Tracking brand equity

What is a brand? A name that influences buyers. What is the source of its influence?A set of mental associations and relationships built up over time among customers or distributors. Brand tracking should aim at measuring these sources of brand power. The role of managers is to build the brand and business. This is true of brand managers, but also of local or regional managers who are in charge of developing this competitive asset in addition to developing the business more generally.

This is why advanced companies now link the level of variable salary not only to increments in sales and profits but also to brand equity. However, such a system presupposes that there is a tracking system for brand equity, so that year after year its progress can be assessed. This system must be valid,reliable, and not too complicated or too costly. What should one measure as aminimum to evaluate brand equity?

An interesting survey carried out by the agency DDB asked marketing directors what they considered to be the characteristics of astrong brand, a significant company asset.

The following were the answers in order of importance:

  • brand awareness (65 per cent);
  • the strength of brand positioning, concept,personality, a precise and distinct image (39per cent);
  • the strength of signs of recognition by the consumer (logo, codes, packaging) (36 percent);
  • brand authority with consumers, brand esteem, perceived status of the brand and consumer loyalty (24 per cent).

Numerous types of survey exist on the measurement of brand value (brand equity). They usually provide a national or international hit parade based just on one component of brand equity: brand awareness (the method may bethel first brand brought to mind, aided or unaided depending on the research institute),brand preference, quality image, prestige, first and second buying preferences when thefavoured brand is not available, or liking.

Certain institutions may combine two of the components: for example, Land or published an indicator of the ‘power of the brand’ which was determined by combining brand-aided awareness and esteem, which is the emotional component of the brand–consumer relationship.The advertising agency Young &Rubicam carried out a study called ‘Brand Asset Monitor’ which positions the brand on two axes: the cognitive axis is a combination of salience and of the degree of perceived difference of the brand among consumers; the emotional axis is the combination of the measures of familiarity and esteem.

TNS, in its study Megabrand System, uses six parameters to compare brands: brand awareness, stated use, stated preference, perceived quality, a mark for global opinion, and an item measuring the strength of the brand’s imagery.

Certain institutions, which believe that the comparison of brands across all markets makes little sense, concentrate on a single market approach and measure, for example, the acceptable price differential for each brand.They proceed in either a global manner (what price difference can exist between a Lenovo PC and a Toshiba PC?) or by using a method of trade-off which isolates the net added value of the brand name. Marketing directors are perplexed because so many different method sexist.

There is little more consensus among academic researchers. Sattler (1994) analysed49 American and European studies on brand equity and listed no fewer than 26 different ways of measuring it. These methods vary according to several dimensions:

  • Is the measure monetary or not? A large proportion of measures are classified in non-monetary terms (brand awareness,attitude, preference, etc).
  • Does the measurement include the time factor – that is, the future of the brand on the market?
  • Does the brand measure take the competition into account – that is, the perceived value in relation to other products on the market? Most of them do not.
  • Does the measurement include the brand’smarketing mix? When you measure brand value, do you only include the value attached to the brand name?

most measures do not include the marketing mix(past advertising expenditure, level of distribution, and so on).

  • When estimating brand value do you include the profits that a user or a buyer could obtain due to the synergies that may exist with it sown existing brand portfolio (synergies of distribution, production, logistics, etc)? The majority of them do not include this, even though it is a key factor.
  • Does the measurement of brand equity include the possibility of brand extensions outside the brand’s original market? Ingeneral, no.
  • Finally, does the measure of brand equity take into account the possibility of geographical extension or globalization?

Again, most of the time the answer is no.

We recommend four indicators of brand assets(equity):

  • Aided brand awareness. This measures whether the brand has a minimal resonance.
  • Spontaneous brand awareness. This is admeasure of saliency, of share of mind when cued by the product.
  • Evoked set, also called consideration set. Does the brand belong to the shortlist of two or three brands one would surely consider buying?
  • Has the brand been already consumed or not?

Some companies add other items like most preferred brand. Empirical research has shown that this item is very much correlated to spontaneous brand awareness, the latter being much more than a mere cognitive measure, but it also captures proximity to the person. Other companies add the item consumed most often.

Of course this is typical of fast moving consumer goods; the item is irrelevant for durables. In addition, in empirical research the item is also correlated to evoked set. One should never forget that tracking studies dwell on the customer’smemory. This memory is itself very much inferential. Do people really know what brand they bought last? They infer from their preferences, that logically it should have been brand X or Y.

Table below gives a typical result of a tracking study for a brand.

There are two ways of looking at the brand equity figures in the table. One can compare the countries by line: although it has similar aided awareness levels, this brand has very different status in the two countries. The second mode is vertical, and focuses on the‘transformation ratios’. It is noticeable that in Japan, the evoked set is 50 per cent of unaided brand awareness, whereas it is 87 per cent in Mexico.

Although there is a regular pattern of decreasing figures, from the top line to the bottom line, this is not always the case. For instance in Europe, Pepsi Cola is not a strong brand: its market share is gained through push marketing and trade offers. As a result,Pepsi Cola certainly grows its business but not its intrinsic desirability. In tracking studies Pepsi Cola has a trial rate far higher than the brand’s preference rate (evoked set).At the opposite end of the spectrum there are brands that have an equity far superior to their consumption rate.

In Europe, Michelin has a clear edge over rival tyre brands as far as image is concerned. However, image does not transform itself into market share if people like the Michelin brand but deem that the use they make of their cars does not justify buying tyres of such a quality and at such aprice.

Tracking studies are not simply tools for control. They are tools for diagnosis and action. Transformation ratios tell us where to act.

Result of a brand tracking study

Strategic Brand Management Related Practice Tests

Strategic Management Practice Tests
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