Chapter 26 MEASURING BRAND EQUITY

Kevin Lane Keller, Dartmouth College

Group 5

Mohit Batra (12P086) Nikhil Gupta (12P087) Abhijeet Parekh (12P090) Radhika Bhatter (12P096) Pauline Paponneau (13EDHEC08) Brieuc De Voghel (13SBS002)

What is brand equity?

Def: the value directly or indirectly accrued by these various benefits (influencing consumer behavior, being bought and sold, and providing the security of sustained future revenues to their owner. Brand equity can be thought of as the "added value" endowed to a product in the thoughts, words, and actions of consumers.

Measuring sources of brand equity

The real power of a brand is in the thoughts, feelings, images, beliefs, attitudes, experiences and so on that exist in the minds of consumers. This brand knowledge affects how consumers respond to products, prices, communications, channels and other marketing activity - increasing or decreasing brand value in the process. Brand knowledge= Brand awareness: strength of the brand node or trace in memory as reflected by consumers' ability to recall or recognize the brand under different conditions. Brand image: consumer perceptions of and preferences for a brand, as reflected by the various types of band associations held in consumers' memory. Because any one typically only captures one particular aspect of brand knowledge, multiple measures need to be employed to account for the multidimensional nature of brand knowledge. Brand awareness ==> can be assessed through a variety of aided and unaided memory measures that can be applied to test brand recall and recognition

Brand image ==> can be assessed through a variety of qualitative and quantitative techniques

Qualitative research Techniques

(often employed to identify possible brand associations and sources of brand equity)

Free association
Ask what comes to mind when subjects think of the brand without any more specific probe or cue than perhaps the associated product category. It help marketers to clarify the range of possible associations and assemble a brand profile. Additional useful questions can be added to complete the Techniques!
To better understand the positivity of brand associations To provide more structure and guidance Consumers can also be probed as to the higher order meaning of different associations through laddering techniques or means-ends chain analysis.

Projective Techniques
Diagnostic tools to uncover the true opinions and feeling of consumers when they are unwilling or otherwise unable to express themselves on these matters. Consumers are presented with an incomplete stimulus and asked to complete it or given an ambiguous stimulus that may not make sense in and of itself and are asked to make sense of it. There are different kinds of projective technique such as completion & interpretation tasks ("fill in the bubble" exercise) or comparison tasks ("if it was an , which one might the brand be" exercise).

Brand Personality and Relationships

Human characteristics or traits that can be attributed to a brand. The simplest and most direct way to measure it is to solicit open-ended responses to a probe such as: "if the brand were a person, what would it be like". Other techniques are possible such as
assembling a brand with specific magazines' pictures Check-lists or ratings (Aaker and the five factor scale of brand personality) Fournier
the six dimensions beyond loyalty/commitment 15 possible consumer-brand relationship form

Critique of qualitative research techniques:

Creative means or perception that can be difficult to uncover Range of possible qualitative research techniques is only limited by the creativity of the marketing researcher Size of samples that may not necessarily generalize to broader populations Questions of interpretation of the data

Quantitative research techniques

Advantages
Permit more confident and defensible strategic and tactical recommendations
Employs various types of scale questions so that numerical representations and summaries can be made. Quantitative measures are often the primary ingredient in tracking studies that monitor brand knowledge strictures of consumers over time

Awareness
Related to the strength of the brand in memory, as reflected by consumers' ability to identify various brand elements under different conditions. Several measures of awareness of brand elements can be employed. Choosing the appropriate measure depends on the relative importance of brand awareness for consumer behavior in the category and the resulting role it plays to the success of the marketing program for the brand.

Recognition
Relates to consumers' ability to identify the brand under a variety of circumstances and can involve identification of any of the brand elements.

The most basic type of recognition procedures gives consumers a set of single items visually or orally and ask them if they thought that they had previously seen or heard these items.
There are also a number of additional, somewhat more subtle recognition measures that involve "perceptually degraded" versions of the brand.

Help marketers to determine which brand elements exist in memory and, to some extent, the strength of their association.

Recall
Consumers' ability to identify the brand under a variety of circumstances. Consumers must retrieve the actual brand element from memory when given some related probe or cue. Different measures are possible depending on the type of cues provided to consumers. Examples
Aided recall Consumers could be probed on the basis of
Product attributes

Usage goals
Different purchase motivations Different times and places when the product could be used

Bigger issue: the salience of the brand -- do consumers think of the brand under the right circumstances.

Image Associations that consumers hold toward the brand. Associations come in many
(

different forms and can be classified along many different dimensions)

)

Brand association beliefs are those specific attributes and benefits linked to the brand and its competitors. Any potentially relevant association can and should be measured. Brand meaning broadly can be distinguished in terms of more functional, performance-related considerations versus more abstract, imageryrelated considerations. Brand performance The ways in which the product or service attempts to meet customers' more functional needs. 5 important types of attributes and benefits that often underlie brand performance and can be measured as follows:
Primary characteristics & supplementary features. Product reliability, durability, & serviceability

Service, efficiency, and empathy

Style and design Price

Brand Imagery
The extrinsic properties of the product or service, including the ways in which the brand attempts to meet customers' more psychological or social needs. What people think about a brand abstractly. 5 categories of intangibles aspects of the brands
User profiles

Purchase situations
Usage situations Personality and values

History, heritage, and experiences.

General, Higher-order Brand Associations

The purpose is to find out how consumers combine all of the specific considerations about the brand in their minds to form different responses (response to the brand and all its marketing). Brand responses can be distinguished according to brand judgments and brand feelings.

Brand Judgments

Brand Feelings

Customers' emotional responses and Customers' own personal opinions and reactions with respect to the brand. 6 evaluations with regard to the brand. How types of brand-building feelings are customers put together all the different performance and imagery associations for Warmth the brand to form different kinds of Fun opinions. 4 types: Excitement
Brand quality Brand credibility Brand consideration (if possible options to buy) Brand superiority (if superior to others) Security Social approval Self-respect

Measuring Outcomes of Brand Equity

Customer-related benefits of positive Brand Equity :
1. Differentiation and different interpretations of product performance 2. Greater loyalty and less vulnerability to competitive marketing actions 3. More inelastic responses to price increases and elastic responses to price decrease

4. Greater trade cooperation and support

5. Increase of marketing effectiveness 6. Yield licensing opportunities

7. Support brand extension

1. o

The comparative methods The brand-based comparative methods

Experiments with 2 groups of consumers: 1 group answers to questions related to the marketing program related to the specific brand and the other group answers for other brands brands ( fictitiously named / unnamed version of the product / competitive brands)

o o

Example of test: bling testing = use of a product with and without brand identification Applications: when the marketing activity under consideration is different from past marketing of the brand ( new sales, trade promotion, ad campaign, potential brand extension) Advantage: understanding exactly how brand knowledge affects on prices, advertising, etc.. Drawbacks: o o to get an accurate brand knowledge , need to assess many marketing activities. Difficult to gain sufficient control on specific elements to isolate the effects of brand knowledge. Often use of concept statements of the particular marketing activity to ease the consumers understanding distortion of results.

o o

The comparative methods (ctd)

2. The Marketing-based comparative approach
o Use of fixed brand but determine consumer response based on changes in the marketing program o Common applications:

Assessing price sensitivity

Studying the effect of advertising, media plans. Testing potentialbrand extensions: collecting consumer evaluation of brand extension candidates o Example of test markets: IRIs electronic test markets = tests of different adversiting weights, repetition schedules o Advantage: Ease of implementation o Drawback: May be difficult to know whether consumer response to changes are caused by brand knowledge or product konwledge, ie consumers could respond the same for any brand of a product category

The comparative methods (ctd)

3. Conjoint Analysis o Survey-based multivariate technique used by marketers to profile the consumer buying decision process with respect to products and brand ( Green & Srinivasan) o Consumers are asked to express their preferences among a number of different product profiles highlights the trade-offs that consumers make between various brand attributes. o Advantage: Simultaneous study of 2 different brand and of different aspects of the product or marketing program ( product composition, price, distribution outlets) o Drawbacks: Marketing profiles presented to consumers can violate their expectations based on what they already know about brands. Difficult to evaluate brand attribute levels

Holistic Methods: an approach of the overall value of a brand

1. The residual approach o Brand equity is what remains of consumer preferences after subtracting out the objective characteristics of the physical product. o Dillons Model : decomposing ratings on a brand attribute into 2 components :

1) brand-specific associations ( features, benefits linked to a brand by consumers)

2) General brand impression o Advantage: Useful in situations when approximations of brand equity are necessary (for financially-oriented perspective on brand equity) o Drawback:

Most appropriate for brands characterized with a predominance of product-related attributes associations (no distinction between different types of non-product-related attribute associations)

o Static view of brand equity identifying sources of consumers preferences and uncovering the contribution of the brand comparative approaches, process views identifying consumer response to the marketing of a brand and uncovering the extent to which that consumer response is affected by brand knowledge

Holistic Methods (ctd)

2. The Valuation approaches o Evaluating a price tag on a brands value is useful to: Evaluate potential mergers and acquisitions : competitive position of brand and reputation with consumers is an asset Raise funds

Take brand management decisions: allocate resources, develop brand strategy

o 3 approaches to determine the value of brand in an acquisition/merger: 1. Cost approach Brand Equity = amount of money required to reproduce or replace a brand (R&D costs, test marketing, ads).

Drawback: it rewards past performance and no link to future performance (many brands with expansive introductions have unucessful).

difficult to estimate costs of intangible assets, lying at the heart of brand equity. 2. Market approach
Brand Equity = the amount an active market would allow such that the asset would exchange between a willing buyer and willing seller. Drawback: lack of open market transactions for brand name assets

The valuation approaches (ctd)

3. Income approach

o Brand Equity = discounted future cash flow from the future earnings stream for the brand.
o 3 main income approaches to capitalize on:

1) Royalty earnings
2) the premium profits earned by a branded 3) on actual profitability of a brand

o Interbrand methodology: based on an income approach 5 crucial steps to capture the complex value creation of brand

1) Market segmentation
2) Financial analysis: intangible earnings 3) Demand analysis: Role of brand (= pourcentage of intangible earnings generated by the brand) in driving the demand 4) Competitive benchmark: Brand Strenght Score = brands market, stability, meadership position, geographic footprint 5) Brand Value calculation: ability of brands to continue generating future earnings.

The Brand Value Chain

Steps of Brand value Creation

1. Marketing Program Investment

o Marketing activity which influences consumers : R&D, development and design, marketing communication,
2. Customer Mindest o Everything that exists in the minds of consumers with respect to a brand ( thoughts, feelings, images, perceptions, attitudes,) o Bottom-Top Hierarchy of customer mindest:

1)Brand Awareness: recall and recognition

2)Brand associations: strength, favorabiliy, 3)Brand Attitudes : quality and the satisfaction 4)Brand attachment: loyalty the consumers feel towards the brand 5)Brand activity: extent to which consumers purchase and use the brand, talk to others about the brand

Steps of Brand value Creation (Ctd)

3. Market Performance : 6 dimensions

1) Price Premium
2) Price elasticity 3) Market share 4) Brand expansion 5) Cost structure: savings in marketing pgm expenditures because of the prevailing cusotmer mindset 6) Profitability 4. Shareholder value: o 3 important indicators : The stock Price The price / earnings multiple Overall market capitalization for the firm

Brand Equity Measurement System

o Set of research procedures that designed to provide timely, accurate and actionable information for marketers for their brands to make the best tactical decisions in the Short term and in strategic decisions in the long run. o Goal : achieve a full understanding of the sources and outcomes of brand equity and relate the two aspects.

o 3 components: 1. Brand Audit Comprehensive examination of a brand Used to set strategic direction for the brand Regular brand audits = to keep fingers on the pulse of brands 2 steps : a)Brand Inventory: comprehensive profile of how all products / services sold by a company are marketed and branded. Should be able to reveal Brand Consistency

a)Brand exploratory: provide detailed information as to what consumers think and feel about the brand by means of the brand exploratory

Brand Equity Measurement System (ctd)

2. Brand Tracking Tracking studies : information collected from consumers on a rountine basis over time Useful for day-to-day decision-making diagnostic insights into the collective effects of a host of marketing activities Quantitatives measures to understand Where, How much and in What ways brand value is being created Enables to make adjustment by monitoring the health of a brand and equity

3. Brand Equity Management systems a)Brand Equity charter : formalized document with companys view of brand equity, providing relevant guidelines to marketing managers and partners. b)Brand Equity Report: provides descriptive information as to what is happening with a brand and diagnostic information on why it is happening.

One section about consumer perceptions on key attributes, preferences, reported behaviour ( tracking studies) and another section on market level information ( cost breakdowns, price, market shares)