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Measuring Brand Equity

Measuring Brand Equity

Brand equity is strategically important but also difficult to measure (or “quantify”). As a result, many experts have developed tools or metrics to analyze brand equity, although there is no universally accepted way to measure it. For example, while it can be measured quantitatively using numerical values such as profit margins and market share, this approach fails to capture qualitative elements such as prestige and mental and emotional associations.

What to Measure

According to David Aaker, a marketing professor and brand consultant, the following are ten attributes of a brand that can be used to assess its strength, or equity:[1]

  1. Price premium: the amount a customer is willing to pay for one brand in comparison to other comparable brands
  2. Customer satisfaction/loyalty: whether a customer would buy the brand at the next opportunity, or remain loyal to that brand
  3. Perceived quality: perceptions about whether a brand is of high, average, or inferior quality
  4. Leadership/popularity: being in market leadership position as a leading brand, a leader in innovation, and/or growing in popularity
  5. Value: perceptions of whether a brand has good value for the money and whether there are reasons to choose it over competitors
  6. Brand personality: distinctive, interesting, emotional, and self-expressive benefits associated with a brand
  7. Organizational associations: the people, values, and programs associated with the brand
  8. Brand awareness: the degree to which customers are familiar with and have knowledge about a brand
  9. Market share: share of sales among the competitive set
  10. Market price and distribution coverage: measures of average selling price relative to competitors and how many people have access to the brand

Marketers can use various research methods to measure each of these attributes. Some organizations invest in complex marketing research projects to measure and track brand equity over time using one or more of these metrics.

Brand Asset Valuator

Young & Rubicam (Y&R), a marketing communications agency, has developed the “brand asset valuator,” a tool used to diagnose the power and value of a brand. The agency uses this tool to survey and measure consumers’ perspectives along the following four dimensions:[2]

  1. Differentiation: the defining characteristics of the brand and its distinctiveness relative to competitors
  2. Relevance: the appropriateness and connection of the brand to a given consumer
  3. Esteem: consumers’ respect for and attraction to the brand
  4. Knowledge: consumers’ awareness of the brand and understanding of what it represents

This approach is useful for gaining a detailed understanding of how target audiences perceive a brand, how well they understand it, and how relevant it is in their lives. Y&R uses this methodology to help organizations diagnose whether their brands are rising or fading relative to competitors and help them develop strategies and tactics to strengthen existing brands or freshen up/rebuild those that are waning. Figure 1, The Power Grid, below, shows how Y&R visually maps this “rising” and “fading.”

Chart measuring brand strength (Differentiation and Relevance) and Brand Stature (Esteem and Knowledge). Unused potential/niche has high differentiation, medium relevance, slightly less esteem, and slightly less knowledge. It is in the aspiring brand category. Leadership has high differentiation, high relevance, high esteem, and high knowledge. Decline has low differentiation and high relevance, high esteem, and high knowledge. Leadership and Decline are both in the power brands category. Erosion has low differentiation, slightly higher relevance, slightly higher esteem, and medium knowledge. Erosion is in the eroding brands category. Unfocused has low-medium differentiation, low relevance, low esteem, and high-medium knowledge. Neu has medium differentiation, less relevance, less esteem, and low knowledge. Unfocused and neu are new/fading brands. Arrows show that new/fading brands and aspiring brands become power brands, which in turn become eroding brands, which in turn become new/fading brands.

Figure 1. Power Grid. With help of the power grid, a brand’s strengths and weaknesses–as well as its growth prospects–can be mapped out. Based on these findings, it can be predicted whether a brand is able to establish itself as a strong power brand, or whether erosion is causing it to lose ground. Source: http://young-rubicam.de/tools-wissen/tools/brandasset-valuator/?lang=en

Other Methods for Measuring Brand Equity

Brand equity can also be measured using other methods, such as the following:

  • As a financial asset: Brand equity can be studied as a financial asset by making a calculation of a brand’s worth as an intangible asset. For example, a company can estimate brand value on the basis of projected profits discounted to a present value. In turn, the present value can be used to calculate the risk profile, market leadership, stability, and global reach. Forbes, Interbrand and other organizations conduct this type of valuation and publish annual lists of the most valuable global brands.
  • As a price differential: The price of an equivalent well-known brand can be compared to that of competing, no-name, or private-label products. The value of this price differential can be calculated to estimate the brand’s price premium in terms of past, present, or future revenue.
  • As consumer favorability and preference: Several brand-equity methodologies try to map the mind of the consumer to uncover associations with a given brand. For example, projective techniques can be used to identify tangible and intangible attributes, attitudes, and various perceptions about the brand. Under this approach, the brands with the highest levels of awareness and most favorable and unique associations are considered high-equity brands.
  • As consumer perceptions: Another brand-equity measurement technique assesses which attributes are most important in influencing customer buying choices, and then measures how well various competitors perform against the most important attributes. This approach helps marketers better understand the customer decision-making process, how brands influence it, and which competitors “own” key attributes that drive customer decisions.
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