Module : Understanding Brand Metrics

Module IV: Understanding Brand Metrics:

• Customer Based Brand Equity Model (CBBE)

• Understanding Brand Value Chain

• Measuring Brand Financials

BRAND EQUITY

Brand Equity is a set of brand assets and liabilities linked to a brand., it’s name and symbol, that add to or subtract from the value provided by a product or services to a firm and/or to that firm’s customers.

(DAVID AAKER)

BUILDING CUSTOMER BASED BRAND EQUITY

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.

Brand KnowledgeCreates the differential effect that drives brand equity

Brand AwarenessConsumer’s ability to identify the brand under different conditions

Brand ImagePerceptions as reflected by

brand associations

Brand Recognition

Brand Recall

Sources of BE (Differential Effect)

Uniqueness Favourability Strength

Consumer Based Brand Equity Pyramid

The Brand Value Chain

• Considers the sources and outcome of the brand equity

• Considers the ways that marketing activities contribute to enhance brand value

The Brand Value ChainMarketing Program

Investment

Customer Mindset

Market Performance

Shareholder Value

Program Quality

Market place

Conditions

Investor Sentiment

Multiplier

Value

Stages

•Awareness•Associations•Attitudes•Attachment•Activity

•Product•Communication•Trade•Employee•Other

•Price premium •Price elasticity•Market share•Expansion success •Cost structure•Profitability

•Stock prices •P/E ratio •Market capitalization

•Market dynamics •Growth potential • Risk Profile•Brand contribution

•Competitive reactions•Channel support•Customer size and profile

•Clarity•Relevance•Distinctiveness •Consistency

..\BM_13-15\BRAND_VIDEO CLIPS\Lufthansa Brand Movie_vcd0.mpg

brand report card.pdf brand report card1.pdf

Brand Equity Management System

• Brand Equity Charter:..\BM_13-15\BRAND_VIDEO CLIPS\ADANI Brand_Guidelines_12M.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

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

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.

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)

rRBrRB nt

t /)1(/(

tRB

nRB

For Example:

•Brand A has anticipated 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

Brand Valuation of A2009 2010 2011 2012 2013 2014

Revenues 600 660 726 798.6 878.46 966.306

1.12 1.2544 1.4049 1.5735 1.7623 1.9738

535.7143 526.148 516.7525 507.5247 498.4618 489.5607

tr)1(

tt rRB )1/(

tt rRB )1/( Summation = 3074.162 crores

nRB =966.306/0.12 = 8052.55 crores

Therefore, Brand Value of A= 3074.162+8052.55 = 11126.71 crores

Key Metrics: Market Potential

• CDI: Category Development Index: a market’s category sales percentage is divided by the total population percentage of that market and multiplied by 100 : A% / X% * 100; A: Product "A"'s total sales in the specific market, X: population in that specific market.

• BDI: Brand Development Index: a market’s brand sales percentage is divided by the total population percentage of that market multiplied by 100. A% / X% * 100; A: Brand "A"'s total sales in the specific market, X: population in that specific market.

CDI BDI REMARK

HIGH HIGH Good sales potential for brand and category, good for advertising.

HIGH LOW Category is doing better than brand. There is potential for growth/Brand Building.

LOW HIGH Brand is doing better than category, good foradvertising.

LOW LOW Brand and category are low so advertising presents a risk.

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