Brand equity: a new framework | WARC | The Feed

Brand equity: a new framework

Successfully combining brand and performance marketing is a longstanding headache for marketers, but a new paper in the Harvard Business Review proposes a different way forward.

Why it matters

It’s something of a holy grail in marketing: to be able to model the alchemy involved in getting people to (hopefully) like and (at least) buy your brand. This research reflects the growing interest in market mix modelling and econometrics that offer a predictive aspect to planning activity. It’s worth a read in conjunction with WARC’s recent The Future of Measurement report.

Background

“Brand building has long suffered from having measures – such as ‘awareness’ and ‘advocacy’ – that have no credible predictive linkage or retrospective connection to financial performance.” That’s the view of Jim Stengel, former global CMO of P&G, Wharton marketing professor Cait Lamberton, and Ken Favaro, chief strategy officer at BERA Brand Management, writing in the Harvard Business Review.

How it works

The paper proposes that it’s possible to connect brand positioning and activation metrics. First you need to consider four metrics in positioning a brand: purpose, emotional attributes, functional benefits and experiential qualities. Then create four composite metrics of overall brand equity, measured at weekly, monthly, and quarterly intervals. The authors recommend the following:

• Familiarity
• Regard
• Meaning
• Uniqueness

As a result, the authors argue, such a model allows brands to measure themselves in a broader competitive set than their immediate category – when people are choosing whether to go to McDonalds, they might also be considering a delivery, or even a freezer meal.

It also requires the brand in question to survey a broad range of customer types across a demographically representative sample and should link to revenue and shareholder value through statistical techniques like elasticity modelling. They argue for getting this element independently verified.

In the field

The research looks at three brands that worked with BERA Brand Management to successfully establish a mix of metrics that started to show a causal link between brand, performance, and the financial result.

“All three companies were able to precisely measure the impact of a given percentage increase in brand equity on their annual revenue and shareholder-value growth – and calculate how much investment would be needed in order to deliver that increase.”

Across an average of 4,000 brands, the study claims, a 4% increase in brand equity, based on an average of 0.8% of current revenue invested, leads to:

• 1% additional revenue growth (annual)
• 1.5% additional shareholder value growth (annual)
• 1.3x revenue return on investment

Effectiveness

• Of course, this is already well covered in the marketing effectiveness realm, not least by Binet and Field’s seminal The Long and the Short of It, which was able to show that for most brands the budget split of 60:40 in favour of long-term activity correlates with peak effectiveness and efficiency, though this varies by category and the brand’s maturity.
• But some of this work echoes some of the newer thinking emerging around econometrics to de-risk marketing investment decisions, especially when it comes to boosting pricing strength that is so important to brands at a time of inflation.

Sourced from HBR, WARC