CHAPTER 8:

DEVELOPING A BRAND EQUITY

MEASUREMENT AND MANAGEMENT
SYSTEM

Kevin Lane Keller

Tuck School of Business
Dartmouth College

8.1

The New Accountability

Virtually every marketing dollar spent

today must be justified as both effective
and efficient in terms of return of
marketing investment (ROMI).
Some observers believe that up to 70%
(or even more) of marketing expenditures
may be devoted to programs and
activities that cannot be linked to shortterm incremental profits, but yet can be
seen as improving brand equity.
8.2

The Brand Value Chain

Broader perspective than just the

CBBE model
The brand value chain is a
structured approach to assessing the
sources and outcomes of brand
equity and the manner by which
marketing activities create brand
value.
8.3

The Brand Value Chain

The brand value chain has several

basic premises. Fundamentally, it
assumes that the value of a brand
ultimately resides with customers.

8.4

The Brand Value Chain

Based on this insight, the model next assumes that the brand
value creation process begins when the firm invests in a
marketing program targeting actual or potential customers.
The marketing activity associated with the program then
affects the customer mindset with respect to the brand what
customers know and feel about the brand.
This mindset, across a broad group of customers, then results
in certain outcomes for the brand in terms of how it performs
in the marketplace the collective impact of individual
customer actions regarding how much and when they
purchase, the price that they pay, and so forth.
Finally, the investment community considers this market
performance and other factors such as replacement cost and
purchase price in acquisitions to arrive at an assessment of
shareholder value in general and a value of the brand in
particular.
8.5

The Brand Value Chain

The model also assumes that a number of linking

factors intervene between these stages.

These linking factors determine the extent to which

value created at one stage transfers or multiplies to
the next stage.

Three sets of multipliers moderate the transfer

between the marketing program and the subsequent
three value stages: the program quality multiplier, the
marketplace conditions multiplier, and the investor
sentiment multiplier.

8.6

Brand Value Chain

VALUE
STAGES

Product
Communications
Trade
Employee
Other

FILTERS

Customer
Mindset

Marketing
Program
Investment

Awareness
Associations
Attitudes
Attachment
Activity

Program
Multiplier
Clarity
Relevance
Distinctiveness
Consistency

Market
Performance
Pricepremiums
Priceelasticity
Marketshare
Expansionsuccess
Coststructure
Profitability

Consumer
Multiplier

Shareholder
Value
Stockprice
P/Eratio
Marketcapitalization

Market
Multiplier

Marketdynamics
Channelsupport
Consumersizeandprofile Growthpotential
Competitivereactions
Riskprofile
Brandcontribution

Value Stages

Marketing program investment

Customer mindset

In what way have customers been changed

as a result of the marketing program?

Market performance

Any marketing program that can be

attributed to brand value development

How do customers respond in the

marketplace?

Shareholder value
8.8

Marketing Program
Investment
Any marketing program
investment that potentially can be

attributed to brand value development, either intentional or

not, falls into this first value stage.
Specifically, some of the bigger marketing expenditures relate
to product research, development, and design; trade or
intermediary support; marketing communications (e.g.,
advertising, promotion, sponsorship, direct and interactive
marketing, personal selling, publicity, and public relations);
and employee training.
The extent of financial investment committed to the marketing
program, however, does not guarantee success in terms of
brand value creation. Many marketers have spent billions of
dollars in marketing activities and programs but due to
questionably strategic and tactically ineffective campaigns.,
have seen competitors steal key market positions. The ability
of a marketing program investment to transfer or multiply
farther down the chain will thus depend on qualitative aspects
of the marketing program via the program quality multiplier.
8.9

Program Quality
Multiplier

The ability of the marketing program to affect

the customer mindset will depend on the
quality of that program investment. There are
a number of different means to judge the
quality of a marketing program and many
different criteria may be employed. To
illustrate, four particularly important factors
are as follows:

8.10

Multipliers

Program quality multiplier

Customer multiplier

The ability of the marketing program to affect

customer mindset
Must be clear, relevant, distinct, and consistent
The extent to which value created in the minds of
customers affects market performance
It depends on factors such as competitive superiority,
channel support, and customer size and profile

Market multiplier

The extent to which the value generated through

brand market performance is manifested in
shareholder value
It depends on factors such as market dynamics,
growth potential, risk profile, and brand contribution
8.11

Program Quality
Multiplier
1. Clarity: How understandable is the marketing

program? Do consumers properly interpret and evaluate

the meaning conveyed by brand marketing?
2. Relevance: How meaningful is the marketing program
to customers? Do consumers feel that the brand is one
that should receive serious consideration?
3. Distinctiveness: How unique is the marketing
program from those offered by competitors? How
creative or differentiating is the marketing program?
4. Consistency: How cohesive and well integrated is the
marketing program? Do all aspects of the marketing
program combine to create the biggest impact with
customers? Does the marketing program relate
effectively to past marketing programs and properly
balance continuity and change, evolving the brand in
8.12
the right direction?

Customer Mindset

A judicious marketing program investment could

result in a number of different customer related
outcomes. Essentially, the issue is,

in what ways have customers been changed as a result of

the marketing program?
How have those changes manifested themselves in the
customer mindset?

Remember that the customer mindset includes

everything that exists in the minds of
customers with respect to a brand: thoughts,
feelings, experiences, images, perceptions,
beliefs, attitudes, and so forth. Understanding
customer mindset can have important
implications for marketing programs.
8.13

Customer Mindset
A host of different approaches and measures are available to
assess value at this stage. One simple way to reduce the
complexity of the brand resonance model into a simpler,
more memorable structure is in terms of five key dimensions.
The 5 As are a way to highlight key dimensions of the
brand resonance model within the brand value chain model
as particularly important measures of the customer mindset:
1. Brand awareness The extent and ease with which
customers recall and recognize the brand and thus the
salience of the brand at purchase and consumption.
2. Brand associations The strength, favorability, and
uniqueness of perceived attributes and benefits for the brand
in terms of points-of-parity and points-of-difference in
performance and imagery.
3. Brand attitudes Overall evaluations of the brand in terms
of the judgments and feelings it generates.
8.14

Customer Mindset
4. Brand attachment How intensely loyal the customer
feels toward the brand. A strong form of attachment,
adherence, refers to the consumers resistance to
change and the ability of a brand to withstand bad
news (e.g., a product or service failure). In the
extreme, attachment can even become addiction.
5. Brand activity The extent to which customers are
actively engaged with the brand such that they use the
brand, talk to others about the brand, seek out brand
information, promotions, and events, and so on.

8.15

Customer Mindset

An obvious hierarchy exists in these five dimensions of

the brand resonance model: Awareness supports
associations, which drive attitudes that lead to
attachment and activity. According to the brand
resonance model, brand value is created at this stage
when customers have

1. deep, broad brand awareness;

2. appropriately strong and favorable points-of-parity and
points-of-difference;
3. positive brand judgments and feelings;
4. intense brand attachment and loyalty; and
5. a high degree of brand engagement and activity.
8.16

Marketplace Conditions
Multiplier
The extent to which value created in the minds of customers
affects market performance depends on various contextual
factors external to the customer. Three such factors are as
follows:
1. Competitive superiority : How effective are the quantity and
quality of the marketing investment of other competing
brands.
2. Channel and other intermediary support : How much brand
reinforcement and selling effort is being put forth by various
marketing partners.
3. Customer size and profile : How many and what types of
customers (e.g., profitable or not) are attracted to the brand.
8.17

Marketplace Conditions
Multiplier

The competitive context faced by a brand can have a

profound effect on its fortunes. For example, both Nike
and McDonalds have benefited in the past from the
prolonged marketing woes of their main rivals, Reebok
and Burger King, respectively. Both of these latter
brands have suffered from numerous repositionings
and management changes. On the other hand,
MasterCard has had to contend for the past decade
with two strong, well-marketed brands in Visa and
American Express and consequently has faced an
uphill battle gaining market share despite its wellreceived Priceless ad campaign.

8.18

Market Performance

The customer mindset affects how customers react or

respond in the marketplace in a six main ways.
The first two outcomes relate to price premiums and
price elasticities. How much extra are customers
willing to pay for a comparable product because of its
brand? And how much does their demand increase or
decrease when the price rises or falls?
A third outcome is market share, which measures the
success of the marketing program to drive brand sales.
Taken together, the first three outcomes determine the
direct revenue stream attributable to the brand over
time. Brand value is created with higher market
shares, greater price premiums, and more elastic
responses to price decreases and inelastic responses to
price increases.
8.19

Market Performance

The fourth outcome is brand expansion, the success of the

brand in supporting line and category extensions and new
product launches into related categories. Thus, this
dimension captures the ability to add enhancements to the
revenue stream.
The fifth outcome is cost structure or, more specifically,
savings in terms of the ability to reduce marketing program
expenditures because of the prevailing customer mindset. In
other words, because customers already have favorable
opinions and knowledge about a brand, any aspect of the
marketing program is likely to be more effective for the
same expenditure level; alternatively, the same level of
effectiveness can be achieved at a lower cost because ads
are more memorable, sales calls more productive, and so on.
When combined, these five outcomes lead to brand
profitability, the sixth outcome.
8.20

Investor Sentiment
Multiplier

The extent to which the value engendered by the

market performance of a brand is manifested in
shareholder value depends on various contextual
factors external to the brand itself. Financial analysts
and investors consider a host of factors in arriving at
their brand valuations and investment decisions.
Among these considerations are the following:

8.21

Investor Sentiment
Multiplier

1. Market dynamics What are the dynamics of the financial markets

as a whole (e.g., interest rates, investor sentiment, or supply of
capital)?
2. Growth potential What are the growth potential or prospects for
the brand and the industry in which it operates? For example, how
helpful are the facilitating factors and how inhibiting are the
hindering external factors that make up the firms economic, social,
physical, and legal environment?
3. Risk profile What is the risk profile for the brand? How vulnerable
is the brand likely to be to those facilitating and inhibiting factors?
4. Brand contribution How important is the brand as part of the
firms brand portfolio and all the brands it has?

8.22

Shareholder Value

Based on all available current and forecasted information about a

brand as well as many other considerations, the financial
marketplace then formulates opinions and makes various
assessments that have very direct financial implications for the
brand value.
Three particularly important indicators are the stock price, the
price/earnings multiple, and overall market capitalization* for the
firm. Research has shown that not only can strong brands deliver
greater returns to stockholders, they can do so with less risk.

* Market capitalization (often market cap) is a measurement of

size of a business enterprise (corporation) equal to the share
price times the number of shares outstanding (shares that have
been authorized, issued, and purchased by investors) of a publicly
traded company.
8.23

Brand Equity Measurement

System

A set of research procedures that is

designed
to provide timely,
accurate, and actionable information
for marketers so that they can make
the best possible tactical decisions in
the short run and strategic decisions
in the long run

8.24

Brand Equity Measurement

System

Conducting brand audits

Developing tracking procedures
Designing a brand equity
management system

8.25

Designing Brand Tracking

Studies

Tracking studies involve information

collected from consumers on a
routine basis over time

Often done on a continuous basis

Provide descriptive and diagnostic

information

8.26

What to Track

Customize tracking surveys to

address the specific issues faced by
the brand
Product-brand tracking
Corporate or family brand tracking
Global tracking

8.27

How to Conduct Tracking

Studies

Who to track (target market)

When and where to track (how
frequently)
How to interpret brand tracking

8.28

Sample Brand Tracking

Survey-McDonalds

Assume that McDonalds was interested in designing a short tracking survey

to be conducted over the phone. How might you set it up? Although there
are a number of different types of questions, it might take the following
form:
Interviewer: We are conducting a short phone interview concerning
consumer opinions about quick -service or fast food restaurant chains.

BRAND AWARENESS
Recall (unaided)
a) What brands of quick service restaurant chains are you aware of?
b) At which brands of quick service restaurant chains would you
consider using?
c) Have you eaten in a quick service restaurant chain in the last week?
Which ones?
d) If you were to eat in a quick service restaurant tomorrow for lunch,
which one would you go to?
e) What if instead it were for dinner? Where would you go?
f) What if instead it were for breakfast? Where would you go?
8.29
g) Which are your favorite quick serve restaurant chains?

Sample Brand Tracking

Survey-McDonalds

BRAND AWARENESS
Recognition
Now, we want to ask you some questions about a
particular quick service restaurant chain, McDonalds.
a) Have you heard of this restaurant? [Establish
familiarity]
b) Have you eaten at this restaurant? [Establish trial]
c) When I say McDonalds, what are the first associations
that come to your mind? Anything else? [List all]

8.30

Brand Tracking SurveyMcDonalds

BRAND IMAGE
What are the top five words that come to mind when you think of
"McDonalds" (This should take less than 30 seconds)
Brand Attributes
How well do the following words describe McDonalds? (1= not at all, 5 =
very much)?
McDonalds ...
a) Is convenient to eat at
b) Provides quick, efficient service
c) Has clean facilities
d) Is for the whole family
e) Has delicious food
f) Has healthy food
g) Has a varied menu
h) Has friendly, courteous staff
i) Offers fun promotions
j) Has a stylish and attractive look
k) Has good prices
8.31

Brand Tracking SurveyMcDonalds

Brand Personality (note
this might also include user imagery,
usage imagery as
breakout questions)
How well do the following traits describe McDonalds (1= not at all,
5 = very much)?
Sincere
Exciting
Competent
Sophisticated
Rugged
Peaceful
Passionate

8.32

Brand Tracking SurveyMcDonalds

Judgments of Quality
What is your overall opinion of McDonalds?
What is your assessment of the product quality of McDonalds?
How good a value is this McDonalds?
Is McDonalds worth a premium price?
What do you like best about McDonalds?
Judgments of Credibility
How innovative is McDonalds?
How much do you admire McDonalds?
How much do you respect McDonalds?
Judgments of Consideration
How likely would you be to recommend McDonalds to others?
To what extent does McDonalds offer advantages that other
brands cannot?
How personally relevant is McDonalds to you?

8.33

Brand Tracking SurveyMcDonalds

Judgments of Superiority
How unique is McDonalds?
To what does McDonalds offer advantages that other brands
cannot?
To what extent is McDonalds superior to other brands in the
quick service restaurant category?
Feelings
Does McDonalds give you a feeling of (1= not at all, 5 = very
much)
Warmth
Excitement
Trust
Awe
Fear
Calm
Intensity

8.34

Brand Tracking SurveyMcDonalds

RELATIONSHIP
If McDonalds came to life as a person, what type of person would
s/he be? This should take less than 30 seconds.
If McDonalds came to life as a person and was at a party with you,
what would s/he say to
you? This should take less than 30 seconds.
Loyalty
I consider myself loyal to McDonalds.
I eat at McDonalds whenever I can.
This is the one brand of fastfood restaurant I would most prefer
to visit.
If McDonalds were not an option, it would make little difference
to me if I had to eat elsewhere.
I would go out of my way to go to McDonalds

8.35

Brand Tracking SurveyMcDonalds

Attachment
I really love McDonalds.
I would really miss this brand if it went away.
McDonalds is special to me.
Engagement
I really like to talk about McDonalds to others.
I am always interested in learning more about McDonalds.
I would be interested in merchandise with this brands name on
it.
I like to visit the website for McDonalds.
Compared to other people, I follow news about McDonalds
closely.
Community
I really identify with people who use this brand.
McDonalds is often frequented by people like me.
I feel a deep connection with others who use this brand.

8.36

Brand Equity Management

System

A brand equity management system

is a set of organizational processes
designed to improve the
understanding and use of the brand
equity concept within a firm:
Brand equity charter
Brand equity report
Brand equity responsibilities

8.37

Brand Equity Charter

Provides general guidelines to

marketing managers within the
company as well as key marketing
partners outside the company
Should be updated annually

8.38

Brand Equity Charter

Components

Define the firms view of the brand equity

Describe the scope of the key brands
Specify actual and desired equity for the brand
Explain how brand equity is measured
Suggest how brand equity should be measured
Outline how marketing programs should be
devised
Specify the proper treatment for the brand in
terms of trademark usage, packaging, and
communication

8.39

The Knicks Brand Charter

The
Knicks

The Fans
Emotional Bond

Uniquely authentic
An incomparable event,
scene and energy
Relentless, resourceful,
and tough
Championship caliber
A vital part of New York
City
Unlimited in its
possibilities

An intensely
passionate,
professional,
unparalleled New
York City experience

Sensory fulfillment
Looks, feels, and sounds
Visceral thrill
Eager anticipation/excitement
War: winning/losing
Psychological benefits

Personal identification (with her

Social currency/belonging
Emotional awards
Intense experience
Childhood
Sustaining
Exceeds

8.40

Brand Equity Report

Assembles the results of the tracking

survey and other relevant
performance measures
To be developed monthly, quarterly,
or annually
Provides descriptive information as
to what is happening with the brand
as well as diagnostic information on
why it is happening
8.41

Brand Equity Report

In particular, one section of the

report should summarize consumer
perceptions on key attribute or
benefit associations, preferences,
and reported behavior as revealed
by the tracking study. Another
section of the report should include
more descriptive market level
information such as:
8.42

Brand Equity Report

1) Product shipments and movement
through channels of distribution.
2) Relevant cost breakdowns.
3) Price and discount schedules where
appropriate.
4) Sales and market share information
broken down by relevant factors, e.g.,
geographic region, type of retail account
or customer, etc.
5) Profit assessments.
8.43

Brand Equity
Responsibilities

Organizational responsibilities and

processes that aim to maximize longterm brand equity

Establish position of VP or Director of Equity

Management to oversee implementation of
Brand Equity Charter and Reports

Ensure that, as much as possible,

marketing of the brand is done in a
way that reflects the spirit of the
charter and the substance of the report
8.44

Internal Branding

Internal brand management makes sure that

employees and partners appreciate and understand
basic branding notions and how these can affect the
equity of the brands that they are working with. The
ultimate goal is to make everyone in the organization,
from the CEO to the trainees, to become passionate
brand advocates. This can be achieved, according to
Davis, by following a threestep course: Hear It,
Believe It, Live It. To get employees to live the
brand,

8.45

Brand Assimilation ProcessScott Davis

Principle 1: Make the Brand Relevant

One of most critical principles is to make sure the brand is
relevant to employees. Each employee in each functional group or
unit of the company must understand not just what the brand
stands for, but how they as individuals can embrace its meaning
and represent it publicly. Only employees who understand the
brand can help support it and use it to guide decision making.
Principle 2: Make the Brand Accessible
If employees are to live and breathe the organizations brand, they
must be equipped with the information and tools they need to
understand it. Giving employees the ability to make brandsupporting decisions means that they must have ready access to
answers to questions. Without creating that kind of access, the
organization risks creating employees who are disinterested or
frustrated with the task.
8.46

Brand Assimilation ProcessScott

Davis
Principle 3: Reinforce the
Brand Continuously

For brand to become a cultural underpinning of the organization,

employees must be continuously exposed to its meaning, far beyond the
initial rollout of the internal branding program.Take Southwest Airlines
as an example. In seeking to internally apply the attributes of its brand
promise,A symbol of freedom, Southwests people (or HR) department
teamed with other such departments as public relations and marketing
to create an internal branding campaign around employee freedom.As
part of the campaign, support was fostered through tactics such as
having the carriers in-house publication highlight employee freedoms,
having employees write about how they personally took advantage of
freedoms, and renaming the intranet site Freedom Net.
Newsletters and the intranet can be invaluable communication tools
that help keep brand identity elements, successes, and updated
information on the brand strategy top-of-mind for employees. Other
tactics can include the rollout of such brand-related tools as laminated
identity cards and brand trading cards.

8.47

Brand Assimilation ProcessScott

Davis
Principle 4: Make Brand Education
an Ongoing
Program

Its particularly important that new employees are grounded in the brand
culture and inspired to believe in what the brand represents. Putting these
processes in place helps newcomers better understand the brands role and
impact on the business, and it gives them the tools and the frameworks they
need for their day-to-day decision-making. Additionally, the investment the
company makes in training new employees speaks volumes about its level
of commitment to them. The hotel chain has emphasized training because
its top priority was the satisfaction of its guestsand it knew that
employees were critical to delivering on that promise. Each new employee
went through an intensive orientation called The Gold Standard, which was
comprised of principles created to support the brand. These brand precepts
were reinforced in daily departmental meetings attended by all employees.
The Gold Standard provided the basis for all ongoing employee training.
Not so coincidentally, Ritz-Carlton became a hospitality industry leader in
training, providing 120 hours of training per employee per year.

8.48

Brand Assimilation ProcessScottBehaviors

Davis
Principle 5: Reward On-Brand

An incentive system rewarding employees for exceptional

support of the brand strategy should be tied to the rollout of
the internal branding program. This not only helps create and
maintain excitement in the program, but it underscores,
through individual recognition, the kinds of behaviors that
need to be supported. Rewards also help demonstrate the
organizations commitment to the brand and the program
while creating a tangible model that helps employees better
understand how they, too, perform on-brand. Continental
Airlines created an employee reward program called Working
Together under its new emphasis of promising on-time
service as a key component of its brand promise to customers.

8.49

Brand Assimilation ProcessScott Davis

Principle 6: Align Hiring Practices

Because the success of a brand assimilation program
hinges on employees ability and capacity to embody the
brand spirit, its also important that HR and marketing
work together to develop basic screening procedures that
ensure new hires will fit with and support the companys
brand culture. This can be accomplished through a variety
of tactics, starting with the incorporation of the core and
extended brand identity elements into the process of
evaluating prospective employees. Over time, job
descriptions should be rewritten to incorporate these
same brand identity traits into the list of expected
employee behaviors.

8.50

Rate Your Firm's Marketing

Assessment System

1. Does the senior executive team regularly and formally assess

marketing performance?
(a) Yearly - 10
(b) Six-monthly - 10
(c) Quarterly - 5
(d) More often - 0
(e) Rarely - 0
(f) Never - 0
2. What does the senior executive team understand by 'customer value'?
(a) Don't know. We are not clear about this - 0
(b) Value of the customer to the business (as in 'customer lifetime value') - 5
(c) Value of what the company provides for the customers' point of view - 10
(d) Sometimes one, sometimes the other - 10
3. How much time does the senior executive team give to marketing
issues? .........%
(a) >30% - 10
(b) 20-30% - 6
(c) 10-20% - 4
(d) <0% - 0
8.51

Rate Your Firm's Marketing

Assessment System

4. Does the business/marketing plan show the non-financial

corporate goals and link them to market goals?
(a) No/no plan-0
(b) Corporate no, market yes-5
(c) Yes to both-10
5. Does the plan show the comparison of your marketing
performance with competitors or the market as a whole?
(a) No/no plan-0
(b) Yes, clearly-10
(c) In between -5
6. What is your main marketing asset called?
(a) Brand equity-10
(b) Reputation-10
(c) Other term-5
(d) We have no term-5
8.52

Rate Your Firm's Marketing

Assessment System

7. Does the senior executive team's performance review

involve a quantified view of the main marketing asset and
how it has changed?
(a) Yes to both-10
(b) Yes but only financially (brand valuation)-5
(c) Not really-0
8. Has the senior executive team quantified what 'success'
would look like five or ten years form now?
(a) No-0
(b) Yes-10
(c) Don't know-0

8.53

Rate Your Firm's Marketing

Assessment System

9. Does your strategy have quantified milestones to indicate

progress towards that sucess?
(a) No-0
(b) Yes-10
(c) What strategy?-0
10. Are the marketing performance indicators seen by the
senior executive team aligned with these milestones?
(a) No-0
(b) Yes, external (customers and competitors) -7
(c) Yes, internal, (employees and innovativeness) -5
(d) Yes, both-10

8.54

Rate Your Firm's Marketing

Assessment System

Score yourself according to the scale below.

- If your total is greater than 90 percent, excellent.

- If your total is 70-90 percent, congratulate yourself
and keep at it.
- More than 50 percent is good.
- Less than 30 percent means what you think it means.

8.55