THE BRAND VALUE CHAIN:

LINKING STRATEGIC AND FINANCIAL BRAND PERFORMANCE

July 2002

Kevin Lane Keller

Amos Tuck School of Business
Dartmouth College

Donald R. Lehmann
Graduate School of Business
Columbia University
 THE BRAND VALUE CHAIN:
LINKING STRATEGIC AND FINANCIAL BRAND PERFORMANCE

Maximizing brand value or equity has become a management imperative to many. To better
understand the process by which brand value is created, this paper presents a model of brand value
creation that we call “The Brand Value Chain.” The Brand Value Chain is defined in terms of a series
of three steps in the creation of value for a brand: The first step is when investment in marketing
activity affects the customer mindset (i.e., what consumers know and feel about the brand); the
second step is when the customer mindset, in turn, affects market performance for the brand; and
the third step is when market performance affects shareholder value. The model also assumes that a
number of factors intervene between these stages and determine the extent to which value created at
one stage transfers or “multiplies” to the next stage. The three sets of multipliers that moderate the
transfer between the marketing program and the subsequent three value stages are the program
quality multiplier, the marketplace conditions multiplier, and the investor sentiment multiplier. Using
the Brand Value Chain, marketers can trace the value creation process for their brands to better
understand the financial impact of marketing expenditures and investments. It offers a holistic,
integrated approach to capturing the value created by brands.
 THE BRAND VALUE CHAIN:
LINKING STRATEGIC AND FINANCIAL BRAND PERFORMANCE

One of the most valuable assets for any firm is the intangible asset represented by their brands.
Recognition of this fact has heightened the importance of properly managing brands to maximize their
value – or brand equity -- to the firm.1 Profitable brand management requires successfully designing
and implementing a brand equity measurement system. Crucial to the development of such a system
is an understanding of how brand value gets created. Towards that goal, this paper presents a model
of brand value creation that we call “The Brand Value Chain.” Using the Brand Value Chain,
marketers can trace the value creation process for their brands to better understand the financial
impact of marketing expenditures and investments. It offers a holistic, integrated approach to
capturing the value created by brands.

The Brand Value Chain makes it clear that numerous individuals within an organization impact brand
equity and should be cognizant of relevant branding effects. Different individuals, however, make
different brand-related decisions and need different types of information. Accordingly, the Brand
Value Chain provides insight to support brand and category managers, chief marketing officers, and
managing directors.

THE MODEL
The Brand Value Chain is based on several basic premises. Fundamentally, it assumes that the value
of a brand ultimately resides with customers. Based on this insight, the model assumes that the
brand value creation process begins when the firm invests in a marketing program targeting actual or
potential customers. The marketing activity associated with the program then impacts the customer
“mindset” with respect to the brand – what they know and feel about the brand. This mindset, across
a broad group of customers, then results in certain outcomes for the brand in terms of how it
performs in the marketplace -- the aggregate of individual customer actions regarding quantity
purchased and the price that they pay. Finally, the investment community considers brand
performance and other factors such as replacement cost and purchase price in acquisitions in terms of
their future prospects (growth rate) to arrive at an assessment of shareholder value in general and a
value of the brand in particular.

The model also assumes that a number of factors intervene between these stages. These linking
factors determine the extent to which value created at one stage transfers or “multiplies” to the next
stage. Thus, there are three sets of multipliers that moderate the transfer between the marketing
 2

program and the subsequent three value stages – the program quality multiplier, the marketplace
conditions multiplier, and the investor sentiment multiplier.

The Brand Value Chain model is summarized in Figure 1. The following sections describe the model in
more detail, i.e., the value stages and multiplying factors. In this discussion, we provide examples of
both positive and negative multiplier effects and a detailed illustration of one major brand at each
stage. After describing the model, we conclude by drawing some branding implications.

THE VALUE STAGES

Brand value creation begins with marketing activity by the firm which influences customers who, in
turn, affect how the brand performs in the marketplace and thus how it is ultimately valued by the
financial community.2

Marketing Program Investment

Any marketing program investment that potentially can impact brand value development, either
intentionally or not, falls into this category. Some of the bigger marketing expenditures relate to
product research, development, and design; trade or intermediary support; marketing
communications (e.g., advertising, promotion, sponsorship, direct and interactive marketing, personal
selling, publicity and public relations, etc.); and employee selection, training, and support – with
marketing communications and product quality being the most commonly thought of sources of brand
equity.

The amount of financial investment committed to the marketing program, however, does not
guarantee success in terms of brand value creation. The ability of that investment to transfer or
multiply farther down the chain will depend on qualitative aspects of the marketing program via the
program quality multiplier.

Program Quality Multiplier

The ability of the marketing program to impact the customer mindset depends on the quality of that
program investment. There are a number of different means to judge the quality of a marketing
program. Here we suggest four such factors. First is the clarity evident in the marketing program.
Will consumers properly interpret and evaluate the meaning conveyed by brand marketing? Second is
the relevance of the marketing program to customers. Will consumers feel that the brand is one that
should receive serious consideration? Third is the uniqueness or distinctiveness of the marketing
program, as compared to those of competitors. How creative or differentiating is the marketing
 3

program? Fourth is the consistency and integration is the marketing program. Do all aspects of the
marketing program combine to create the biggest impact with customers? Does the marketing
program relate effectively to past marketing programs and properly balance continuity and change,
evolving the brand forward in the right direction?

Not surprisingly, a well-integrated marketing program that has been carefully designed and
implemented to be highly relevant and unique to customers is likely to achieve a greater return on
investment from marketing program expenditures. For example, despite being out-spent by such
beverage brand giants as Coca-Cola, Pepsi, and Budweiser, the California Milk Processor Board was
able to reverse a decades-long decline in consumption of milk in California partly through their well-
designed and executed “Got Milk?” campaign. On the other hand, numerous marketers have found
that expensive marketing programs do not necessarily transfer to sales. For example, in the beverage
category, brands such as Michelob, Miller Lite, and 7Up have seen their sales decline despite sizable
marketing support, arguably because of poorly targeted and delivered marketing campaigns. More
broadly, numerous “dot coms” succeeded in burning a great deal of cash through ill-advised
marketing programs that failed to attract many customers.

Customer Mindset
The customer mindset could potentially include everything that exists in the minds of customers with
respect to a brand – thoughts, feelings, experiences, images, perceptions, beliefs, attitudes, etc.
Marketing program investments result in a number of such different customer-related outcomes. 3
Essentially, the issue is in what ways have customers been changed as a result of the marketing
program? How have those changes manifested themselves in what we call the customer mindset?

A host of different approaches and measures are available to assess value at this stage. Nevertheless,
there are five key dimensions that have emerged from prior research as particularly important
measures of the customer mindset. The first is brand awareness and the extent and ease to which
customers recall and recognize the brand and can identify the products and services with which it is
associated. The second dimension is brand associations, i.e., the strength, favorability, and
uniqueness of perceived attributes and benefits for the brand. Brand associations often represent key
sources of brand value, as they are the means by which consumers feel brands satisfy their needs.
The third dimension is brand attitudes and overall evaluations of the brand in terms of its quality and
the satisfaction it generates. The fourth dimension is brand attachment, i.e., how loyal the customer
feels toward the brand. A strong form of attachment, adherence, refers to the resistance to change
and the ability of a brand to withstand bad news (e.g., a product or service failure). In the extreme,
 4

attachment can even become addiction. Finally, the fifth dimension is brand activity, the extent to
which customers use the brand, talk to others about the brand, seek out brand information,
promotions, and events, and so on. A good example of brand activity is the development of clubs
(e.g., Harley-Davidson) and on-line brand communities (e.g., Saab).

There is an obvious hierarchy in the dimensions of value: awareness supports associations, which
drives attitudes that lead to attachment and activity. Brand value is created at this stage when
customers have a high level of awareness; strong, favorable, and unique brand associations; positive
brand attitudes; intense brand attachment and loyalty; and a high degree of brand activity. The right
customer mindset can be crucial to realizing brand equity benefits and value. For example, AMD and
Cyrix found that achieving product performance parity with Intel’s microprocessors did not reap
immediate benefits in 1998 when OEM’s were reluctant to adopt their new chips because of their lack
of brand image and reputation.

Reebok provides a vivid illustration of how ineffective marketing can lead to declining a customer
mindset and then to product market and financial market problems. A one-time market share leader
in the U.S. in the late 80’s – by a considerable amount – Reebok has struggled to remain a player in
the athletic shoe and clothing market. The 1990’s got off to a rough start for the company. As
Business Week observed in 1993, “Ever since Nike usurped the company as the top maker of athletic
shoes in 1989, Reebok has been flailing wildly in attempts to get back on top. Half a dozen ad
campaigns have fizzled. It has been plagued by poor designs. And it missed a key fashion shift
toward outdoors shoes that began a couple of years ago. Reebok also means to overhaul what CEO
Fireman acknowledges has been until now a ‘chaotic’ marketing effort.”

The remainder of the decade was not much better for Reebok. The brand was seen as out of touch
by women and largely irrelevant to kids – two of their key target markets. A cutback in R&D resulted
in less stylish shoes, leading one analyst to comment: “Reebok shoes started looking like they
belonged on the shelf of a orthopedic patient.” Reebok also continued on a wandering path
characterized by inconsistent marketing, management turnover, and a bloated product lineup. As
former president Roberto Muller noted, “There’s been no consistency. It’s still such a great brand that
if they pick any strategy and stick with it, you will have a successful company. But lately it’s been like
Argentina and its ministers: for years they’ve been changing who runs the show and so they’ve got
4000% devaluation.”
 5

Figure 2 displays Young & Rubicam’s Brand Asset Valuator (BAV) ratings of brand strength (i.e., brand
relevance and differentiation) and stature (i.e., brand esteem and knowledge), as perceived by
consumers, for Reebok. Brand strength and stature bears a strong relationship to the five dimensions
of the customer mindset. As a result of its marketing woes, customer mindset as measured by BAV
failed to recover and in fact slightly declined. The Brand Value Chain analysis in Figure 2 thus shows
how Reebok’s lack of support – both in quantitative and qualitative terms – led to a slide in their
image with consumers and, ultimately, to a severe drop in their brand value. Specifically, a failure to
maintain marketing investments at a competitive level and a declining program quality multiplier
combined to create a sharp decrease in brand performance and shareholder value.

Success with consumers or customers may not translate to success in the marketplace, however,
unless other conditions also prevail. The ability of the customer mindset to create value at the next
stage depends on certain external factors that we designate the marketplace conditions multiplier.

Marketplace Conditions Multiplier

The extent to which value created in the minds of customers impacts brand performance depends on
various contextual market factors external to the customer. Three such factors are competitive
superiority (i.e., how effective is the quantity and quality of the marketing investment versus those of
other competing brands); channel and other intermediary support (i.e., how much brand
reinforcement and selling effort is put forth by various marketing partners); and customer size and
profile (i.e., how many and what types of customers – e.g., profitable or not -- are attracted to the
brand).

The value created in the minds of customers translates to favorable brand performance when
competitors provide no significant threat, when channel members and other intermediaries provide
strong support, and when a sizable number of profitable customers are attracted to the brand. The
competitive context faced by a brand can have a profound effect on its fortunes. For example,
McDonald’s benefited in the 1990’s from the marketing woes of their main rival, Burger King, which
suffered from numerous repositionings, management changes, etc. On the other hand, MasterCard
has had to contend for the past decade with two strong, well-marketed brands in Visa and American
Express and consequently has faced an uphill battle gaining market share. As another example,
Clorox found their initially successful entry into the detergent market thwarted by competitive
response once major players such as P&G countered (e.g., via Tide with Bleach). Similarly, Arm &
Hammer’s expansive brand extension program met major resistance in categories such as deodorants
when existing competitors fought back.
 6

Brand Performance
The customer mindset and marketplace multipliers affect how customers react or respond in the
marketplace to the brand in a variety of ways. There are six key aspects or dimensions of that
response. The first two (related) dimensions are price premiums and price elasticities. How much
extra are customers willing to pay for a comparable product because of its brand? And how much
does their demand for the brand increase or decrease when the price rises or falls? A third
dimension, market share, measures the success of the marketing program in driving brand unit sales.
Taken together, the first three dimensions determine the direct revenue stream attributable to the
brand over time. Brand value is created with higher market shares and greater price premiums, which
result partly from more elastic responses to price decreases and inelastic responses to price increases.

The fourth dimension is the success of the brand in supporting line and category extensions and new
product launches into related categories. This dimension captures brand expansion potential and the
ability to add enhancements to the revenue stream. The fifth dimension is cost structure or, more
specifically, the ability to reduce marketing program expenditures for the brand because of the
prevailing customer mindset. In other words, because customers already have favorable opinions and
knowledge about a brand, any aspect of the marketing program is likely to be more effective for the
same expenditure level or, alternatively, the same level of effectiveness can be achieved at a lower
cost because ads are more memorable, sales calls more productive, and so on. When combined,
these five factors lead to brand profitability, the sixth dimension.

Miller Brewing is an example of a brand whose investments failed to create brand value due to poor
brand performance as a result of a fading customer mindset and low program quality and marketplace
conditions multipliers. Miller Brewing spent $1.5 billion on measured advertising during the 1990’s
but still managed to lose share. Why? Their multipliers were primarily negative. Their ad campaigns
were highly distinctive but, unfortunately, also largely irrelevant to their targeted customer base, as
they unsuccessfully attempted to tap into the 21-25 year old male psyche. A writer from the
Washington Post called one of Miller’s ad efforts during this time, "quite possibly the worst ad
campaign of the decade."4 One ad executive experienced in beer marketing noted, “Beer industry
veterans looked at Miller Lite's `Dick' campaign and said, `This has no chance of working,' It violated
every convention in the business. You don't have to be stupid and insulting to be breakthrough." 5

New ad campaigns for Miller Lite, Miller Genuine Draft, and Miller High Life came and went, creating
program inconsistency. Besides a weak program quality multiplier, Miller encountered stiff
 7

competition from well-conceived and funded marketing programs from Anheuser-Busch, Coors, and
Heineken, all of whom gained share during this period. Moreover, their distributors became
disenchanted, also contributing to a weak marketplace multiplier. "The company has to make
wholesale changes. Advertising has to improve," said one distributor during this period. "It can't get
worse."

Not surprisingly, financial performance suffered, and a new management team was put into place. As
the 1990’s came to a close, the industry bible Advertising Age offered a stinging criticism of Miller’s
marketing efforts, “The broader question is when-and whether-someone at Miller can get a grasp on
what's happening to the damaged public perceptions of these two fine brands and turn things around.
The hops in Lite may be choice, but nothing about the marketing at Miller can now be called
smooth.”6 Figure 3 shows how brand value deteriorated, despite huge investments, as the customer
mindset declined, which the drop in BAV ratings documents.

In short, brand value is manifested at this stage by profitable sales volumes. The ability of the brand
value created at this stage to reach the final stage in terms of stock market valuation again depends
on external factors reflected in the investor sentiment multiplier.

Investor Sentiment Multiplier

The extent to which the value manifested in the brand performance of a brand is translated to
shareholder value depends on various contextual factors, many external to the brand itself. Financial
analysts and investors consider a host of factors in arriving at their brand valuations and investment
decisions.7 Among these considerations are the following: First, what are the dynamics of the
financial markets as a whole (e.g., interest rates, investor sentiment, or supply of capital)? Second,
what are the growth potential or prospects for the brand and the industry in which it operates? For
example, how helpful are the facilitating factors and how inhibiting are the hindering external factors
that make up the firm’s economic, social, physical and legal environment? Third, and relatedly, what
is the risk profile for the category in general and the brand in particular? How vulnerable is the brand
likely to be to various facilitating and inhibiting factors? Fourth, how important is the brand as part of
the firm’s brand portfolio and all the brands it has? Said differently, big volume and flagship brands
have more impact than small, mature ones.

An important component of the investment multiplier relates to the “option value” of potential brand
expansion. This component depends, in addition to factors such as competition and economic
growth, on the ease with which the firm can expand into other categories. The ease of expansion, in
 8

turn, depends on the customer mindset – especially brand associations such as the breadth and
timeliness of the brand “promise” – which determine what markets the brand has the customer’s
permission and support to expand into. For example, in spite of having the name “electric” in its
name, GE customers thought it was also appropriate for the company to make gas ranges -- and even
thought that they did -- before the company began to do so.

The value created for the brand is most likely to be reflected in greater shareholder value when the
firm is operating in a healthy and growing industry without serious environmental hindrances or
barriers and when the brand contributes a significant portion of the firm’s revenues and appears to
have bright prospects. An extreme example of brands that benefited from a strong investor sentiment
multiplier – at least for a while – were the numerous dot.com brands such as Priceline, eToys, etc.
The huge premium placed on (basically negative) brand performance, however, quickly dissipated.
On the other hand, many firms have lamented what they perceive as under-valuation by the market.
For example, repositioned companies such as Corning found it difficult to realize what they viewed as
their true market value due to lingering investor perceptions from their past (i.e., dishes vs. optical
fiber), although they were also certainly subject to the recent general devaluation of the tech sector.

Shareholder Value
Based on available information about a brand as well as many other considerations, the financial
marketplace formulates opinions and makes various assessments that have direct financial
implications for the brand value. Three particularly important indicators are the stock price, the
price/earnings multiple, and ultimately overall market capitalization for the firm. Other measures such
as EVA are also useful. These may be fairly insensitive indicators, however, for a brand that, unlike
Reebok or Miller, accounts for only a small portion of the value to a firm.

As an example of a brand that was able to successfully transfer value all the way through the Brand
Value Chain, consider Starbucks. Figure 4 shows how Starbucks created value in their corporate
brand during the 1993-1999 period. Specifically, although Starbucks increased their advertising
budget some during this time, their main marketing investment was in market expansion and an
increase in the number of outlets -- and thus potential consumption opportunities for consumers. As
one marketing observer noted, “Despite its lack of national advertising, Starbucks has become a
household word by turning coffee into a ubiquitous attitude product … and by expanding the brand
beyond its traditional roots-strategically placed, extremely fragrant coffee shops-into airplanes,
restaurants, hotels, supermarkets and other venues.” Another commentary noted, “Starbucks' growth
has come with virtually no use of traditional media advertising; the chain has relied on in-store
 9

marketing initiatives and word of mouth to develop brand cachet.” As founder Howard Schultz noted,
"The marketing of Starbucks is not only what people see on the outside. The cost of internal
marketing is quite high, but it is the key to our success." Because of their high quality product and
service delivery that created a positive experience, the expansion investment enhanced the customer
mindset.

As Figure 4 shows, Starbucks experienced a steady improvement in consumer perceptions as

measured by Young & Rubicam’s BAV during this period. This increasingly favorable customer
mindset led to greater sales and a higher stock price and market capitalization. Thus, Starbucks
marketing investment appeared to pay clear financial dividends.

Starbucks was able to create so much value, in part, because of the positive multipliers they
experienced. Starbucks’ program quality multiplier was positive because of the relevance and
distinctiveness of their product offerings. They also maintained great consistency during this period of
time. Their marketplace multiplier was also positive because of the lack of strong competitive
reactions, the strong channel support they provided themselves due to their retail presence, and their
single-minded customer focus on coffee lovers. As one research analyst during this time said, "It's a
foregone conclusion that Starbucks owns the specialty coffee market nationally … No one wants to
take them head on." Another analyst noted, “Local competition among coffee stores is intense, but
Starbucks is the only one out there that has a national level of recognition and awareness.'' Finally,
the investor sentiment multiplier was equally positive due to their corporate branding strategy,
favorable financial market conditions, and continued growth.

CONCLUSIONS

Summary
Marketers create value first through shrewd investments in their marketing program and by
maximizing, as much as possible, the program quality, marketplace conditions, and investor sentiment
multipliers that translates those initial expenditures into bottom line financial benefits. The Brand
Value Chain thus provides a structured means for managers to understand where and how value is
created and suggests where to look to improve that process. Certain stages, however, will be of
greater interest to different members of the organization.
 10

1. Brand and category marketing managers are likely to be comparatively more interested in the
customer mindset and the impact of the marketing program on customers.

2. Chief marketing officers are likely to be comparatively more interested in brand performance
and the impact of customer mindset on actual marketplace behaviors.

3. A CEO or CFO is likely to be comparatively more interested in shareholder value and the
impact of brand performance on investment decisions and market capitalization.

The Brand Value Chain provides a detailed road map for tracking value creation that should facilitate
marketing research and intelligence efforts to inform each of these three different constituents. Each
of the stages and multipliers has a set of measures by which they can be assessed (Figure 5),
although customer mindset measures by far are the most commonly available in the marketing
function. In general, there are three main sources of information for understanding the brand value
chain, and each source of information taps into one value stage and one multiplier. The first stage,
the marketing program investment, is straightforward and can come from the marketing plan and
budget. Customer mindset and the program quality multiplier can both be assessed by customer
surveys. Brand performance and the marketplace conditions multiplier can both be captured through
market scans (e.g., via IRI and Nielsen scanner data) and internal accounting records. Finally,
shareholder value and the investor sentiment multiplier can be estimated through stock price and P/E
ratios, investor analysis and interviews with analysts

Implications
A number of implications arise from the Brand Value Chain, some of which are briefly highlighted
here. First, value creation begins with marketing program investment. Therefore, a necessary -- but
not sufficient condition -- for value creation is a well funded, designed, and implemented marketing
program. It is rare that marketers “get something for nothing.” Nevertheless, value creation, from a
marketing perspective, involves more than the initial marketing investment. Each of the three
different multipliers can increase or decrease market value as it moves from stage to stage. In other
words, value creation also involves attempting to ensure that value properly transfers from stage to
stage.

Unfortunately, in some cases, factors that can potentially inhibit value creation may be largely out of
the hands of the marketer (e.g., entrenched and skillful competitors). Recognizing the uncontrollable
nature of these factors is important to help put in perspective the relative success or failure of a
marketing program. Just as in sports where coaches should not be (but often are) held accountable
 11

for unforeseen circumstances such as injuries to key players, financial hardships that make it difficult
to attract top talent, etc., marketers cannot logically be held accountable for certain market forces and
dynamics with their brands. Specifically, the farther to the right along the Brand Value Chain
marketers get, the less control they have on brand value creation. It is thus critical to generate
sufficient momentum with the marketing program at the beginning of the Brand Value Chain such that
value will carry through the rest of the chain.

That said, each multiplier in the Brand Value Chain must be maximized to the greatest extent possible
to ensure that the initial value created by the marketing program has the best opportunity to impact
stock price. Beyond designing a high quality marketing program, it is thus critical to enhance the
marketplace conditions and investor sentiment multipliers. Improving these multipliers involve a
myriad of different activities, but perhaps one of the most important is to communicate the amount
and nature of brand value that has been created at the previous stage to all relevant parties in the
next stage and make them fully aware of the potential benefits that could accrue from maintaining
and potentially enhancing that brand value.

For example, enhancing the marketplace conditions multiplier could involve making sure that retailers
and other intermediaries are aware of the brand value that has been potentially created by the
marketing program (e.g., via improved store traffic or category profits) and how they can share in
that value creation through supporting activities. Enhancing the investment community multiplier
involves ensuring that investor relations and other such activities appreciate the value that has been
created in the marketplace as well as future growth plans. For example, attempts to convey the
value at this stage may include name changes – such as when American Home Products changed their
name to Wyeth – in order to signal to the investment community the category (and hence growth
and margin rates) in which a company intends to compete.

Future Directions
Several possible enhancements to the Brand Value Chain could expand its relevance and applicability.
First, a number of feedback loops are possible. For example, stock prices can have an important
effect on employee morale and motivation and hence on the program quality multiplier. Second, in
some cases, value creation may not occur sequentially. For example, stock analysts may react directly
to an ad campaign for the brand – either personally or in recognition of public acceptance – and factor
those reactions directly into their investment assessments. Third, some marketing activity may have
effects that are only manifested over the long-term. For example, cause-related or social
responsibility marketing activity might affect customer or investor sentiment slowly over time. Fourth,
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both the mean and variance of some of the measures of the Brand Value Chain could matter. For
example, in terms of the customer mindset, a niche brand may receive very high marks but only
across a very narrow range of customers. Nevertheless, such a brand may be much more valuable at
least potentially than a bigger brand which had some low or average position. In spite of such
caveats, however, the Brand Value Chain shows considerable promise both at the conceptual level to
organize managerial decisions and as a basis for measuring and assessing marketing performance.
 13

REFERENCES
 Figure 1.  Brand Value Chain

Marketing Customer Brand Shareholder

VALUE Program Mindset Performance Value
STAGES Investment

­ Product ­ Awareness ­ Stock price

­ Price premiums
­ Communications ­ Associations ­ P/E ratio
­ Trade ­ Price elasticities
­ Attitudes ­ Market cap
­ Employee ­ Market share
­ Attachment
­ Other ­ Expansion success
­ Activity
­  Cost structure
­  Profitability
Program  Marketplace Investor
MULTIPLIERS Quality Conditions
Sentiment

­ Clarity ­ Competitive reactions
­ Market dynamics
­ Relevance ­ Channel support ­ Growth potential
­ Distinctiveness ­ Customer size & profile ­ Risk profile
­ Consistency ­ Brand contribution
 Figure 2
Reebok Brand Value Chain Analysis

1993 1997 1999

Advertising 56.3 53.4 10.2
(LNA millions)

BAV Strength 2.26 1.94 1.96

BAV Stature 22.2 19.0 20.0

Sales (Revenue) (Millions-Net) 2894 3644 2900

Stock Price 30.0 28.8 8.2

Market Capitalization (millions) 2510 1625 460

 Figure 3
Miller Brand Value Chain Analysis

1993 1997 1999

Advertising 170.4 227.5 133.5
(LNA millions)

BAV Strength .86 .83 .76

BAV Stature 14.5 13.9 13.2

Sales (Revenue) (Millions-Net) 1650 1810 1770

Stock Price — 1.75 2.25

Market Capitalization (millions) 1400 590 790

 Figure 4
Starbucks Brand Value Chain Analysis

1993 1997 1999

Advertising 3.73 13.48 12.24
(LNA millions)

Number of Outlets 272 1412 2498

BAV Strength .59 1.5 1.8

BAV Stature 2.4 6.7 10.1

Sales (Revenue) (Millions-Net) — 975.4 1680.1

Stock Price 2.78 9.59 12.13

Market Capitalization (millions) 621 3034 4445

 Figure 5
Brand Value Chain Measurement Approaches

Customer Mindset Product-Market Financial Market

Generic
Awareness Repeat rate Stock price
Associations Market share EVA
Attitude Price premium Residual in valuation
Attachment Revenue premium Value in a sale
Activity Marketing mix elasticities
Satisfaction Brand extension success
Brand relationship

Commercial
Young & Rubicam’s Interbrand Interbrand
Brand Asset Valuator Stern-Stewart
Milward-Brown’s BrandZ
Research International’s
Equity Engine

Primary User
Brand/product managers Brand/product managers CFO’s
CMO’s CEO’s
COO’s
1
See for example D.A. Aaker, and E. Joachimsthaler, “Brand Leadership,” (New York: Free Press, 2000); J.
Kapferer, “Strategic Brand Management” (New York: Free Press, 1998); and S. Davis “Brand Asset
Management” (New York: Jossey-Bass, 2000).
2
For complementary views, see R.K. Srivastava, T.A. Shervani, L. Fahey, “Market-Based Assets and Shareholder
Value,” Journal of Marketing, 62 (February 1998), 2-18; and M. Epstein and R.A. Westbrook, “Linking Actions to
Profits in Strategic Decision Making,” MIT Sloan Management Review, 42 (Spring 2000), 39-49.
3
For greater detail, see K.L. Keller, “Building Customer-Based Brand Equity: A Blueprint for Creating Strong
Brands,” Marketing Management, 10 (July/August 2001), 15-19.
4
Paul Farhi. "Canning an Ad Campaign." Washington Post, April 25, 1999.
5
Ira Teinowitz , “New Miller CEO Gives Agencies a Chance: Fallon, Wieden Get Opportunity to Drive Brands,”
Advertising Age, April 12, 1999.
6
“No Debate: “Miller Aching,” Advertising Age, March 22, 1999.
7
For discussion of how brand-related factors impacts financial investment decisions, see D.A. Aaker and R.
Jacobson, “The Financial Information Content of Perceived Quality,” Journal of Marketing Research, 31 (May
1994), 191-201; D.A. Aaker and R. Jacobson, “The Value Relevance of Brand Attitude in High-Technology
Markets,” Journal of Marketing Research, 38 (November 2001), 485-493; V.R. Lane and R. Jacobson, “Stock
Market Reactions to Brand Extension Announcements: The Effects of Brand Attitude and Familiarity,” Journal of
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