Measuring Brand Equity

OUR PERSPECTIVE

March, 2012

Measuring Brand Equity

2012 Brand Amplitude, LLC All Rights Reserved May not be reproduced without permission

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Brand Amplitude is an insights-based brand strategy consulting firm.

Clients include CPG, Retail, B2B, Higher Education, Healthcare.

Relationships are led by experienced marketing practitioners and industry thought leaders, Carol Phillips and Judy Hopelain.

Supported by a virtual team of research, analytic and consulting associates.

Who Are We?

Client-Side Agency Consulting

JWT Leo Burnett Mullen Y&R

Accenture BCG Prophet Swander Pace & Co.

Illuminations Patagonia Whirlpool

Business Faculty

A strong brand is one of a company’s most important assets. By growing brand equity, marketers help achieve the organization’s business objectives.

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We help clients solve strategic business and brand issues by leveraging a range of proven tools and frameworks.

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What Services Do We Offer?

– Brand audit

– Market segmentation

– Target insights (motivations, culture and decision-making)

– Brand identity and rallying cry

– Brand positioning

– Brand architecture

– Brand activation

– Brand measurement


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Metrics are an integral part of the brand strategy process.

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Why Measure Brand Equity?

Strategic Marketing Framework

I. Business Strategy

II. Brand Strategy – Architecture, Identity & Positioning

III. Go-to-Market Strategy

Value Proposition

Messaging & Offer Design

Customer Experience

IV. Marketing Execution & Metrics

Understand drivers of brand strength in order to support strategic decision – making.

To evaluate performance of brand management in increasing equity over time.

To evaluate efficacy of brand building programs -- ROMI.

To assess the value of the brand for purposes of licensing or sale.

Reasons to Measure Brand Equity


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Brand Equity vs. Brand Value

“(For most companies) the operative question is less what their brand is worth than what their brand could do for them in terms of revenue and profit. …gaining an understanding of the causal activities related to the changes would make brand equity measures more actionable.”

-- Tom Reynolds & Carol Phillips

“In Search of True Brand Equity Metrics: All Market Share Ain’t Created Equal” Journal of Advertising Research, 2005

Brand value and brand equity are not the same. Brand value is a financial measure specific to a point in time that is especially useful in M&A or licensing. Brand equity represents the potential for your brand to impact your business.


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Little consensus among experts about the best way to measure brand equity.

Key Issues:

• Definition of equity – brand value vs. impact of customer knowledge

• Measurement complexity – many components, unclear weights

• Accountability – hard to relate to market share, profitability

• Actionability – hard to link to marketing activities, spend, programs

• Engagement – limited organizational uptake of results

Brand Equity: What Do Experts Recommend?

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Source: Journal of Advertising Research, June 2005

Leading Brand Equity Measures & Sources


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How Is Equity Usually Measured in Practice?

Changes in brand awareness 81%

Changes in market share 79%

Changes in consumer attitude toward the brand 73%

Changes in purchase intent 59%

Return on objective 36%

Lifetime customer value 23%

Changes in the financial value of brand equity 20%

Most commonly used metrics:

Source: ANA, State of ROMI Measurement, 2007

“’There is no consistent definition of ROI.’ Marketing organizations are instead using "surrogate" metrics, ranging from input-related metrics such as awareness and brand image in financial services to market share and growth in consumer packaged goods companies.”

-- ANA/Booz Allen survey October, 2004.

Brand equity is usually measured through easy-to-obtain ‘proxies’ such as awareness or market share.


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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

Little Standardization – Many Opinions

Each industry and consulting firm defines equity in terms that are specific to its model or unique needs.

Leading Brand Measurement Firms Sample of Industry Brand Measures

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“Customer-based brand equity is the differential effect that brand knowledge has on customer response to the marketing of that brand.”

-- Kevin Keller, Strategic Brand Management, 2008, p. 48

What Is the Best Proxy for Brand Equity?

Which jar would you choose? The decision is not driven by price alone, but moderated by the sum of your experiences with

the brand. This is what enables some brands to charge a premium, while others cannot.

$1.99 $4.18 $2.29

Brand equity resides in the minds of customers. The best ‘proxy’ is one that best captures that intangible idea that impacts choice.

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Brand Equity Defined

“The mechanism that underlies (equity) is agreed to be a latent value in the mind of customers that is exhibited through its impact on behavior.”

Dr. Tom Reynolds & Carol Phillips, “In Search of True Brand Equity Metrics: All Market Share Ain’t

Created Equal”, Journal of Advertising Research, 2005

Loyal Behavior

Beliefs Intent

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• Share of wallet • Purchase frequency • Vendor consolidation

• Relative overall quality • Perceived cost • Preference • Willingness to recommend • Understands my needs

• Future purchase intent • Self-perceived trend (more

or less of my business)

Brand Equity Components

Brand equity is observed through its impact on choice. Measures of brand equity should reflect both attitudinal and behavioral components.


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Share Tiering Approach to Measurement

Premium

Brand?

Price

Brand?

Loyalty Contribution by BrandCustomers who devote 80% or more of requirements to the brand

28.0%

34.5%37.4%

Brand A Brand B Brand C

76% Sales 56% Sales 40% Sales

“Size and vitality of the core varies by brand. Every brand could benefit from having the core group represent a larger share of its total franchise.”

Mar

ket

Shar

e Just as all calories are not equally nutritious, not all share points contribute equally

to the health of the brand. Loyal customers are ‘nutrient rich’ and contribute more to brand health than the ‘empty calories’ of price sensitive customers.

Sales contributed by loyal customers

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Share Tiering Measures

Goal is to determine how much of a brand’s share is being driven by people who are loyal in both attitude and behavior.

Loyal Behavior

Beliefs Intent

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Operationally define loyal behavior in a way that is specific to the category (e.g., 80% total category needs).

Determine what percentage of Total Volume is ‘Loyalty Volume’* by brand.

Classify customers according to their brand beliefs.

Determine Total Volume and Loyalty Volume* within each classification.

*Loyalty volume = brand volume contributed by customers who are classified as ‘loyal’

Classify customers regarding how typical their recent purchasing has been and whether they expect a shift in the future.

Superior Quality

Good Quality

Acceptable Quality

Price Not a Barrier

Advocates Unconvinced Indifferents

Price a Minor Barrier

Aspirers Opportunists Ignorers

Price a Significant Barrier

Admirers Skeptics Rejectors


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Share Tiering Metrics

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Market Share Share of total category volume Top Box Contribution % Brand volume sourced from Advocates Loyalty Contribution Brand’s loyalty volume as % of total brand volume Equity Share Share of loyal user volume (any brand) Leveragability Index Ratio of volume from Aspirers to combined sales of Aspirers and Unconvinced

From these measures, a range of metrics can be calculated.


Ragu, 46%

Prego, 25%

Store, 6%

Other, 23%

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Example of Sharing Tiering

n=417 male and female primary grocery shoppers who purchased spaghetti sauce in past 3 months, 2005

Volume expressed in units of jars, cans, tubs.

57% rate quality ‘superior’; 44% say ‘cost is not a barrier’ to purchase.




Consumer beliefs regarding Ragu and Prego are similar – what explains their very different market shares?

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Market Share Spaghetti Sauce Category - Self Report Data*


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Self-report information on beliefs and behavior obtained through surveys can be used to measure brand equity components.

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Example of Share Tiering

Loyal Behavior

Beliefs Intent

• Share of wallet • Purchase frequency • Vendor consolidation

• Relative overall quality • Perceived cost • Preference • Willingness to recommend • Understands my needs

• Future purchase intent • Self-perceived trend (more

or less of my business)


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Share tiering reveals that Ragu derives more volume from its core customers – those who think it is superior and worth the price. This data reflects volume; profitability is most likely even more skewed.

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Ragu derives nearly 38% of its volume from Advocates while Prego derives just 15% from its Advocates.

A higher proportion of Ragu volume is ‘Loyalty Volume’, even among those with high future intent.

Share of Volume

Share of Volume

Q1 Q2 Q3 Q1 Q2 Q3

P1 37.9% 11.4% 1.6% P1 15.0% 14.3% 7.3%

P2 26.1% 13.0% 6.2% P2 32.3% 21.8% 0.4%

P3 0.5% 1.4% 1.8% P3 2.3% 2.7% 3.8%

Loyalty Share

Loyalty Share

Q1 Q2 Q3 Q1 Q2 Q3

P1 80.0% 65.8% 76.9% P1 57.0% 31.0% 90.9%

P2 84.8% 15.2% 0.0% P2 51.5% 10.7% 0.0%

P3 0.0% 0.0% 0.0% P3 0.0% 0.0% 0.0%

Share Tiers Based on Volume


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Share tiering provides direction for improving Prego brand equity relative to Ragu.

Prego is vulnerable - its market share is a misleading indicator of its brand health, as much of the volume is driven by non-loyal customers.

Prego is strongly ‘leveragable’ – the brand should focus on driving volume among ‘Aspirers’ by convincing them Prego’s superior quality is ‘worth the price’.

Market Share (Share of category

volume)

Equity Share (Share of

category loyal user volume)

Loyalty Contribution

(Loyal user volume as % total)

Advocate Contribution

(Contribution of top box respondents to

volume)

Leveragability Index

(Ratio of Aspirer volume to Total Aspirer +

Unconvinced volume)

Ragu 46% 51% 63% 30% 70%

Prego 25% 20% 44% 9% 69%

Store 6% 4% 33% 23% 0%

Other 23% 26% 66% 16% 60%

TOTAL 100% 100% 57% 21% 64%

Loyal users = 4 of last 5 purchases devoted to one brand. Advocates = those who rate brand superior on quality, price is no barrier to purchase


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Measures are understandable, not black box

Easily translated into financial strength and ROI

Yields universal metrics that can be applied across categories, brands, SBU’s

Questions are easy to administer, so equity can be assessed more frequently

Frequent measurement allows tracking of changes over time

Allows modeling relative to marketing activities and investments

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Advantages of Share Tiering


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Other Directions in Brand Equity Measurement

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Academics are actively proposing improved ways to measure brand equity, but each tends to emphasize a different aspect – belief, behavior, intent.

Metric Publication Author Definition

Corporate Branding Index

Leveraging the Corporate Brand

James R. Gregory Reputation, communications &

financial performance

Net Promoter Score The Loyalty Effect Fred Reichfeld Difference between percentage

of brand promoters and detractors

Driving Customer Equity

Customer Equity Roland Rust Sum of the lifetime volues of current and future customers

Energized Differentiation

The Brand Bubble John Gerzema and

Ed Lebar Palpable and measurable energy

that fosters irrational fidelity


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Recommended Approach

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Financial Impact/Performance

Activity & Program

Metrics

Market

Performance

Customer Perceptions &

Behavior

The ‘right’ way to measure brand equity involves a mix of measures and the ability to relate them to business results.

Comprehensive Brand Equity Measurement Approach


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Key Takeaways

Understand the difference between brand equity and brand value –

which is more important to you to know?

Recognize there is no silver bullet

– Requires a thoughtful approach based on a clear idea of how brand equity manifests itself in your business -- what behaviors and attitudes drive brand value for customers and investors?

– Use a mix of measures – belief, behavior, intent, financial

Tie measures to strategy

– If possible, model the relationship between brand equity measures and business performance to determine equity drivers

Be consistent

– Movies work better than ‘snapshots’ – pick a method and stay with it to build knowledge over time

Prioritize measures

– Don’t confuse data with insight – make it meaningful or it will be ignored – Most companies suffer more from too much data than from too little

Carol Phillips [email protected] 269-429-6526

Judy Hopelain

[email protected] 415-810-8268

To Learn More, Contact Us:


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