How to Measure Brand Equity

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OUR PERSPECTIVE

March, 2012

Measuring Brand Equity


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2012 Brand Amplitude, LLC All Rights Reserved

May not be reproduced without permission

INTRODUCTIONS

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 AgencyConsulting

JWT

Leo BurnettMullen

Y&R

Accenture

BCGProphet

Swander Pace & Co.

Illuminations

PatagoniaWhirlpool

Business Faculty

A strong brand is one of a companys most important assets. By growing

brand equity, marketers help achieve the organizations business objectives.

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INTRODUCTIONS

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 anddecision-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 Aint 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 Iexpect to consume on my next consumptionoccasion?

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 eachbrand

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 FirmsSample of Industry Brand Measures

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PERCEPTIO

NSIMPACTBEHA

VIOR

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 youchoose?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 Aint

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. Everybrand could benefit

from having the core group represent a larger share of its total franchise.

MarketShare

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 moreto 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 brands share is being driven by people

who are loyal in both attitude and behavior.


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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 andwhether they expect a shift

in the future.

Superior

Quality

Good

Quality

Acceptable

Quality

Price Not a

BarrierAdvocates Unconvinced Indifferents

Price a Minor

BarrierAspirers 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 Brands 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.


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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.


44%say cost is not a

barrier to purchase.


42%say cost is not a barrier

to purchase.


42%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


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, asmuch 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 Pregos 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, SBUs

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 BrandJames R. Gregory

Reputation, communications &

financial performance

Net Promoter Score The Loyalty Effect Fred Reichfeld

Difference between percentage

of brand promoters anddetractors

Driving Customer

EquityCustomer Equity Roland Rust

Sum of the lifetime volues of

current and future customers

Energized

DifferentiationThe 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 & ProgramMetrics MarketPerformanceCustomer 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 tobuild knowledge over time

Prioritize measures

Dont confuse data with insight make it meaningful or it will be ignored

Most companies suffer more from too much data than from too little


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Carol Phillips

[email protected]

Judy Hopelain

[email protected]

To Learn More, Contact Us:


CONTACTUS

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Documents

How to Measure Brand Equity