Measuring Brand Equity

OUR PERSPECTIVE
March, 2012

Who Are We?

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. Client-Side
Illuminations Patagonia Whirlpool

INTRODUCTIONS

Consulting
Accenture BCG Prophet Swander Pace & Co.

Agency
JWT Leo Burnett Mullen Y&R

Business Faculty

A strong brand is one of a companys most important assets. By growing brand equity, marketers help achieve the organizations business objectives.
2012 Brand Amplitude, LLC All Rights Reserved May not be reproduced without permission
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What Services Do We Offer?

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

INTRODUCTIONS

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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Why Measure Brand Equity?

Metrics are an integral part of the brand strategy process.
Reasons to Measure Brand Equity 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. Strategic Marketing Framework I. Business Strategy II. Brand Strategy Architecture, Identity & Positioning III. Go-to-Market Strategy
Value Proposition Messaging & Offer Design

BRAND EQUITY MEASUREMENT

Customer Experience

IV. Marketing Execution & Metrics

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Brand Equity vs. Brand Value

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. (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 EQUITY MEASUREMENT

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Brand Equity: What Do Experts Recommend?

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 MEASUREMENT

Leading Brand Equity Measures & Sources

Source: Journal of Advertising Research, June 2005

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How Is Equity Usually Measured in Practice?

Brand equity is usually measured through easy-to-obtain proxies such as awareness or market share. 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.
Most commonly used metrics:
Changes in brand awareness Changes in market share Changes in consumer attitude toward the brand Changes in purchase intent Return on objective Lifetime customer value Changes in the financial value of brand equity
Source: ANA, State of ROMI Measurement, 2007

BRAND EQUITY MEASUREMENT

81% 79% 73% 59% 36% 23% 20%

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Little Standardization Many Opinions

Each industry and consulting firm defines equity in terms that are specific to its model or unique needs.
Sample of Industry Brand Measures 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?

BRAND EQUITY MEASUREMENT

Leading Brand Measurement Firms

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

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What Is the Best Proxy for Brand Equity?

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

PERCEPTIONS IMPACT BEHAVIOR

$1.99

$4.18

$2.29

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.
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Brand Equity Defined

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

BRAND EQUITY MEASUREMENT

Brand Equity Components

Loyal Behavior
Share of wallet Purchase frequency Vendor consolidation

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

Intent
Future purchase intent Self-perceived trend (more or less of my business)

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Share Tiering Approach to Measurement

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.
Loyalty Contribution by Brand
Customers who devote 80% or more of requirements to the brand

BRAND EQUITY MEASUREMENT

34.5%

37.4%
Sales contributed by loyal customers

Market Share

28.0%

Premium 76% Sales Brand?

56% Sales

Price Brand? 40% Sales

Brand A

Brand B

Brand C

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.
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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.

BRAND EQUITY MEASUREMENT

Loyal Behavior
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.
Price Not a Barrier Price a Minor Barrier Price a Significant Barrier

Beliefs
Classify customers according to their brand beliefs. Determine Total Volume and Loyalty Volume* within each classification.
Superior Quality Advocates Good Quality Unconvinced Acceptable Quality Indifferents

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

Aspirers

Opportunists

Ignorers

Admirers

Skeptics

Rejectors

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

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Share Tiering Metrics

From these measures, a range of metrics can be calculated.
Market Share Top Box Contribution Loyalty Contribution Equity Share Share of total category volume % Brand volume sourced from Advocates Brands loyalty volume as % of total brand volume Share of loyal user volume (any brand)

BRAND EQUITY MEASUREMENT

Leveragability Index

Ratio of volume from Aspirers to combined sales of Aspirers and Unconvinced

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Example of Sharing Tiering

Consumer beliefs regarding Ragu and Prego are similar what explains their very different market shares?
Market Share Spaghetti Sauce Category - Self Report Data*

BRAND EQUITY MEASUREMENT

Other, 23% Ragu, 46% Store, 6% Prego, 25%

57% rate quality superior; 44% say cost is not a barrier to purchase. 52% rate quality superior; 42% say cost is not a barrier to purchase.

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.

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Example of Share Tiering

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

BRAND EQUITY MEASUREMENT

Loyal Behavior
Share of wallet Purchase frequency Vendor consolidation

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

Intent
Future purchase intent Self-perceived trend (more or less of my business)

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Example of Share Tiering

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.
Share Tiers Based on Volume

BRAND EQUITY MEASUREMENT

P1 P2 P3

Share of Volume Q1 Q2 37.9% 11.4% 26.1% 13.0% 0.5% 1.4% Loyalty Share Q1 Q2 80.0% 65.8% 84.8% 15.2% 0.0% 0.0%

Q3 1.6% 6.2% 1.8%

P1 P2 P3

Share of Volume Q1 Q2 15.0% 14.3% 32.3% 21.8% 2.3% 2.7% Loyalty Share Q1 Q2 57.0% 31.0% 51.5% 10.7% 0.0% 0.0%

Q3 7.3% 0.4% 3.8%

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.

P1 P2 P3

Q3 76.9% 0.0% 0.0%

P1 P2 P3

Q3 90.9% 0.0% 0.0%

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Example of Share Tiering

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 Pregos superior quality is worth the price.

BRAND EQUITY MEASUREMENT

Market Share
(Share of category volume)

Equity Share
(Share of category loyal user volume)

(Contribution of top (Ratio of Aspirer volume (Loyal user volume box respondents to to Total Aspirer + as % total) volume) Unconvinced volume)

Loyalty Contribution 63% 44%

Advocate Contribution

Leveragability Index

Ragu Prego

46% 25%

51% 20%

30% 9%

70% 69%

Store
Other TOTAL

6%
23% 100%

4%
26% 100%

33%
66% 57%

23%
16% 21%

0%
60% 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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Advantages of Share Tiering

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

BRAND EQUITY MEASUREMENT

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Other Directions in Brand Equity Measurement

Academics are actively proposing improved ways to measure brand equity, but each tends to emphasize a different aspect belief, behavior, intent.
Metric
Corporate Branding Index Net Promoter Score Driving Customer Equity Energized Differentiation

BRAND EQUITY MEASUREMENT

Publication
Leveraging the Corporate Brand The Loyalty Effect

Author
James R. Gregory

Definition
Reputation, communications & financial performance Difference between percentage of brand promoters and detractors Sum of the lifetime volues of current and future customers

Fred Reichfeld

Customer Equity

Roland Rust

The Brand Bubble

John Gerzema and Palpable and measurable energy Ed Lebar that fosters irrational fidelity

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

BRAND EQUITY MEASUREMENT

Comprehensive Brand Equity Measurement Approach

Activity & Program Metrics

Customer Perceptions & Behavior

Market Performance

Financial Impact/Performance

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Key Takeaways
Understand the difference between brand equity and brand value which is more important to you to know?

BRAND EQUITY MEASUREMENT

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

CONTACT US

How Can We Help You Grow?

To Learn More, Contact Us:

Carol Phillips carol@brandamplitude.com
269-429-6526

Judy Hopelain judy@brandamplitude.com

415-810-8268

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