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Chapter 10: Measuring Outcomes of Brand Equity, Capturing Market Performance.

Preview:

Holistic Approach

Brand equity is a multidimensional concept - too complex to only have one type of measure.

Need a "dashboard" of multiple measures in order to analyze the overall health of a brand.

Chapter 9 explained ways to measure brand knowledge structures -

By using these techniques we can gain a good understanding of :

  • Depth and breadth of brand awareness
  • Strength , favorability and uniqueness of brand associations
  • Positivity of brand responses
  • Nature of brand relationships for brands
  • Perception of better product or service performance
  • Greater loyalty + less vulnerability to competitive marketing action and marketing crises
  • Larger margins and more inelastic response to price increases, and elastic responses to decreases
  • Increased marketing communication effectiveness
  • Greater trade co-operation and support
  • Opportunity for successful licensing and brand extension

Valuation Approaches:

Place an overall value on the brand

Can be abstract utility terms or concrete financial terms

These methods attempt to “net out” considerations to determine the unique consumers’ preference

There are 2 approaches:

  • Residual Approach
  • Valuation Approach

Accounting Background:

Much of the corporate value of many companies is wrapped up in intangible assets

Useful to put a specific price tag on a brands value is useful because

  • Mergers and acquisitions
  • Brand licensing
  • Fund raising
  • Brand portfolio decisions

  • Tanglible (Porperty, Plant and Equipment
  • Intangible (Patents and Trademarks)

General approaches:

Residual Approaches

  • • Cost Approach. This approach maintains that brand equity is the amount of money that would be required to reproduce or replace the brand (including all costs for research and development, test marketing, advertising, and so on).
  • • Market Approach. According to the second approach, the market approach, we can think of brand equity as the present value of the future economic benefits to be derived by the owner of the asset. In other words, it is the amount an active market would allow so that the asset would exchange between a willing buyer and willing seller.
  • • Income Approach The third approach to determining the value of a brand, the income approach, argues that brand equity is the discounted future cash flow from the future earnings stream for the brand.
  • • Three such income approaches are as follows:
  • • Capitalise royalty earnings from a brand name
  • • Capitalise the premium profits that are earned by a branded product
  • • Capitalise the actual profitability of a brand after allowing costs of maintaining it and the effects of taxation
  • View that brand equity is what remains of consumer preferences and choices after we subtract physical product effects
  • We can infer the relative valuation of brands by observing consumer preferences and choices
  • If we take into account as many sources of measured attribute values as possible
  • View allows us to calculate brand equity by subtracting preferences for objective characteristics of the physical product from overall preference

Interbrand's brand valuation methodology:

Critique

Choice experiments:

This is a realted for measuring:

  • Branding names
  • Product attributes
  • Brand image
  • Differences in consumer socio-demographic characteristics
  • Brand usage

• Interbrand is the premier brand valuation firm. In chapter 1 we looked at the 25 most valuable brands according to Interbrand. In developing its brand valuation methodology, Interbrand approached the problem by assuming that the value of a brand, like the value of any other economic asset, was the present worth of the benefits of future ownership.

Scanner Panel:

The model explains the choices observed from a panel of consumers as a function of:

  • Store environment
  • Physical characteristics of available brands
  • Residual term dubbed brand equity
  • Estimate the aspect of brand preference that's unique to a brand, and not duplicated by competitors

  • • Residual approaches provide a useful benchmark for interpreting brand equity, especially when we need approximations of brand equity or a financially oriented perspective on it.
  • • The disadvantage of residual approaches is that they are most appropriate for brands with a lot of product-related attribute associations, because these measures are unable to distinguish between different types of non-product-related attribute associations
  • • This takes a fairly static view of brand equity residual approaches take a fairly static view of brand equity by focusing on consumer preferences. This contrasts sharply with the process view advocated by the customerbased brand equity framework.

Review

Multi-attribute attitude models:

There are 3 components that reveal relative sizes of different bases of brand equity;

  • Brand Awareness
  • Attribute-perception biased component. This is the difference between subjectively perceived attribute values and objectively measured attribute values
  • Non-attribute preference component. This is the difference between subjectively perceived attribute values and overall preference. It reflects the consumer’s overall appraisal of a brand that goes beyond the utility of individual product attributes.
  • There is a model for decomposing attribute ratings of a brand into two components: (1) brand-specific associations, meaning features, attributes, or benefits that consumers link to a brand; and (2) general brand impressions based on a more holistic view of a brand

Comparative Methods

  • Spend wisely - Focus and be creative!
  • Look for benchmarks - examine competitive spending leves and historical company norms.

Studies or experiments that examine consumer attitudes towards a brand to directly estimate specific benefits arising from having a high level of brand awareness and strong, unique and favorable brand associations.

1) Brand-Based Comparative Approaches:

  • Be strategic - apply brand equity models.
  • Experiments in which one group of consumers responds to an element of a marketing program/activity when it is attributed to the target brand, and another group responds to the same element when it is attributed to a different or fictitiously named brand.

Conjoint Analysis

  • Be observant - track both formally and informally.

Survey-based multivariate technique that enables marketers to profile the consumer decision process with respect to products and brands.

  • Competitive brands can be useful benchmarks
  • When comparing products blindly consumers may have a particular brand exampler in mind eg their preferred brand.

Marketing-based Brand Apporaches

Critique

  • Ask consumers to express preferences to choose amoung a number of carefully desgined product profiles - can then determine trade-offs consumers are making between various brand attribues.
  • Example: Blind testing

Advantages:

  • Holds all aspects of marketing program fixed, isolating the value of a brand in a very real sense.
  • Useful in developing strategies.
  • Particularly applicable when marketing activities under consideration represents a change from past marketing of the brand.

Disadvantage:

  • Distorted results.
  • Part worth = the value consumers attatch to each attribute level.

Critique

Use experiments in which consumers respond to changes in elements of the marketing program for target or competitive brands.

  • Holds the brand as fixed and measure consumer response based on changes in the marketing program.
  • Can be used to assess consumer response to different advertising strategies, executions, or media plans.
  • Can also be used to explore potential brand extensions.

Advantages:

  • Allows for studying different brands and different aspects of the product or marketing program simultaneously.

Disadvantages:

  • Marketing profiles may violate consumers expectations based on what they already know about the brands.

Critique

Advantages:

  • Ease of implementation
  • Can compare virtually an set of marketing actions

Disadvantages

  • Difficult to discern whether responses to changes in the marketing stimuli are being caused by brand knowledge or by mor generic product knowledge
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