Presentation at Fisher College of Business

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  • Many measures of brand equity would inappropriately locate equity with Isuzu instead of with Honda. Demonstrates that outcomes are not reliable source for equity calculation.
  • This is a generalized picture of brand valuation. Brand-level outcomes are aggregated up to generate brand value; thus, brand equity and brand value are identical constructs.
  • The question to ask is, “What drives the observable individual-level outcomes?”
  • The link between Brand Equity and Individual-level outcomes is hard to understand (similar to the relationship between attitude and behavior), but it’s the key to building valuable brand equity that can be leveraged.
  • The loss function helps you make a managerial decision after you understand the data-generating process (likelihood). In the same way, I must first understand equity before I can understand how it influences marketplace action.
  • 1. Rolex; aspirational brands 2. Objectively good; dominant attribute 3. Pampers 4. Lava Soap 5. Niche brands don’t seek general awareness; value brands don’t seek a price premium 6. Avoid “smoke & mirrors”; assuming that brand equity is the difference between expert and novice evaluation misses equity that is not tied up in benefit beliefs 7. How you got there; not just where you are
  • Cracker Jack example.
  • Also consider Snapple example.
  • Presentation at Fisher College of Business

    1. 1. The Theoretical Separation of Brand Equity and Brand Value 2006 Winter AMA Marketing Educator’s Conference February 18, 2006 Bob Leone [email_address] The Ohio State University Randy Raggio [email_address] The Ohio State University
    2. 2. Motivation <ul><li>In 1994, Honda introduced the Passport, an Isuzu Rodeo that cost $5,000 more than the Rodeo, without a roof rack, and a 1-year vs. 5-year warranty </li></ul><ul><li>The first author bought the Rodeo </li></ul><ul><li>How does Honda recognize value from this action? </li></ul><ul><li>How do we distinguish brand equity, customer equity and brand value? </li></ul>Raggio/Leone 2006 Winter AMA
    3. 3. Equity vs. Value <ul><li>Firms A and B bid on Brand 1 </li></ul>Firm A Consumer-Based Brand Equity Brand 1 $ Valuation Firm B $ Valuation <ul><li>Equity and Value are distinct constructs </li></ul><ul><ul><li>Value is idiosyncratic to the bidding firm </li></ul></ul><ul><ul><li>Each firm attempts to objectively measure equity </li></ul></ul>Raggio/Leone 2006 Winter AMA
    4. 4. Brand Valuation Shareholder Value Brand Value Aggregate up to: Brand-level Outcomes Individual-level Outcomes Impact: Aggregate up to: <ul><li>Follow the Money: </li></ul>Brand Value : Sale or replacement price of the brand Estimates will vary with capabilities and resources A firm’s perspective Raggio/Leone 2006 Winter AMA Outcomes have become the measure of brand equity
    5. 5. Moving Upstream <ul><li>What drives Individual-Level Outcomes? </li></ul>Generates: Impacts: Leads to: Individual-level Outcomes The consumer’s perspective Consumer-Based Brand Equity Brand Knowledge Environment Brand : A promise of benefits Brand Equity : Perception or desire that a brand meets a salient promise Raggio/Leone 2006 Winter AMA
    6. 6. Equity ≠ Outcomes Input Consumer-Based Brand Equity Individual-level Outcomes Marketing Actions - Product offering - Advertising - Promotion, etc. Mktplace Info., etc. Consideration Purchase WOM Loyalty Commitment, etc. Strength Salience Raggio/Leone 2006 Winter AMA Brand : A promise of benefits Brand Equity : Perception or desire that a brand meets a salient promise
    7. 7. Customer Equity <ul><li>Passport vs. Rodeo example: </li></ul><ul><ul><li>The Rodeo lasted 11 years </li></ul></ul><ul><ul><ul><li>Next purchase: </li></ul></ul></ul><ul><ul><ul><li>Honda Odyssey </li></ul></ul></ul><ul><ul><li>Isuzu may have received value from my purchase, but motivation indicated more equity and a higher CLV for Honda </li></ul></ul><ul><ul><li>Honda now needs to leverage existing equity to capture Customer Equity </li></ul></ul><ul><ul><ul><li>C.E. is the customer-based portion of brand value </li></ul></ul></ul>Raggio/Leone 2006 Winter AMA
    8. 8. Separate Constructs <ul><li>The goal is to build and leverage equity. </li></ul>Individual-level Outcomes Brand Knowledge Environment Shareholder Value Company-Based Brand Value Brand-level Outcomes Build Equity (4 P’s) Consumer-Based Brand Equity Raggio/Leone 2006 Winter AMA Leverage Equity
    9. 9. So What? <ul><li>Confusing Equity and Value is like confusing the likelihood and loss functions </li></ul><ul><li>Individuals may have threshold levels that must be passed before Brand Equity impacts behavior </li></ul><ul><li>Promise of benefits is context-specific, so Brand Equity may exist within individuals, but may only be “active” when the promise is salient </li></ul><ul><li>“ Leveraging” opens for consideration other segments, markets, products/services </li></ul><ul><li>(e.g., IBM, Scotts) </li></ul>Raggio/Leone 2006 Winter AMA
    10. 10. Brand Equity Considerations <ul><li>Measures of brand equity should: </li></ul><ul><ul><li>Not solely rely on purchase or other outcomes </li></ul></ul><ul><ul><li>Minimize alternative explanations </li></ul></ul><ul><ul><li>Consider non-customers and future potential </li></ul></ul><ul><ul><li>Consider changing usage contexts and user groups </li></ul></ul><ul><ul><li>Consider different corporate goals and objectives </li></ul></ul><ul><ul><li>Not emphasize short-term, vulnerable effects </li></ul></ul><ul><ul><li>Offer diagnostic ability </li></ul></ul>Raggio/Leone 2006 Winter AMA
    11. 11. Brand Value <ul><li>At a point in time, for a particular firm, there are two levels of brand value </li></ul>Current value Appropriable value Gap is a function of a firm’s ability to leverage Brand Equity Given fully-leveraged Brand Equity Brand Value Given current strategy, management, etc. Raggio/Leone 2006 Winter AMA
    12. 12. Brand Value <ul><li>Over time, both current and appropriable value can change </li></ul>Current value Appropriable value time Borden Frito-Lay Current value time Sale of Cracker Jack to Frito-Lay ADA approval of Crest Chasing appropriable value Chasing appropriable value Appropriable value Borden “max” F-L’s “system” value P&G Raggio/Leone 2006 Winter AMA
    13. 13. What This Means… <ul><li>Managerial goal is to build and leverage equity to generate (chase) value </li></ul><ul><li>Brand Value also comes from sources not directly related to consumers (e.g., HR) </li></ul><ul><li>Effective strategy is based on a comprehensive understanding of the relationship between equity and value </li></ul><ul><li>Tactical decisions follow analysis of the drivers of equity and the linkage between equity and value </li></ul><ul><li>Optimization methodologies (e.g., CRM) should always be considered in the context of the larger framework </li></ul>Raggio/Leone 2006 Winter AMA
    14. 14. New Framework Raggio/Leone 2006 Winter AMA
    15. 15. <ul><li>Thank you! </li></ul>Raggio/Leone 2006 Winter AMA

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