Perceived Brand Equity: A Journey from Efficiency to Effectiveness

Copyright © 2015 by Prof. Dr. V. Charles

V. Charles, PhD, PDRF Director of CENTRUM Research

Distinguished Research ProfessorEditor-in-Chief,

JCC: The Business and Economics Research JournalCENTRUM Católica Graduate Business School

PUCP, Lima, Peru.

Perceived Brand Equity: A Journey from

Efficiency to Effectiveness


Copyright © 2015 by Prof. Dr. V. CharlesCopyright © 2015 by Prof. Dr. V. Charles

In recent decades, brands have become comparable across the industries, based on their value derived

either from the consumer/customer perception or in terms of the firm financials. There is always a trade-off

between perception and financials, so as a trade-off between efficiency and effectiveness.

Ever since the inception of brand values, these have become a benchmark for many data-driven strategies,

eventually providing a basis for vertical/horizontal integrations, as well.


Such an attempt allows the firm to create virtual brands, which provides room for benchmarking not only the existing brands, but also the virtual brands;

this certainly provides an avenue to create new brands in virtue of virtual brands.

The present research provides the scope to design frontiers for the brands from developed and emerging economies, as well as it substantially allows to compare brands under various frontier technologies of interest.


Profit- seeker User-oriented,

friendly

The perception of brands is key to the development of the brand value. The image of a profit-seeking company affects the brand value in a bad way, whereas the user-oriented, friendly

brand has a more appealing approach towards consumers.

Brand perception


The recession gave consumers important lessons about consumption.

The true value of goods.

Are products really needful?

What is the real satisfaction I get from products?

Change in consumption habits



Advertising plays a vital role in

promoting the brand; however,

there are extreme and

exceptional cases: for instance,

on the one hand, Starbucks has

hardly spent money on

advertisement, while on the

other hand, Disney has spent

huge amount of money on

advertisement.


Data Envelopment Analysis (DEA)

• DEA is widely known as a technique for the evaluation of efficiency.

DEA is an extreme-point method and compares each decision-making unit (DMU) with the best DMU.

No need of assumption on the functional form.

Flexibility to incorporate multiple inputs and outputs.

Works well with a small sample size.

Advantages


1 2

1 2

Let be the number of DMUs. Each DMU 1,2,..., consumes a

vector of inputs, , ,..., to produce a vector of outputs,

, ,..., , where T is transpose. We define the DMU to beeval

jT

j j j njT

j j j nj

n j n

x x x x

y y y y

0uated as DMU .

0

1 1

1

01

. .

0, 1,2,..., ,

, 1,2,..., ,

0, 0, 0, 1,2,..., ; 1,2,..., ; 1,2,..., .

s s

r ir i

n

r rj j rj

n

ij j r ij

j r i

Max s s

s t

y y s r s

x s x i m

s s j n r s i m

DEA basic model

This is an output-oriented CRS model.

The efficiency of DMU0

is one over Phi .


FRH

CRS

FDH

VRS,

o

o

Y Y ,X X ,

0 .n

Max

1.Te

VRS

1,

0,1 .

T

FDH

e

0

free,.

T

FR

e

H

CRS, VRS, FDH, and FRH


Brand Value Vs. Advertising Costs


Developed countries


Axis


Country: USAAbbreviation Brand

AEX AMERICAN EXPRESSAMZ AMAZONAPL APPLEATT AT&TCCL COCA-COLADSN DISNEYFCB FACEBOOKGET GENERAL ELECTRICGOG GOOGLEIBM IBMMCD MCDONALD'SMLB MARLBOROMSF MICROSOFTMTC MASTERCARDNKE NIKESBU STARBUCKSUPS UPSVIS VISAVZN VERIZON

WMT WALMARTWSF WELLS FARGO

Abbreviation Brand CountrySAP SAP GermanyTMO T- MOBILE GermanyTOY TOYOTA JapanVDN VODAFONE UK

Developed Countries


Abbreviation Brand CountryFBC FACEBOOK USAMLB MARLBORO USAMCD MCDONALD´S USAVIS VISA USAAPL APPLE USAIBM IBM USA

Developed Countries

FDH

IBM and Visa have the same output level; however, still IBM can reduce its

advertising cost by 5.2% without affecting its efficiency level.


Developed CountriesFRH

Abbreviation Brand CountryFBC FACEBOOK USAMLB MARLBORO USAMCD MCDONALD´S USAVIS VISA USAAPL APPLE USA


Developed CountriesVRS

Abbreviation Brand CountryFBC FACEBOOK USAAPL APPLE USA


Input/Output orientationVRS

Abbreviation Brand CountryFBC FACEBOOK USAAPL APPLE USATOY TOYOTA JAPAN

Decrease 40.1%

Increase 20.9%


Efficiency

Efficient

• We have cases such as Mastercard (MTC), which holds the 20th place in the Brand ranking; nevertheless, it has the 4th place in the efficiency ranking.

• Another case is Facebook (FCB), which holds the 12th place in the Brand ranking; nevertheless, it is listed as efficient under every technology of interest.

Inefficient • Microsoft, which holds the 3rd place in the Brand ranking, but holds the 12th place in the efficiency ranking.


LegendFRHFDHVRS

Developed Countries


Emerging countries


Abbreviation Brand CountryABB ALIBABA ChinaAIT AIRTEL India

BDU BAIDU ChinaCMB CHINA MOBILE ChinaHDF HDFC BANK IndiaICB ICBC China

SBI STATE BANK OF INDIA India

TNC TENCENT China

Emerging Countries


Abbreviation Brand CountryHDF HDFC BANK IndiaBDU BAIDU ChinaABB ALIBABA ChinaTNC TENCENT China

Emerging CountriesFDH


Abbreviation Brand CountryHDF HDFC BANK IndiaBDU BAIDU ChinaABB ALIBABA ChinaTNC TENCENT ChinaICB ICBC China

FDHEmerging Countries

ICBC and Baidu have the same output level; however, ICBC can reduce its advertising cost by

43.84% without affecting its efficiency level.


Emerging CountriesFRH

Abbreviation Brand CountryHDF HDFC BANK IndiaBDU BAIDU ChinaABB ALIBABA China


Emerging Countries

Abbreviation Brand CountryHDF HDFC BANK IndiaBDU BAIDU ChinaTNC TENCENT China

VRS


VRSInput/Output Orientation

Abbreviation Brand CountryHDF HDFC BANK IndiaBDU BAIDU ChinaTNC TENCENT ChinaICB ICBC China

Decrease 43.85%

Increase 6.43%


EfficientThe outstanding cases of Baidu and HDFC, which are ranked in the 21st place and 72nd place in the Brand ranking, respectively; nevertheless, they are efficient under every technology of interest.

Inefficient China Mobile is ranked in the 15th place in the Brand ranking, nevertheless, it is ranked in the 21st place in the efficiency ranking.

Efficiency


Emerging Countries

LegendFRHFDHVRS


Developed & EmergingCountries


Country: USAType Brand

D1 APPLED2 GOOGLED3 MICROSOFTD4 IBMD5 VISAD6 AT&TD7 VERIZOND8 COCA-COLAD9 MCDONALD'SD10 MARLBOROD11 FACEBOOKD12 AMAZOND13 WELLS FARGO

D14 GENERAL ELECTRIC

D15 UPSD16 DISNEYD17 MASTERCARD

D20 AMERICAN EXPRESS

D21 WALMARTD23 NIKED24 STARBUCKS

Type Brand Country

D18 VODAFONE UK

D19 SAP Germany

D22 T- MOBILE Germany

D25 TOYOTA Japan

Country: ChinaType Brand

E1 TENCENTE2 ALIBABAE3 CHINA MOBILEE4 BAIDUE5 ICBC

Country: IndiaType Brand

E6 HDFC BANK

E7 AIRTEL

E8 STATE BANK OF INDIA

Developed and Emerging Countries


Type Brand CountryE6 HDFC BANK IndiaE4 BAIDU China

D11 FACEBOOK USAD10 MARLBORO USAD9 MCDONALD'S USAD5 VISA USAD1 APPLE USA


FDH


Input Orientation

FDH


D11 FACEBOOK USAD10 MARLBORO USAD9 MCDONALD'S USAD5 VISA USAD1 APPLE USAE1 TENCENT China


Output Orientation

FDH


D11 FACEBOOK USAD10 MARLBORO USAD9 MCDONALD'S USAD5 VISA USAD1 APPLE USAE2 TENCENT China

D13 WELLS FARGO USAD15 UPS USA



FRH


D11 FACEBOOK USAD10 MARLBORO USAD9 MCDONALD'S USA


Input Orientation

FRH


D11 FACEBOOK USAD10 MARLBORO USAD9 MCDONALD'S USAE7 AIRTEL India

E8STATE BANK OF INDIA India


Output Orientation

FRH


D11 FACEBOOK USAD10 MARLBORO USAD9 MCDONALD'S USAE7 AIRTEL India

E8STATE BANK OF INDIA India



D11 FACEBOOK USAD1 APPLE USA


VRS


Input/Output Orientation


D11 FACEBOOK USAD1 APPLE USA

D10 MARLBORO USA

VRSMarlboro (D10) can reduce its advertising costs by 15.85% or increase its output level

by 4.87% to become efficient.



LegendFRHFDHVRS


APP

LE

FAC

EBO

OK

BA

IDU

HD

FC B

AN

K

MA

RLB

OR

O

MA

STER

CA

RD

GO

OG

LE

VIS

A

MC

DO

NA

LD'S

IBM

ALI

BA

BA

MIC

RO

SOFT

STA

RB

UC

KS

TEN

CEN

T

WEL

LS F

AR

GO

AIR

TEL

STA

TE B

AN

K O

F IN

DIA

UPS

VER

IZO

N

AT&

T

CO

CA

-CO

LA

GEN

ERA

L EL

ECTR

IC

AM

AZO

N

AM

ERIC

AN

EX

PRES

S

ICB

C

T- M

OB

ILE

CH

INA

MO

BIL

E

SAP

DIS

NEY

WA

LMA

RT

VO

DA

FON

E

NIK

E

TOY

OTA

0.00

0.10

0.20

0.30

0.40

0.50

0.60

0.70

0.80

0.90

1.00

Efficiency ranking - Input-orientedEfficient Inefficient

Developed Emerging


Developed & Emerging Countries (VRS)Developed VRS

frontier

Emerging VRS frontier


High

Low

Low High

Efficiency vs. Effectiveness


Low

Low

Type Brand CountryD6 AT&T USAD8 COCA-COLA USA

D16 DISNEY USAD18 VODAFONE UKD19 SAP GermanyD22 T- MOBILE GermanyD23 NIKE USA

Low efficiency and low effectiveness


High

Low

Type Brand CountryD7 VERIZON USA

D14 GENERAL ELECTRIC USA

D15 UPS USA

D20 AMERICAN EXPRESS USA

D21 WALMART USAD25 TOYOTA Japan

E3 CHINA MOBILE China

E5 ICBC China

E8 STATE BANK OF INDIA India

Low efficiency and high effectiveness


Hig

h

High

Type Brand CountryD1 APPLE USAD2 GOOGLE USAD3 MICROSOFT USAD4 IBM USAD5 VISA USAD9 MCDONALD'S USA

D10 MARLBORO USAD11 FACEBOOK USAD13 WELLS FARGO USAD17 MASTERCARD USAD24 STARBUCKS USAE1 TENCENT ChinaE2 ALIBABA ChinaE4 BAIDU ChinaE6 HDFC BANK IndiaE7 AIRTEL India

High efficiency and high effectiveness


The present research provides the scope to design frontiers for the brands from developed and emerging economies, as well as it substantially allows to compare brands under various frontier technologies of interest.

Advertising plays a vital role in promoting the brand… but how much money should be spent on advertising? Or, otherwise stated, how much can we cut down on

advertising costs without affecting the efficiency of the brand?

Takeaways


For example:1. Developed countries: We have the outstanding case of

Facebook, which holds the 12th place in the Brand ranking; nevertheless, it is listed as efficient under every

technology of interest. 2. Developing countries: We have the outstanding case of

HDFC Bank, which is ranked in the 72nd place in the Brand ranking; nevertheless, it is efficient under every

technology of interest.

The analysis shows that the brand value ranking of the brands differs significantly from the efficiency ranking under different

technologies of interest.

Takeaways…


It is to be noted that the brands from developed countries which are inefficient are furthermore

inefficient even under the emerging countries frontier!

Apple and Facebook (Developed Countries) and Baidu and HDFC Bank (Emerging Countries) are efficient under every technology of interest and represent the

peers for the rest of the brands analysed.

Takeaways…


1. A substantial number of brands can be found with higher effectiveness.

2. 50% of the selected sample is sustaining with higher efficiency and higher effectiveness.

The brands have been classified into four quadrants, based on their efficiency and effectiveness:

Takeaways…


© reserved to Prof. Charles Vincent, PhD, PDRF

THANK YOUPerseverance, Persistence: Thomas Edison Quote

Nearly every man who develops an idea works at it up to the point where it looks impossible, and then gets discouraged. That's not the place to become discouraged.

Leadership & Management

Perceived Brand Equity: A Journey from Efficiency to Effectiveness