48990195 Strategic Brand Management Keller 10 Rev Measuring Outcomes of BE Market Performance 0010

7/29/2019 48990195 Strategic Brand Management Keller 10 Rev Measuring Outcomes of BE Market Performance 0010

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Measuring Outcomes of Brand EquityCapturing Market Performance


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10.2

Measuring Brand Equity

Brand Equity is a multi-dimensional concept

Many different measures required for

comprehensive evaluation

The ultimate value of a brand depends on theunderlying components of brand knowledge

and sources of brand equity


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Measuring Outcomes of Brand Equity

Capturing Market Performance

Different measures used to measure brand equity Comparative method

Brand based comparative approaches

Marketing based comparative approaches

Conjoint analysis (combines both)

Holistic methods Residual approaches

Valuation approaches

Accounting background Historical perspective

General approaches Cost approach:BE is cost of reproducing or replace the brand

Market approach:present value of the future economic benefits

Income approach:discounted future cash flow from the future earnings stream


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Measurement procedures used to assess

impact of BKS on outcomes

Comparative Methods

experiments examine Consumer attitudes, behavior towards brand

Estimate benefits arising from -

awareness levels

brand image


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Capturing Market PerformanceComparative Methods

Two types of comparative approaches

1. Brand-based comparative approach

Holds marketing program as fixed, and Examines consumer response to changes in brand

identification

2. Marketing-based comparative approach Holds the brand as fixed and

examines consumer response based on changes in themarketing program

Conjoint analysis is used to combine the 2 approaches


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1. Brand-based comparative approaches

Holds marketing element fixed and examines responsebased on changes in brand identification

Experiments - to find out how consumers react to an adcampaign, new promotion offer, new product

One group of customers respond to questions about the product /aspect of the marketing program when it is attributed to the brand

One or more groups respond to the same product / aspect of themarketing program attributed to other brands (real or fictitious)

Response of the 2 groups are compared to get insight about BE

Competitive brands become useful benchmarks in this approach

Consumers may a have particular brand, product category or anexemplar (category leader / or a brand considered to be representativeof the category


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1. Brand-based comparative approaches ApplicationUsed for Brands existing products,

extensions, pricing margins, premiums, etc. Blind test research product is used / examined without a

brand name

Checking Mar. Com. is sometimes a challenge

Rational advtg. is easier to check Brand knowledge than

Transformational type of ads (where production values arecritical to achieve the communication goal) are difficult tocheck for brand knowledge


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CritiqueBrand-based comparative approachesAdvantages of comparative approach

Isolates the brand value in a real sense by holding the

marketing program fixed important for developing strategies

Variety of marketing strategies can be studied and differentapplications can be examined

Useful to study new marketing programs (but not for ongoingprograms associated with the Brand)

Detailed concept statement required for respondents toexamine / experience elements of the marketing program /respond to new initiatives.

But this may also make the new attributes more salient anddistort results


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2. Market-based comparative approaches Holds brand as fixed and examines consumer

response based on changes in marketing program Applicationused for a long time

For demand curves and price sensitivity and thresholds ofmany brands Intel

Different advertising strategy executions, or media plans in

multiple test markets Potential brand extensions explored by evaluating a range of

concept statements of brand extension candidates

Contrasting those approved, with those notapproved, gives an indication of the nature of CBBE


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Comparative Methods

Critique - Comparative approaches Main advantage is ease of implementation

Virtually any set of marketing actions can be compared

Main drawbacks difficult to discern if consumer

response is caused by brand knowledge or more

generic product knowledge

Hence findings may be applicable to any brand One way to determine whether it is specific to the

brand is to conduct similar tests for competitive brands

using Conjoint analysis


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Capturing Market PerformanceComparative Methods 3. Conjoint analysis

A multivariate, survey based technique that profilesconsumer decision process with respect to products andbrands

Asks consumers to make choices among different product profiles Research determine the tradeoffs consumers are making between

brand attributes and the importance attributed to those attributes

Each profile shown to the consumers is made up of a set of attributelevels

Particular attribute levels are chosen on the basis of experimentaldesign principles to satisfy certain mathematical properties

Value that consumers attach to each attribute level (as derived by theconjoint formula) called the part worth, is used to evaluate howconsumers will value a new combination of attribute levels

Brand name must be an attribute to reflect its value (part worth)


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3. Conjoint analysis Application

Brand /price tradeoff methodology a means ofassessing advertising effectiveness and brand value

Series of simulated purchase choices between different combination ofbrands and prices

Each choice triggers increase in the price and of the selected brandcompelling a trade off between choosing a preferred brand and paying less

Thus revealing how much their brand loyalty is worth

Which brands would be abandoned for a lower price

Other variations used to assess brand image and equity How brand names interact with product features to affect extendibility to other

categories

Corporate image programs to determine the company attributes that are

Relevant to customers

Rank the importance of those attributes

Estimate the cost of making improvements Prioritizing image goals for maximum customer value for resource spent


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Capturing Market PerformanceComparative Methods Conjoint analysis

Critique Main advantage allows simultaneous study of -

different brands, different aspects of product, orof marketing program Information can be recovered for both competition and

own brand

Disadvantages marketing profiles that violate

expectations based on what is known about thebrand may be presented Unrealistic product profiles / scenarios should not be

presented


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Holistic Methods attempts to place an overallvalue on the brand in concrete financial terms

Residual approaches uncovers BE by

what remains of consumer preferences andchoices after subtracting physical product

effects the incremental preference over and above that which

would result for the product without brand identification

Valuation approaches attempts to place afinancial value on BE for accounting purposes,

A&Ms, etc.


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Holistic Methods

Residual approaches Kamakura and Russell

Consumer purchase histories from scanner data used

To study choices made by the panel of consumers as afunction of shelf price, promotions, displays, physical

characteristics of brands and residual term BE

By controlling other aspects of the marketing mix, an attempt

is made to estimate that aspect of the brand preference that

is unique to the brand The output of this approach are

Estimates of benefit segments

Cross-price elasticities for segments and the entire market

And equity measures for each brand


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Holistic Methods

Residual approaches Swait and Louvier

Designs choice experiments that account for

brand names, product attributes, brand image,and usage, differences in consumer socio-

demographic characteristics

The equalization priceis defined (price thatequates the utility of the brand to utilities that

could be attributed to the brand, where no

differentiation occurs) proxy for BE


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Capturing Market PerformanceHolistic Methods

Residual approaches Park and Srinivasan

Based on multi-attribute attitude model

BE is divided into components attribute based andnon-attribute based to reveal sizes of different BE bases

Attribute based componentof BE - difference betweensubjectively perceived attribute values and objectively

measured attribute values

Non-attribute based component difference betweensubjectively perceived attribute values and overall preference

and reflects the consumers configural brand appraisal

Survey procedure is used to collect information to estimate

these different perception and preference measures


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Capturing Market PerformanceHolistic Methods -

Residual approachesCritique Provides a useful benchmark for interpreting BE particularly

when approximations of BE are needed for a financially oriented

perspectiveDisadvantage

Appropriate for brands with product related attributeassociations (unable to distinguish between different types ofnon-product related attributes thus diagnostic value is limited)

Takes a static view of BE in attempting to identify sources ofconsumer preferences to uncover the contribution by the brand(unlike brand and marketing based competitive approaches thatare process based that attempt to assess how consumers willreact to new marketing activities)


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Holistic Methods

Valuation approaches ability to put a pricetag on a brands value. Application -

Mergers and acquisitions (for purchase / disposal)

Brand licensing (to third parties and for tax

purposes)

Fund raising (collateral for loans and leasebackarrangements

Brand management decisions to allocate

resources, develop brand strategy, prepare

financial resources


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Holistic Methods

Valuation approaches to put a price tagon brands value.

Balance sheets are adjusted to reflect true value

of the brand purchase premium to book value

No conventional method for estimating capital

required by brands, and the expected after-

acquisition ROI of a company

Accounting background is an approach that is

used


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Holistic Methods Valuation approachesHistorical Perspectives

A way to strengthen presentation of a companys

accounts, record hidden assets, enhance companyshareholders funds, improve its earning ratio, etc.

and increase the assets value of the firm

Actual practices vary across countries

Rupert Murdochs New Corporation was one of the first toput magazines valuation on balance sheet


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Holistic Methods Valuation approachesAccounting BackgroundAssets are classifiedas either

Tangible

property, plant, equipment, current assets,investments in stocks and bonds

Accounting book values, estimates of replacement costs,

considered

or Intangiblefactors of production, or specialized resources

that allow the company to earn cash flows in excess of thereturn on tangible assets

Goodwill items - Patents, trademarks, licensing

agreements, skills of management and customer relations,

premium paid which exceeds the value of tangible and

intangible assets in an acquisition


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Holistic Methods Valuation approachesGeneral Methodology

In A&Ms 3 main approaches are possible

1. The cost approach2. The market approach

3. The income approach


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Holistic Methods Valuation approaches

General Methodology

1. The cost approach (replacement cost approach) -

BE is the amount of money that would be needed toreplace the brand (R&D, marketing etc)

The disadvantage of the approach are -

Considers past performance - may have little or no bearing on

the future profitability

With old brands - to find out the true investment in the brandmay be impossible, and irrelevant as well

Easier to estimate costs of tangible assets than intangible

assets that is at the heart of BE

Problems exist with replacement cost approach - depends on

how quickly the process would take, and the what legal,

logistical and other obstacles may be encountered


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Holistic Methods Valuation approachesGeneral Methodology

2. Market approach BE is thought of as the

present value of future economic benefits Disadvantage

Lack of open transactions for brand name assets

Uniqueness of the brand makes extrapolating from one

transaction to another problematic


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Holistic Methods Valuation approaches

General Methodology

3. Income approach BE is the discounted future cash

flow from the future earnings stream for the brand Three income approaches are

1. Capitalizing royalty earnings from a brand name

2. Capitalizing premium profits earned by branded products (by

comparing it with unbranded products)

3. Capitalizing the actual profitability of a brand after allowing for

costs of maintaining it and the effects of transactions

Interbrands Brand valuation Methodologybased on

income approach


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Interbrands Brand Valuation

Interbrands Brand valuation Methodologybasedon Income Approach

To estimate brand value, Interbrand determines: Projected future earnings for the brand

-- AND --

The discount rate to adjust earnings for inflation &risk.

Brand earnings are based on a 3-year weighted

average of historical profits that exclude anumber of considerations that do not relate tothe brand identity.


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Interbrand To adjust these earnings, an in-depth assessment ofbrand strength based on seven factors is conducted:

LEADERSHIP (25%)

Market Share

Awareness

Positioning

Competitor Profile

STABILITY (15%)

Longevity

Coherence

Consistency

Brand Identity

Risks

SUPPORT (10%)

Consistency of message

Consistency of spend

Above vs. below line

Branch franchise

MARKET (10%)

What is the market?

Nature of the market

(e.g., volatility)

Size of market

Market dynamics

Barriers to entry

PROTECTION (5%)

Trademark registration

& registrability

Common lawLitigation/disputes

TREND (10%)

Long term market share performance

Projected brand performance

Sensibility of brand plans

Competitive actions

INTERNATIONALITY (25%)

Geographical spread

International positioning

Relative market share

Prestige

Ambition


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Measuring Brand Equity

By David Aaker


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Brand Equity Tenby David Aaker Loyalty measures

1. Price premium

2. Satisfaction / loyalty

Perceived quality / leadership measures3. Perceived quality

4 . Leadership / popularity - esteem

Association / differentiation measures5. Perceived value

6. Brand personality

7. Organizational associations

Awareness measures8. Brand awareness

Market behavior measures9. Market share

10. Market price & distribution coverage

Quanity and Qualy

research used to

measure equity


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Y&Rs Brand Asset Valuator

Brand Strength = differentiation x relevance

Differentiation (how distinctive is the brand)

Relevance (how meaningful is the brand)

Brand Stature = esteem x knowledgeEsteem (high regard, perceived quality)

Knowledge (understanding what the brand stands for)


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Equitrend by Total Research

Three BE assets are combined into a BE score

Salience (brand awareness plus knowledge)

Perceived quality (liking, trust, pride, willingness to

recommend)

User satisfaction (based on use experience)

48990195 Strategic Brand Management Keller 10 Rev Measuring Outcomes of BE Market Performance 0010

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