1. Module III: Understanding Brand Metrics

2. Module III: Understanding Brand Metrics:
Understanding Brand Value Chain
Measuring Brand Financials
Brand Valuation Models

3. BRAND EQUITY 3

4. The Brand Value Chain
Considers the sources and outcome of the brand equity
Considers the ways that marketing activities contribute to enhance brand value

5. Marketing Program Investment Market place Conditions
The Brand Value Chain
Marketing Program Investment
Customer Mindset
Market Performance
Shareholder Value
Value
Stages
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Price premium
Price elasticity
Market share
Expansion success
Cost structure
Profitability
Product
Communication
Trade
Employee
Other
Awareness
Associations
Attitudes
Attachment
Activity
Stock prices
P/E ratio
Market capitalization
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Program Quality
Market place Conditions
Investor Sentiment
Multiplier
Clarity
Relevance
Distinctiveness
Consistency
Market dynamics
Growth potential
Risk Profile
Brand contribution
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Competitive reactions
Channel support
Customer size and profile

6. Brand Equity Management System
Brand Equity Charter: BRAND_VIDEO CLIPS\easyGroup_Brand_Manual.pdf ..\..\IBM_CLASS_2009\BRAND_VIDEO CLIPS\Hewlett Packard - Brand Standards And Tools.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

7. BUILDING CUSTOMER BASED BRAND EQUITY7

8. 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. 8

9. Sources of BE (Differential Effect)
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
Uniqueness
Favourability
Strength 9

10. Consumer Based Brand Equity Pyramid
4. Brand Relationships (WHAT About You AND ME?)
Consumer-
Brand
Resonance
Consumer
Judgments
Consumer
Feelings
3. Brand Response (WHAT About You?)
Brand
Performance
Brand
Imagery
2. Brand Meaning (WHAT Are You?)
Brand Salience
1. Brand Identity (WHO Are You?) 10

11. Brand Salience Relates to aspects of awareness of the brand.
How often and easily the brand is evoked under various situations and circumstances.
To what extent is the brand top-of-mind and easily recalled or recognized.
How pervasive is the brand awareness.
A highly salient brand is one that has both depth and breadth of
brand awareness such that customers make purchases as well
as think of the brand in a variety of settings. 11

12. Brand Performance
Refers to the intrinsic properties of the brand in terms of inherent product or service characteristics.
5 important attributes underline brand performance:
Primary ingredients and supplementary features
Product reliability, durability and serviceability
Service effectiveness, efficiency and empathy
Style and design
Price 12

13. Brand Imagery
Deals with the extrinsic properties and intangible aspects of the brand.
4 categories of associations can be linked to a brand:
User profiles: the type of person who uses the brand
Purchase and usage occasions: time, location, activity
Personality and values
History, heritage and experiences 13

14. Brand Judgments Customers’ personal opinions and evaluations
4 types of summary brand judgments:
Brand quality = attributes and benefits of the brand
Brand credibility = judgments w.r.t. the company
Expertise
Trustworthiness
Likeability
Brand consideration
Brand superiority = unique and better from other brands 14

15. Brand Feelings
Customers’ emotional responses and reactions with respect to the brand
6 important types:
Warmth
Fun
Excitement
Security
Social approval
Self-respect 15

16. Brand Resonance
Focuses on the ultimate relationship and level of identification that the customer has with a brand.
4 categories:
Behavioral loyalty: how often and how much do consumers purchase of a brand
Attitudinal attachment: “love” for a brand
Sense of community: kinship or affiliation with people associated with the brand
Active engagement: customers spend time, energy, money in the brand beyond purchase or consumption 16

17. Measuring Brand Equity:
Track consumer’s brand knowledge
Towards Favorable and unique brand association
To trace the ways in which Brand equity is created and its financial implications

18. BRAND VALUATION Tangible Benefits: Intangible Benefits
Merger & Acquisition
Disposal
Licensing
Fund Raising
Intangible Benefits
Enhances Confidence
Indicator of effective utilization
Credibility to the real worth
Strategy development

19. 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

20. 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

21. 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.

22. 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)
For Example:
Brand A had 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

23. Brand Valuation of A
2009
2010
2011
2012
2013
2014
Revenues
600
660
726
798.6
878.46
1.12
1.2544
1.4049
1.5735
1.7623
1.9738
Summation
= crores
= /0.12 = crores
Therefore, Brand Value of A= = crores

24. The Interbrand method for valuing brands:

25. Inter-brand Method
The Interbrand Co., UK developed a structured method for arriving at brand equity. This method aims at arriving at a value at which a brand can be sold by one company to another. The steps used in this method are described below:
The weighted average of the last three year’s profits of the brand is computed.
This figure when multiplied with a number gives the value of brand equity. The number is arrived at by multiplying the P/E of the company or industry in which the company operates and a factor called brand strength.
Brand strength is dependant on certain variables like leadership, stability, internationality, etc. of the brand.
Brand Equity= (weighted average of brand profits x P/E of the industry x Brand Strength)

26. Consider a Brand X whose profit is shown below:
Year
Profits ($ in million)
Weightage
Average Profit = (15 x 1) + (20 x 2) + (30 x 3)/ 1+2+3
= $ 24.2 million

27. Maximum Score Score for Brand X
Brand Strength depends upon the variables given below. The implication of the variables is also explained.
Maximum
Score
Score for
Brand X
Factors
Implications
Leadership
Is the brand a leader in market share, pricing
Is there brand loyalty? Does the brand have stable market share?
What is the brand’s acceptance level internationally?
Is the brand actively promoted and supported by the company?
Is it adequately protected by trademark?
Is the market in which the brand operates stable?
What is the future of the brand in the long term? 25 15 5 20 13 7 1 8 2 10
Stability
Internationality
Support
Protection
Market
Trend
Total
100 43

28. Brand Strength Score = 43/100 = .43
Suppose the P/E value of the industry is 15, then the multiple = brand strength score x P/E
= .43 x 15 = 6.45
Brand Equity = 6.45 x 24.2 = $ million

29. A Two Dimensional Framework for Diagnosing Brands: The Power Grid
BrandAsset® Valuator
Leading
Brand Strength
Differentiation
Relevance
Lagging
Brand Stature
Esteem
Knowledge
OK, so here’s the cheat sheet.
I’m Miss Lonelyhearts and I’m checking out what you’re telling me about the brands.
I want to know about Brand Strength and Brand Stature and what they tell me about pursuing the relationship further. 11

30. Brand Health Is Captured on the PowerGrid
Power Leaders
Niche/
Unrealized Potential
Declining
Leaders
(Differentiation & Relevance)
BRAND STRENGTH
Eroded
New
Unfocused
BRAND STATURE
(Esteem & Knowledge) 12