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Brand Equity
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Brand Equity 2007
Definition
Brand Equity is a set of assets (and liabilities) linked to a brand’s name and symbol that adds to (or substracts from) the value provided by a product or service to a firm and/or that firm’s customers.
Brand equity is the value built-up in a brand. The value of a company's brand equity can be
calculated by comparing the expected future revenue from the branded product with the expected future revenue from an equivalent non-branded product.
This calculation is at best an approximation.
This value can comprise both tangible, functional attributes (eg. TWICE the cleaning power or thrice the whitening effect) and intangible, emotional attributes (eg. The brand for people with style and good taste).
Brand Equity Increases Value
BrandEquity
Brand Loyalty
Brand Awareness
Perceived Quality
Brand Associations
Other Brand Assets
Value to Customer
Value to Firm
Categories of Assets
Brand name awareness Brand loyalty(franchise) Perceived Quality(image) Brand Associations(image) Other Proprietary Brand Assets (e.g.,
channel relationships, patents,…)
Brand Name Awareness Brand awareness is composed of the strength
of the brand in consumers' minds, for example their ability to recall the brand, or the visual identity.
Anchor to which other associations can be attached- Shoppers’ StopShoppersStop.htm
Familiarity-liking Signal of substance/commitment- Brands to be considered
Signal of substance/ commitment
Brand considered
Recall connected to buying decisions by ensuring product is in consideration set
Critical for frequently purchased products like coffee, detergents etc where the brand is pre-decided
How to achieve awareness( how to enhance recognition and recall
Be different,memorable Involve a slogan/jingle/mnemonic Symbol exposure Publicity Event sponsorships Brand extensions Repetition
Awareness pyramid
Brand unawareness
Brand recognition
Brand recall
Top of mind
importance of brand recognition and brand recall depends on whereconsumers make decision of purchasing.
the first stage of purchasing is selection of a consideration set of brands. Therefore, brand recall play a main role to enter the set.
top of mind and brand recall play critical role for products whichpurchasing decision is done before going to stores.
importance of brand recognition and brand recall depends on whereconsumers make decision of purchasing.
the first stage of purchasing is selection of a consideration set of brands. Therefore, brand recall play a main role to enter the set.
top of mind and brand recall play critical role for products whichpurchasing decision is done before going to stores.
Brand Loyalty Reduced marketing costs Trade leverage Attracting new customers
Create awareness Reassurance
Time to respond to competitive threats
Loyalty pyramid
Switchers / Price sensitive/ No brand Loyalty
Satisfied/ Habitual Buyer
Satisfied Buyer with Switching Cost
Like the BrandConsider It a Friend
Committed Buyer
Brand loyalty is different from other brand equities, because it strongly related to
experience in using.
Brand loyalty is different from other brand equities, because it strongly related to
experience in using.
Double – jeopardy line
Super – loyalty brands
Change – of – space brands
Niche brands
Market share
Rep
eate
d pu
rcha
se p
roba
bilit
y
100%0%0
1.0
“There is a wide consensus that brand loyalty does develop systematically in connection
with penetration in stable markets for frequently purchased low-involvement products and
for established brands. There, however , are exceptions.”
“There is a wide consensus that brand loyalty does develop systematically in connection
with penetration in stable markets for frequently purchased low-involvement products and
for established brands. There, however , are exceptions.”
Double – jeopardy line
From awareness to brand loyalty
All brands
Aware
Unaware
Spontaneous awareness
Aided awarenessonly
Considerationset
Not acceptable
Not consideration
Unique(Only accepted)
Top brand
Second brand
Third brand
In repertoire
Not in repertoire
100% brandloyalty
Top brandbuyers
Repertoire buyers
Occasional buyers
Maintaining and enhancing loyalty
Customers do not like to change – inertia People do not want to admit that they were wrong…Hence..
Treat the customer right(There is no brand loyalty that a 20% discount cannot buy)
Stay close to the customer Measure/manage customer satisfaction Create switching costs Provide extras SELL TO OLD CUSTOMERS INSTEAD OF NEW Analyse irritations,reasons for brand exits, plug the holes in the
bucket Young brand managers should avoid short term “blip” temptations
Perceived Quality Reason-to-buy Differentiate/Position Price Channel member interest Extensions
Brand Associations
Help process/retrieve information Reason-to-buy Create positive attitude/feelings Extensions
Brand Equity and Brand Value
Brand Equity provides value to customers: Interpretation/processing of information Confidence in the purchase decision Use satisfaction
Brand Building Inhibitors Pressure to compete on price – Indica/Indigo Proliferation of competitors - Laptops Fragmenting markets and media - Movies Complex brand strategies and relationships -
Hyundai Bias toward changing strategies - Coke Bias against innovation - Nirma Pressure to invest elsewhere – Reliance - Vimal Short-term pressures
Brand Equity and Brand Identity
BrandIdentity
BrandAssociations
BrandEquity
Beyond Brand Equity:Using Customer Equity Insights to Make Profitable Marketing Decisions
The Conference Board
prepared for:
These are tough times for brand businesses. Consumer confidence has dropped like a stone; revenues
are growing but unit profits are down even more; investments
in R&D and marketing have been cut to the bone.
14%Above
average
2%Well below
average
68%Average marketing
program
The Zone ofExceptional Marketing
The Zone ofConventional Marketing
14%Below
average
2%Well above
average
Marketing Performance
Embarrassing
Troubling Disappointing Pleasing Amazing
Market Share Growth Precipitous
DeclineSignificant
Decline Modest DeclineSignificant Increase
Dramatic
Increase
New Product Success Rate 0% 5% 10% 25% 40%+
Advertising ROI
Negative 0% 1-4% 5-10% 20%
Consumer and Trade Promotion Disaster
Very Unprofitable
Marginally Unprofitable Profitable
Very Profitabl
eCustomer Satisfaction 0-59% 60-69% 70-79% 80-89% 90-95%
Even brand equity is imperiled. Four different studies suggest that
equity scores for some leading brands are in decline.
AirlinesAthletic ShoesAuto Insurance
BanksBeers
BookstoresBottled water
Catalog clothingCigarettes
ColasCold Cereals
CookiesCosmetics
Credit CardsDepartment Stores
Fast Food Restaurants
Categories StudiedGas Stations
Haircare ProductsHeadache Remedies
Health & Fitness ClubsHome Entertainment
EquipmentHotels
Household CleansersInternet Search Engines
Internet Service ProvidersJewelry
Laundry DetergentsLiquor
Long-Distance Telephone Services
Luxury American CarsLuxury Foreign Cars
Major Household Appliances
The study revealed that out of 48 product categories, Brand Equity
scores are:
Decreasing in 39 Stable in 5 Improving in only 4
The study also showed that in 25 out of 37 product categories, a low price is becoming more important
than brand driven product features, attributes, and benefits.
This study led us to conclude that far more brands are being
transformed into commodities than commodities are being transformed
into brands.
Why are so many marketing programs
under performing?
Decisions based on intuition, not research
No time to do it right, lots of time to do it over
The pursuit of short-term results, often in 30 days
Emphasis on brand juice not brand equity; visual identity, not strategy and substance
Little knowledge of real customer needs and problems
No clear targeting and positioning Entertaining rather than informative
advertising Weak implementation, poor follow
through
Decisions based on intuition, not research
No time to do it right, lots of time to do it over
The pursuit of short-term results, often in 30 days
Emphasis on brand juice not brand equity; visual identity, not strategy and substance
Little knowledge of real customer needs and problems
No clear targeting and positioning Entertaining rather than informative
advertising Weak implementation, poor follow
through
1960s The Product Life Cycle
1970s Benefit Segmentation
1980s Simulated Test Marketing
1990s Brand Equity
2000s Customer Equity
Breakthrough Marketing Concepts
Customer Equity
How much each customer will spend (over time) in your marketSummed up (over all the customers in the market)Discounted back to present value
Is a measure of…
Brand switching patterns
Demographic projections
Life expectancy forecasts
Value discounting
It’s A Sophisticated Concept Which Takes Into Account…
Three Factors Drive Customer Equity
Product Manager
s
Advertising Managers
BrandEquity
Product Equity
Loyalty Program Managers
Customer
Equity
Relationship Equity
Customer Equity
Three Drivers of Equity
Brand Equity
Relationsh
ip Equity
Product
Equity
Pathways to Customer EquityImprove
Customer Equity
ImproveCustomer Lifetime
Value
ImproveSwitching Matrix
ImproveProduct Equity
ImproveRetention Equity
ImproveProduct Equity
Drivers
ImproveRetention Equity
Drivers
ImproveBrand Equity
ImproveBrand Equity
Drivers
References David Aaker, Managing Brand Equity and
Building Strong Brands Keller.K, Strategic Brand Management M G Parmeswaran, Building Brand Value Kasai, Brand Equity
Measuring Brand Equity
2007 brand values Infosys: Rs 17,000 cr Tata: Rs 14,000 cr Satyam: 3,500 cr Color plus: Rs 70 cr Dabur paid 1430 cr for Balsara British telecom giant Vodafone has bagged the
67% Hutch Telecom International (HTIL) stake in Hutch-Essar at an enterprise value of $19.3 billion (approx Rs 86,000 crore). 30% of this came from the brand alone
Changes in Brand Equity Occur When…
• Major New ProductsMajor New Products
• Product ProblemsProduct Problems
• Change in top ManagementChange in top Management
• Competitor ActionsCompetitor Actions
• Legal ActionsLegal Actions
Methods for Calculating Customer ValueMethods for Calculating Customer Value1. Composition approach: Questions to
consumers about value of attributes
2. Importance ratings: Customer rank ordering or rating of the importance of product attributes as well as comparisons between competitors.
3. Value-in-Use Approach3. Value-in-Use Approach
Product manager selects a reference product (product used by customer or competitive product)
Product manager calculates the incremental economic benefit to the customer of using the product or brand in question
4. Simulating the Buying Experience4. Simulating the Buying Experience Laboratories at or near shopping malls
“Customer” groups receive different price/attribute treatments
“Customers” select product they would choose
4. Estimating Brand Equity with Conjoint Analysis4. Estimating Brand Equity with Conjoint Analysis Conjoint Analysis
Price Thresholds
Currency Scales
5. Estimating Brand Equity with Conjoint Analysis5. Estimating Brand Equity with Conjoint Analysis
Assume 3 attributes of a laptop computer choice:4 or 8 Hour Battery | Intel Pentium or AMD | Dell or Compaq
Task: Rank order the following combinations of these characteristics from 8 = most preferred to 1 = least preferred
4 Hours, PV, Dell _____ 4 Hours, PV, Compaq ____8 Hours, AMD, Compaq _____ 8 Hours, AMD, Dell ____8 Hours, PV, Dell _____ 8 Hours, PV, Compaq ____4 Hours, AMD, Compaq _____ 4 Hours, AMD, Dell ____
6. Estimating Brand Equity with Currency Scales6. Estimating Brand Equity with Currency Scales
Rather than use 1-7 likelihood of purchase scales, responses are given in currency terms. What should the relative prices of the five brands be? First, the respondent chooses the brands most preferred, and next, how much extra would they be willing to pay for a six pack? Coke, Pepsi 2 Coke, 7Up 8 Analysis Totals: Comparative Brand Value Coke, Dr Pepper 5 Coke: +2 +8 +5 +12 = 27 cents Coke, Fresca 12 Pepsi: -2 +6 +3 +10 = 17 cents Pepsi, 7Up 6 7Up: -8 -6 -3 +4 = -13 cents Pepsi, Dr Pepper 3 Dr Pepper: -5 -3 +3 +7 = 2 cents Pepsi, Fresca 10 Fresca: -12 -10 -4 -7 = -33 cents 7Up, Dr Pepper 3 7Up, Fresca 4 Dr Pepper, Fresca 7
7. Estimating Brand Equity using the Perceived Value Concept7. Estimating Brand Equity using the Perceived Value Concept
Market Share, Perceived Value, Price Relationship Perceived Value
Market Share = f [ -------------------- ] Price
Increase Perceived Value by: Improving the product itself by increasing actual quality or offering
better service or a longer warranty period Advertise to enhance the product’s image Institute value added services in the distribution channels such as
technical support or financing Improve sales effort by training the sales force to sell value rather
than price
Brand Equity, Perceived Value and PriceBrand Equity, Perceived Value and Price Reducing price is more common, but often more
expensive than adding value. (# of units sold) x ( Decrease in contribution margin)
= Cost of Price Decrease
VS:
Cost of providing sales training, Cost of improving customer service, Improved warranty, Improving time for delivery, Reducing phone waiting time.
Value added is also distributed over all units sold
Nine ways to manage your brand as an asset
1. Formally link business and brand strategy
2. Create a unique and relevant Brand Identity
3. Create a clear and distinct Positioning
4. Extend your brand strategically
5. Build a strategic Brand Architecture
6. Evaluate and align touchpoints
7. Consistently deliver on your Brand Contract
8. Practice effective global brand management
9. Set the organization up for success
Virgin’s Brand Identity
Essence of the Brand
IrreverenceCore Identity Elements
Innovation
Fun & Entertainment
Value
Service Quality
Extended Identity Elements
Underdog
Personality
Richard
Brand Identity
Build a strategic Brand Architecture
The logical, strategic and relational structure for all of the brands in the organization’s brand portfolio
The objective is to maximize clarity, synergy and leverage to maximize customer value and internal efficiencies
Should clarify what role each of your brands and products play in different markets, and may result in a brand rationalization
Brand Architecture is the organizing structure of a brand portfolio
Brand Architecture is the organizing structure of a brand portfolio
– David A. Aaker, Brand Leadership
Master brand
Subbrands
Product brands
The Brand Architecture spectrum
A Branded House uses a single Master Brand to span a set of offerings that operate only with descriptive offerings.
A House of Brands consists of independent stand-alone brands, each maximizing its impact on the market with little connection to its parent.
Significant investment in multiple Brands Significant investment in multiple Brands
Build Brand Equity in Master BrandBuild Brand Equity in Master Brand
Maximize synergies among business unitsMaximize synergies among business units
Target unique & separate customer baseTarget unique & separate customer base
Reinforce comprehensive solution focusReinforce comprehensive solution focus
Key Issues Driving The Spectrum:
Branded House
House of Brands
Sub-Brands
Stand-Alone
A flexible architecture can be used to address local differences
The Sony brand system uses the Sony brand in a variety of ways, in different markets, to target specific customers with unique value propositions
Endorser
IngredientDriver
Stand-AloneCorporate
Play Station and Columbia Tri-Star are not visibly connected to Sony, but many consumers know about the link. This shadow endorsement provides positive associations, but allows the strong brands to stand on their own
The ProAudio brand augments the Sony brand by communicating cutting edge technology across multiple Sony Electronics product lines
Endorser brands usually represent organizations, rather than products, and provide credibility to the offering. Since the Sony brand is somewhat insulated from the product brand, poor performance of Metreon is unlikely to affect the Sony brand
A driver brand has the primary responsibility for a purchase decision and owns the customer’s brand experience. Sony uses their master brand with a descriptive, “Pictures,” to drive the film division
Sony chooses a flexible architecture and leverages their corporate brand in several different ways
What is brand equityMeaning
Difference between perceived value of the brand and the core product, i.e., the total value of the brand minus that part of the value “owed” to the core product.
Perspectives: Marketing, MR, FinancialMarketing Perspective: Brand Building- How to improve the Brand Value/ Brand Equity: Identification & Appreciation of Factors that influence Brand Equity: Conceptual Framework
What is brand equity Perspective (contd.)
MR Perspective: Brand Equity Measure: To Evaluate, Compare & Track the Brand Building efforts in a particular market :
Proprietary Tools- May or May not be monetary
Financial Perspective: To estimate the asset value of a Brand for the Purpose of Merger / Acquisition or any other Financial Transaction/ Purpose :
Proprietary Tools- Always in Monetary Terms
Do brands add value ? Successful brand producers / owners can:
Charge premium Higher volumes Better economies of scale Customer recognition and loyalty Lower customer acquisition and retention cost Enhance corporate value
Successful brands are valuable to retailers / suppliers: Stimulate customer flow Facilitate choice Command higher price
The Coca-Cola brand name is worth $67 billion, a whopping 59 percent of the company’s
market capitalization, according to Interbrand, a global brand consultancy
based in New York.
Why are brands valuable?
Brands are consistent holistic pledge made
by the company
Serve as unmistakable symbol of products
and services
Conveys values and attitudes embodied in
product and company
In mergers and acquisitions
Increasing role of branding
60
40
155
30
30
25
15
Features of Global Brands
Strength in home market Geographical sales balance Consistent positioning Addresses similar consumer needs
worldwide Country of origin provides customer value Product category focus Easy to pronounce name
Approaches for Valuing Brands
1. Cost Original cost to develop brand Replacement cost
2. Market Valuation Premium paid over book value
3. Income Discounted value of future net revenues
• Price premium over generic• Future brand extensions
4. Multi-factor Index
Efforts to measure brand equities
Young & Rubicam’s Brand Asset Evaluator
Total Research’ Interbrand’s Top Brands
Young & Rubicam’s Brand Asset Evaluator 450 global, 8000 local brands in 24 countries 32 item questionnaire, 4 sets of measures
Differentiation Relevance Brand strength = DxR Esteem Knowledge Brand stature= ExK
Power Grid
Brand stature vs Brand strength
High Stature Low Stature
HighStrength
Wipro,Infosys, Maruti
Colas, MTNL
Low strength Lenova Adlabs, Lays?
Total Research’s Equitrend
700 brands, 100 categories Salience Quality Satisfaction
Give Equitrend Brand equity score
Brand Equity =
• Ability to influence market• Ability to maintain a consumer franchise• Vulnerability of market demand to changes in taste or
technology• International scope• Long-term appeal to consumers• Strength of communication support• Security of legal or property rights
Brand Valuation Using the Interbrand Index
AdjustedNet Income
(after tax)
BrandStrength
x
less earnings expected for an equivalent unbranded product
multiples range from 6 to 20
The Value of the Kellogg Name1994 World-wide Operating Income
Less: Operating Income of equivalentunbranded product*
Adjusted Operating Income
Less U.S. corporate tax (.34)
Net income
Estimate of brand strength
brand value
*Estimated capital investment to produce sales of $5.5 billion = .32 x 5.58 = $1.76 billion
ROCE for equivalent unbranded = 0.05 x $1.76 billion = .09 billion
= $ 1.00 billion
- .09
0.91 billion
- 0.31
0.60
x 18.76
= $11.25 billion