Measuring Brand Equity Nov. 10, 2008 BrandAmplitude, LLC All Rights Reserved

Positioning recommendation For __________________________ is the only_____________________ that_________________________ because ______________________. Mantra

P&G Gain: $1 Billion Brand http://www.ilovegain.com/home.do Successful repositioning of value brand to appeal to Hispanic Households. Create Brand Positioning

Brand Strategy Process Target & Insight Brand Execution Brand Elements Competitive Assessment Brand Inventory Equity Pyramid Positioning Objectives & Metrics Personality Communications Strategy Brand Experience Map Brand Audit CRM & Community Building Points of Parity and Difference

Why Measure Brand Equity? Understand drivers of brand value in order to support strategic decision – making. To evaluate efficacy of brand value building programs -- ROMI. Why Measure Brand Health?? If you don’t know where you are, it’s hard to decide how to get there. If you don’t know where you’re going, any road will get you there.

Understand drivers of brand value in order to support strategic decision – making.

To evaluate efficacy of brand value building programs -- ROMI.

“ The health of your brand is a prime indicator of the health of your company…The most effective way to monitor your brand is to combine consistent real-world research with the use of quantitative models to measure, and even predict, change in key variables.” Jim Gregory, The Best of Branding, 2004, p 57 Why Measure Brand Health?

“ The health of your brand is a prime indicator of the health of your company…The most effective way to monitor your brand is to combine consistent real-world research with the use of quantitative models to measure, and even predict, change in key variables.”

Jim Gregory, The Best of Branding, 2004, p 57

What Are the Key Measures?

Source: ANA, State of ROMI Measurement, 2007 Most commonly used metrics: The ‘Usual’ Approaches Changes in brand awareness 81% Changes in market share 79% Changes in consumer attitude toward the brand 73% Changes in purchase intent 59% Return on objective 36% Lifetime customer value 23% Changes in the financial value of brand equity 20%

What’s Wrong With These Metrics?

There is no consistent definition of ROI," noted one respondent. 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.” Source: ANA/Booz Allen online survey of over 370 marketing and non-marketing managers of mostly publicly traded companies. October, 2004. About 80% of the respondents were senior or middle managers representing 14 industries, with over 90% of the respondents distributed evenly between Consumer Packaged Goods, Financial Services, Retail, Technology, Telecommunications, Manufacturing, Health, Auto and Professional Services industries. Measuring Brand Equity Need to begin with a clear definition of the construct we want to measure.

There is no consistent definition of ROI," noted one respondent. 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.”

Source: The Capre Group, Definitions of ‘Marketing ROI’ Measuring Brand Equity

Brand Loyalty Underlies Brand Equity “ 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. Positive equity results in behavior that benefits the brand through purchase frequency, brand loyalty, price insensitivity, willingness to recommend and more.” -- Dr. Tom Reynolds & Carol Phillips, “In Search of True Brand Equity Metrics: All Market Share Ain’t Created Equal”, paper in review, Journal of Advertising Research Brand Equity Defined Loyal Behavior Psychological Preference

Perceptions Impact Behavior Now which box would you choose? $5 $5,000 $500 $50

Perceptions Impact Behavior Which jar would you choose? $1.89 $2.49 $2.29

Brand equity can be measured by determining loyal users’ contribution to category profits (ideally) and to brand sales (realistically). Premium Brand? Price Brand? Every brand could benefit from having the core group represent a larger share of its total franchise. – Dr. Tom Reynolds Brand Equity Defined

Brand equity can be measured by determining loyal users’ contribution to category profits (ideally) and to brand sales (realistically).

Now , what Are the Key Measures?

Sources: D. Aaker, Building Strong Brands, 1996; K. Keller, Strategic Brand Management, 2003 What The Experts Say Aaker Keller Y&R Equi-Trend Inter-brand Aaker Keller Y&R Equi-Trend Inter-brand Associations x x Market Trend x Awareness x x Mktng Support x Brand Trend x Org. Associations Differentiation x Perceived Quality x x xx Dist. Coverage x Perceived Value x Esteem x Personality x x International x Price Premium xx Knowledge x Relevance x Leadership x xx Salience x Legal Protect’n x User Sat./Loyalty x x xx Market Share x Stability x

Financial Value The Right Approach Activity & Program Metrics Market Performance Customer Perceptions & Behavior “ You can’t put attitudes in the bank!” ROMI

Multiple measures at different levels of the value chain, benchmarked and tracked consistently over time: Activity & Program Metrics Market Performance Customer Perceptions & Behavior The ‘Right’ Approach Marketing Investment Program Quality Clarity Relevance Distinctiveness Consistency Channel expansion Brand awareness Brand familiarity/associations Brand evaluations/attitudes Customer acquisition/ conversion Customer retention Attachment/Loyalty Sales Market share Price premium Profitability Price elasticity Expansion success

Multiple measures at different levels of the value chain, benchmarked and tracked consistently over time:

Marketing Investment

Program Quality

Clarity

Relevance

Distinctiveness

Consistency

Channel expansion

Brand awareness

Brand familiarity/associations

Brand evaluations/attitudes

Customer acquisition/ conversion

Customer retention

Attachment/Loyalty

Sales

Market share

Price premium

Profitability

Price elasticity

Expansion success

Financial Value The Right Approach Stock price P/E ratio Market capitalization Brand contribution (i.e., CoreBrand index) Activity & Program Metrics Market Performance Customer Perceptions & Behavior Linking customer perceptions and market performance to impact on financial value to assess ROMI. ROMI

Stock price

P/E ratio

Market capitalization

Brand contribution (i.e., CoreBrand index)

Linking customer perceptions and market performance to impact on financial value to assess ROMI.

Customer Based Brand Metrics Based on CBBE model Traditional marketing and communications tracking Examples: Millward Brown “BrandDynamics”, Y&R “Brand Asset Valuator” Incremental Brand Performance Short term incremental sales volume, premium pricing, other outcomes Historical modeling and predictive modeling Branded Business Value Financial value of intangible assets Measure increases or decreases in brand asset value over time The ‘Right’ Approach Measuring Brand Value, Don E. Schultz & Heidi F. Schultz, Kellogg on Branding , 2005

Customer Based Brand Metrics

Based on CBBE model

Traditional marketing and communications tracking

Examples: Millward Brown “BrandDynamics”, Y&R “Brand Asset Valuator”

Incremental Brand Performance

Short term incremental sales volume, premium pricing, other outcomes

Historical modeling and predictive modeling

Branded Business Value

Financial value of intangible assets

Measure increases or decreases in brand asset value over time

Examples 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? 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 Equity Measure Examples

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?

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

Brand Valuation and Measurement Firms Financial Value Strategic Value Measurement Firms Are Brand Equity and Brand Valuation the Same?

See also: “The Best Global Brands”, Businessweek , August 4, 2004; “Microsoft, GE top brand equity study, BtoB , 1.19.04. and “Don’t Waste Time with Brand Valuation”, MarketingNPV.com, October 2004. Brand Equity vs. Value “ (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.” --Dr. Tom Reynolds & Carol Phillips, “In Search of True Brand Equity Metrics: All Market Share Ain’t Created Equal”, paper in review, Journal of Advertising Research

See also: “The Best Global Brands”, Businessweek , August 4, 2004; “Microsoft, GE top brand equity study, BtoB , 1.19.04. and “Don’t Waste Time with Brand Valuation”, MarketingNPV.com, October 2004.

New Ideas in Measurement Net Promoter Score Fred Reichfeld, The Loyalty Effect Customer Equity Roland Rust Sum of the lifetime values of current and future customers Customer Income Flows Don Schultz Royalty Rate Share Tiering New Equity Measure Ideas

Net Promoter Score

Fred Reichfeld, The Loyalty Effect

Customer Equity

Roland Rust

Sum of the lifetime values of current and future customers

Customer Income Flows

Don Schultz

Royalty Rate

Share Tiering

Share Tiering Objective: Relate changes in consumer behavior and perceptions to changes in financial performance. Consumer Measures: Relative barrier of price Brand Quality perceptions Brand purchase loyalty Self-report future brand purchase trend In Search of True Brand Equity Metrics: All Market Share Ain’t Created Equal , Journal of Advertising Research , June 2005, Tom Reynolds and Carol Phillips

Objective:

Relate changes in consumer behavior and perceptions to changes in financial performance.

Consumer Measures:

Relative barrier of price

Brand Quality perceptions

Brand purchase loyalty

Self-report future brand purchase trend

Other Brands

Share ‘Tiering’ Measures

Measuring Brand ‘Value’ Companies Clueless On Brand Value, Evaluations Needed by Karlene Lukovitz, Tuesday, Oct 28, 2008 3:15 PM ET Now that The Brand Bubble has spelled out that most brands--and their companies--are greatly overvalued by the financial markets, we find out that those on the inside do not have a clear idea of what their brands are worth, either. More than half (55%) of senior marketing executives lack a quantitative understanding of brand value within their organizations, according to a recent survey by the Association of National Advertisers and global branding consultancy Interbrand. Further, because brand value's effect on corporate value is not clearly quantified, it isn't being incorporated in decision-making: 64% of the 118 marketing officers and senior marketing executives polled said that brands do not influence decisions made at their organizations.

Among those who said brands don't influence corporate decisions, the underlying causes cited include: Incentives that don't support brand importance (51%); Inability to prove the brand's financial benefit (49%); Existing branding expertise is not widely accepted (40%); Metrics do not support the brand's importance (39%); Budgets are focused on communications activities (32%); Brand is not included in the "sphere of influence" (28%); Branding expertise does not yet exist (15%). Measuring Brand ‘Value’ Companies Clueless On Brand Value, Evaluations Needed by Karlene Lukovitz, Tuesday, Oct 28, 2008 3:15 PM ET

What Are the Key Measures?

There Is No Silver Bullet Each firm requires unique measures MSI Report – Tim Ambler Use a mix of measures Include perceptual (knowledge), financial impact and behavioral (loyalty) measures Tie measures to strategy – what behaviors and attitudes drive brand value for customers and investors? Consistency is Key Movies work better than ‘snapshots’ Build knowledge over time Prioritize More likely to suffer from too much data than from too little Key Takeaways

There Is No Silver Bullet

Each firm requires unique measures

MSI Report – Tim Ambler

Use a mix of measures

Include perceptual (knowledge), financial impact and behavioral (loyalty) measures

Tie measures to strategy – what behaviors and attitudes drive brand value for customers and investors?

Consistency is Key

Movies work better than ‘snapshots’

Build knowledge over time

Prioritize

More likely to suffer from too much data than from too little

Recommended Resources “ Brand Vitals: Essential Principles for Monitoring Brand Health”, Carol Phillips and Judy Hopelain, 2008 http://www.brandamplitude.com/whitepapers/Brand%20Vitals%20vF.pdf “ In Search of True Brand Equity Metrics: All Market Share Ain’t Created Equal”, Tom Reynolds and Carol Phillips, Journal of Advertising Research, 2005 http://www.brandamplitude.com/whitepapers/all_market_share_aint_created_equal.pdf “ On Track: The Next Generation of Brand Tracking”, Judy Hopelain, AMA’s Marketing Management, October, 2005 http://www.brandamplitude.com/whitepapers/on_track.pdf “ Measuring Brand Value”, Don E. Schultz and Heidi F. Schultz, Kellogg on Branding , 2005, Ch 13 “ Make a Case for Your Brand”, Susan Fournier, Advertising Age, November 26, 2007 “ Brand Metrics: good, bad and don’t bother”, Scott Davis, Strategy , January, 26, 2004