Measuring outcomes of Brand equity

Question 1

distinction between brand value (valuation) and brand equity

Answer 1

Brand equity: more consumer-based perspective.
Brand value: more of a company-based perspective.

–> Brand equity is therefore a concept a lot broader than brand value

Question 2

what are some questions to ask when evaluating brands?

Answer 2

1. What is being valued, the trademarks, the brand or the branded business?
2. What is the purpose for such valuation?

Question 3

what are the three kinds of comparative methods for brand valuation

Answer 3

• Brand-Based Comparative Approaches
• Marketing-Based Comparative Approaches
• Conjoint Analysis

Question 4

brand-based comparative methods: description

Answer 4

• Competitive brands used as benchmarks by consumers
  – Exemplar: Category leader or some other brand that consumers feel is representative of the category, like their most preferred brand

Question 5

brand-based comparative methods: applications

Answer 5

– Classic example is blind testing research
* Consumers examine or use a product with or without brand identification
* Differences typically emerge

Question 6

brand-based comparative methods: critique

Answer 6

Learning is limited by the number of different applications examined

Question 7

marketing-based comparative methods: description

Answer 7

Hold the brand fixed
– Examine consumer response based on changes in the marketing program

Question 8

Marketing-Based Comparative methods: applications

Answer 8

– Long academic and industry tradition of exploring price premiums using marketing-based comparative approaches
* Variations to derive similar types of demand curves
– Many firms now try to assess price sensitivity and willingness-to- pay thresholds for different brands

Question 9

Marketing-Based Comparative methods: critique

Answer 9

May be difficult to discern whether consumer responses to changes in the marketing stimuli are being caused by brand knowledge or by more generic product knowledge

Question 10

conjoint analysis: description

Answer 10

Survey-based multivariate technique that enables marketers to profile the consumer decision process with respect to products and brands
– Part worth: The value consumers attach to each attribute level, as statistically derived by the conjoint formula

Question 11

conjoint analysis: applications

Answer 11

– Allows study of different brands and different aspects of the product or marketing program simultaneously
* Product composition, price, distribution outlets, etc.

Question 12

conjoint analysis: critique

Answer 12

Marketing profiles may violate consumers’ expectations based on what they already know about brands
–> this might increase consumer expectations (have them wondering why not both things?)

Question 13

what are some holistic methods of brand evaluation

Answer 13

• Residual Approach
• Valuation Approach

Question 14

residual approach

Answer 14

– Examines the value of the brand by subtracting consumers’ preferences for the brand from their overall brand preferences
* Based on physical product attributes alone

Question 15

valuation approach

Answer 15

– Places a financial value on brand equity
* Accounting purposes, mergers and acquisitions, or other such reasons

Question 16

what are some residual approaches

Answer 16

• Scanner Panel
• Choice Experiments
• Multi-Attribute Attitude Models

Question 17

what are some valuation approaches

Answer 17

• Accounting Background
• Historical Perspectives
• General Approaches

Question 18

describe academic approaches for brand valuation

Answer 18

Seminal academic research study proposed estimating a firm’s brand equity derived from financial market estimates of brand- related profits

Question 19

what are three other well-establish brand valuation approaches

Answer 19

– Interbrand
– Brand Z
– Brand finance

Question 20

Interbrand

Answer 20

• Leading brand valuation firm
• How a brand benefits an organization
  – Internally and externally

Question 21

three key components of Interbrand

Answer 21

1. Financial forecast
2. Role of brand
   a. In some businesses, e.g. fragrances or packaged goods, the Role of Branding is very high - as the brand is the predominant driver of the customer purchase decision.
   b. In b2b, the brand is only one purchase driver among many and the Role of Branding is therefore lower.
3. Strength analysis
   a. $100 from the RBC brand in 5 years commands a lower discount rate than $100 from the National Bank of Canada brand in 5 years, as the RBC brand is stronger and therefore more likely to deliver the expected earnings.

Question 22

concerns with interbrand system

Answer 22

• Interbrand system does not consider the potential of the brand to support extensions into other product classes.
• Brand support may be ineffective; spending money on advertising does not necessarily indicate effective brand building.
• Trademark protection, although necessary, does not of itself create brand value.

Question 23

BrandZ

Answer 23

• Based on the Meaningfully Different Framework
  – Suggests brands create value if they offer three key benefits (power, premium, potential):
• They are meaningful
• They are different
• They are salient

Question 24

Key steps in the BrandZ valuation

Answer 24

– Calculating financial value
– Calculating brand contribution
– Calculating brand value

Question 25

Brand Finance

Answer 25

• Based on the “relief from royalty” approach
  – Brand’s value is based on the royalties that a company would have paid for licensing that brand from a third party
• Assuming it was not the brand owner

Question 26

4 Things to think about when comparing the major brand valuation approaches

Answer 26

1. All three approaches are based on some variation of the income-based approach to brand valuation
   – All are based on projections of income
2. All three methods compute the present value of projected future earnings
   – Based on an estimate of brand strength, and
   –An application of a discount rate
3. All three approaches use available financial and market data
   – And compute the economic value added
4. Types of data used to measure brand perceptions vary across the three approaches