The Business Case for Brand

Relationships

3rd International Consumer Brand Relationship Conference

Ed Lebar

September 28, 2013

Rollins College

Winter Park, Fla.

Presentation Content

● Overview of the BlackBar Brand Relationships Model

● Demonstration of how and which brand relationships

influence consumer franchise power

● Contribution of Consumer Brand Relationships to brand

pricing power (perceptions of worth)

● Explanation of how branded business valuation multiples

are significantly impacted by Consumer Brand

Relationship Equity, customer franchise power and

operating profit

● Exploration of how consumer brand communication and

Consumer Brand Relationships work together to build

consumer franchise

Brand Perceptions

Brand Relationship is defined by the combination of a specific brand image with a specific attitude of the brand;

Brand Perceptions

Brand

Experiences

Based on Relational

Psychology. Brands are seen

as “Transitional Objects”

Brand Relationships are defined

by the combination of Brand

Perceptions /Attitudes and

Brand Experiences. Brand

Relationships are a two way street.

Our Perspective on Brand

Relationships

Five Universal Relationships

● Reinforcement

● Identification

● Role Model

● Self-Differentiation

● Playful

ReinforcementYour brand of choice

makes you

look and feel good

IdentificationLet the brand you love

tell the world who you

are

Role Model

Be empowered by

brands

that lead the way

Self-DifferentiationLet a brand with a

difference

make a difference to you

PlayfulFun brands that

are

just to enjoy

Brand Perceptions

Brand Perceptions

Brand

Experiences

CustomerCustomerAcquisitio

nGrowt

hMaintenanc

e

Retentio

n

Brand Relationships Influence

the Size and Composition

of a Brands’ Customer

Franchise

Acquisition of New Users is

Influenced by Brand

Relationships4 of the Universal Brand Relationships

contribute significantly to trial consideration

among non-users

Entertaining

/Playful

Identification

Reinforcement

Self-

Differentiating

0.54*

0.48*

0.38*

0.22*

Acquisitio

ns

Customer

Brand Relationships Build the

Customer Franchise

* Standardized regression

coefficients

Reinforcement

Role Model

0.24*

0.10*Maintenanc

e

IdentificationCustomer

0.16*

Brand Relationships Build the

Customer FranchiseInfluence of Brand Relationships

on Franchise Maintenance A different combination of relationships are significant

influencers of brand preference among users

* Standardized regression

coefficients

Brand Perceptions

Brand Perceptions

Brand

Experiences

$Pricing

Power

Brand Relationships Contribute to

Pricing Power

Brand Relationships Contribute to

Consumer Pricing Power ( perceptions of

Worth)● The Five Universal Brand Relationships account for

almost 25 % of consumer price evaluations ( willingness

to pay/perceptions of worth)

● Identification has the most influence on pricing power;

the implication is that brands that inspire a strong

emotional bond (“ I love the brand/it loves me”) and

facilitates self expression are worth paying more for

● Self Differentiating and Roll Model have significantly

less impact of pricing power. Brand Relationships built

around differentiation do little to assist a brand’s power

to price.

Relative contribution of Universal Brand

Relationships to Pricing Power

Brand Perceptions

Brand Perceptions

Brand

Experiences

Customer

$Financial &

Market

Returns

Brand Relationships influence

brands’ Market value directly,

and also indirectly via

their influence on

Customer

Franchise.

Relationship Equity and Stable

Franchise Size are both very

significant Influences on Sales to

Market Cap. multiple.

R2=.42

Market Cap.

/Sales

.48*

.43*

Stable Franchise is defined as the percentage of

customers

saying they use the brand regularly less the percentage

saying

they do so only if there is no alternative.

Brand Relationships Directly

Influence Branded Business

Valuation

Relationsh

ip

Equity

Stable

franchis

e

* Standardized regression

coefficients

Relationsh

ip

Equity

Operatin

g

Profit

Stable

franchis

e

R2=.86

Market

Cap.

.14*

.89*

.32*

-

.22

The negative correlation between Relationship Equity

and Operating Profit reflects the fact that there is a trade-

off

between investment in the brand and the quarterly or

yearly

earnings statement. Nothing comes without a cost.

Actual Market Cap. is a function of

Relationship Equity, Operating Profit

and Stable Franchise Size

Brand Relationships Directly

Influence Branded Business

Valuation

* Standardized regression

coefficients

Assessing Individual Company Brands:

Relative Contribution of Relationship Equity,

Operating Profit & Franchise to Market

CapitalizationWhen we apply this regression to 2012 financial data for the 30

‘mono” brands in our data, the relative contributions of each of

the three factors average out as follows:

● Relationship Equity 40%

● Operating Profit 47%

● Stable Franchise Size 13%

● However, as shown in the following examples the relative

contributions on the three factors to the individual brands’

market capitalization vary significantly from the above

averages

Brand Relationships Directly

Influence Branded Business

Valuation

Brand Relationships Directly

Influence Branded Business

Valuation

Brand Perceptions

Brand Perceptions

Brand

Experiences

Customer

$Financial &

Market

Returns

Marketing investment in Brand

Relationships shape their

strength and pattern.

Marketing

Investment

s

Non-purchase

Behaviors/

Word of

Mouth

Specific Brand Relationships Encourage personal and electronic word of mouth

CONSUMER COMMUNICATION

ABOUT BRANDS

What’s this got to do with the business case

?....

Work with the right relationships and empower

your marketing strategy

Summary ( non-users)● Identification prompts the most positive

communication about the brand – whether or

not people use it.

● People can use brand communication as a form of

self expression; that doesn’t mean they necessarily

love the brand – or love it enough to use it.

If Identification is the Relationship with the most power; It is likely to

prompt positive communication about the brand and discourage

negatives communication

Summary ( users)

● Reinforcement generates the most negative and

least positive comment about the brand● The brand’s satisfactory performance will not bond consumers

with the brand unless it also provides active support for self

esteem – they are independent.

Users’ generate more positive comments among all

relationships

But Users brand relationships discriminate little between

among

positives and also little among negatives type of

communication

Net Take Away

Consumer Brand Relationship

Positively Impact1. Acquisition

2. Retention

3 Pricing power/willingness to pay more

4. Valuation multiples

5.Consumer brand communication

Statistical Appendix

Top reinforcement brands are

Pantene,

L’Oreal, J&J, Amazon and Google.

While

both components of the relationship

are

important, hair care brands do it more

by enhancing self-esteem.

<< Reinforcement

>>

Brands most identified with are Amazon,

Google and WalMart. Apple and J&J

are well-loved brands, but are not

experienced as a means of self-

expression to the extent of the former.

Facebook is a means of self-expression

– but not as well loved.

.

<< Identification

>>

Many corporate brands – like GE, 3M,

Facebook and Amazon - are seen as

leaders and innovators, but only Apple and

Google manage to combine those

perceptions with that key personal

experience of feeling both challenged and

encouraged by the brand.

<< Role Model

>>

J&J and WalMart epitomize the customer

experience of feeling at the center of

attention, but their product offering is not

differentiated from competitors’. The

uniqueness of Amazon - and the way its

offering feels customized - makes the

customer feel different.

<< Self-

Differentiation>>

Brands from several very different

categories are seen as relaxed and stylish,

but the most successful casual dining

brands – together with YouTube and

Amazon – are the ones which just seem to

give pleasure, without requiring anything in

return.

<<

Playful>>

The Market Valuation Model: Produces an Excellent Fit

Predicting Market Capitalization Predicted vs. Actual market cap

Relative Contribution of Relationship Equity,

Operating Profit and Stable Franchise -

calculation of percentages for Individual Brands

In order to apply the regression equation to actual data – where operating profit is measured in $m’s ,

franchise in terms of % of consumers, and Relational Equity in terms of a constructed scale measure

– it is necessary to use non-standardized coefficients.

The three components of MarCap are:

MarCap= (c1 x RE) +(c2 x OP) + (c3 x StabFran)

1 2 3

The relevant percentages are calculated for each brand as::

1/MarCap,

2/Marcap

3/Marcap

Specific Brand Relationships and

Pricing Power

Consumer Brand Communication &

Relationship Equity

There is relatively little difference in Relationship Equity between those communicatingnegatively and those not communicating at all about the brand. For brands used, Relationship Equity is actually higher among the former - No news is not necessarily goodnews.

Constructing and Measuring

Brand Relationships

Our Definition of Brand Relationships● Based on the concepts of Relational Psychology, in

which relationships -- with other people and things --

form an integral part of the individual’s personality.

● Relational Psychology recognizes how inanimate

relationship partners -- so-called “Transitional

Objects” -- may be invested with the same type of

characteristics (personality, motivations, imagined

behaviours, etc.) as animate ones.

● The Brand is a “Transitional Object”, represented in

the individual’s psyche simultaneously as both the

object and source of emotions, feelings and

behaviors. The relationship with the brand reflects

both sides of these inner exchanges.

A Brand Relationship is defined by the conjunction of one

dimension of brand perception (image, personality, attributes…)

and a dimension of brand attitude or experienceBrand Attitudes/Experiences

Brand

Perceptions

Self-

Esteem

Self-

Expressio

n

Mentoring There For

Me

Pleasure

Performance/

Satisfaction

Emotional

Attachment

Charisma

Positive

Differentiatio

n

Relaxed &

Stylish

These 5 Universal Brand Relationships have been identified across

multiple brands and categories with emergent properties: the

combination of the two components has an effect greater than the sum

of their parts Brand Attitudes/Experiences

Brand

Perceptions

Self-

Esteem

Self-

Expressio

n

Mentorin

g

There For

Me

Pleasure

Performance/

Satisfaction

Emotional

Attachment

Charisma

Positive

Differentiatio

n

Relaxed &

Stylish

Reinforce

ment

Identificatio

n

Role

Model

Self-

Differentiatin

g

Brand Perception Factors

Relaxed and StylishFunCoolEasy FriendlyStylishDifferent

Positive DifferentiationDistinctiveUnique

CharismaDynamicExcitingly

InnovativeLeaderProgressive

FunctionalityPerforms wellGives Satisfaction

Emotional ValuesLove itFits my life

COPYRIGHT 2012 BRANDYIELD CONSULTING LLC

Brand Attitude/Experience Factors

● MentoringChallenges Me To Think

Differently

Teaches Me

Inspires Me

Shares My Values

● There For MeAppreciates My Business

Is Recommended By People I

Care About

Responds To My Needs

Has My Interests At Heart

● PleasureBrings Back Good Memories

Provides A Little Treat For Me

Excites Me

● Self-ExpressionSimplifies My Life

Helps Me To Express Myself

Frees Me To Be Myself

● Self-EsteemMakes Me Look Good To

Others

Makes Me Feel Good About

Myself

COPYRIGHT 2012 BRANDYIELD CONSULTING LLC

Consumer Brand Communication:● Little communication (bottom left)● Little communication – but what there is, positive (top left)● A lot of communication, generally positive (top right)