LIEBERMAN RESEARCH WORLDWIDE1900 Avenue of the Stars, 15th floorLos Angeles, CA 90067Tel: (310) 553-0550 • Fax: (310) 553-4607www.lrwonline.com

A Practical Guide to Measuring Brand Equity

Marketers attempting to measure brand equity should understand:

¶ How is brand equity defined and what are its component parts?

¶ Why would it be important to measure brand equity?

¶ What are the research methods and approaches that will be most effective?

¶ Once obtained, how can these measures be used to greatest advantage?

Introduction

The purpose of this document is to provide a practical guide for marketers interested in measuring and more effectively managing brand equity. The framework attempts to identify all of the components of brand equity and the recommended approaches for measuring each. In application, of course, the measurement approach and process should be customized to best meet the clients’ needs.

Components

The Marketing

Effect That Is

Uniquely

Attributable to

the Brand

The Marketing

Effect That Is

Uniquely

Attributable to

the Brand

Brand Equity

What Is Brand Equity?

Brand equity can be defined as the marketing effect that is uniquely attributable to the brand. More specifically, it can be characterized as franchises, or constituencies, who possess leverageable attitudes and beliefs that can be translated into greater demand for branded products and services.

A customer franchise/constituency of some determined size and quality ---

A customer franchise/constituency of some determined size and quality ---

Who have leverageable associations with, and attitudes toward, the brand ---

Who have leverageable associations with, and attitudes toward, the brand ---

Which result in a greater willingness to consider, and pay a premium price for, products and services with the brand name.

Which result in a greater willingness to consider, and pay a premium price for, products and services with the brand name.

BRAND EQUITY DEFINED

REASONS TO MEASURE EQUITY

What’s The Motivations For Measuring Brand Equity

Typically, management is interested in measuring brand equity for one of two reasons: To establish a value for financial/accounting purposes, or to increase the productivity of the brand by managing it more effectively.

• The company that owns the brand is being sold/merging

• The brand itself is being sold

• Licensing or co-marketing activities are being considered/undertaken with business partners

• The company that owns the brand is being sold/merging

• The brand itself is being sold

• Licensing or co-marketing activities are being considered/undertaken with business partners

• The brand is under-performing and diagnostic input is needed

• The brand is performing at acceptable levels, but not optimally

• There may be unrealized line or brand extension potential

• The brand is under-performing and diagnostic input is needed

• The brand is performing at acceptable levels, but not optimally

• There may be unrealized line or brand extension potential

Establish a Valuefor the Brand

Provide Direction toImprove Productivity

Key Measures Brand Equity Components

Key Measures of Brand Equity

To obtain an estimate of overall brand equity, each of the primary components must be evaluated. This process includes determining the size and nature of the franchise, identifying the positive images and associations that define the brand and measuring the degree of marketing leverage the brand provides.

• Market penetration of the brand• Profile of the customer franchise• Brand loyalty and satisfaction levels,

i.e., how strong is your grasp

• Market penetration of the brand• Profile of the customer franchise• Brand loyalty and satisfaction levels,

i.e., how strong is your grasp

• Words/phrases, symbols, products and concepts associated with the brand

• Brand imagery• Perceived performance

• Words/phrases, symbols, products and concepts associated with the brand

• Brand imagery• Perceived performance

• Price elasticity (brand/pricetrade-off)

• Brand extendibility/stretch

• Price elasticity (brand/pricetrade-off)

• Brand extendibility/stretch

Customer franchise of some determined size and quality ---Customer franchise of some

determined size and quality ---

Who have leverageable associationswith and attitudes toward the brand ---Who have leverageable associations

with and attitudes toward the brand ---

Which result in a greater willingnessto consider, and pay a premium for,

products and services with thebrand name

Which result in a greater willingnessto consider, and pay a premium for,

products and services with thebrand name

INTERVIEW CONTENT

Recommended Methodology

It is possible to obtain all of the key measures of brand equity from a single survey among a representative sample of category users. The interview will typically be 25 - 45 minutes long. It should be conducted in-person either via intercept or by pre-recruiting to a central location. In both cases the sample needs to be stratified and weighted to ensure representativeness.

Marketing LeverageMarketing LeverageAttitude and ImageryAttitude and ImageryCustomer FranchiseCustomer Franchise

Penetration• Brand awareness• Advertising awareness• Trial and usage

Penetration• Brand awareness• Advertising awareness• Trial and usage

Price Elasticity/Premium• Brand/price trade-off exercise• Premium price commanded by

the brand

Price Elasticity/Premium• Brand/price trade-off exercise• Premium price commanded by

the brand

Brand Associations• Advertising recall• Words/phrases, symbols• Products and services• Etc.

Brand Associations• Advertising recall• Words/phrases, symbols• Products and services• Etc.

Profiling• Demographics• Psychographics• Lifestyle• Usage patterns

Profiling• Demographics• Psychographics• Lifestyle• Usage patterns

Brand Extendibility• Acceptance (i.e., appropriateness

and purchase interest) of “close-in” products and services

• Acceptance of “farther out” products

Brand Extendibility• Acceptance (i.e., appropriateness

and purchase interest) of “close-in” products and services

• Acceptance of “farther out” products

Attribute Importance• Objective product attributes• Brand image

Attribute Importance• Objective product attributes• Brand image

Loyalty/Commitment• Primary/exclusive usage• Purchase intent (next time)• Overall satisfaction

Loyalty/Commitment• Primary/exclusive usage• Purchase intent (next time)• Overall satisfaction

Attribute Performance• Product attributes• Image attributes

Attribute Performance• Product attributes• Image attributes

Penetration -- Sizing the Franchise

The primary purpose of the penetration measures is to provide an estimate of the size of the customer franchise. They also provide an understanding of the brand dynamics which is helpful in developing strategies to improve overall performance.

Brand Penetration and Dynamics

Awareness

TrialCurrent Usage

Primary Usage

Exclusive Usage

Brand awareness— Unaided— Aided

Advertising awareness— Unaided— Aided

Usage— Ever tried— Current usage— Primary usage— Exclusive usage— Purchased last time

*All key competitors

Brand awareness— Unaided— Aided

Advertising awareness— Unaided— Aided

Usage— Ever tried— Current usage— Primary usage— Exclusive usage— Purchased last time

*All key competitors

Data Needs*

Profiling the Franchise

Demographics, psychographics, usage and lifestyle information provide the input to create an in-depth profile of the customer franchise. CHAID analysis is used to synthesize these inputs into a summary profile and a discriminant function analysis identifies key characteristics for targeting.

Demographics— Age— Income— Ethnicity— Education— Household composition— Etc.

Lifestyle— Home Ownership— Travel patterns— Etc.

Psychographics— (Appropriate to category)

Usage patterns— (Appropriate to category)

Demographics— Age— Income— Ethnicity— Education— Household composition— Etc.

Lifestyle— Home Ownership— Travel patterns— Etc.

Psychographics— (Appropriate to category)

Usage patterns— (Appropriate to category)

Data Needs

• Males 18-34 years old

• Completed college

• Own home

• Believe price is best indicator of quality

• Prefer IBM compatible to MAC platform

• Not brand loyal

• Males 18-34 years old

• Completed college

• Own home

• Believe price is best indicator of quality

• Prefer IBM compatible to MAC platform

• Not brand loyal

• Prefer IBM compatible to MAC

• Have laptop PC

• Use PC for work and at home

• Use 10+ hours/week

• Prefer IBM compatible to MAC

• Have laptop PC

• Use PC for work and at home

• Use 10+ hours/week

CHAID (Illustrative)

Discriminant Function Analysis (Illustrative)

Profiling the Franchise

Demographics, psychographics, usage and lifestyle information provide the input to create an in-depth profile of the customer franchise. CHAID analysis is used to synthesize these inputs into a summary profile and a discriminate function analysis identifies key characteristics for targeting.

Trial & usage— Ever tried— Current usage— Primary usage— Exclusive usage

Purchase interest— (Next time)

Overall satisfaction

Trial & usage— Ever tried— Current usage— Primary usage— Exclusive usage

Purchase interest— (Next time)

Overall satisfaction

Data Needs

50%

30%

20%

10%

Evertried

Currentusage

Primaryusage

Exclusiveusage

Definitely Not

Probably Not

Might

Probably

Definitely

Very Dissatisfied

Somewhat Dissatisfied

Neutral

Somewhat Dissatisfied

Very Satisfied

Overall PurchaseSatisfaction Interest

Loyalty Funnel

Brand Associations

The products and services associated with a brand are one important measure of its fundamental meaning in the market. Other associations such as slogans, logos, trademarks, etc. are important indicators of the brand’s communication power and profile. LRW uses several special techniques such as clutter logo recognition and write/draw exercises to measure these associations.

Products and services

Advertising recall— Unaided— Aided

Associated words/phrases— Slogans— Taglines

Associated symbols— Logos— Signatures— Trademarks

Characters— Founder/management— Spokesperson— Continuing character

Concepts/ideas

Products and services

Advertising recall— Unaided— Aided

Associated words/phrases— Slogans— Taglines

Associated symbols— Logos— Signatures— Trademarks

Characters— Founder/management— Spokesperson— Continuing character

Concepts/ideas

Data Needs

• Write/draw recall exercises (assess colors, words, symbols)

• Both open-end and aided recall

• Correct brand association within a competitive context

• Logo and symbol recognition within competitive clutter

• Write/draw recall exercises (assess colors, words, symbols)

• Both open-end and aided recall

• Correct brand association within a competitive context

• Logo and symbol recognition within competitive clutter

Special Techniques

Brand Imagery Performance

An extensive battery of both product and image attributes are rated on their importance and all of the competing brands are rated on their performance on the same attributes. The analysis includes importance vs. performance grids to identify strengths and weaknesses and perceptual brand maps to identify the strength of the associations for each brand.

Attribute Importance— Product attributes— Image attributes

Brand Performance Ratings— Product attributes— Image attributes

Competitive Performance Ratings

Attribute Importance— Product attributes— Image attributes

Brand Performance Ratings— Product attributes— Image attributes

Competitive Performance Ratings

Data Needs Perceptual BrandMap

Importance vs. PerformanceBrand A

• Trust- worthy

• Reliable

• Convenient• Low

Price

• Service• Warranty

• Quality

• Consulting

• Brand A• Brand B

Service

• Brand C

Quality

Value

High

Low

Imp

orta

nce

High LowPerformance

Price

Pricing Leverage -- Brand/Price Trade-Off

A purchase decision exercise in which respondents systematically trade-off brand vs. price, combined with a conjoint analysis, is used to provide measures of price elasticity. The result is the specific price premium the brand commands relative to an unbranded or competitively branded version of the same product.

Brand I

Attributes:— A— B— C

Price: High

Brand I

Attributes:— A— B— C

Price: High

Purchase Decision Trade-Off- Conjoint Analysis -

Price Premium vs. Unbranded Product

Brand I

Attributes:— A— B— C

Price: High

Brand I

Attributes:— A— B— C

Price: High

Brand I

Attributes:— A— B— C

Price: High

Brand I

Attributes:— A— B— C

Price: High

$17.00

$11.50

$5.00

$23.50

$0 $5 $10 $15 $20 $25

Brand I

Brand II

Brand III

Brand IV

Brand/Category AppropriatenessTwo Monadic Cells

Appropriateness Map

Brand Extendibility

The ability of a brand to stretch into other product or service categories is a key measure of its marketing leverage. LRW recommends monadic cells to separate “close-in” new product ideas from “farther out” ideas to eliminate cross-influences. We also recommend the use of stimulus such as branded packages or products when possible. The results are plotted on an appropriateness map which illustrates the relative potential of competing brands in each product category.

Cell #1: Cell #2:Close In Farther Out

Product Competitors CompetitorsCategory B1 B2 B3 B1 B2 B3

A 8 6 5 8 5 9

B 7 5 6 6 4 7

C 6 5 6 5 6 7

D 4 6 7 6 8 9

E 8 9 9 6 4 4

F 9 5 6 4 7 7

G 5 10 4 5 9 5

H 4 4 7 4 5 8

I 7 2 2 7 5 7

J 10 7 4 7 4 3

Cell #1: Cell #2:Close In Farther Out

Product Competitors CompetitorsCategory B1 B2 B3 B1 B2 B3

A 8 6 5 8 5 9

B 7 5 6 6 4 7

C 6 5 6 5 6 7

D 4 6 7 6 8 9

E 8 9 9 6 4 4

F 9 5 6 4 7 7

G 5 10 4 5 9 5

H 4 4 7 4 5 8

I 7 2 2 7 5 7

J 10 7 4 7 4 3

• H

• A

• D

• F

• BCompaqIB

Xerox

• I

• E

• C

• G

Customer Franchise• 14 MM households aware with moderate to very positive overall

impressions

• 11 MM households that use at least occasionally

• 6 MM loyal/highly satisfied user households

• Most loyal users are upper income males who value status and prestige and spend heavily on luxury goods

Associations, Imagery and Performance

Marketing Leverage

Typical Brand Equity Summary

The output from LRW’s brand equity audit includes the size and profile of the customer franchise, the attitude and image assets associated with the brand, and its marketing leverage.

Executive SummaryEquity Components

• The brand commands a $14 premium vs. and unbranded product with identical attributes

• There is a good opportunity to extend existing lines, but little opportunity to extend the brand beyond the current category

• Brand is strongly associated with good value and reliability and weakly associated with status

• Logo, package and advertising spokespersons all have very high recognition

Illustrative

Key Measures Brand Equity Components

Channel Equity

In addition to measuring equity with end-customers, for many products and services it is also important to measure equity in the distribution channels, e.g., supermarkets, electronics distributors, etc. The components of channel brand equity are very similar, but the key measures are slightly different.

• Penetration of primary and secondary channels• Profile of primary distributors• Overall satisfaction levels

• Penetration of primary and secondary channels• Profile of primary distributors• Overall satisfaction levels

• Performance on key attributes• Performance on key attributes

• Margins (net of promotional spending)• Promotional support• Extendibility

• Margins (net of promotional spending)• Promotional support• Extendibility

Extent and quality of distribution networkExtent and quality of distribution network

Attitudes and perceived performanceAttitudes and perceived performance

Ability to command a premium price and sell-in new products

Ability to command a premium price and sell-in new products

PARTIAL LIST OF CLIENTS

Why Select LRW for Brand Equity Research?

LRW has conducted a large number of brand equity projects, many for large blue-chip clients. Some have been full brand equity audits while others have had a more limited scope.

ITT HartfordITT Hartford

AT&TAT&T

Kellogg’sKellogg’s

Eli LillyEli Lilly

Eddie BauerEddie Bauer

TurnerTurner

Chicago TribuneChicago Tribune

Blue CrossBlue Cross

Bank of AmericaBank of America

BarclaysBarclays

Macy’sMacy’s

Taco BellTaco Bell

Discovery ChannelDiscovery Channel

Callaway GolfCallaway Golf

Warner Bros.Warner Bros.

MicrosoftMicrosoft

Brooklyn Union GasBrooklyn Union Gas

SunbeamSunbeam