18 Brand Equity Measurement

ACCORDING TO A well-known axiom, you can’t manage what you don’t measure. This is true of brand equity as well. Any strong brand equity measurement system will accomplish the following objectives:

• Measure the brand’s equity across a variety of dimensions at different points in time over time.

• Provide diagnostic information on the reasons for the changes in brand equity.

• Provide insight into the brand’s positioning vis-à-vis its major competitors, including its strengths, weaknesses, opportunities, and threats.

When I was named director of brand management and marketing at Hallmark, I was given two primary objectives: 1) to increase Hallmark market share and 2) to increase Hallmark brand equity.

Market share is a relatively straightforward objective for which we already had metrics. Brand equity was much less well defined. I spent the better part of the next three years drawing upon the knowledge of various consultants, researchers, and scholars and dozens of different brand equity models to define brand equity in a way that was useful to Hallmark. To be useful to Hallmark, it had to show how to move people from high brand awareness to brand insistence. Since then, this work has resulted in a validated and refined measurement system that is used by scores of organizations across dozens of industries.

Components of a Brand Equity Measurement System

• Brand awareness (first mention, or top-of-mind unaided recall, and total unaided recall)

• Brand relevant differentiation (open-ended question and perceptions on key attributes)

• Brand loyalty (multiple behavioral and attitudinal measures, including share of requirements/wallet)

• Brand imagery (against a standard battery of category-independent brand personality attributes proven to drive brand insistence, and a customized battery of brand personality attributes for the particular organization and its product/service category)

Most Important Brand Equity Measures

• Brand’s delivery against key benefits. (We have found two separate approaches to be insightful: mapping benefit importance against brand benefit delivery—a scaled response—and an open-ended question, “What makes brand XX different from other brands in the YY category?”)

Specific Brand Equity Measures

What follows is a list of specific questions and measures that will help you manage a brand’s equity:

- What is the first brand that comes to mind when thinking about the xxx category?

- Which brand (of product category) do you prefer? (The incidence of those with no brand preference can also provide insights into the importance of brand in the category.)

- Which brand or brands (of product/service category) do you prefer when you are looking for the (relevant differentiated) benefit?

- How well does the xxx brand deliver against the yyy benefit? (Rated on a five-point scale.)

Figure 18–1. Emotional connection.

- Share of last ten purchases. (Constant sum questioning works best. Questions about the “brand most often purchased” or “brands bought in the past six months” almost always overstate purchases for well-known brands and understate purchases for low-price brands.)

A particularly telling question is, “Describe your most memorable recent interaction with [brand].” Such an open-ended question provides insight regarding the source of interaction (touchpoint), quality of interaction, and intensity of interaction.

• Brand Vitality. Design marketing campaigns to build perceived brand momentum:

- Other (e.g., innovative, dependable, contemporary, old-fashioned, practical, boring, fun).

What a Robust Brand Equity Measurement System Must Have

A robust brand equity system should include all the measures listed previously. It should be tailored to a particular company and industry. (At a minimum, the competitive set, personality attributes, and category benefit structure will vary by industry. Ways of measuring value and loyalty typically also vary by industry.) The measurement system should also include behavioral and attitudinal measures, especially for brand loyalty. Through regression analysis and other techniques, the system should determine attitudinal measures that best predict brand loyalty and other desired behaviors (predictive modeling). The system should be capable of analyzing brand equity by category or customer segment if required. Comparing results of frequent users, occasional users, and nonusers also provides useful insights. It is important to measure brand vitality because purchase intent is almost always overstated for well-known, well-regarded older brands with waning differentiation (i.e., declining brands) and understated for newer brands with low awareness but high relevance and differentiation (i.e., emerging brands). Brand vitality can help adjust for this variance.

• A visual portrayal of positioning opportunities and vulnerabilities, such as mapping attribute/benefit importance against brand delivery (see Figure 18–2).

• Comparisons to other industries (from a normative database) to identify additional opportunities and vulnerabilities.

Figure 18–2. Perceptual map.

Common Problems with a Brand Equity Measurement System

• The system from which to manage brand equity is too simplistic (e.g., those omnibus studies that measure only two to four dimensions of brand equity, such as awareness or favorability).

• No competitive comparisons are included in the measurement. (Many companies measure against themselves by, for instance, measuring customer satisfaction improvements. A brand equity measurement system must include competitive comparisons. By definition, brands are positioned against other brands. And few customers compare you against yourself. Most customers compare you with other companies and brands. Competitive context is not only highly insightful—it is critical to managing your brand’s equity.)

• The sample size is too small to detect small changes in brand equity in the shorter term.

• Customers are surveyed too frequently. Typically, it is sufficient to measure brand equity once a year, unless one of the following conditions exist:

- You have repositioned the brand or otherwise altered the brand communication or delivery in a major way.

• You make use of the organization’s own customer and/or prospect list so that brand awareness, usage, and other measures are not projectable to the general population.

• The survey is designed in a way that biases the unaided brand awareness question—rendering the results of that question invalid.

• Organizations are unable to identify a primary product category or set of competitors because of the uniqueness of their brand or the lack of a brand unifying principle. This eliminates some of the most important brand equity measures (top-of-mind awareness, brand differentiation, etc.) from the measurement system.

• A tailored set of brand/category benefit statements is not included in the study. These statements must come from a rigorous understanding of the category benefit structure, typically identified by prior qualitative customer research dedicated to the purpose of identifying that structure.

• The organization confuses other studies with a brand equity measurement system. Mostly, people believe that customer satisfaction studies, attitude and usage studies, and corporate image studies are the same as brand equity measurement systems (or viable substitutes for them).

Assessing the Effectiveness of an Organization’s Brand Equity Measurement System

Brand equity measurement systems are the most effective when clients can answer each of the following questions affirmatively:

Brand Equity Should Not Be Measured Just for Customers

Businesses should also monitor their brand equity with certain groups (in addition to their customers). These groups include:

A brand’s power comes not just from the loyalty that it creates in its customers, but also from the loyalty that it creates in its employees and its investors.

Brand Building and Marketing Are Investments with a Tangible Return

I am tired of hearing some businesspeople say that there is no way to correlate business results with marketing expenditures, implying that marketing is an expense with no corresponding return. Others are slightly more charitable and say that there is no way to measure direct results. This is wrong—at least for direct response marketing, including direct response marketing via the Internet. (Many direct marketing websites even offer free direct marketing ROI calculators.) For other types of marketing, this conclusion is partially wrong.

There are a few important components to measuring the results of marketing programs. They include 1) being clear about the program’s objectives up front, 2) being sure that there are ways to measure results against the objectives, 3) measuring those results, and 4) evaluating the program’s results against the objectives. This is a closed-loop system.

It is also important to keep in mind that there are marketing programs with long-term results, such as brand building, and there are marketing programs with short-term results, such as direct response marketing and sales promotion. You must be clear about which ones each marketing investment is intended to achieve (see Figure 18–3).

Figure 18–3. Long-term vs. short-term marketing investments.

	Long-Term Investment	Short-Term Investment
Type of Marketing Investment	Brand building	Direct response marketing, sales promotion, and other shorter-term marketing expenditures
Primary Result	Creation of leverageable asset	Short-term increase in sales
Indirect Impact on Business	- Decreased price sensitivity - Increased customer loyalty - Increased revenues - Increased share of market - Increased ability to hire and retain quality employees - Increased stock price - Increased company value - Increased ability to grow into new product and service categories - Increased ability to mobilize the organization around a vision	NA
Measurement	Financial: asset value Nonfinancial: awareness, relevant differentiation, preference, loyalty	Program ROI

Measuring Marketing ROI

There are many useful models for estimating the impact of various revenue drivers on total revenues. One of the more widely used models is based on the following calculation:

× (multiplied times) the average number of purchase transactions per person (per time period)

You can design your marketing programs to affect any combination of these factors, and you can measure the level of investment required to get the results through each of these levers:

• You can encourage customers to upgrade their products or services or to purchases additional products and services.

• Your can encourage them to rely on your brand for a greater proportion of their purchases.

Given the right data, it becomes trivial to estimate the return to your company from increasing your market share by one share point, gaining one more customer, or retaining a current customer’s business for another year.

Take another example: lead generation. If you code ads and direct mail pieces, you will be able to determine which marketing programs resulted in leads, which of those leads were qualified, which of those qualified leads were translated into sales by your sales force, and how much revenue each of those successful leads returned. You can relate this result to the marketing investment required to generate those leads. Now you have calculated return on marketing investment.

Many marketing tactics achieve numerous objectives. For instance, banner ads have been shown to increase brand awareness and reinforce a brand’s positioning while also generating sales leads or transactions (depending on what is on the other side of the click-through). Trade shows also achieve multiple ends. Through our postshow research, Element K has found that shows increase brand awareness and preference and the prospect’s propensity to purchase our products. They also increase current customer attitudinal loyalty. They generate qualified sales leads as well. Be careful to evaluate marketing tactics that achieve multiple ends against all of those ends—not just one.

On a macro basis, one can measure the effectiveness of marketing expenditures by comparing increases in total marketing expenditures to increases in sales for a specified period of time (e.g., quarter-over-quarter, year-over-year). Two cautions with this approach, however. First, a complex combination of variables affects sales. Not all the credit (positive or negative) can be attributed to marketing actions. The general economy, sales tactics, and other executive-level decisions can also impact sales in significant ways. Second, remember that some of your marketing programs, including most brand building programs, are designed to affect a longer-term cumulative result not measurable in the short term.

Importance of Investing in the Brand Asset

A number of studies have shown that the percentage of a company’s value that is unaccounted for by tangible assets has increased significantly. From 50 percent to 90 percent of a company’s total value is now attributable to factors other than tangible assets. In a 2013 study, the intellectual capital equity firm Ocean Tomo discovered that nonfinancial assets account for as much as 80 percent of institutional investors’ valuation of a company. In 2000, Cap Gemini Ernst & Young joined with Forbes Magazine and the Wharton Research Program to develop the Value Creation Index, a method for determining the real value of intangible and nonfinancial assets. In “Measuring the Future: The Value Creation Index,” Cap Gemini reported that, after rigorous research, it discovered that 50 percent of a traditional company’s value and 90 percent of an e-commerce company’s value result from nine factors. The following value drivers seem to be common across most industries:¹

Neel Foster, a former board member at the Financial Accounting Standards Board, once said:

As we move into more of an information age and service-based economy, the importance of soft assets is becoming more relevant to valuing some companies than brick and mortar. A lot of companies don’t even have brick and mortar.²

An increasing number of methods have emerged to measure nonfinancial business drivers, from economic value added and the balanced scorecard to value-based management and the Value Creation Index. Wharton accounting professors conducted a study across 317 companies and discovered that 36 percent of the companies sampled used nonfinancial measures to determine executive incentive compensation.³

Building brand awareness, differentiation, and emotional connection together with the appropriate pricing and distribution strategies results in brand preference, purchase, repeat purchase, and, eventually, loyalty. Also, an increasing body of evidence links brand building activities with a wide range of long-term benefits, from decreased price sensitivity and increased customer loyalty to increased stock price and shareholder value.

Sometimes, the results of brand building programs are obvious, especially for new brands. When I arrived at Element K, it was a newly created brand. People in the e-learning industry had not heard of Element K. Our sales force found it difficult to gain the attention of potential buyers: We were not on industry analysts’ “radars,” we did not receive coverage in trade magazine articles, people passed by our trade show booth, and we got few calls from conference companies. After a year of focused and relentless brand building efforts, prospects started coming to us (we are on their “short lists”). Soon we were in all of the industry analysts’ reports, our president writes a column for one of the major trade publications, we sponsor a major user conference in parallel with one of the most important industry trade shows, we receive a continuous stream of invitations to participate in conferences and other industry events, companies approach us about business partnerships, our employees are sought after as industry experts, and our competitors talk about us. In this case, the results of our brand building efforts were obvious and didn’t require the validation of formal brand equity measures or the corresponding revenue increases (both of which we also have).

You can measure and manage the nonfinancial impact of your brand through a brand equity measurement system (covered earlier in this chapter). You can also measure the financial value of your brand as an asset.

Brand valuation has been made possible by a number of financial approaches—activity-based costing (ABC), discounted cash flow (DCF), and economic value added (EVA)—and by a myriad of more recent customer purchase tracking techniques.⁴ Interbrand (www.interbrand.com) has a depth of experience in brand valuation. Also, Don E. Schultz, Ph.D., professor of integrated marketing communications at Northwestern University and president of Agora, Inc., has studied and applied the concepts of brand valuation and return on marketing investment in depth. Both would be good resources for people with a further interest on this topic.

Brand Building and Marketing as Investments: A Summary

1. Brand building is an investment that results in a significant leverageable asset.

2. Other shorter-term marketing actions exist for the sole purpose of increasing sales.

4. You can also measure the nonfinancial aspects of brands that drive positive financial consequences in the long term—awareness, relevant differentiation, and loyalty, for instance.

7. Although some businesspeople (typically finance and operations types) may view marketing as an expense without significant corresponding benefits, this is untrue. Marketing is one of the most important investments a company can make.

Implication: Don’t look first to marketing (and employee training, for that matter) when expenses need to be trimmed to achieve short-term goals. This decision will only hamper value creation and revenue growth in the long term.

Marketing is a fundamental driver of organizational success. Together, brand building, marketing. and sales strategies and tactics create, build, and sustain a company’s revenues. To ensure positive results, you must understand and track how each marketing program impacts sales in the short term and the long term. In many instances, you will be able to track and measure the specific short-term impact of specific programs. In others, especially for longer-term brand building programs, you will have to track and measure indirect business drivers (e.g., brand awareness, attitudinal loyalty) and validate how each of these affects revenue gains in the long run. Formal marketing (and brand) plans and metrics will help you achieve this end. And don’t forget—a brand is an asset, and one of the most important assets in creating long-term value for organizations. Build the brand, sustain it, and leverage it.

Use the checklist in Figure 18–4 to assess the efficacy of your brand management practices in the area covered by this chapter. The more questions to which you can answer “yes,” the better you are doing. The checklist also provides a brief summary of the material covered in the chapter.

Figure 18–4. Checklist: Brand equity measurement.

	YES / NO
Do you know what drives your brand’s equity?	—	—
Have you established and validated equity measures for your brand?	—	—
Have you established targets against those brand equity measures? Do you actively manage against those targets?	—	—
Do you measure your brand’s equity at least once a year?	—	—
Are people held accountable for achieving brand equity objectives and targets?	—	—
Is senior management regularly updated on performance against brand equity objectives and targets?	—	—
Do you measure each of the following brand equity dimensions: awareness, accessibility/convenience, value, relevant differentiation, emotional connection, preference, usage, vitality, loyalty, and key associations?	—	—
Do you also measure your primary competitors against the same brand equity dimensions?	—	—
Do you know if competitors are making inroads on key associations that you intend your brand to own?	—	—
Do you measure behavioral and attitudinal aspects of brand loyalty?	—	—
Do you measure your brand’s price premium (with consumers and the trade)?	—	—
Do you measure “intent to purchase”?	—	—
Do you measure your brand’s rank in the consideration set?	—	—
Do you measure your brand’s share of dollar/share of requirements?	—	—
Do you measure your brand’s share of market?	—	—
For products sold at retail: Do you measure retail sales productivity/turns for your brand vs. competitive brands?	—	—
Is your brand equity system sensitive enough to measure changes in your brand’s equity over time?	—	—
Does the system provide diagnostics on why the equity is increasing or decreasing?	—	—
Does the system provide insights into positioning threats and opportunities?	—	—
Do you track changes in consumers’ ability to accurately play back key brand positioning points?	—	—
Do you have a plan (and measurement targets) for the brand associations you want to increase and decrease?	—	—
Has your brand’s equity been increasing over time?	—	—
Is your brand perceived to be authentic?	—	—
Is your brand likable?	—	—
Do you know if your brand is perceived to be an up-and-comer (rather than on the decline)? Do you measure brand vitality?	—	—
If your brand is venerated and dominant in the market, would you be able to tell if it was in danger of becoming generic? If it was, are you aware of the steps that can be taken to avoid that outcome?	—	—
Have you measured the financial value of your brand asset? Have you shared that information with your organization to reinforce that your brand is an asset that should be actively managed and leveraged?	—	—

Table of Contents for 18 Brand Equity Measurement

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18

brand equity measurement

Components of a Brand Equity Measurement System

Most Important Brand Equity Measures

Specific Brand Equity Measures

What a Robust Brand Equity Measurement System Must Have

Common Problems with a Brand Equity Measurement System

Assessing the Effectiveness of an Organization’s Brand Equity Measurement System

Brand Equity Should Not Be Measured Just for Customers

Brand Building and Marketing Are Investments with a Tangible Return

Measuring Marketing ROI

Importance of Investing in the Brand Asset

Brand Building and Marketing as Investments: A Summary

Table of Contents for
18 Brand Equity Measurement