Brand Equity - Methodologies

Methodologies

Brand Equity Ten (Aaker)

David Aaker, a marketing professor and brand consultant, highlights ten attributes of a brand that can be used to assess its strength. These include Differentiation, Satisfaction or Loyalty, Perceived Quality, Leadership or Popularity, Perceived Value, Brand Personality, Organizational Associations, Brand Awareness, Market Share, and Market Price and Distribution Coverage. Aaker doesn't weight the attributes or combine them in an overall score, as he believes any weighting would be arbitrary and would vary among brands and categories. Rather he recommends tracking each attribute separately.

Brand Equity Index (Moran)

Marketing executive Bill Moran has derived an index of brand equity as the product of three factors:

• Effective Market Share is a weighted average. It represents the sum of a brand's market shares in all segments in which it competes, weighted by each segment's proportion of that brand's total sales.
• Relative Price is a ratio. It represents the price of goods sold under a given brand, divided by the average price of comparable goods in the market.
• Durability is a measure of customer retention or loyalty. It represents the percentage of a brand's customers who will continue to buy goods under that brand in the following year.

Brand Asset Valuator (Young & Rubicam)

Young & Rubicam, a marketing communications agency, has developed the Brand Asset Valuator, a tool to diagnose the power and value of a brand. In using it, the agency surveys consumers' perspectives along four dimensions:

• Differentiation: The defining characteristics of the brand and its distinctiveness relative to competitors.
• Relevance: The appropriateness and connection of the brand to a given consumer.
• Esteem: Consumers' respect for and attraction to the brand.
• Knowledge: Consumers' awareness of the brand and understanding of what it represents.

Brand Valuation Model (Interbrand and Brand Finance)

• Interbrand, a brand strategy agency, draws upon financial results and projections in its own model for brand valuation. It reviews a company's financial statements, analyzes its market dynamics and the role of brand in income generation, and separates those earnings attributable to tangible assets (capital, product, packaging, and so on) from the residual that can be ascribed to a brand. It then forecasts future earnings and discounts these on the basis of brand strength and risk. The agency estimates brand value on this basis and tabulates a yearly list of the 100 most valuable global brands.
• The Royalty Relief approach of Brand Finance, an independent brand valuation consultancy, is based on the assumption that if a company did not own the trademarks that it exploits, it would need to license them from a third party brand owner instead. Ownership therefore ‘relieves’ the company from paying a license fee (the royalty) for the use of the third party trademarks. The royalty relief method involves estimating likely future sales, applying an appropriate royalty rate to them and then discounting estimated future, post-tax royalties, to arrive at a Net Present Value (NPV). This is held to represent the brand value. The independent consultancy publishes yearly lists by industry sector and geographic region as well as a top 500 global list.

Conjoint Analysis

Marketers use conjoint analysis to measure consumers' preference for various attributes of a product, service, or provider, such as features, design, price, or location. By including brand and price as two of the attributes under consideration, they can gain insight into consumers' valuation of a brand—that is, their willingness to pay a premium for it.

Note: These customer satisfaction methodologies have not been independently audited by the Marketing Accountability Standards Board (MASB) according to MMAP (Marketing Metric Audit Protocol).