That is not to say that many research firms have been making money on measuring Brand Equity for decades. However, as a brand-business driving goal, Brand Equity has been supplanted by the goals of financial engineers and private equity firms. With the quick profits from financial engineering, Wall Street has not been focused on Brand Equity since 1988 when a flurry of brand-business mega-deals were all the rage. Kohlberg Kravis Roberts paid $25 billion for RJR Nabisco (more than double its book value); Philip Morris bought Kraft for $12.9 billion (four times book value) and Nestlé spent $4.5 billion for Rowntree (five times book value), according to The Economist.

In 1988, Brand Equity was the driver for these acquisitions. Brand Equity is simply the customer’s perception of the financial worth of the brand identity. Brand Equity is the difference in the financial value of a branded good or service compared to an equivalent good or service without the brand identity.

A brand’s Brand Equity could be segued to a corporate balance sheet as Goodwill. In accounting, Goodwill is an asset defined as the excess of the price paid for a brand over its fair market value. A strong brand has increased Goodwill. And, that is what occurred.

And so, the brand-business world was all good. All good, until 1993. 1993 was the year that brand-business owners began to fear for their brand-businesses and their Brand Equity.

1993 was the year of Marlboro Friday. Marlboro Friday, April 2, 1993, was the day that Phillip Morris, the tobacco company, announced a drastic cut in the price of Marlboro cigarettes to fight off the generic brands that were eating into its market share. As a result, the company’s stock tanked, wiping out $13.4 billion off Philip Morris’s stock market value in a single day.  Investors also dumped shares in other consumer-goods firms. RJR, P&G, Coca-Cola, PepsiCo, Quaker Oats and Gillette were all affected as Wall Street became convinced that the extraordinary profit growth once delivered by brand-businesses was a thing of the past. All that Goodwill was wiped away from those balance sheets.

Marlboro, a cigarette brand reflecting American West individualism, freedom and pride, supported by advertising featuring the Marlboro cowboy, took such a financial hit that Wall Street said “… the Marlboro man fell off his horse.” It may be difficult to believe now, putting the negative health effects of smoking aside, but Marlboro was not only a great brand-business, its image with its associated values was extremely appealing.

At the time, Marlboro epitomized the crisis brand-businesses were undergoing due to high prices, an economic downturn and retail own-brands. Shoppers became more skeptical. And, increasingly, shoppers saw little differentiation between name brands and retail generics.

Brand-businesses did bounce back. It took only two years for Marlboro to completely recoup its Marlboro Friday losses. Observers indicated this recovery was to the strength of Philip Morris’ brands and its customers’ brand loyalty. Additionally, the cost of manufacturing a cigarette is miniscule relative to the cost of the purchase. Philip Morris was able to survive. Packaged goods brand-businesses started to focus on building the brand rather than deals.

Prior to the COVID-19 crisis, brand-businesses were battered by financial engineers who favored short-term profits to satisfy investors and Wall Street. Financial engineering, the catchall phrase for extreme cost cutting including job losses, debt accumulation, share buy-backs, increased dividends, forced spinoffs, and money siphoned into the pockets of investors rather than invested into businesses, can damage brands. Kraft Heinz with its stable of cherished icons (Heinz ketchup, Kraft macaroni and cheese, Oscar Meyer hot dogs); British Airways; Toys R’ Us, Sears and others have focused on one priority: build shareholder value at the expense of customer value.

Financial engineers see strong Brand Equity as an opportunity to extract value rather than extend brand strength. This is a form of brand extortion. Proponents of financial engineering take brand loyalty for granted. Investments in continuous improvement and innovation are decreased as dividends and share buybacks are increased. Monies are siphoned from R&D, customer insight research, service and increased. Monies are siphoned from R&D, customer insight research, service and support and marketing resources.

Remarkably, there is a noticeable positive trend underway. The trend is brand-business owners realizing the financial benefits of building Brand Equity rather than focusing on short-term detrimental actions of financial engineers, A recent search on Nexis for just one week of reporting turned up 645 mentions of Brand Equity.

One example is Olive Garden. A recent review of Olive Garden’s success mentions the brand-business’ focus on reducing price promotions while investing in brand equity. Olive Garden owner, Darden Restaurants’ CEO and president said, “Whatever we do is going to elevate brand equity. We’re not going to do things that are going to impact us in the long-term just for the short-term. We are focused on providing great value to our guests, but doing so in a way that drives profitable sales growth.”

Another example is Constellation Brands’ Modelo beer. Observers recognize that Modelo has been extremely “patient” with brand building efforts over many years giving Modelo a differentiated brand equity.

In Wayfair’s recent earnings call, its CEO made it clear that Wayfair’s long-term focus on building brand loyalty has been paying off. Brand loyal customers are extremely valuable.

Smucker just bought Hostess for billions of dollars after its private equity owners spent years reviving the Hostess Brand Equity.

Wall Street seems to want streaming services to focus on customer loyalty rather than behaving like scavengers for new customers. Constantly chasing new customers at the expense of current customers has not been profitable.

On the other hand, brand-business H&M, the fast-fashion retailer currently pursues a strategy of cost-cutting and buybacks.

Brand-businesses have cycled through some bad times. Financial engineering destroyed some of our most iconic brands. COVID-19 took out a few more, like Bed, Bath & Beyond. Generating high quality revenue growth leading to enduring profitable growth must always be the goal. A renewed focus on building Brand Equity is welcome. Let’s hope that brand leadership continues the trend and that Wall Street rewards those brand-businesses that choose Brand Equity building.

Contributed to Branding Strategy Insider by: Larry Light, Author of The Paradox Planet: Creating Brand Experiences For The Age Of I

The Blake Project Can Help: Discover Your Competitive Advantage With Brand Equity Measurement

Join 20,000 Marketers Who Have Taken A Transformative Journey To A Bigger Future In Mark Ritson’s Mini MBAs In Marketing And Brand Management Courses.

Branding Strategy Insider is a service of The Blake Project: A strategic brand consultancy specializing in Brand Research, Brand Strategy, Brand Growth and Brand Education

FREE Publications And Resources For Marketers

While on one hand I agree with the notion any investment in a communication campaign should deliver incremental results (at least to a degree to offset the investment), I don’t subscribe to measuring success that way.

Final results are considered an “end-process” measure. They let you know how well you ran the race and what place you finished in. But, that information doesn’t allow you to make any mid-course corrections to either get on track or to positively enhance the results for a maximum return on investment.

Consequently, I advocate “in-process” measures. These are signs of whether you are on track or not. Continuing with the race analogy, “in-process” measures are the equivalent of split times that inform you whether you are ahead or behind your target pace.

The best “in-process” measure in my mind, is a brand equity monitor.

A brand equity monitor provides a quantitative market research methodology to determine changes in target customer perceptions regarding the key “equities or attributes” that drive preference.

Consequently, the first step in creating a brand equity monitor is to gain insights into what those equities are for the category in which your brand competes. An actionable brand equity monitor will capture perceptual data for both your brand and a pre-defined set of competitive brands.

For each equity you have respondents tell you on a scale, typically from 1 to 10, how closely it is associated with your brand in their mind. You need to make sure the sample size is statistically projectable, and you will want to field the brand equity study on a regular frequency (typically annually).

When you have the quantitative results in hand, you can begin to analyze the relative position of your brand vs. competitive brands in the mind of your target customer.

The rule I used is – A statistically significant difference in score at the 80% confidence level was worth a deeper analysis. Note, I used an 80% confidence level rather than the more stringent 95% you often see in publications. For perspective, an 80% confidence level implies there is a 20% chance your conclusion is wrong. In business, many times you make decisions on the proverbial flip of a coin, so I always felt an 80% confidence level was more than adequate.

When you have run the study at least twice, you can then begin looking at how the scores change over time. The key thing you are trying to evaluate is did the brand communication effort over the last year 1) make an overall difference 2) lengthen the gap on equities that are competitive advantages and 3) close the gap on equities that are competitive disadvantages.

If nothing changes in a year, you need to understand why your effort made no difference.

It takes time to get the first brand equity monitor pulled together. And, it is time well spent because you do not want to change the questionnaire going forward. You want as much of an apples-to apples comparison as possible when looking at the data year over year. The sustainability of the questionnaire is directly driven by how well you understand the choice drivers in your competitive category.

You can use a brand equity monitor to also get data on brand awareness, brand recall, and brand loyalty. Gathering these data is a function of the questions you ask in the study.

You could design and deploy a brand equity model yourself, but because of the mission-critical importance of getting the right measures and the reluctance you should have in changing questions over time, I would recommend partnering with a quality research firm.

The agency will not only help you design the study so it has statistical validity, but will also give you an important objective third party review to minimize question bias.

Remember, the value of the data is in aiding decision making. You want it to be as reliable as possible. It is wise to remember the old adage of garbage in, garbage out. The investment in a research firm to help design your equity study is worth it.

Of course, having the brand equity data to look at is fascinating. But if you don’t use it to make decisions moving forward these data are no better than an end process measure. The power in using an in-process measure is the flexibility to make changes aimed at maximizing the performance of your brand.

Professor David Aacker has written a number of papers about brand equity that are worth reading. He defines brand equity as brand loyalty, brand awareness, perceived quality, brand association and other proprietary assets (e.g. logo). His simplest characterization of brand equity is “the value of a brand”.

Professor Kevin Keller has also played in this space and created his own “Customer-Based Brand Equity Model”. Definitely read the work of these two academics so you can be grounded in the subject.

Always remember, data is an aid to not a substitute for judgement.

Contributed to Branding Strategy Insider by: Ed Burghard and excerpted from his book Building Brands: What Really Matters

The Blake Project’s brand equity measurement system is comprehensive, measuring each of the five drivers of customer brand insistence – awareness, relevant differentiation, value, accessibility and emotional connection – along with other factors such as brand vitality, brand loyalty, brand personality and brand associations. Contact us for more on brand equity measurement

Branding Strategy Insider is a service of The Blake Project: A strategic brand consultancy specializing in Brand Research, Brand Strategy, Brand Growth and Brand Education

FREE Publications And Resources For Marketers

Brand equity measurement (like brand valuation, has a definition and methodology for every consultant) is generally understood to be the perception that a company, brand or mark has with the market which can, with proper management, command a premium price and drive stakeholder value.

Valued and valuable brands like Amazon, Starbucks and Disney didn’t get there by just building a better offering and experience. Their brand-building efforts of course benefit from analyzing and acting on reams of data from VOC research, customer satisfaction surveys, social media analytics and CRM and sales reports. But they also invest in obtaining data and insight not found in these sources. These top performing brands conduct regular brand equity studies that provide them with a comprehensive and actionable view of market needs and brand performance.

6 Ways We Act On Brand Equity Studies

At The Blake Project, we are pragmatic and opportunistic in applying our clients’ brand equity research in myriad ways. Ultimately the study manifests as a decision document for helping the company to achieve brand and business goals.

Here are six ways we use brand equity research with our clients:

1. Measure Brand Progress Toward Vision

The brand equity study becomes a scorecard for management to regularly measure where the company is on the trajectory to reach its vision. Attribute related questions are especially helpful for this purpose. We help clients integrate other key metrics (HR, marketing) into a comprehensive brand performance dashboard.

2. Align Employees

There are two ways equity studies are used to align employees. The first involves management’s sharing of customer equity study findings with employees as part of a collaborative dialogue in moving the organization and brand toward the vision. The second way to engage employees is by surveying them directly, in parallel with customer studies and comparing alignment on metrics such as attribute association and loyalty. This process also should be managed as a two-way conversation.

3. Build Leadership Buy-In

It is not only helpful to get cross-functional, senior management’s input on the actual brand equity study questionnaire; investing them in the research process will only make brand-led (and related) programs to follow more credible, successful and less likely to be derailed.

4. Reveal Product, Experience Or Operational Needs

The brand equity survey instrument needs to be concise yet thoughtfully well-rounded; the resultant data becomes a beacon of truth for the client, informing areas outside of brand and marcom, for example HR, sales, customer experience, and offering development. Questions relating to the brand’s performance on certain attributes reveals key areas for improvement.

5. Provide A Big, Longer-Term Picture Of Brand Performance

When diagnosing brand performance, it’s easy for leaders to get caught up in the moment (quarterly numbers), or with specific customers (VOC, CRM) or touchpoints (social media, customer satisfaction feedback); but understanding how ALL customers regard the brand OVERALL, over the LONG-TERM—a view the brand equity study delivers–is critical for effective brand management and stewardship.

6. Establish A Fact-Based, Strategic Foundation To Guide Business And Brand Decisions

Most of our brand equity research projects follow up with a series of client leadership workshops and development of the brand strategy. The data captured from the brand equity research is rich and robust and is critical in guiding, informing and inspiring the workshop and strategy deliverables.

All of the data we collect—each question we ask in the brand equity study—is actionable. Some examples:

>Path-to-purchase questions  (awareness-to-advocacy) – Applied to various communications to optimize touchpoint ‘stickiness’

>Attribute importance questions – Applied to product/service development and messaging

>Attribute association questions – Applied to measuring brand movement toward vision

>Brand performance questions — Applied to diagnosing and improving the customer experience

>Employee vs. customer brand association questions — Applied to analyzing and closing gaps between internal and market perceptions

>Persona questions – Applied to audience targeting and messaging

>Media use questions – Applied to media planning

Knowledge is power today just as it was several thousand years ago; brand equity research is one of the best investments your brand can make to be in the position to make better decisions.

The Blake Project’s brand equity measurement system is comprehensive, measuring each of the five drivers of customer brand insistence – awareness, relevant differentiation, value, accessibility and emotional connection – along with other factors such as brand vitality, brand loyalty, brand personality and brand associations. Contact us for more on brand equity measurement

Branding Strategy Insider is a service of The Blake Project: A strategic brand consultancy specializing in Brand Research, Brand Strategy, Brand Growth and Brand Education

FREE Publications And Resources For Marketers

“Can price reductions impact brand equity?”

Thanks for your question Laura. The answer is not nearly as simple as the question implies. “It depends” is the most accurate two-word answer. It depends on the following:

• Is the brand a premium segment brand, a mid-segment brand or a value brand?
• What price premium does the brand currently command over competitive alternatives?
• Was the brand perceived to deliver a poor, adequate, average, good or excellent value prior to the price reduction?
• Is the price reduction a one-time event, a periodic event or a permanent reduction?
• What is the pre-reduction price of the brand?
• What is the proposed price reduction amount and percentage of the overall price?
• Is the brand in trouble or is it hugely popular?
• Is it a new brand that is attempting to penetrate an established market? Is it one of many brands in a highly fragmented market? Is it a legacy brand that has long since lost its cache?
• What is the brand’s mind share and its market share?
• In what channels is the brand distributed? Are they mostly discount channels, premium outlets, luxury boutiques, department stores, grocery stores, mass channels, convenience stores or some other type of channel?
• Has the brand recently crossed any price thresholds that have significantly increased its price sensitivity?
• What are the patterns of price increases and reductions in the product category in question?
• Is the brand trying to manage demand through its pricing?
• Is the price reduction a strategic long-term adjustment or a tactical short-term action to lift sales over a limited period of time?
• Is the price reduction offered to all customers or just some customers?
• Is the price reduction part of a price segmentation strategy?

As you might surmise from these questions, a price reduction can have any of the following impacts on brand equity:

• It can INCREASE perceived brand value and brand equity (some brands)
• It can INCREASE perceived brand value but DECREASE brand equity (some premium brands)
• It can DECREASE perceived brand value and brand equity (many brands including many premium brands)
• It can DECREASE perceived brand value but INCREASE brand equity (some super premium brands)
• It can have NO IMPACT on perceived brand value and brand equity (some brands – if the reduction is small or imperceptible or no price threshold is being crossed or the price is already extremely low compared to competitive alternatives)

As you can see, pricing is quite tricky and there is no simple rule of thumb to link all price increases or reductions to definitive changes in brand equity. Having said that, our BrandInsistence brand equity measurement system recognizes “brand value” as one of the five drivers of customer brand insistence. For most brands, increased value leads to increased brand equity. But remember that “value” is a holistic perception that is based on the often subconscious ratio of costs to benefits. The costs can be in terms of time, money or some other scarce resource. The benefits can be functional, emotional, experiential or self-expressive. And perceived values can also be influenced by reference prices, which is yet another separate pricing topic.

If a customer is largely convenience-driven, price reductions might have no impact on that person. Alternatively, if the customer is largely price-driven, a price reduction could have a significant impact on that person’s purchase behavior. Low prices could drive some category enthusiasts to try a new product or brand, while price reductions may have little to no impact on brand-loyal customers. Again, the relationships between price, perceived value, brand equity and sales are not always linear and cannot be solved by just one simple equation.

I hope this has helped you to think more deeply about the relationships between pricing, perceived value and brand equity.

We hope this help you build your brand Laura.

Do you have a question related to branding? Just Ask The Blake Project

The Blake Project Can Help: Discover Your Competitive Advantage With Brand Equity Measurement

Branding Strategy Insider is a service of The Blake Project: A strategic brand consultancy specializing in Brand Research, Brand Strategy, Brand Growth and Brand Education

FREE Publications And Resources For Marketers

If one defines brand equity as the value that a brand adds to the branded product, service or organization itself, then we have a broad understanding of brand equity. Common brand equity measures include brand awareness and a brand’s perceived relevant differentiation. Most models include these two metrics. Other common metrics include a brand’s market share, the price premium that the brand can command over unbranded products in the same category and customer loyalty to the brand.

Models can be super-simplistic, such as the popular Net Promoter Score, which only measures one thing – attitudinal loyalty to the brand – with one question, the likelihood of recommending the brand to a friend or colleague. Or they can be comprehensive, such as our BrandInsistence brand equity measurement system, which measures over 90 brand equity components (including two different attitudinal brand loyalty questions). Most brand equity measurement systems are somewhere in between these two extremes.

Creating Brand Insistence

The Blake Project’s BrandInsistence system has as its underpinning the five drivers of customer brand insistence – awareness, relevant differentiation, value, accessibility and emotional connection. But it also measures the importance of and brand delivery against up to 24 brand or category benefits or shared values. The benefits can be functional, experiential, emotional or self-expressive. It also measures top-of-mind brand associations (the brand is owned in the mind of the customer) and top-of-mind brand differentiators. And brand loyalty and brand vitality and up to 30 different brand personality attributes. We have four standard emotional connection measures, which move from mild emotional connection to deep emotional connection. But we can go much deeper with an ancillary product that can map your brand against hundreds of personality attributes and emotions.

Brand equity systems should be used to achieve the following on behalf of your brand:

• Create a baseline brand equity measurement for your brand so that you can measure the impact of your brand management activities on the brand over time
• Identify the brand’s strengths, weaknesses, vulnerabilities and threats, including brand positioning vulnerabilities and threats
• Identify competitive brands’ strengths, weaknesses, opportunities and threats
• Identify advantageous brand (re)positioning opportunities (for your brand and competitive brands)
• Measure the impact of specific brand enhancing programs or campaigns
• Measure progress made by the brand over time
• Validate the value of your brand to the leadership team of your organization

Here are some examples of how our clients from Global, National and emerging brands have used our BrandInsistence brand equity measurement system to strengthen their brands:

• One client discovered that they had a value and price perception problem. They took corrective action and then remeasured the brand equity, which increased substantially after the corrective action.
• Another client discovered that they were doing everything very well and that the people familiar with their brand loved the brand and were very loyal but that their major problem was extremely low brand awareness based on very low market penetration. After taking corrective action, sales of their brand skyrocketed.
• Another brand discovered that a recent extension of their brand into a new market to increase sales turned their traditional customers off and that their loyalty was decreasing substantially. Based on this, we recommended a new business model to the client.
• Another client whose brand was in rapid decline discovered new product and service areas through which their brand could become relevant and compelling to its target audience again. When it implemented these changes, it saved the brand and its organization. Based on this project’s outcome, key members of the organization’s leadership team were promoted.
• Another brand discovered that its brand perceptions were incongruent with the perceptions of its primary distribution channels. By changing distribution channels, its sales began to soar.
• Another brand discovered that the consumer was completely confused about the brand and the benefits that it delivers because of some very confusing brand cues from product packaging. Based on this insight, it is revising its brand’s promise, redesigning the brand’s product packaging and identifying the customer segments that are most likely to highly value this repositioned brand.
• One client discovered a competitor’s brand positioning vulnerability and was able to successfully reposition the competitor in a negative light, creating a share shift to their brand.

If you are considering different brand equity measurement systems, consider how sophisticated each one is and to what degree and in what ways it can help you increase brand loyalty, decrease brand price sensitivity and increase brand sales, market share and profitability. I hope this provides you with a better understanding of what brand equity measurement is and how it can be used to strengthen your brand.

The Blake Project Can Help: Discover Your Competitive Advantage With Brand Equity Measurement

Branding Strategy Insider is a service of The Blake Project: A strategic brand consultancy specializing in Brand Research, Brand Strategy, Brand Growth and Brand Education

FREE Publications And Resources For Marketers