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Executive Summary

"Brand value is very much like an onion. It has layers and a core. The core is the user who will
stick with you until the very end."
Edwin Artzt

Branding is that valuable point that acts as a point of connection between

consumers and an organization. It is a tool used by marketers to sell products
to consumers. Brands can express vision, mission, and process in addition to
communicating differentiation, relevance and value. By doing so, branding
can continue to extend its relevance beyond the world of marketing and take its
rightful place as an asset to the CEO. However, to realize its operational and
strategic potential, branding must evolve beyond its jargon and artificial models
to play a more dynamic and inclusive role that bridges the connection between
the various
The tools used for understanding customer data have grown in sophistication.
This growth is complemented by improved methods for collecting that data,
managing a continuing relationship with consumers. However, just as Moores
Law (suggesting that computing power would roughly double every 18 months)
has applied to marketing sophistication and it is similarly true for consumer
expectations, which are being transformed by new possibilities for interaction and
communication. Generating and sustaining its competitive advantage resides
in a companys ability to push the boundaries of conventional thinking and by
setting standards that are more ambitious.
The measurement and management of brand value has become a major issue
for marketers and marketing researchers over the last several years. The
concept of brand value and brand equity goes well beyond the legal concept
of a trademark or the accounting concept of goodwill. Brand equity
encompasses a gamut of intrinsic values, or equities that adds to the tangible,

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measurable benefits delivered by a particular product or service. These intrinsic
values may include things such as the image imparted to the purchaser,
advertising quality, advertising quantity, and trust, long-term reputation for
reliability, customer support, social responsibility, and so forth
The challenge to both marketers and marketing researchers is determining
how we measure and manage the intrinsic value of a brand (its equity) and how
do we tie that value and our attempts to improve value to customer loyalty.

Is Market Value a reflection of Brand Value?

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Crisis in Marketing
Traditional methods for brand building and marketing have lost their
effectiveness.
According to a study published by Krober-Riel, as much as 90% of the
information provided to the consumer is ignored. An average person is
exposed in a normal day to an estimated 3,000 commercial messages. This
information overload is compounded by an unalterable shift in consumers media
consumption and leisure patterns. Consumers today are more easily distracted
and spend more time engaged with personal media, such as iPods, video
game consoles, and Internet browsers, than they do with traditional sources
such as TV, Radio, and Films. Due to the inherent interactivity and
customizability of these new media platforms, the ground rules and expectations
for how consumers will interact with brands are changing. Consumers now
expect marketing messages to be more relevant to their interests and needs,
less obtrusive and invasive, and inherently valuable themselves.
Meeting these consumer expectations is harder than it may sound. The problem
is that traditional marketing methods are deeply rooted in a much simpler
world where three television networks are all that separated marketers from their
potential consumers.
With extremely broad appeal and consumers undivided attention, television
(and radio before it), provided marketers with a medium in which they could
carefully and directly communicate the existence and benefits of their products.
This uniqueness and the longevity of the dominance of these media platforms
means the basic underpinnings of consumer marketing have remained relatively
unchanged for nearly 100 years. This deep-seeded bias towards a one-tomany broadcast approach to marketing, where a message developed for a
mass audience is prominently displayed in places where the right people will
come across it, is visible in all forms of marketing today. Even progressive
marketing strategies that incorporate new media platforms like webisodes,

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banner ads, and pod casts are still defined by this flawed broadcast marketing
mentality.
Because these practices inherently do not meet consumers need for relevance,
subtlety, and value, they are being tuned out by the consumers today. The
response from marketers has been to create broader, louder, and marketing with
messages that are more superficial in an attempt to rise above the clutter. The
only way out of this predicament is for a shift in the marketing area that breaks
the hold of a one-to-many broadcast marketing mentality and moves towards a
more innovative approach of engaging consumers. With many traditional
marketing techniques exhausted, the time has come for marketers and their
agencies to look to fields outside of the traditional marketing disciplines in order
to identify business practices that will engage the consumer, enhance the brand,
and encourage a purchase.

What is Value?
"Any damn fool can put on a deal, but it takes genius, faith and perseverance to create a brand." David Ogilvy

In general, the economic value of something is how much a product or service

is worth to someone relative to other things (often measured in money)
It can be either an assessment of what it could or should be the price (valuation),
or an explanation of its actual market value (price).
Financially, it could be market capitalization plus the market value of debt. Also,
referred to as "Total Market Value".
Value of a product within the context of marketing means the relationship
between the consumer's expectations of product quality to the actual amount
paid for it. It can be expressed as the equation:

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Value = Benefits / Price
or alternatively:
Value = Quality received / Expectations

Value in marketing can be defined by both qualitative and quantitative

measures. On the qualitative side, value is the perceived gain composed of
individual's emotional, mental and physical condition plus various social,
economic, cultural and environmental factors. On the quantitative side, value
is the actual gain measured in terms of financial numbers, percentages, and
Dollars/Rupees.
For an organization to deliver value, it has to improve its value: cost ratio. When
an organization delivers high value at high price, the perceived value may be
low. When it delivers high value at low price, the perceived value may be high.
The key to deliver high-perceived value is attaching value to each of the
individuals or organizations -- making them believe that what you are offering is
beyond expectation -- helping them to solve a problem, offering a solution, giving
results, and making them happy.

What is Brand?
A brand includes a name, logo, slogan, and/or design scheme associated with
a product or service. Brand recognition and other reactions are created by the
use of the product or service and through the influence of advertising, design,
and media commentary. A brand is a symbolic embodiment of all the information
connected to the product and serves to create associations and expectations
around it. A brand often includes a logo, fonts, color schemes, symbols, and
sound, which may be developed to represent implicit values, ideas, and even
personality.

Branding Concepts

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Marketers engaged in branding seek to develop or align the expectations behind
the brand experience, creating the impression that a brand associated with a
product or service has certain qualities or characteristics that make it special or
unique. A brand image may be developed by attributing a "personality" to or
associating an "image" with a product or service, whereby the personality or
image is "branded" into the consciousness of consumers. A brand is therefore
one of the most valuable elements in an advertising theme. The art of creating
and maintaining a brand is called brand management.

Concept of DNA and Brand Equity

"DNA" refers to the unique attributes, essence, purpose, or profile of a brand
and, therefore, a company. The term is borrowed from the biological DNA, the
molecular "blueprint" or genetic profile of an organism, which determines its
unique characteristics

Brand Equity measures the Total Value of the brand to the brand owner, and
reflects the extent of brand franchise.
For a firm to deliver value to its customers, they must consider what is known as
the "Total Market Offering." This includes the reputation of the organization,
staff representation, product benefits, and technological characteristics as
compared to competitors' market offerings and prices. Value can thus be defined
as the relationship of a firm's market offerings to those of its competitors

Factors that affect a Brand

Quality
Quality is a vital ingredient of a good brand. The core benefits the things
consumers expect. These must be delivered well, consistently. The branded

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washing machine that leaks, or the training shoe that often falls apart when wet
will never develop brand equity.

Positioning
Positioning is the position a brand occupies in a market in the minds of
consumers. Strong brands have a clear, often unique position in the target
market.
Positioning can be achieved through several means, including brand name,
image, service standards, product guarantees, packaging and the way in which it
is delivered. In fact, successful positioning usually requires a combination of
these things.

Communications
Communications play a key role in building a successful brand. All elements of
the promotional mix need to be used to develop and sustain customer
perceptions. Initially, the challenge is to build awareness, then to develop the
brand personality and reinforce the perception.

First-mover advantage
In terms of brand development, by First-Mover advantage means that it is
possible for the first successful brand in a market to create a clear positioning
in the minds of target customers before the competition enters the market. There
is plenty of evidence to support this.
Leading consumer product brands like Pepsi and Hindustan Unilever Ltd. that,
in many ways, defined the markets they operate in and continue to lead.
However, being first into a market does not necessarily guarantee long-term
success. Competitors drawn to the high growth and profit potential
demonstrated by the market-mover will enter the market and copy the best
elements of the leaders brand

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Long-term perspective
There should be a need to invest in the brand over the long-term. Building
customer awareness, communicating the brands message and creating
customer loyalty takes time. This means that management must invest in a
brand, perhaps at the expense of short-term profitability.

Internal marketing
Finally, a firm must market itself internally as well as externally. The whole
business should understand the brand values and positioning. This is important
in service businesses where a critical part of the brand value is the type and
quality of service that a customer receives.

Measuring Brand Value

Consider an example of two "unbranded" Salts. Both may have the exact same
set of features in terms of Price, Quality, Quantity, etc. As long as these two
products remain unbranded, they will be undifferentiated and therefore
equivalent to the user/purchaser. However, if one label is "TATA Salt" and the
other "XYZ, most users/purchasers will attribute additional, intrinsic, value to the
TATA product. The two branded Salts are no longer undifferentiated. The same
concept applies to service industries such as telecommunications.
The key challenges in Brand Value/Brand Equity measurement are to:
Measure the importance of "brand" in the consumers product selection
process
To dissect that measure of "brand" and determine its key contributing
components
A brand's equity becomes part of the tradeoff a consumer considers as they first
select their consideration set, and then decide which product or service to
purchase. That is, purchasers actively trade off both the perceived tangible

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benefits and the perceived intrinsic benefits delivered by products in their
consideration set, against price, to arrive at their value hierarchy, and ultimately
their purchase decision.
Brands that have high-perceived value are always included in a purchaser's
consideration set. If a brand's combined tangible and intrinsic equities are
consistently higher than any other brand in the category, that brand will have
the highest customer loyalty in terms of purchase, repurchase, and
recommendation. Competing brands can only improve their loyalty against the
brand equity leader by lowering price in the short term, improving their product's
tangible features in the mid term, or improving their brand's intrinsic benefits, or
equity, in the long term

Questions asked while measuring Brand Value.

Given a set of tangible product features, what is the price premium a

consumer is willing to pay for my brand compared to a competitor' brand or
an unbranded product?

What are the intangible product attributes and image features that lead to
consumer willingness to pay a premium price?

Who are the customers that are willing to pay that premium for my brand?

Who are the customers that are willing to pay that premium for the
competitive brand?

How do they differ from each other?

With regard to these attributes and features, how does my brand compare
to the competition?

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How does the equity of my brand(s) develop over time?

Which activities will increase (or decrease) my brand's equity?

What activities of my competitors will cause/have caused their brand equity

to increase or decrease?

Does the equity of my brand carry over to other products and services? If
yes, what are these products and services to which equity of my brand
extends?

What is the proportion of "brand loyal", "price sensitive", or "feature

sensitive" consumers?

Answers to the above questions reflect the "Brand Image", "Brand

Awareness", "Brand Loyalty", and other concepts and when combined
together give a score called "Brand Value". Different markets, products and
product categories will result in different brand value profiles.
In addition, a brand's value is directly related to customer loyalty. That is, if a
particular brand maintains a significantly higher perception of value to a
consumer than any other brand does in the category, that consumer will
consistently purchase that brand and consistently recommend that brand to
others. Conversely, as brands in a category become less differentiated in
terms of both tangible and intrinsic features, price becomes the major
differentiator

of

value,

and

thus,

there

is

little

loyalty.

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How to calculate Value of a Brand Name.

From

Net

Income

to

Operating

Income

and

Equity

to

Value

The profits margins for firms can be stated in terms of net income or in terms
of operating income (EBIT). If pre-tax operating margins are used, the
appropriate value estimate is that of the firm. In particular, if one makes the
assumption that
Free Cash Flow to the Firm = EBIT (1 - tax rate): Net Capital exp. and working
capital needs are zero.
Then the Value of the Firm can be written as a function of the after-tax operating
margin= (EBIT (1-t)/Sales

Where,
g = Growth rate in after-tax operating income for the first n years

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gn = Growth rate in after-tax operating income after n years forever (Stable
growth

rate)

WACC = Weighted average cost of capital

Rural Consumers Some Insights

A brief mention of the fact that rural India makes up close to three-fourths of
Indias population and 51% of the total disposable income is enough to
ascertain that this market holds a significant amount of potential.
Some indicators that represent their characteristics as of today:
1. Increase in potential market size - Close to 96% of the Indian rural
consumers fall in the category of low income and very affluent groups.
Out of these, low-income households represent close to five-sixths of
the total with the rest being very affluent households. The chart given
below highlights the growth in the number of low income and very
affluent households in India. These facts make it easy to infer that this
segment of the market is fast presenting a lucrative business
opportunity.

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2. Increase in incomes As highlighted by the graph above, the incomes

for the relevant groups, i.e. low income and mass affluent is also on the
rise signifying a greater purchasing power.
3. Mindset - Rural consumers upgrading from locally made substances to
(e.g. sand mix for washing hands) to convenience products (e.g. soaps)
which may be unbranded. This signifies an effort to move towards better
and easy to use products. However, this change is only reflected in the
buying patterns of the younger sections of the family. The elders still prefer
to use age-old natural solutions.
4. Awareness Several modes of communication, both conventional and
unconventional, have made their way through the hinterlands of India.
The rural consumers are today exposed to a variety of entertainment
sources and other stimuli because of the extensive media reach and
scope. Around 35% of rural India watches television, which attempts to
influence consumer patterns.
5. Consuming

potential

According

to

the

Central

Statistical

Organization (CSO), India is a consumption led economy because of

its high private final consumption expenditure (PFCE) levels of 60% of
its GDP. The chart below highlights the share of the rural market in
terms of consumption of various products and services. It is evident that
contribution of the rural markets cannot be ignored (their PFCE is
31.7% of GDP).

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6. Position in the consumption chain This relates to their income levels

that determine the category into which the additional income generated
will fall. For the urban consumer, it could be entertainment or some
investments. However, in rural households, a small part of the
additional income is saved and the rest will goes into consumption.
7. Consumption pattern The pie chart given below gives a depiction of
the expenditure heads of a rural household.

Challenges faced in purchase stages

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1. Low prices The cost of the inputs, i.e. both materials and labor make
it possible for unbranded goods to be sold at much cheaper rates than
their branded counterparts do.
2. Local aspect Many unbranded goods are manufactured by regional
players and hence the products are tuned to the local preferences of
the region.
3. Derived benefits The rural consumer used to be more priceconscious than value-conscious. The mindset for securing quality for an
extra additional price, i.e. value consciousness has now seeped in. e.g.
MARICO claims that its brands of low cholesterol oils have penetrated
rural areas largely.
4. Rural income levels The incomes in rural areas are not as much as
compared to urban areas. Hence, many items fall out of the purchasing
capacity of the rural consumers
5. Rural income generation Even if rural consumers do have the
aggregate monthly income to purchase branded products, they do not to
have enough money at one point of time to purchase the item. This is
why in areas where branded products are available, they are often sold in
loose quantities since they fall into the purchasable range.
6. Counterfeits Even though these counterfeit products would be
branded, if a consumer is not satisfied with the value that he is getting

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out of the product, his buy in into the branded products will take a
downturn.
7. Mindset for quality As soon as the rural consumer is convinced that
branded goods are expensive because of their quality, which is
beneficial to him, he will switch over thereby becoming a part of the
branded goods purchaser category. It is important to realize that all
brands need to reinforce a quality mindset into the rural consumer in a
concerted manner.

8. Lack of awareness It is the lack of information about products that

can add convenience to the life of a rural consumer. This lack of
awareness can be a result of a companys insufficient promotional
efforts or even illiteracy of rural consumers. E.g. Mobile phones,
medicinal items etc.

Action orientations
Dividing the product categories based on the action orientation that branded
product categories should follow to generate greater returns from the rural
market. These action orientations are aimed at targeting the different sections of
the consumer pyramid and will eventually lead brands to the bottom of the
pyramid:

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1. Drive visibility and trial These would be feel-good items such as

jewellery, apparel, furniture & white goods etc. Interestingly, penetration of
brands in these product categories in urban areas is not as high as FMCG
goods & other items.
2. Drive penetration This category is again host to a wide range of FMCG
goods. Other categories under this purview would include building
materials etc.
3. Drive up gradation and consumption This is for product categories
that already have a high level of penetration in the rural markets. These
would include mostly very basic FMCG goods.

Conclusion
How much one can expect to pay for the creation of a brand?
The answer is that the fee does not have to be astronomical, but it can be
depending on whom one decides to do business.
Creating a brand is often a classic case of getting what one pays for. A
person may create a name and commensurate logo (without applications like
letterhead, signage and packaging) for $500 or pay for an international identity
and branding company $100,000. In theory, that $100,000 should give higher
quality images and plenty of targeted branding theory, but that is not always
the case.

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A small business probably will never have a globally recognized "power
brand" simply because it may not have (and for that matter don't need) the
marketing resources that would fuel that level of awareness.

But it can be the most powerful brand in its target market. All it takes is

Knowing the brand image that it wants to project

Having commitment and discipline to project itself well

Spending what's necessary to get the message to its target market

Managing the marketing so that it makes a consistent impression that

etches the desired brand image into the minds of its target prospect

Hence, Market Value need not necessarily always be a reflection of Brand

Value.

References:

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Websites:

http://pages.stern.nyu.edu

http://www.allaboutbranding.com

http://www.allbusiness.com

http://en.wikipedia.org

http://www.fastcompany.com

Papers:

Brand Licensing A misunderstood piece of the marketing mix.

- By Ramez Toubassy, Senior Vice President, Brand Sense Partners

A new approach to loyalty reveals hidden opportunities

- By VITTORIO RAIMONDI