This document discusses various methods for measuring brand equity and market performance, including comparative, holistic, and valuation approaches. Comparative methods examine consumer responses based on changes in branding versus marketing elements. Holistic methods attempt to place an overall value on a brand through residual or valuation techniques. Valuation approaches seek to assign a financial value to brand equity for purposes like mergers and acquisitions. The document specifically describes Interbrand's brand valuation methodology, which calculates brand value as the net present value of forecast brand earnings discounted by a brand-specific rate.

1. 10.1
CHAPTER 10:
CHAPTER 10:
MEASURING OUTCOMES OF BRAND EQUITY:
MEASURING OUTCOMES OF BRAND EQUITY:
CAPURING MARKET PERFORMANCE
CAPURING MARKET PERFORMANCE
Kevin Lane Keller
Kevin Lane Keller
Tuck School of Business
Tuck School of Business
Dartmouth College
Dartmouth College

2. 10.2
Measuring Brand Equity
Measuring Brand Equity
 Multi-dimensional concept
Multi-dimensional concept
 Many different measures required
Many different measures required
 The ultimate value of a brand depends on the
The ultimate value of a brand depends on the
underlying components of brand knowledge and
underlying components of brand knowledge and
sources of brand equity
sources of brand equity

3. 10.3
Comparative Methods
Comparative Methods
 Brand-based comparative approaches
Brand-based comparative approaches
 Marketing-based comparative approaches
Marketing-based comparative approaches
 Conjoint analysis
Conjoint analysis

4. 10.4
Brand-Based Approaches
Brand-Based Approaches
 The marketing element under consideration is
The marketing element under consideration is
fixed.
fixed.
 Consumer response is examined based on changes
Consumer response is examined based on changes
in brand identification.
in brand identification.
 Application example:
Application example: Blind testing
Blind testing
 Advantage:
Advantage: Isolates the value of the brand
Isolates the value of the brand
 Disadvantage:
Disadvantage: The totality of what is learned depends
The totality of what is learned depends
on how many applications are examined.
on how many applications are examined.

5. 10.5
Marketing-Based Approaches
Marketing-Based Approaches
 The brand is held fixed and consumer response is
The brand is held fixed and consumer response is
examined based on changes in marketing programs.
examined based on changes in marketing programs.
 Applications:
Applications: Explore price premiums’ effect on
Explore price premiums’ effect on
switching, consumer evaluations of marketing
switching, consumer evaluations of marketing
activities, brand extensions, etc.
activities, brand extensions, etc.
 Advantage:
Advantage: Ease of implementation
Ease of implementation
 Disadvantage:
Disadvantage: Difficult to determine whether
Difficult to determine whether
consumer responses are caused by brand
consumer responses are caused by brand
knowledge or generic product knowledge
knowledge or generic product knowledge

6. 10.6
Conjoint Analysis
Conjoint Analysis
 A survey-based multivariate technique that enables
A survey-based multivariate technique that enables
marketers to profile the consumer decision process with
marketers to profile the consumer decision process with
respect to products and brands
respect to products and brands
 Helps researchers determine the trade-offs consumers
Helps researchers determine the trade-offs consumers
make between brand attributes
make between brand attributes
 Applications:
Applications: Assess advertising effectiveness and brand
Assess advertising effectiveness and brand
value; analyze brand/price trade-off
value; analyze brand/price trade-off
 Advantage:
Advantage: Allows for different brands or different aspects
Allows for different brands or different aspects
of the product to be analyzed simultaneously
of the product to be analyzed simultaneously
 Disadvantage:
Disadvantage: May violate consumers’ expectations based on
May violate consumers’ expectations based on
what they already know about brands
what they already know about brands

7. 10.7
Holistic Methods
Holistic Methods
 Attempt to place an overall value on the brand
Attempt to place an overall value on the brand
in either abstract utility terms or concrete financial
in either abstract utility terms or concrete financial
terms
terms
 Net out various considerations to determine the
Net out various considerations to determine the
unique contribution of the brand
unique contribution of the brand
 Holistic methods:
Holistic methods:
 Residual approaches
Residual approaches
 Valuation approaches
Valuation approaches

8. 10.8
Residual Approaches
Residual Approaches
 Examine the value of the brand by subtracting
Examine the value of the brand by subtracting
consumers’ preferences based on physical product
consumers’ preferences based on physical product
attributes alone from their overall brand
attributes alone from their overall brand
preferences
preferences
 Advantage:
Advantage: Useful benchmark for interpreting
Useful benchmark for interpreting
brand equity, especially from a financially oriented
brand equity, especially from a financially oriented
perspective
perspective
 Disadvantage:
Disadvantage: Static view. Limited diagnostic value
Static view. Limited diagnostic value
for strategic decision making
for strategic decision making

9. 10.9
Valuation Approaches
Valuation Approaches
 Attempt to place a financial value on brand equity
Attempt to place a financial value on brand equity
for accounting purposes
for accounting purposes
 Useful in cases of mergers and acquisitions, brand
Useful in cases of mergers and acquisitions, brand
licensing, fund raising, and brand management
licensing, fund raising, and brand management
decisions
decisions
 Valuation approaches:
Valuation approaches:
 Accounting background
Accounting background
 Historical perspectives
Historical perspectives
 General approaches
General approaches
 Interbrand’s brand valuation methodology
Interbrand’s brand valuation methodology

10. 10.10
Accounting Background
Accounting Background
 Intangible assets
Intangible assets are typically lumped under the
are typically lumped under the
heading of
heading of goodwill
goodwill and include things such as
and include things such as
patents, trademarks, and licensing agreements,
patents, trademarks, and licensing agreements,
as well as “softer” considerations such as the
as well as “softer” considerations such as the
skill of the management and customer relations.
skill of the management and customer relations.
 In an acquisition, the goodwill item often
In an acquisition, the goodwill item often
includes a premium paid to gain control, which,
includes a premium paid to gain control, which,
in certain instances, may even exceed the value
in certain instances, may even exceed the value
of tangible and intangible assets.
of tangible and intangible assets.

11. 10.11
Historical Perspectives
Historical Perspectives
 In Australia Rupert Murdoch’s News Corporation
In Australia Rupert Murdoch’s News Corporation
included a valuation of some of its magazines on its
included a valuation of some of its magazines on its
balance sheets in 1984.
balance sheets in 1984.
 British firms used brand values primarily to boost their
British firms used brand values primarily to boost their
balance sheets.
balance sheets.
 In the United States, generally accepted accounting
In the United States, generally accepted accounting
principles (blanket amortization principles) mean that
principles (blanket amortization principles) mean that
placing a brand on the balance sheet would require
placing a brand on the balance sheet would require
amortization of that asset for up to 40 years. Such a
amortization of that asset for up to 40 years. Such a
charge would severely hamper firm profitability; as a
charge would severely hamper firm profitability; as a
result, firms avoid such accounting maneuvers.
result, firms avoid such accounting maneuvers.

12. 10.12
General Approaches
General Approaches
 In determining the value of a brand in an acquisition or
In determining the value of a brand in an acquisition or
merger, firms can choose from three main approaches:
merger, firms can choose from three main approaches:
 Cost approach:
Cost approach: Brand equity is the amount of money that
Brand equity is the amount of money that
would be required to reproduce or replace the brand
would be required to reproduce or replace the brand
 Market approach:
Market approach: The present value of the future economic
The present value of the future economic
benefits to be derived by the owner of the asset
benefits to be derived by the owner of the asset
 Income approach:
Income approach: The discounted future cash flow from the
The discounted future cash flow from the
future earnings stream for the brand
future earnings stream for the brand

13. 10.13
Interbrand’s Brand Valuation
Interbrand’s Brand Valuation
 Assumes that brand value is the present worth of the
Assumes that brand value is the present worth of the
benefits of future ownership
benefits of future ownership
 Follows five valuation steps:
Follows five valuation steps:
 Market segmentation
Market segmentation
 Financial (role of branding) analysis
Financial (role of branding) analysis
 Demand (brand strength) analysis
Demand (brand strength) analysis
 Competitive benchmarking
Competitive benchmarking
 Brand value calculation
Brand value calculation
 Brand value calculation : Calculate the brand value as the
Brand value calculation : Calculate the brand value as the
net present value (NPV) of the forecast brand earnings,
net present value (NPV) of the forecast brand earnings,
discounted by the brand discount rate
discounted by the brand discount rate