impact Behavior Perceptions Impact Behavior

$1.89

$2.49

$2.29

Which jar would you choose?

Price & Quality Perceptions Drive Brand Choice

Price Brands
49% rate quality superior; 64% say cost is not a barrier to purchase.

52% rate quality superior; 42% say cost is not a barrier to purchase.

?
57% rate quality superior; 44% say cost is not a barrier to purchase.

Source: Brand Amplitude, proprietary research Sept., 2005

n=417 male and female primary grocery shoppers who purchased spaghetti sauce in past 3 months 8

It can Which Decision Drivers Can relevant choice Discern be difficult to determine what relevant? Hard are drivers? But Underlying ideas are mostare the mostBeWhich todrivers.

CBBE can be thought of as a bridge.

What if everyone thought (and acted) like

Our Best Customers?

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Why Why Measure Brand Equity? Measure Brand Equity?

Understand drivers of brand value in order to support strategic decision making.
If you dont know where you are, its hard to decide how to get there.

To evaluate efficacy of brand value building programs -- ROMI.

If you dont know where youre going, any road will get you there.

Understand Decision Drivers

Understanding customers decision drivers gives companies insights about how to influence customer choices.

Customer Values, Self-Image & Goals

Choice A

Choice B
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Assess Marketing Efficacy

The health of your brand is a prime indicator of the health of your companyThe most effective way to monitor your brand is to combine consistent real-world research with the use of quantitative models to measure, and even predict, change in key variables.
Jim Gregory, The Best of Branding, 2004, p 57

What Are the Key Measures?

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The Usual Approaches

Most commonly used metrics:
Changes in brand awareness Changes in market share Changes in consumer attitude toward the brand Changes in purchase intent Return on objective Lifetime customer value Changes in the financial value of brand equity
Source: ANA, State of ROMI Measurement, 2007

81% 79% 73% 59% 36% 23% 20%

Whats Wrong With These Metrics?

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Measuring Brand Equity

Need to begin with a clear definition of the construct we want to measure. There is no consistent definition of ROI," noted one respondent. Marketing organizations are instead using "surrogate" metrics, ranging from input-related metrics such as awareness and brand image in financial services to market share and growth in consumer packaged goods companies.
Source: ANA/Booz Allen online survey of over 370 marketing and non-marketing managers of mostly publicly traded companies. October, 2004. About 80% of the respondents were senior or middle managers representing 14 industries, with over 90% of the respondents distributed evenly between Consumer Packaged Goods, Financial Services, Retail, Technology, Telecommunications, Manufacturing, Health, Auto and Professional Services industries.

Measuring Brand Equity

Definitions of Marketing ROI
66% 57% 55% 55% 51% 49% 40% 34% 34% 30% 25% 23% 21% 19% 17% 6% Incremental sales revenue generated by marketing activities Changes in brand awareness Total sales revenue generated by marketing activities Changes in purchase intention Changes in attitudes toward the brand Changes in market share Number of leads generated Ratio of advertising costs to sales revenue Cost per lead generated Reach and frequency achieved Gross rating points delivered Cost per sale generated Post buy analysis comparing media plan to actual media delivery Changes in the financial value of brand equity Increase in customer lifetime value Other/none of the above
Marketing Mix Model Common Metrics Across Organization Currently Creating ROI Model Not Able High Level Estimates

How Do You Prove ROI?

30% 30% 25% 20% 15% 10% 5% 0%
Profit/Revenue

13% 13% 13% 13% 9% 4% 4%

Source: ANA/Forrester Survey of 300 executives, http://www.ana.net/news/2004/07_19_04.cfm

Source: The Capre Group,

Compare Spending Against Competitiors

Sales Force Productivity

Brand LoyaltyDefined Brand Equity Equity Underlies

Loyal Behavior
Psychological Preference

The mechanism that underlies (equity) is agreed to be a latent value in the mind of customers that is exhibited through its impact on behavior. Positive equity results in behavior that benefits the brand through purchase frequency, brand loyalty, price insensitivity, willingness to recommend and more.
-Dr. Tom Reynolds & Carol Phillips, In Search of True Brand Equity Metrics: All Market Share Aint Created Equal, paper in review, Journal of Advertising Research

Brand Equity Defined

Brand equity can be measured by determining loyal users contribution to category profits (ideally) and to brand sales (realistically).
Loyalty Contribution by Brand
Customers who devote 80% or more of requirements to the brand

37.4% 34.5% 28.0%

Premium Brand?

Price Brand?
56% Sales 40% Sales

76% Sales

Brand A

Brand B

Brand C

Every brand could benefit from having the core group represent a larger share of its total franchise. Dr. Tom Reynolds

Now, what Are the Key Measures?

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What The Experts Say

Aaker Keller Y&R EquiTrend Interbrand Aaker Keller Y&R EquiTrend Interbrand

Associations

Market Trend

Awareness
Brand Trend Differentiatio n

x
x x

Mktng Support
Org. Associations Perceived Quality

x x

xx

Dist. Coverage Esteem

International

Perceived Value

x
x

Personality
Price Premium

x
xx

x x
x

Knowledge
Leadership

x
x xx x

Relevance
Salience

Legal Protectn

User Sat./Loyalty

xx x

x Market Share Aaker, Building Strong Brands, 1996; K. Keller, Strategic Brand Management, 2003 Stability Sources: D.

The Right Approach

Linking customer perceptions and market performance to impact on financial value to assess ROMI.
Activity & Program Metrics Customer Perceptions & Behavior Market Performance

ROMI

Financial Value

You cant put attitudes in the bank!

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The Right Approach

Multiple measures at different levels of the value chain, benchmarked and tracked consistently over time:
Activity & Program Metrics
Marketing Investment Program Quality Clarity Relevance Distinctiveness Consistency Channel expansion

Customer Perceptions & Behavior

Brand awareness Brand familiarity/associations Brand evaluations/attitudes Customer acquisition/ conversion Customer retention Attachment/Loyalty

Market Performance
Sales Market share Price premium Profitability Price elasticity Expansion success

The Right Approach

Linking customer perceptions and market performance to impact on financial value to assess ROMI.
Activity & Program Metrics Customer Perceptions & Behavior Market Performance

ROMI

Financial Value
Stock price P/E ratio Market capitalization Brand contribution (i.e., CoreBrand index)
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The Right Approach

Customer Based Brand Metrics
Based on CBBE model Traditional marketing and communications tracking Examples: Millward Brown BrandDynamics, Y&R Brand Asset Valuator

Incremental Brand Performance

Short term incremental sales volume, premium pricing, other outcomes Historical modeling and predictive modeling

Branded Business Value

Financial value of intangible assets Measure increases or decreases in brand asset value over time

Measuring Brand Value, Don E. Schultz & Heidi F. Schultz, Kellogg on Branding, 2005

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Equity Measure Examples Examples

Soft Drink Which brand of soft-drink do I consume most often? Which is my first preference of soft drink brands Top two boxes purchase intent or which brand do I expect to consume on my next consumption occasion?

Wireless Brand owned/used Intention to Switch in next 3, 6, 12 months? What brands would I consider purchasing?
Packaged Food Price and Quality perceptions Number of purchases of last 10 allocated to each brand Future intent to buy

Brand Valuation and Measurement Firms Measurement Firms

Financial Value

Strategic Value

Are Brand Equity and Brand Valuation the Same?

Brand Equity vs. Value

(For most companies) the operative question is less what their brand is worth than what their brand could do for them in terms of revenue and profit. gaining an understanding of the causal activities related to the changes would make brand equity measures more actionable.
--Dr. Tom Reynolds & Carol Phillips, In Search of True Brand Equity Metrics: All Market Share Aint Created Equal, paper in review, Journal of Advertising Research

See also: The Best Global Brands, Businessweek, August 4, 2004; Microsoft, GE top brand equity study, BtoB, 1.19.04. and Dont Waste Time with Brand Valuation, MarketingNPV.com, October 2004.

NewNew Ideas in Measurement Equity Measure Ideas

Net Promoter Score Fred Reichfeld, The Loyalty Effect Customer Equity Roland Rust Sum of the lifetime values of current and future customers

Customer Income Flows Don Schultz

Royalty Rate Share Tiering

Share Tiering
Objective:
Relate changes in consumer behavior and perceptions to changes in financial performance.

Loyalty Contribution by Brand

Customers who devote 80% or more of requirements to the brand

37.4% 34.5% 28.0%

Consumer Measures:
1) 2) 3) 4) Relative barrier of price Brand Quality perceptions Brand purchase loyalty Self-report future brand purchase trend

76% Sales

56% Sales

40% Sales

Brand A

Brand B

Brand C

In Search of True Brand Equity Metrics: All Market Share Aint Created Equal, Journal of Advertising Research, June 2005, Tom Reynolds and Carol Phillips
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Other Brands

Base= 164 Male and Female Primary Shoppers 24-64 Who purchased spaghetti sauce at a grocery store, supermarket or club store in past 3 mos. (Sept 2005) Ragu Volume Q1 Q2 122.0 36.8 84.2 42.0 1.6 4.4 Prego Volume Q1 Q2 27.0 25.8 58.2 39.3 4.2 4.8 Share of Prego Volume Q1 Q2 15.0% 14.3% 32.3% 21.8% 2.3% 2.7% Store Brand Volume Q1 Q2 17.6 15.8 0.0 4.8 0.0 0.0 Other Brand Volume Q1 Q2 Q3 P1 32.2 41.8 4.0 P2 27.4 30.0 3.2 P3 0.0 12.8 8.0 159.4 Share of Other Brand Volume Q1 Q2 Q3 P1 20.2% 26.2% 2.5% P2 17.2% 18.8% 2.0% P3 0.0% 8.0% 5.0% 100.0%

Q3 5.2 20.0 5.8 322.0 P1 P2 P3

P1 P2 P3

Q3 13.2 0.8 6.8 180.1 Q3 7.3% 0.4% 3.8% 100.0%

Q3

P1 P2 P3

P1 P2 P3

Share of Ragu Volume Q1 Q2 Q3 37.9% 11.4% 1.6% 26.1% 13.0% 6.2% 0.5% 1.4% 1.8% 100.0%

P1 P2 P3

2.8 0.8 0.8 42.6 Share of Store Brand Volume Q1 Q2 Q3 P1 41.3% 37.1% 6.6% P2 0.0% 11.3% 1.9% P3 0.0% 0.0% 1.9% 100.0%

Base = Those who do say they intend to purchase less in the future. Ragu Loyalty Servings Q1 Q2 Q3 97.6 24.2 4.0 71.4 6.4 0 0 0 0.4 204.0 Ragu Loyalty Share Q1 Q2 Q3 80.0% 65.8% 76.9% 84.8% 15.2% 0.0% 0.0% 0.0% 0.0% Prego Loyalty Servings Q1 Q2 15.4 8.0 30.0 4.2 0.0 0.0 Prego Loyalty Share Q1 Q2 57.0% 31.0% 51.5% 10.7% 0.0% 0.0% Store Brand Loyalty Servings Q1 Q2 Q3 9.6 3.0 0.6 0 0.8 0 0 0 0 14 Store Brand Loyalty Share Q1 Q2 Q3 54.5% 19.0% 21.4% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Other Brand Loyalty Servings Q1 Q2 Q3 P1 25.0 27.6 1.6 P2 20.0 18.6 2.4 P3 0 10.0 0 105.2 Other Brand Loyalty Share Q1 Q2 Q3 P1 77.6% 66.0% 40.0% P2 73.0% 62.0% 75.0% P3 0.0% 78.1% 0.0%

P1 P2 P3

P1 P2 P3

Q3 12.0 4.0 4.8 78.4 Q3 90.9% 500.0% 0.0%

P1 P2 P3

P1 P2 P3

P1 P2 P3

P1 P2 P3

Share Tiering Measures

Loyalty Loyalty Contribution Top Box Volume Equity (Loyalty Contribution (Volume Share Volume as (Top Box attributabl (Share of Top Percent of Volume as Market e to loyal loyal user Box Brand Percent Brand Share users*) volume*) Volume Volume) Volume) 45.7% 25.6% 6.1% 22.6% 204.0 78.4 14.0 105.2 50.8% 19.5% 3.5% 26.2% 97.6 15.4 9.6 25.0 63.4% 43.5% 32.9% 66.0% 30.3% 8.6% 22.5% 15.7%

Total Volume Ragu Prego Store Other 322.0 180.1 42.6 159.4

TOTAL 704.1 100.0% 401.6 100.0% 147.6 57.0% 21.0% Volume is expressed in units of jars, cans or tubs. *Loyal users are defined as respondents who indicate they devote 4 or 5 out of last five purchases to one brand. *Top Box = respondents rating brand Q1/P1

Measuring Brand Value

Companies Clueless On Brand Value, Evaluations Needed
by Karlene Lukovitz, Tuesday, Oct 28, 2008 3:15 PM ET

Now that The Brand Bubble has spelled out that most brands--and their companies--are greatly overvalued by the financial markets, we find out that those on the inside do not have a clear idea of what their brands are worth, either. More than half (55%) of senior marketing executives lack a quantitative understanding of brand value within their organizations, according to a recent survey by the Association of National Advertisers and global branding consultancy Interbrand. Further, because brand value's effect on corporate value is not clearly quantified, it isn't being incorporated in decision-making: 64% of the 118 marketing officers and senior marketing executives polled said that brands do not influence decisions made at their organizations.
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Measuring Brand Value

Among those who said brands don't influence corporate decisions, the underlying causes cited include: Incentives that don't support brand importance (51%); Inability to prove the brand's financial benefit (49%); Existing branding expertise is not widely accepted (40%);

Metrics do not support the brand's importance (39%); Budgets are focused on communications activities (32%);
Brand is not included in the "sphere of influence" (28%); Branding expertise does not yet exist (15%).
Companies Clueless On Brand Value, Evaluations Needed
by Karlene Lukovitz, Tuesday, Oct 28, 2008 3:15 PM ET
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What Are the Key Measures?

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Key Takeaways
There Is No Silver Bullet
Each firm requires unique measures MSI Report Tim Ambler

Use a mix of measures

Include perceptual (knowledge), financial impact and behavioral (loyalty) measures Tie measures to strategy what behaviors and attitudes drive brand value for customers and investors?

Consistency is Key
Movies work better than snapshots Build knowledge over time

Prioritize
More likely to suffer from too much data than from too little

Recommended Resources
Brand Vitals: Essential Principles for Monitoring Brand Health, Carol Phillips and Judy Hopelain, 2008 http://www.brandamplitude.com/whitepapers/Brand%20Vitals%20vF.pdf In Search of True Brand Equity Metrics: All Market Share Aint Created Equal, Tom Reynolds and Carol Phillips, Journal of Advertising Research, 2005 http://www.brandamplitude.com/whitepapers/all_market_share_aint_created_equal.pdf

On Track: The Next Generation of Brand Tracking, Judy Hopelain, AMAs Marketing Management, October, 2005 http://www.brandamplitude.com/whitepapers/on_track.pdf
Measuring Brand Value, Don E. Schultz and Heidi F. Schultz, Kellogg on Branding, 2005, Ch 13 Make a Case for Your Brand, Susan Fournier, Advertising Age, November 26, 2007 Brand Metrics: good, bad and dont bother, Scott Davis, Strategy, January, 26, 2004

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