Monetary Value. The amount of additional
income expected from a branded product over and above
what might be expected from an identical, but unbranded
product (e.g., a generic brand or store brand label
like Kroger's). Generic or store brands sell for significantly
less than their name brand counterparts, even when the
contents are identical. This price differential is the
monetary value of the brand name.
Intangible. The intangible value associated
with a product that can not be accounted for by price
or features. Nike has created many intangible benefits
for their athletic products by associating them with
star athletes. Children and adults want to wear Nike's
products to feel some association with these star athletes
(like Michael Jordan). It is not the physical features
that drive demand for their products, but the marketing
image that has been created. Buyers are willing to pay
extremely high price premiums over lesser known brands
which may offer the same, or better, product quality
and features.
Perceived Quality. The overall perceptions
of quality and image attributed to a product, independent
of its physical features. For example, Mercedes and
BMW are associated with high-quality, luxurious automobiles.
Years of image building, brand nurturing and quality
manufacturing has lead consumers to assume a high level
of quality in everything they produce relative to other
brand name automobiles, even when such a perception
is unwarranted.
The idea of Brand Equity incorporates the ability to
provide added value to your company's products and services,
which can be used to your company's advantage to charge
price premiums, lower marketing costs and offer greater
opportunities for customer purchase. A badly mismanaged
brand can actually have negative Brand Equity, meaning
that potential customers have such low perceptions of
the brand that they prescribe less value to the product
than they would if they objectively assessed all its
attributes/features.
One of the best examples of Brand Equity is in the
soft drink industry. Without a brand name and all of
the marketing dollars that have gone into, Coca-Cola
would be nothing more than flavored water. Due to the
company's long-term marketing efforts and protection,
enhancement and nurturing of their brand name, Coke
is one of the most recognizable brands in the world.
However, even this marketing giant has trouble capitalizing
on its own Brand Equity when handled improperly (e.g.
New Coke). If someone suddenly took their brand name
and Brand Equity away from them, Coke would lose hundreds
of millions , if not billions, of dollars. This includes
lost sales, lost marketing dollars and lost promotions,
additional marketing costs to promote a new brand, and
significantly lower awareness and trial rates for their
new brand.
The Benefits of Brand Equity
Brand Equity improvement increases business value
and provides many strategic advantages to your company:
Positive brand equity allows you to charge a price
premium relative to competitors with less brand equity.
Strong brand names simplify the decision process
for low-cost and non-essential products.
Brand names can give comfort to buyers unsure of
their decision by reducing their perceived risk.
Brand names are used to maintain higher awareness
of your products, and they provide for continuity
when company’s are acquired or reorganized.
Company’s use brand equity to gain leverage
when introducing new products.
The brand name is often interpreted as an indicator
of quality.
Strong brand equity insures that your products are
considered by most buyers..
Your brand can be linked to a quality image that
buyers want to be associated with.
Higher brand name equity leads to greater loyalty
from customers.
Strong brand equity is the best defense against new
products and new competitors.
Improvements in brand equity lead to higher rates
of product trial and repeat purchasing due to buyers'
awareness of your brand, approval of its image/reputation
and trust in its quality.
Brand names represent real assets that must be invested
in, protected and nurtured to maximize their long-term
value to your company. Brands have many of the same
implications as capital assets (like equipment and plant
purchases) on a company's bottom line. Brand names increase
business value, including the ability to be bought and
sold and the ability to provide strategic advantages.
How to Measure Brand Equity
Most evaluations of Brand Equity involve utility estimation.
In essence, the value (utility) of a brand name product's
features/benefits and price level versus unbranded measures.
The difference between total branded utility and total
unbranded utility of the product features/benefits is
the value of brand equity. Another approach is to measure
the price premium for the branded product over the unbranded
product. In other situations, the utility of the brand
is measured directly and added to the feature utilities
to produce an overall utility for the product.
Besides utilities, there are other important determinants
of brand equity. These contributing factors include:
awareness (aided, unaided), associations with various
attributes, as well as overall perceptions. Generally,
recognized brands should be measured. It is also useful
to obtain estimates of marketing, advertising and promotional
expenses for the major brands in the market. Armed with
utility estimates, key performance measures (awareness,
association scores, preference) and expenditure levels,
we can develop a complete picture of the relative value
of each brand. This information allows you to understand
the major forces driving brand equity and purchase decisions
that lead to superior brand equity strategies.
How to Estimate Utilities (Value)
We use trade off analysis (e.g., conjoint analysis,
discrete choice modeling) to estimate utilities. These
are very powerful and proven techniques for measuring
the value people place on product features, prices and
brand names. The most effective research designs for
measuring Brand Equity use a two-stage conjoint model:
First, we measure the utilities of all key
features of the product, including price and brand
name, and in total. Respondents are also asked how
they make tradeoffs, and what criteria drives their
decision making. From this data we are able to derive
utilities for each product feature (often combining
and re-defining terms to arrive at the real underlying
buying factors) and calculate an estimate of brand
equity. This demands careful analysis because experience
has shown that price utility is usually understated
when it is included with many other product features.
And without an accurate estimate of price utility,
we can not measure the true monetary value of Brand
Equity.
Second. Additionally information is collected
to correct the understated price utility. This step
uses choice-based conjoint task or discrete choice
modeling to evaluate just two attributes: price and
brand name. Several Brands are shown at different
price levels and respondents are asked to choose which
one they would purchase. By isolating price with Brand
name, we are able to accurately measure price utility.
Brand equity (stage 2) is linked back to the first
stage conjoint model. Together these approaches yield
brand equity, price sensitivity and feature utilities.
How to Use Brand Equity Information
Market simulations and scenarios can be performed.
Using estimated utilities, we can simulate market preferences
for our products and those of the competition. Various
scenarios can be created which involve the introduction
of new products or modifications to existing products
to determine the effects of these changes on preferences.
This information can be used to:
Evaluate product line extensions with and without
the use of an existing brand name.
Introduce new products with and without brand name
affiliation.
Estimate the premium your brand carries relative
to competition for the same features/benefits.
Determine the effects of improving Brand Equity or
reducing your investment in a high-equity Brand.
Estimate the impact of moving into new geographic
areas where your brand name is unknown or has negative
perceptions.
Understand the effects of co-branding with a company
who has more or less Brand Equity than does your brand.
Monitor Brand Equity over time for your company and
your competitors in order to make timely decisions
to counteract changes in competitors' Brand Equity.
Measure the effectiveness of your advertising and
marketing campaigns in building your brand image.
Clearly, brand equity varies across individuals, but
we can measure these differences and segment the market
into various groups based on perceived benefits. Using
the utility estimates from the conjoint models, we can
identify benefit segments in your market. These segments
can then be compared to each other to highlight differences
in Brand Equity between various types of product users,
different levels of price-sensitivity, different levels
of feature importance. Demographic and psychographic
profiles of these benefit segments can ultimately be
used to target groups with specific messages.
