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2 BrandEquity-2 PDF
2 BrandEquity-2 PDF
“ Brand Management”
MK542E
Chapter Overview
Overview
Learning Objectives
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Introduction
Brands have become part of consumers’ life and they are ready to pay higher prices
A brand is a
Includes value attached to it that can make profits, increase market share and enhance
organizational performance
“the set of associations and behavior on the part of a brand’s customers, channel
members, and parent corporation that permits the brand to earn greater volume or
greater margins than it could without the brand name” (Leuthesser, 1988)
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This partly explains why brands have been added to company’s balance sheet
In 1988, Nestlé paid six times of the book value for acquisition of brands; for example,
Kit Kat
Quality Street
Smarties, etc.
Unless, a brand earns a high volume of sales and high margins the brand has no value
The definition only takes into account financial value of the brand
Brand Assets
Awareness
Saliency
Image
Relationship
Patents
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Market share
Market leadership
Loyalty rate
Price premium
Growth rate
Brand Value
The very first brand valuation done by Interbrand in mid 80s for Rank Hovis Mcdougall
It reflected the developments in the previous year and how it effected the company’s
brand value
In London Stock Exchange, it was allowed in 1989 to have intangible assets on the balance
sheet
MCDonald’s - no
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Value of brand is equal to cost of product development, test marketing, and marketing
communication
It includes historical costs – the resources that have already been invested in brand
Also considers the amount of money that will be required to replace a brand
It seeks to measure future benefits by assessing the amount to create a similar brand from a
scratch
It might be subjective
Other issues may be related to the time period over which accounting needs to be done
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Based on the amount customer or the market is willing to pay for the brand
This method ignores the customers’ reasons behind purchase which may be personal
It assumes that the stock price of a company will reflect the brand value and is calculated as
Brand Value =
(stock price x number of shares) – (tangible assets + all remaining intangible assets)
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Comparable
In similar target group, channels of distribution, advertising and promotion it may provide a
reasonable evaluation
Premium price
However, the primary objective is not to charge premium but to create higher future demand
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Simon & Sullivan (1993 ) developed methods of separating brand value from other assets
Firm’s total brand equity can be measured by subtracting the estimated economic value (not
just book value) of tangible and intangible assets from its stock market value
Focus too much on earning capacity, future revenues, and market capitalization
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Takes into account attitudes of the consumer and defines (Leuthesser, 1988)
Early definition included customers only; later included other stake holders as well
Parent corporation
Therefore, includes brand’s names, symbols, associations, and reputation to all target audience
who interact with it
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Brand equity is made of five elements (brand awareness, brand association, perceived quality;
proprietary brand assets, and brand loyalty)
Create awareness
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Is created through repeated exposure of the brand and appropriate association with the
related product category
High awareness can considered as a solid base for good financials and for brand loyalty
Brand loyalty
To realize long term benefits, bilateral benefits need to be taken into consideration
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Value of brand and its equity is derived from the actions of the customers
“the differential effect that consumer brand knowledge has on their response to brand
marketing activity” (Keller, 2003)
An indirect approach to evaluate brand equity by assessing potential sources for brand
equity by measuring consumer mindset or brand knowledge
Thoughts
Feelings
Perceptions
Images
Experiences, etc. 16
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Categories Characteristics
- Quantitative procedures to compute a monetary value
for brand equity.
- Consumer’s perspective not taken into account.
- Used to value brand equity in the context of
Business finance acquisitions, licensing and analyusts’ options.
models - Referring to cost-based approach; market-based
method; income-based or earning capacity method;
market value orientated or comparables; and premium
pricing.
Brand valuation
models
- Brand equity seen as a qualitative construct that can be
made manifest using scorecards.
- Not empirically verifiable.
- High degree of subjectivity in the choice of factors
Psychographic/ explaining brand strength.
behaviorally - Endeavour to explain what goes on in the “hearts and
orientated models minds” of customers to determine a brand’s value.
- Refer to Aaker’s brand equity approach; Keller’s
customer based brand equity; and Young & Rubicam
BAV.
Brandz
Brandz Top
Top 100
100 brands
brands of
of 2018
2018
https://www.youtube.com/watch?v=CUHkJr-rixA
https://www.youtube.com/watch?v=CUHkJr-rixA
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https://www.youtube.com/watch?v=jECdQQEYgYw
2_2_Overview.mp4
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Brandz
https://www.youtube.com/watch?v=u7oIjjq3z80
2_3_BrandZMethod.mp4
Interbrands
https://www.youtube.com/watch?v=tK2ozWQ0HA4
2_4_InterbrandMethod.mp4
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It helps in
Turning the marketing department from a cost center into a profit center
Allocating marketing expenditure according to benefit each business unit derives from the
brand asset
Organizing and optimizing the use of different brands in the business mix
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It helps in
Communicating where appropriate the economic value of the brand to the capital markets in
order to support share prices and obtain funding
Tax planning
Securitizing borrowing
Litigation support
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Emerging Trends
Institute of Practitioners in Advertising (IPA) has come up with new ways of reporting
brand intangibles
Should include human capital, customer service, marketing, customer service in KPIs, customer
retention, numbers, retention rate, and customer complaints
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https://www.youtube.com/watch?v=sQLlPC_alT8
2_5_Brand.mp4
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Case Study
Nike Incorporated
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dildar.hussain@rennes-sb.com
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