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  1. 1. A Practical Guide to Measuring Brand Equity LIEBERMAN RESEARCH WORLDWIDE 1900 Avenue of the Stars, 15th floor Los Angeles, CA 90067 Tel: (310) 553-0550 • Fax: (310) 553-4607
  2. 2. Introduction <ul><li>The purpose of this document is to provide a practical guide for marketers interested in measuring and more effectively managing brand equity. The framework attempts to identify all of the components of brand equity and the recommended approaches for measuring each. In application, of course, the measurement approach and process should be customized to best meet the clients’ needs. </li></ul><ul><li>Marketers attempting to measure brand equity should understand: </li></ul><ul><ul><li>How is brand equity defined and what are its component parts? </li></ul></ul><ul><ul><li>Why would it be important to measure brand equity? </li></ul></ul><ul><ul><li>What are the research methods and approaches that will be most effective? </li></ul></ul><ul><ul><li>Once obtained, how can these measures be used to greatest advantage? </li></ul></ul>
  3. 3. What Is Brand Equity? <ul><li>Brand equity can be defined as the marketing effect that is uniquely attributable to the brand. More specifically, it can be characterized as franchises, or constituencies, who possess leverageable attitudes and beliefs that can be translated into greater demand for branded products and services. </li></ul>Components The Marketing Effect That Is Uniquely Attributable to the Brand Brand Equity A customer franchise/constituency of some determined size and quality --- Who have leverageable associations with, and attitudes toward, the brand --- Which result in a greater willingness to consider, and pay a premium price for, products and services with the brand name. BRAND EQUITY DEFINED
  4. 4. What’s The Motivations For Measuring Brand Equity <ul><li>Typically, management is interested in measuring brand equity for one of two reasons: To establish a value for financial/accounting purposes, or to increase the productivity of the brand by managing it more effectively. </li></ul>REASONS TO MEASURE EQUITY <ul><li>The company that owns the brand is being sold/merging </li></ul><ul><li>The brand itself is being sold </li></ul><ul><li>Licensing or co-marketing activities are being considered/undertaken with business partners </li></ul><ul><li>The brand is under-performing and diagnostic input is needed </li></ul><ul><li>The brand is performing at acceptable levels, but not optimally </li></ul><ul><li>There may be unrealized line or brand extension potential </li></ul>Establish a Value for the Brand Provide Direction to Improve Productivity
  5. 5. Key Measures of Brand Equity <ul><li>To obtain an estimate of overall brand equity, each of the primary components must be evaluated. This process includes determining the size and nature of the franchise, identifying the positive images and associations that define the brand and measuring the degree of marketing leverage the brand provides. </li></ul>Key Measures Brand Equity Components <ul><li>Market penetration of the brand </li></ul><ul><li>Profile of the customer franchise </li></ul><ul><li>Brand loyalty and satisfaction levels, i.e., how strong is your grasp </li></ul><ul><li>Words/phrases, symbols, products and concepts associated with the brand </li></ul><ul><li>Brand imagery </li></ul><ul><li>Perceived performance </li></ul><ul><li>Price elasticity (brand/price trade-off) </li></ul><ul><li>Brand extendibility/stretch </li></ul>Customer franchise of some determined size and quality --- Who have leverageable associations with and attitudes toward the brand --- Which result in a greater willingness to consider, and pay a premium for, products and services with the brand name
  6. 6. Recommended Methodology <ul><li>It is possible to obtain all of the key measures of brand equity from a single survey among a representative sample of category users. The interview will typically be 25 - 45 minutes long. It should be conducted in-person either via intercept or by pre-recruiting to a central location. In both cases the sample needs to be stratified and weighted to ensure representativeness. </li></ul>INTERVIEW CONTENT Marketing Leverage Attitude and Imagery Customer Franchise <ul><li>Penetration </li></ul><ul><li>Brand awareness </li></ul><ul><li>Advertising awareness </li></ul><ul><li>Trial and usage </li></ul><ul><li>Price Elasticity/Premium </li></ul><ul><li>Brand/price trade-off exercise </li></ul><ul><li>Premium price commanded by the brand </li></ul><ul><li>Brand Associations </li></ul><ul><li>Advertising recall </li></ul><ul><li>Words/phrases, symbols </li></ul><ul><li>Products and services </li></ul><ul><li>Etc. </li></ul><ul><li>Profiling </li></ul><ul><li>Demographics </li></ul><ul><li>Psychographics </li></ul><ul><li>Lifestyle </li></ul><ul><li>Usage patterns </li></ul><ul><li>Brand Extendibility </li></ul><ul><li>Acceptance (i.e., appropriateness and purchase interest) of “close-in” products and services </li></ul><ul><li>Acceptance of “farther out” products </li></ul><ul><li>Attribute Importance </li></ul><ul><li>Objective product attributes </li></ul><ul><li>Brand image </li></ul><ul><li>Loyalty/Commitment </li></ul><ul><li>Primary/exclusive usage </li></ul><ul><li>Purchase intent (next time) </li></ul><ul><li>Overall satisfaction </li></ul><ul><li>Attribute Performance </li></ul><ul><li>Product attributes </li></ul><ul><li>Image attributes </li></ul>
  7. 7. Penetration -- Sizing the Franchise <ul><li>The primary purpose of the penetration measures is to provide an estimate of the size of the customer franchise. They also provide an understanding of the brand dynamics which is helpful in developing strategies to improve overall performance. </li></ul>Brand Penetration and Dynamics <ul><li>Brand awareness </li></ul><ul><ul><li>Unaided </li></ul></ul><ul><ul><li>Aided </li></ul></ul><ul><li>Advertising awareness </li></ul><ul><ul><li>Unaided </li></ul></ul><ul><ul><li>Aided </li></ul></ul><ul><li>Usage </li></ul><ul><ul><li>Ever tried </li></ul></ul><ul><ul><li>Current usage </li></ul></ul><ul><ul><li>Primary usage </li></ul></ul><ul><ul><li>Exclusive usage </li></ul></ul><ul><ul><li>Purchased last time </li></ul></ul><ul><li>*All key competitors </li></ul>Data Needs*
  8. 8. Profiling the Franchise <ul><li>Demographics, psychographics, usage and lifestyle information provide the input to create an in-depth profile of the customer franchise. CHAID analysis is used to synthesize these inputs into a summary profile and a discriminant function analysis identifies key characteristics for targeting. </li></ul><ul><li>Demographics </li></ul><ul><ul><li>Age </li></ul></ul><ul><ul><li>Income </li></ul></ul><ul><ul><li>Ethnicity </li></ul></ul><ul><ul><li>Education </li></ul></ul><ul><ul><li>Household composition </li></ul></ul><ul><ul><li>Etc. </li></ul></ul><ul><li>Lifestyle </li></ul><ul><ul><li>Home Ownership </li></ul></ul><ul><ul><li>Travel patterns </li></ul></ul><ul><ul><li>Etc. </li></ul></ul><ul><li>Psychographics </li></ul><ul><ul><li>(Appropriate to category) </li></ul></ul><ul><li>Usage patterns </li></ul><ul><ul><li>(Appropriate to category) </li></ul></ul>Data Needs <ul><li>Males 18-34 years old </li></ul><ul><li>Completed college </li></ul><ul><li>Own home </li></ul><ul><li>Believe price is best indicator of quality </li></ul><ul><li>Prefer IBM compatible to MAC platform </li></ul><ul><li>Not brand loyal </li></ul><ul><li>Prefer IBM compatible to MAC </li></ul><ul><li>Have laptop PC </li></ul><ul><li>Use PC for work and at home </li></ul><ul><li>Use 10+ hours/week </li></ul>CHAID (Illustrative) Discriminant Function Analysis (Illustrative)
  9. 9. Profiling the Franchise <ul><li>Demographics, psychographics, usage and lifestyle information provide the input to create an in-depth profile of the customer franchise. CHAID analysis is used to synthesize these inputs into a summary profile and a discriminate function analysis identifies key characteristics for targeting. </li></ul><ul><li>Trial & usage </li></ul><ul><ul><li>Ever tried </li></ul></ul><ul><ul><li>Current usage </li></ul></ul><ul><ul><li>Primary usage </li></ul></ul><ul><ul><li>Exclusive usage </li></ul></ul><ul><li>Purchase interest </li></ul><ul><ul><li>(Next time) </li></ul></ul><ul><li>Overall satisfaction </li></ul>Data Needs Ever tried Current usage Primary usage Exclusive usage Overall Purchase Satisfaction Interest Loyalty Funnel Definitely Not Probably Not Might Probably Definitely Very Dissatisfied Somewhat Dissatisfied Neutral Somewhat Dissatisfied Very Satisfied
  10. 10. Brand Associations <ul><li>The products and services associated with a brand are one important measure of its fundamental meaning in the market. Other associations such as slogans, logos, trademarks, etc. are important indicators of the brand’s communication power and profile. LRW uses several special techniques such as clutter logo recognition and write/draw exercises to measure these associations. </li></ul><ul><li>Products and services </li></ul><ul><li>Advertising recall </li></ul><ul><ul><li>Unaided </li></ul></ul><ul><ul><li>Aided </li></ul></ul><ul><li>Associated words/phrases </li></ul><ul><ul><li>Slogans </li></ul></ul><ul><ul><li>Taglines </li></ul></ul><ul><li>Associated symbols </li></ul><ul><ul><li>Logos </li></ul></ul><ul><ul><li>Signatures </li></ul></ul><ul><ul><li>Trademarks </li></ul></ul><ul><li>Characters </li></ul><ul><ul><li>Founder/management </li></ul></ul><ul><ul><li>Spokesperson </li></ul></ul><ul><ul><li>Continuing character </li></ul></ul><ul><li>Concepts/ideas </li></ul>Data Needs <ul><li>Write/draw recall exercises (assess colors, words, symbols) </li></ul><ul><li>Both open-end and aided recall </li></ul><ul><li>Correct brand association within a competitive context </li></ul><ul><li>Logo and symbol recognition within competitive clutter </li></ul>Special Techniques
  11. 11. Brand Imagery Performance <ul><li>An extensive battery of both product and image attributes are rated on their importance and all of the competing brands are rated on their performance on the same attributes. The analysis includes importance vs. performance grids to identify strengths and weaknesses and perceptual brand maps to identify the strength of the associations for each brand. </li></ul><ul><li>Attribute Importance </li></ul><ul><ul><li>Product attributes </li></ul></ul><ul><ul><li>Image attributes </li></ul></ul><ul><li>Brand Performance Ratings </li></ul><ul><ul><li>Product attributes </li></ul></ul><ul><ul><li>Image attributes </li></ul></ul><ul><li>Competitive Performance Ratings </li></ul>Data Needs Perceptual Brand Map Importance vs. Performance Brand A <ul><li>Trust- worthy </li></ul><ul><li>Reliable </li></ul><ul><li>Convenient </li></ul><ul><li>Low Price </li></ul><ul><li>Service </li></ul><ul><li>Warranty </li></ul><ul><li>Quality </li></ul><ul><li>Consulting </li></ul><ul><li>Brand A </li></ul><ul><li>Brand B </li></ul><ul><li>Service </li></ul><ul><li>Brand C </li></ul><ul><li>Quality </li></ul><ul><li>Value </li></ul>High Low Importance High Low Performance <ul><li>Price </li></ul>
  12. 12. Pricing Leverage -- Brand/Price Trade-Off <ul><li>A purchase decision exercise in which respondents systematically trade-off brand vs. price, combined with a conjoint analysis, is used to provide measures of price elasticity. The result is the specific price premium the brand commands relative to an unbranded or competitively branded version of the same product. </li></ul><ul><li>Brand I </li></ul><ul><li>Attributes: </li></ul><ul><ul><li>A </li></ul></ul><ul><ul><li>B </li></ul></ul><ul><ul><li>C </li></ul></ul><ul><li>Price: High </li></ul>Purchase Decision Trade-Off - Conjoint Analysis - Price Premium vs. Unbranded Product <ul><li>Brand I </li></ul><ul><li>Attributes: </li></ul><ul><ul><li>A </li></ul></ul><ul><ul><li>B </li></ul></ul><ul><ul><li>C </li></ul></ul><ul><li>Price: High </li></ul><ul><li>Brand I </li></ul><ul><li>Attributes: </li></ul><ul><ul><li>A </li></ul></ul><ul><ul><li>B </li></ul></ul><ul><ul><li>C </li></ul></ul><ul><li>Price: High </li></ul>Brand I Brand II Brand III Brand IV
  13. 13. Brand Extendibility <ul><li>The ability of a brand to stretch into other product or service categories is a key measure of its marketing leverage. LRW recommends monadic cells to separate “close-in” new product ideas from “farther out” ideas to eliminate cross-influences. We also recommend the use of stimulus such as branded packages or products when possible. The results are plotted on an appropriateness map which illustrates the relative potential of competing brands in each product category. </li></ul>Brand/Category Appropriateness Two Monadic Cells Appropriateness Map Cell #1: Cell #2: Close In Farther Out Product Competitors Competitors Category B 1 B 2 B 3 B 1 B 2 B 3 A 8 6 5 8 5 9 B 7 5 6 6 4 7 C 6 5 6 5 6 7 D 4 6 7 6 8 9 E 8 9 9 6 4 4 F 9 5 6 4 7 7 G 5 10 4 5 9 5 H 4 4 7 4 5 8 I 7 2 2 7 5 7 J 10 7 4 7 4 3 <ul><li>H </li></ul><ul><li>A </li></ul><ul><li>D </li></ul><ul><li>F </li></ul><ul><li>B Compaq </li></ul>IB Xerox <ul><li>I </li></ul><ul><li>E </li></ul><ul><li>C </li></ul><ul><li>G </li></ul>
  14. 14. Typical Brand Equity Summary <ul><li>The output from LRW’s brand equity audit includes the size and profile of the customer franchise, the attitude and image assets associated with the brand, and its marketing leverage. </li></ul>Customer Franchise <ul><li>14 MM households aware with moderate to very positive overall impressions </li></ul><ul><li>11 MM households that use at least occasionally </li></ul><ul><li>6 MM loyal/highly satisfied user households </li></ul><ul><li>Most loyal users are upper income males who value status and prestige and spend heavily on luxury goods </li></ul>Associations, Imagery and Performance Marketing Leverage Executive Summary Equity Components <ul><li>The brand commands a $14 premium vs. and unbranded product with identical attributes </li></ul><ul><li>There is a good opportunity to extend existing lines, but little opportunity to extend the brand beyond the current category </li></ul><ul><li>Brand is strongly associated with good value and reliability and weakly associated with status </li></ul><ul><li>Logo, package and advertising spokespersons all have very high recognition </li></ul>Illustrative
  15. 15. Channel Equity <ul><li>In addition to measuring equity with end-customers, for many products and services it is also important to measure equity in the distribution channels, e.g., supermarkets, electronics distributors, etc. The components of channel brand equity are very similar, but the key measures are slightly different. </li></ul>Key Measures Brand Equity Components <ul><li>Penetration of primary and secondary channels </li></ul><ul><li>Profile of primary distributors </li></ul><ul><li>Overall satisfaction levels </li></ul><ul><li>Performance on key attributes </li></ul><ul><li>Margins (net of promotional spending) </li></ul><ul><li>Promotional support </li></ul><ul><li>Extendibility </li></ul>Extent and quality of distribution network Attitudes and perceived performance Ability to command a premium price and sell-in new products
  16. 16. Why Select LRW for Brand Equity Research? <ul><li>LRW has conducted a large number of brand equity projects, many for large blue-chip clients. Some have been full brand equity audits while others have had a more limited scope. </li></ul>PARTIAL LIST OF CLIENTS ITT Hartford AT&T Kellogg’s Eli Lilly Eddie Bauer Turner Chicago Tribune Blue Cross Bank of America Barclays Macy’s Taco Bell Discovery Channel Callaway Golf Warner Bros. Microsoft Brooklyn Union Gas Sunbeam