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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 subtracts from) the value provided by a product or ---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?

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

52% rate quality

Price Brands
49% rate quality

purchase.

purchase.

?
57% rate quality

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

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

CBBE can be thought of as a bridge.

What if everyone thought (and acted) like

Our Best Customers?

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Why Measure Brand Equity? Why Measure Brand Equity?


Understand drivers of brand value in order to support strategic decision making.
hard to decide how to get there.

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


any road will get you there.

Understand Decision Drivers


Understanding 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

monitor your brand is to combine consistent real-world research with the use of quantitative models to

Jim Gregory, The Best of Branding, 2004, p 57

What Are the Key Measures?

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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%

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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

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


How Do You Prove 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
30% 25% 20% 15% 10% 5% 0%
Profit/Revenue Marketing Mix Model Common Metrics Across Organization Currently Creating ROI Model Not Able High Level Estimates

30%

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 Equity Defined Brand Loyalty Underlies Brand Equity


Loyal Behavior
Psychological Preference

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,
-Created Journal of Advertising Research

Brand Equity Defined


to category profits (ideally) and to brand sales (realistically).
Loyalty Contribution by Brand
Customers who devote 80% or more of requirements to the brand

34.5% 28.0%

37.4%

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

User Sat./Loyalty

xx x

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

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

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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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Customer Based Brand Metrics


Based on CBBE model Traditional marketing and communications tracking

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

their brand is worth than what their brand could do for them of the causal activities related to the changes would make

-Journal of Advertising Research

Businessweek, BtoB,

New Equity Measure Ideas New Ideas in Measurement


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

34.5%

37.4%

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

28.0%

76% Sales

56% Sales

40% Sales

Brand A

Brand B

Brand C

, 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

Tiering
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

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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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
Build knowledge over time

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

Recommended Resources
Hopelain, 2008 http://www.brandamplitude.com/whitepapers/Brand%20Vitals%20vF.pdf Reynolds and Carol Phillips, Journal of Advertising Research, 2005 http://www.brandamplitude.com/whitepapers/all_market_share_aint_created_equal.pdf Management, October, 2005 http://www.brandamplitude.com/whitepapers/on_track.pdf Kellogg on Branding, 2005, Ch 13 Advertising Age, November 26, 2007 Strategy, January, 26, 2004

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