Measuring Brand Equity

Nov. 10, 2008

BrandAmplitude, LLC All Rights Reserved

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Positioning recommendation

For __________________________ is the only_____________________that_________________________

because ______________________.

Mantra

P&G Gain: $1 Billion Brand

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http://www.ilovegain.com/home.do

Successful repositioning of value brand to appeal to Hispanic Households.

Create Brand Positioning

Brand Strategy Process

Target & Insight

Brand Execution Brand Execution

Brand Elements

Competitive Assessment

Brand Inventory

Equity Pyramid

Positioning

Objectives & Metrics

Personality

CommunicationsStrategy

Brand Experience Map

Brand AuditBrand Audit

CRM &Community

Building

Points of Parity and Difference

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Why Measure Brand Equity?

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

• To evaluate efficacy of brand value building programs -- ROMI.

Why Measure Brand Health??

If you don’t know where you are, it’s If you don’t know where you are, it’s hard to decide how to get there. hard to decide how to get there.

If you don’t know where you’re going, If you don’t know where you’re going, any road will get you there.any road will get you there.

““The health of your brand is a prime indicator of The health of your brand is a prime indicator of the health of your company…The most effective the health of your company…The most effective

way to monitor your brand is to way to monitor your brand is to combine combine consistent real-world research with the use of consistent real-world research with the use of

quantitative models to measure, and even quantitative models to measure, and even predict, change in key variables.”predict, change in key variables.”

Jim Gregory, The Best of Branding, 2004, p 57

Why Measure Brand Health?

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What Are the Key Measures?

Source: ANA, State of ROMI Measurement, 2007

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:

The ‘Usual’ Approaches

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What’s Wrong With These Metrics?

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

Source: ANA/Booz Allen online survey of over 370 marketing and non-marketing managers of mostly publicly traded companies. October, 2004. About 80% of the respondents were senior or middle managers representing

14 industries, with over 90% of the respondents distributed evenly between Consumer Packaged Goods, Financial Services, Retail, Technology, Telecommunications, Manufacturing, Health, Auto and Professional Services

industries.

Measuring Brand Equity

Need to begin with a clear definition of the construct we want to measure.

30%

13% 13% 13%13%

9%

4% 4%

0%

5%

10%

15%

20%

25%

30%

How Do You Prove ROI?

Profit/Revenue

Marketing Mix Model

Common Metrics Across Organization

Currently Creating ROI Model

Not Able

High Level Estimates

Sales Force Productivity

Compare Spending AgainstCompetitiors

Source: The Capre Group, Other/none of the above6%

Increase in customer lifetime value17%

Changes in the financial value of brand equity19%

Post buy analysis comparing media plan to actual media delivery21%

Cost per sale generated23%

Gross rating points delivered25%

Reach and frequency achieved30%

Cost per lead generated34%

Ratio of advertising costs to sales revenue34%

Number of leads generated40%

Changes in market share49%

Changes in attitudes toward the brand51%

Changes in purchase intention55%

Total sales revenue generated by marketing activities55%

Changes in brand awareness57%

Incremental sales revenue generated by marketing activities66%

Other/none of the above6%

Increase in customer lifetime value17%

Changes in the financial value of brand equity19%

Post buy analysis comparing media plan to actual media delivery21%

Cost per sale generated23%

Gross rating points delivered25%

Reach and frequency achieved30%

Cost per lead generated34%

Ratio of advertising costs to sales revenue34%

Number of leads generated40%

Changes in market share49%

Changes in attitudes toward the brand51%

Changes in purchase intention55%

Total sales revenue generated by marketing activities55%

Changes in brand awareness57%

Incremental sales revenue generated by marketing activities66%

Source: ANA/Forrester Survey of 300 executives, http://www.ana.net/news/2004/07_19_04.cfm

Definitions of ‘Marketing ROI’

Measuring Brand Equity

Brand Loyalty Underlies Brand Equity

““The mechanism that underlies (equity) is agreed to be a The mechanism that underlies (equity) is agreed to be a latent latent value in the mind of customersvalue in the mind of customers that is that is exhibited through its exhibited through its

impact on behavior.impact on behavior. Positive equity results in behavior that Positive equity results in behavior that benefits the brand through purchase frequency, brand loyalty, benefits the brand through purchase frequency, brand loyalty,

price insensitivity, willingness to recommend and more.” price insensitivity, willingness to recommend and more.” ----

Dr. Tom Reynolds & Carol Phillips, “In Search of True Brand Equity Metrics: All Market Share Ain’t Created Dr. Tom Reynolds & Carol Phillips, “In Search of True Brand Equity Metrics: All Market Share Ain’t Created Equal”, paper in review, Equal”, paper in review, Journal of Advertising ResearchJournal of Advertising Research

Brand Equity Defined

Loyal Behavior Psychological Preference

Perceptions Impact Behavior

Now which box would you choose?

$5 $5,000$500$50

Perceptions Impact Behavior

Which jar would you choose?

$1.89 $2.49 $2.29

• Brand equity can be measured by determining loyal users’ contribution to category profits (ideally) and to brand sales (realistically).

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

Every brand could benefit from having the core group represent a Every brand could benefit from having the core group represent a larger share of its total franchise.larger share of its total franchise.

– – Dr. Tom ReynoldsDr. Tom Reynolds

Brand Equity Defined

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Now, what Are the Key Measures?

  Aaker Keller Y&R Equi-Trend

Inter-brand   Aaker Keller Y&R

Equi-Trend

Inter-brand

Associations   x x     Market Trend         x

Awareness x x       Mktng Support         x

Brand Trend         xOrg. Associations          

Differentiation     x    

Perceived Quality x x   xx  

Dist. Coverage x        

Perceived Value x        

Esteem     x     Personality x   x    

International         x Price Premium xx        

Knowledge     x     Relevance     x    

Leadership x       xx Salience       x  

Legal Protect’n         x

User Sat./Loyalty x x   xx  

Market Share x         Stability         xSources: D. Aaker, Building Strong Brands, 1996; K. Keller, Strategic Brand Management, 2003

What The Experts Say

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Financial Value

The Right Approach

Activity & Program Metrics

Market Performance

Customer Perceptions & Behavior

““You can’t put attitudes in the bank!”You can’t put attitudes in the bank!”

ROMI

• Multiple measures at different levels of the value chain, benchmarked and tracked consistently over time:

Activity & Program Metrics

Market Performance

Customer Perceptions & Behavior

The ‘Right’ Approach

•Marketing Investment•Program Quality

•Clarity•Relevance•Distinctiveness•Consistency

•Channel expansion

•Brand awareness•Brand familiarity/associations•Brand evaluations/attitudes•Customer acquisition/ conversion•Customer retention•Attachment/Loyalty

•Sales•Market share•Price premium•Profitability•Price elasticity•Expansion success

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Financial Value

The Right Approach

•Stock price•P/E ratio•Market capitalization•Brand contribution (i.e., CoreBrand index)

Activity & Program Metrics

Market Performance

Customer Perceptions & Behavior

• Linking customer perceptions and market performance to impact on financial value to assess ROMI.

ROMI

• Customer Based Brand Metrics– Based on CBBE model– Traditional marketing and communications tracking– Examples: Millward Brown “BrandDynamics”, Y&R “Brand Asset Valuator”

• Incremental Brand Performance– Short term incremental sales volume, premium pricing, other outcomes– Historical modeling and predictive modeling

• Branded Business Value– Financial value of intangible assets– Measure increases or decreases in brand asset value over time

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The ‘Right’ Approach

Measuring Brand Value, Don E. Schultz & Heidi F. Schultz, Kellogg on Branding, 2005

Examples

• 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

Equity Measure Examples

Brand Valuation and Measurement Firms

Financial Value

Strategic Value

Measurement Firms

Are Brand Equity and Brand Valuation the Same?

Brand Equity vs. Value

See also: “The Best Global Brands”, Businessweek, August 4, 2004; “Microsoft, GE top brand equity study, BtoB, 1.19.04. and “Don’t Waste Time with Brand Valuation”, MarketingNPV.com, October 2004.

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

brand equity measures more actionable.”brand equity measures more actionable.”

--Dr. Tom Reynolds & Carol Phillips, “In Search of True Brand Equity Metrics: All Market Share Ain’t Created Equal”, paper in review, Journal of Advertising Research

New Ideas in Measurement• Net Promoter Score

– Fred Reichfeld, The Loyalty Effect

• Customer Equity– Roland Rust– Sum of the lifetime values of current and future customers

• Customer Income Flows– Don Schultz

• Royalty Rate

• Share Tiering

New Equity Measure Ideas

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Share Tiering

Objective:

Relate changes in consumer behavior and perceptions to changes in financial performance.

Consumer Measures:

1)Relative barrier of price2)Brand Quality perceptions3)Brand purchase loyalty4)Self-report future brand purchase trend

In Search of True Brand Equity Metrics: All Market Share Ain’t Created Equal, Journal of Advertising Research, June 2005, Tom Reynolds and Carol Phillips

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

Base= 164 Male and Female Primary Shoppers 24-64 Who purchased spaghetti sauce at a grocery store, supermarket or club store in past 3 mos. (Sept 2005)

Q1 Q2 Q3 Q1 Q2 Q3 Q1 Q2 Q3 Q1 Q2 Q3P1 122.0 36.8 5.2 P1 27.0 25.8 13.2 P1 17.6 15.8 2.8 P1 32.2 41.8 4.0P2 84.2 42.0 20.0 P2 58.2 39.3 0.8 P2 0.0 4.8 0.8 P2 27.4 30.0 3.2P3 1.6 4.4 5.8 P3 4.2 4.8 6.8 P3 0.0 0.0 0.8 P3 0.0 12.8 8.0

322.0 180.1 42.6 159.4

Q1 Q2 Q3 Q1 Q2 Q3 Q1 Q2 Q3 Q1 Q2 Q3P1 37.9% 11.4% 1.6% P1 15.0% 14.3% 7.3% P1 41.3% 37.1% 6.6% P1 20.2% 26.2% 2.5%P2 26.1% 13.0% 6.2% P2 32.3% 21.8% 0.4% P2 0.0% 11.3% 1.9% P2 17.2% 18.8% 2.0%P3 0.5% 1.4% 1.8% P3 2.3% 2.7% 3.8% P3 0.0% 0.0% 1.9% P3 0.0% 8.0% 5.0%

100.0% 100.0% 100.0% 100.0%

Base = Those who do say they intend to purchase less in the future.

Q1 Q2 Q3 Q1 Q2 Q3 Q1 Q2 Q3 Q1 Q2 Q3P1 97.6 24.2 4.0 P1 15.4 8.0 12.0 P1 9.6 3.0 0.6 P1 25.0 27.6 1.6P2 71.4 6.4 0 P2 30.0 4.2 4.0 P2 0 0.8 0 P2 20.0 18.6 2.4P3 0 0 0.4 P3 0.0 0.0 4.8 P3 0 0 0 P3 0 10.0 0

204.0 78.4 14 105.2

Q1 Q2 Q3 Q1 Q2 Q3 Q1 Q2 Q3 Q1 Q2 Q3P1 80.0% 65.8% 76.9% P1 57.0% 31.0% 90.9% P1 54.5% 19.0% 21.4% P1 77.6% 66.0% 40.0%P2 84.8% 15.2% 0.0% P2 51.5% 10.7% 500.0% P2 0.0% 0.0% 0.0% P2 73.0% 62.0% 75.0%P3 0.0% 0.0% 0.0% P3 0.0% 0.0% 0.0% P3 0.0% 0.0% 0.0% P3 0.0% 78.1% 0.0%

Ragu Loyalty Share Prego Loyalty Share Store Brand Loyalty Share Other Brand Loyalty Share

Ragu Loyalty Servings Prego Loyalty Servings Store Brand Loyalty Servings Other Brand Loyalty Servings

Share of Ragu Volume Share of Prego Volume Share of Store Brand Volume Share of Other Brand Volume

Ragu Volume Prego Volume Store Brand Volume Other Brand Volume

Other Brands

Total Volume

Market Share

Loyalty Volume (Volume

attributable to loyal users*)

Equity Share

(Share of loyal user volume*)

Top Box

Volume

Loyalty Contribution

(Loyalty Volume as Percent of

Brand Volume)

Top Box Contribution

(Top Box Volume as

Percent Brand Volume)

Ragu 322.0 45.7% 204.0 50.8% 97.6 63.4% 30.3%Prego 180.1 25.6% 78.4 19.5% 15.4 43.5% 8.6%Store 42.6 6.1% 14.0 3.5% 9.6 32.9% 22.5%Other 159.4 22.6% 105.2 26.2% 25.0 66.0% 15.7%

TOTAL 704.1 100.0% 401.6 100.0% 147.6 57.0% 21.0%

*Top Box = respondents rating brand Q1/P1

*Loyal users are defined as respondents who indicate they devote 4 or 5 out of last five purchases to one brand.

Volume is expressed in units of jars, cans or tubs.

Share ‘Tiering’ Measures

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Companies Clueless On Brand Value, Evaluations Neededby Karlene Lukovitz, Tuesday, Oct 28, 2008 3:15 PM ET

Now that The Brand Bubble has spelled out that most brands--and their companies--are greatly overvalued by the financial markets, we find out that those on the inside do not have a clear idea of what their brands are worth, either.

More than half (55%) of senior marketing executives lack a quantitative understanding of brand value within their organizations, according to a recent survey by the Association of National Advertisers and global branding consultancy Interbrand.

Further, because brand value's effect on corporate value is not clearly quantified, it isn't being incorporated in decision-making: 64% of the 118 marketing officers and senior marketing executives polled said that brands do not influence decisions made at their organizations.

Measuring Brand ‘Value’

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Among those who said brands don't influence corporate decisions, the underlying causes cited include:

Incentives that don't support brand importance (51%);

Inability to prove the brand's financial benefit (49%);

Existing branding expertise is not widely accepted (40%);

Metrics do not support the brand's importance (39%);

Budgets are focused on communications activities (32%);

Brand is not included in the "sphere of influence" (28%);

Branding expertise does not yet exist (15%).

Measuring Brand ‘Value’

Companies Clueless On Brand Value, Evaluations Neededby Karlene Lukovitz, Tuesday, Oct 28, 2008 3:15 PM ET

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What Are the Key Measures?

• There Is No Silver Bullet– Each firm requires unique measures– MSI Report – Tim Ambler

• Use a mix of measures– Include perceptual (knowledge), financial impact and behavioral (loyalty) measures– Tie measures to strategy – what behaviors and attitudes drive brand value for

customers and investors?

• Consistency is Key – Movies work better than ‘snapshots’– Build knowledge over time

• Prioritize – More likely to suffer from too much data than from too little

Key Takeaways

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Recommended Resources

“Brand Vitals: Essential Principles for Monitoring Brand Health”, Carol Phillips and Judy Hopelain, 2008 http://www.brandamplitude.com/whitepapers/Brand%20Vitals%20vF.pdf

“In Search of True Brand Equity Metrics: All Market Share Ain’t Created Equal”, Tom Reynolds and Carol Phillips, Journal of Advertising Research, 2005 http://www.brandamplitude.com/whitepapers/all_market_share_aint_created_equal.pdf

“On Track: The Next Generation of Brand Tracking”, Judy Hopelain, AMA’s Marketing Management, October, 2005http://www.brandamplitude.com/whitepapers/on_track.pdf

“Measuring Brand Value”, Don E. Schultz and Heidi F. Schultz, Kellogg on Branding, 2005, Ch 13

“Make a Case for Your Brand”, Susan Fournier, Advertising Age, November 26, 2007

“Brand Metrics: good, bad and don’t bother”, Scott Davis, Strategy, January, 26, 2004