4. Brand Equity is a set of brand assets and liabilities
linked to a brand., it’s name and symbol, that add to
or subtract from the value provided by a product or
services to a firm and/or to that firm’s customers.
(DAVID AAKER)
6. Keller: Customer Based Brand Equity (CBBE)
Specifically customer based brand equity is defined as the
differential effect that brand knowledge has on consumer
response to the marketing of that brand. A brand is said to
have positive customer-based brand equity when customers
react more favorably to a product and the way it is marketed
when the brand is identified as compared to when it is not.
7. Brand Knowledge
Creates the differential effect that drives brand equity
Brand Awareness
Consumer’s ability to identify the
brand under different conditions
Brand Image
Perceptions as reflected by
brand associations
Brand
Recognition
Brand
Recall
Sources of BE (Differential Effect)
Uniqueness Favourability Strength
9. The Brand Value Chain
• Considers the sources and outcome of the
brand equity
• Considers the ways that marketing
activities contribute to enhance brand
value
10. The Brand Value Chain
Marketing
Program
Investment
Customer
Mindset
Market
Performance
Shareholder
Value
Program
Quality
Market
place
Conditions
Investor
Sentiment
Multiplier
Value
Stages
•Awareness
•Associations
•Attitudes
•Attachment
•Activity
•Product
•Communication
•Trade
•Employee
•Other
•Price premium
•Price elasticity
•Market share
•Expansion success
•Cost structure
•Profitability
•Stock prices
•P/E ratio
•Market capitalization
•Market dynamics
•Growth potential
• Risk Profile
•Brand contribution
•Competitive reactions
•Channel support
•Customer size and profile
•Clarity
•Relevance
•Distinctiveness
•Consistency
..BM_13-
15BRAND_VI
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CLIPSLuftha
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brand report card.pdf brand report card1.pdf
11. Brand Equity Management System
• Brand Equity Charter:..BM_13-15BRAND_VIDEO CLIPSADANI Brand_Guidelines_12M.pdf
– Define the firm’s concept of Brand Equity
– Scope of key terms
– Desired equity at various levels of Brand Hierarchy
– Range of relevant associations
– Method of measurement Brand equity
– Strategic guidelines to manage brand (eg.. Stress on
Clarity, relevance, distinctiveness and consistency in
marketing programmes)
– Tactical guidelines for marketing programmes
– Specific guidelines for brand element usage..
Trademarks, packaging, communications
12. Different Valuation Techniques
• The Price Premium Method
• Process: The revenues of an unbranded competing product are
deducted from the revenues of a comparable branded product to
establish the excess or premium value of the brand
• Criticisms:
– It is only based on market information of revenue. It does not consider
the cost factors
– There may be no unbranded product comparable to the branded one
Brand Value= Brand Revenue-Revenue from an unbranded product
13. COST BASED METHODS
• Historical Costs: This is the money that has been spent on the
brand till date. Suppose $100 million have been spent so far in
creating a brand called ‘X’. The value at which the brand can be
sold to another organization should be $100 million.
• Replacement Costs: This is the cost of how much would it cost
to create a brand with similar turnover, profitability, distribution
reach, brand loyalty, etc.? This cost is its brand equity
– Replacement Cost= Launch cost + production & administrative
costs incurred over the years + brand premium acquired over the
years due to brand loyalty, distribution etc.
14. Discounted Cash Flows Method:
Value of Brand =
Where = Anticipated Revenue in year t attributable to the brand
r = Discounting rate or WACC (Weighted average cost of capital)
= Residual Value after n (year)
rRBrRB n
t
t /)1(/( ++∑
tRB
nRB
For Example:
•Brand A has anticipated revenues of Rs 600 crores ( 2009).
•The Brand A is expected to grow at around 10% per annum for the next five years.
•The Discounting rate is taken at 12 %.
•The period when the brand is expected to operate status quo is assumed to be the
next five years
15. Brand Valuation of A
2009 2010 2011 2012 2013 2014
Revenues 600 660 726 798.6 878.46 966.306
1.12 1.2544 1.4049 1.5735 1.7623 1.9738
535.7143 526.148 516.7525 507.5247 498.4618 489.5607
t
r)1( +
t
t rRB )1/( +
t
t rRB )1/( +Summation = 3074.162 crores
nRB =966.306/0.12 = 8052.55 crores
Therefore, Brand Value of A= 3074.162+8052.55 = 11126.71 crores
16. Key Metrics: Market Potential
• CDI: Category Development Index: a market’s category sales
percentage is divided by the total population percentage of that
market and multiplied by 100 : A% / X% * 100; A: Product "A"'s total
sales in the specific market, X: population in that specific market.
• BDI: Brand Development Index: a market’s brand sales percentage
is divided by the total population percentage of that market
multiplied by 100. A% / X% * 100; A: Brand "A"'s total sales in the
specific market, X: population in that specific market.
CDI BDI REMARK
HIGH HIGH Good sales potential for brand
and category, good for
advertising.
HIGH LOW Category is doing better than
brand. There is potential for
growth/Brand Building.
LOW HIGH Brand is doing better than
category, good for
advertising.
LOW LOW Brand and category are low so
advertising presents a risk.
17. Key Metrics: Consumer Based
Brand Persuasion =Ratio of Intention to Purchase Brand/ Spontaneous Brand Recall
Brand Pull =Ratio of Likely Switch-ins to the Brand / Likely Switch-outs from the
Brand
Brand Loyalty = Ratio of Likely to Continue Buying the Brand / Total Current Users
of the Brand
Secondary Brand Share = Total Current Users of the Brand / Total Current Users of
the Category
Primary Brand Share =Preferred Current Users of the Brand / Total Current Users
of the Category
