Measuring Outcomes of Brand

Equity: Market Performance

Chapter 11

UNIT – 4 MEASURING BRAND EQUITY Measuring Sources of Brand Equity

– Research Methods and Techniques – Conducting Brand Audits –
Measuring Outcome of Brand Equity (Brand Performance).
 Brand Equity
• It is multidimensional concept and complex
which require many different type of
measures.
 The concept of brand equity
(Franzen, 1999)
Mental Brand
response
Market response

Brand Equity

Mental Brand Behavioural Brand Financial/Economical

Equity Equity Brand Equity

Brand behavioural response

 Brand EQUITY vs Brand VALUE

Intangible Asset Tangible Asset

Market Performance Approaches (Measuring
Outcome)
1. Comparative Methods
a. Brand based comparative approaches
b. Marketing based comparative approaches
a. Conjoint Analysis
2. Holistic Methods (Overall Value of the Brand)
c. Residual approach
a. Scanner Panel
b. Choice Experiments
d. Valuation approach
a. Cost Approach
b. Market Approach
c. Income Approach
 Market Performance Approaches
• 1. Comparative Methods – are research studies
or experiments that examines consumer
attitudes and behavior toward a brand to
directly estimate specific benefits arising from
having a high level of awareness and strong,
favorable and unique brand associations.
1. Brand based comparative approaches
2. Marketing based comparative approaches
3. Conjoint Analysis
 Brand-based comparative approaches
• Use experiments with one group of consumers
responds to an element of the marketing program
or some marketing activity when it is attributed to
the target brand and another group responds to
that same element or activity when it is attributed
to a competitive or fictitiously name brand.
• Example – Blind testing
• Can be also with brand name
Marketing based comparative approaches

• Use experiments in which consumers respond

to changes in elements of the marketing
program or marketing activity for the target
brand or competitive brands.
– To assess price sensitivity and willingness to pay
thresholds for different brands.
– Different ad strategies
– Potential brand extensions
• Proposed extension for Coca cola
– Ice Cream
– Yogurt
– Snack Crackers
– Potato Chips
 Conjoint Analysis
• Conjoint analysis is one of the most effective
approaches for extracting consumer
preferences regarding the purchasing process
and generating quantitative estimates of the
value or weight they associate with different
product features, including price and brand. 
 Conjoint Analysis
• Is a survey based multivariate technique that
enables marketers to profile the consumer
decision process with respect to products and
brands.
 2. Holistic Methods
• Place an overall value on the brand in either
abstract utility terms or concrete financial
terms.
– Residual approach examines the value of the
brand by subtracting consumers’ preference for
the brand based on physical product attributes
alone from their overall brand preferences.
– Valuation approach places a financial value on
brand equity for accounting purposes.
 Residual Approach
• The rational behind residual approaches is the
view that brand equity is what remains of
consumer preferences and choices after we
subtract physical product effects.

Choice
Scanner
Experiment
Panel
s
 Residual Approach
• Scanner Panel – analysis brand value based on
data sets from supermarket scanners of
consumer purchases. – difference in revenues
between a brand and a generic or private
lable.
• Choice Experiments - eliciting preferences
that can be used in the absence of revealed
preference data. 
Valuation Approaches

• Widely held belief is that much of corporate value of it is wrapped up in the value of a brand

Company Brand Value (in $ billions)* Total Value (in $ billions)** Brand Value as a Percentage of Overall
Value
Apple 184.1 868.88 21%
Google 141.7 729.1 19%
Microsoft 79.9 659.9 12%
Coca-Cola 69.7 195.5 36%
Amazon 64.7 563.5 11%
Samsung # 56.2 300 19%
Toyota 50.3 188.2 27%
Facebook 48.2 420.8 11%
Mercedes 47.8 79.3 60%
IBM 46.8 142 33%

*Source: Data are for 2017; http://interbrand.com/best-brands/best-global-brands/2017/ranking/

**Source: Market Capitalization information based on data from CRSP Monthly

# Samsung market capitalization converted to US Currency from South Korean Won
 Valuation Approaches
• Valuation is mostly by intangible assets
• Brand Finance has estimated that brand value
for Nike is made up as much as 84% of total
company value in 2006.
 Approaches – Brand Equity
• Cost Approach – amount of money that would
be required to reproduce or replace the brand.
• Market Approach – Present value of the future
economic benefits to be derived by the owner
of the asset.
• Income Approach – discounted future cash
flow from the future earnings stream for the
brand. Royalty earnings, premium profits etc
 Coast Oriented Brand Valuation
• Historic Cost or Replacement Cost
• Brand is an asset based on resources that have
already been invested in it
• Marketing and R&D expenditures
 Market Value

• Brand Value = Stock Price x No. of shares –

Tangible assets + intangible assets
 Income Approach - types
• Capitalizing Royalty earnings from a brand
name
• Capitalization the premium profits that are
earned by a branded product
• Capitalizing the actual profitability of a brand
after allowing for the costs of maintaining it
and effects of taxation
• Additional Topics
Brand Equity Index
BrandZ
BrandZ
 Moran Brand Equity Index
• Brand Equity = Effective Market Share (%) *
Relative Price * Durability (Loyalty Index)
– Effective Market Share (%) = weighted average
(Share %, all segments)
– Relative Price = Your Price ($) – Avg Price, All
Products in Market ($)
– Durability = Expected Repeat Customers (#)/ Total
Customers (#)
 Interbrand’s Brand Valuation Model

• Brand Earnings = Total Earnings – Earnings

from Tangible Assets.
 Brand Asset Valuator

Brand Vitality which refers to the current and future growth potential that a brand holds in it.
Brand Stature which refers to the power of a brand.