Advertising and brand equity

This article addresses two key questions: first, how can we evaluate a brand’s equity with the consumer, and secondly how can we determine which advertising campaigns are likely to generate brand equity in the long term? The framework for answering these questions is based on Millward Brown’s experience over the past 15 years of linking tracking data to sales modelling, and the initial results from a research project looking at the consumer research measures which are common across successful brands.

Advertising and brand equity

How to evaluate brand equity - and how to identify those advertising campaigns most likely to generate brand equity in the short-term

Andy Farr
. THIS PAPER ADDRESSES two key questions which are taxing the minds of advertise Why do we need to measure consumer equity? With sophisticated scanner data, we should expect to be able to identify an immediate short-term sales response to most fmcg advertising. The problem is that this is likely to show that much advertising will not be justifiable on the basis of its short-term payback. However, our own experience, together with an analysis of IPA Advertising Effectiveness Award winners and Nielsen's initial pilot analysis of 45 major UK brands over the past three years (1) indicates that advertising does have a role in long-term brand building. There is, however, a proviso; not all advertising and new innovations will be successful - some strategies will be more powerful than others and some executions more effective at delivering that strategy. What marketers need is proof that today's advertising investment is going to be worthwhile in the longer term. This means we must look for changes in the brand's underlying long-term core sales, and other measures of sales equity. But because, by its nature, a long-term effect only occurs over a one to five year window, we need to consider what short-term measures are precursors to long-term brand building. The role of consumer research is to identify which measures are the leading indicators of advertising's effect on the brand, and to identify with confidence the strategies and executions that are moving the brand in the right direction, at an early stage. Survey research only measures one part of a brand's equity, but it is an important part. The ideas, associations and images that people have of a brand determine the demand side of the brand equity equation. They define the brand's worth to the consumer - what makes a user willing to pay the price asked for it and a non-user willing to consider the brand for purchase. If the brand's standing is strong enough in consumers' minds to warrant them paying the price asked of it, then the brand will have realised its consumer equity and turned it into sales equity. This consumer brand equity can be summarised via five elements: presence, relevance, product performance, advantage, and bonding . The brands in a marketplace will sit on a spectrum ranging from no awareness, through passive name recognition, to brands which consumers have some familiarity with, to the brands which they know well through actual experience or marketing activity, and finally to those brands which are felt to be dynamic or growing in popularity. Using standard research measures of prompted awareness, saliency, familiarity and brand dynamism it is possible to place the brands on a grid showing the level of awareness and the extent to which this is active or passive. Brands in the top right quadrant are those with active brand presence . The concept and importance of brand presence becomes clearer when we look at examples of this dynamic. For a new brand, advertising has a key role in putting the brand on the map, and success in creating awareness is one of the first steps towards a successful launch. shows the level of prompted awareness for 51 fmcg product launches. All the figures are taken from six months after launch. Across the bottom is the level of TV Ratings during the first six months. There is a wide variation in awareness, but a generally positive trend. After 400 TVRs we would typically expect about 40 per cent brand awareness, after 600 TVRs about 50 per cent and after 1,000 TVRs 60 per cent or more. For a new product, brand presence can be seen as the gateway to the brand for consumers - they are unlikely to buy a brand they know nothing about - except in the lowest of risk categories. An analysis of launch awareness against trial within product field shows a strong correlation. Awareness does not guarantee trial, but it is an important factor. Creating a 'buzz' or sense of excitement about a brand is one of the ways of generating an increase in the underlying sales trend of the brand. The Peperami example demonstrates this point excellently. However, it is only one of a number of truly great campaigns which were effective in raising the brand's presence to new levels. Other examples include the campaigns for Wonderbra and Tango. Peperami, prior to the award winning advertising campaign in 1992, already had prompted awareness of 90 per cent, but sales had plateaued after rising in the late 80s. The introduction of the highly impactful 'bit of an animal' campaign had the effect of raising advertising awareness from 11 per cent to 67 per cent, placing the brand above major confectionery brands like Mars, with one of the smallest budgets in the snacks sector. It also doubled the brand's perceived popularity among children and young adults. In other words, the brand moved from having a passive presence to a highly active presence in the snacks marketplace. The resulting impact on sales was a 35 per cent average increase. For established brands, increased brand presence is a genuine leading indicator of sales growth - sustained increases in brand saliency or a sense that the brand is growing in popularity often precede changes in the brand's core sales. The new launch data showed a generally positive pattern with increased weight. But some launches, despite investing heavily in above-the-line media, failed to put the product on the map. This can be due to a number of factors, the most important being lack of distribution. However, the effectiveness of the execution to cut through and leave a branded advertising message is also a key factor. The amount of variance explained just by the TVR weight increases by over a third when the TVRs are factored by the Awareness Index, to create a measure of 'effective weight'. (The Awareness Index is Millward Brown's advertising efficiency index calculated by relating the rise in advertising awareness to increased media weight). In the case of established brands, it is also no surprise that the dramatic changes in brand presence have resulted from advertising which generates Awareness Indices in the top few per cent of all ads tracked. One of the earliest indicators that a campaign has the potential to generate an increase in consumer equity, is an increase in the level of advertising awareness among the target group. Thus brand presence can be created by all styles of advertising, from the simplest announcement of a new product and its USP, to the highly creative. However, the branded visibility of the advertising is a key component in its success. If the brand's presence is the gatekeeper for the consumer, then the relevance of the brand's promise to the consumer's needs and aspirations will then determine the potential size of the market available to the brand. For example, in the toothpaste market, a niche brand like Sensodyne can have a very clear positioning. It is seen as the most effective brand for sensitive teeth by three-quarters of the market, but because the relevance of this to most consumers is limited, its market share is only four per cent (by volume). Nigel Hollis (2) has shown that the degree to which advertising is immediately motivating is driven by a combination of new content, relevance, enjoyment and branding, with relevance on its own accounting for nearly half the variance in the persuasion scores. This is particularly true of lapsed users and non-trialists. Most new innovations will be immediately motivating for some people, but advertising has the power to widen this. For example, was there a need for round tea bags before Tetley launched them? Would Toilet Duck have been so successful without the simple creative device of the woman turning upside down? Would Radion have generated sales at launch without advertising to make smell removal an issue? I doubt it. This is even more clear cut when it applies to an established brand. Advertising can be used to leverage existing advantages by making them relevant to a new need or group of consumers. A famous example of this is Lucozade's switch from a drink for convalescents to a fashionable sports drink. In such cases the evaluation and proof of the advertising's effectiveness is not just to measure the increases in trial and repeat, but also to consider if the opportunity has been maximised. Did the advertising deliver the message effectively to the target group, was it clear, and was it as credible and relevant as it should have been? Actual product performance is a highly subjective measure but ultimately, if the product fails to deliver, or fails to keep up with the competition, then in the long term its sales will decline. As Paul Feldwick (3) says, 'if you look at brands that are really in trouble today, you will often find products that have lost their competitive advantage through devaluation or just failure to innovate, and yet still expect to command an ever widening price gap against parity competitors'. In other words, advertising can have a profound effect on the perceptions of product performance, but it cannot make a weak product strong. However, it can give a product at parity performance a perceived edge. Having a clear understanding of what the product is actually delivering is an important strand in understanding the brand's consumer equity and its ability to warrant a premium. A brand's advantage can be a direct extension of some unique aspect of the product delivery. However, in the crowded markets of the '90s, many brands have little genuine product differentiation. The most successful brands have managed to take some aspect of their product performance and make it a perceived advantage, or develop a distinctive brand personality and positioning which gives the brand a perceived consumer advantage in the market. The results of this are that they can command a price premium not justified purely on the basis of the 'ingredients'. There are two elements to the way that advertising is likely to influence perceived product performance. First, by guiding the expectations about the product experience - a process we call product enhancement - and second, by creating a halo of superiority around the brand via a mechanic we have termed 'interest-status'. The Red Mountain case study (IPA Awards commended paper, 1988) is an excellent example of the enhancement process at work. The advertising successfully set up the taste expectations as the coffee with the 'ground coffee taste without the grind'. Previously, consumers had been inclined to interpret the slightly bitter taste of the coffee as a negative, due in part to advertising imagery showing cowboys drinking Red Mountain round a camp fire. However, in the light of the new advertising, this was interpreted positively as the ground coffee taste. This change was apparent in an increase in conversion from trial to repeat. However, the full effects of this advertising were not apparent until re-trial had been encouraged via a low priced trial-sized jar. The advertising in itself was not sufficiently motivating to generate re-trial, but the message was capable of influencing perceptions at trial. An experiment conducted by Millward Brown in 1993 (4) confirmed the magnitude of the enhancement effect and showed that advertising increased the conversion from trial to definite purchase intent from 19 per cent to 30 per cent. However, in real market conditions, proof that advertising is having a positive enhancement effect is not straightforward, because much of the influence works at the point of trial, rather than when the ad was viewed. For example, the effectiveness of a sampling exercise following advertising with an enhancing element is likely to be much greater - but could be ascribed to the below-the-line activity, and not the multiplier effect of the advertising working with the trial-building activity. If there is no specific trial-building activity, then the enhancement effect of advertising on the product perceptions may only gradually become apparent over time. This pattern is shown clearly in . The campaign generated considerable advertising presence, but the effect on product perceptions and underlying sales only became apparent over several years. If the advertising is working effectively with the product, over time we would expect to see increases in the extent to which the brand is associated with specific product advantages, as in Exhibit 4 . However, because of the interaction with the product experience, we need to have a clear understanding of the strength of the product in order to be able to evaluate this fully. Because of the effect of product and enhancement on the perceived product delivery, it is an important aid to marketing decision making to consider how the perceived and actual product performance match . Brands in the top right quadrant where both perceived and actual performance are strong are able to command a premium. Brands in the bottom right quadrant are vulnerable, branding is providing insulation for the brand but ultimately this cannot be sustained in the long-term. The brand is not able to justify its premium in the long-term. Brands in the top left quadrant have potential and are worthy of support, in particular using a combination of advertising focusing on the product strengths and trial-building below-the-line activity. The viability of brands in the bottom left quadrant must be in doubt. Unless considerable resources are devoted to product improvement, followed by sustained above and below-the-line investment, the brand will die. Because the enhancement effect is delayed until product experience, we need to be able to anticipate whether advertising has the potential to work via this mechanic in the short-term. There are two key advertising-related factors. First, the advertising needs to be remembered - important because its main influence is at the point of trial, and second, the message should relate in some way to the experience of 'using' the product - for instance, does it create any expectations of what the product would 'feel like to eat', and are they in line with what the product can actually deliver? There is therefore a strong argument for undertaking product testing alongside the advertising development work to understand how the synergies between the two can be maximised. The role of advertising in this context is to take an aspect of the product's performance and to channel the consumer towards that benefit. The role of advertising to create emotional pulls for the brand is discussed more fully in the next section. However, it is clear that successful 'brand' advertising can create a halo of product advantage. Perhaps the best documented is the example of PG Tips. The data showed that when tested blind in 1983 there was very little to distinguish between the brands, including the Tesco and Sainsbury brands. However in branded tests, PG enjoyed the greatest preference. In other words, the brand was able to create a level of perceived product advantage not wholly supported by the actual product offering. If this places PG Tips in a long-term vulnerable position, it would be doubly true for any brand which failed to maintain its perceived brand advantage. PG Tips continued to be supported by the much-loved Chimps campaign, and this offered some insulation against the threat from own-label, but this was not true of the market as a whole. At the time of the blind taste test, own-label's share of the market was about 20 per cent. It is now approaching 40 per cent. While the strength of retailer brands in general has increased over the past twenty years, the lack of genuine product differentiation in this market is likely to have made the process more rapid. Within the tea market as a whole, the lack of differentiation is such that for two of the three main consumer segments - the repertoire buyers and the non-discriminators - the retailer own brands are felt to meet the consumer's needs equally with the manufacturer brands. A brand can also lose its market advantage through the launch of competitive products. shows the effect that the launch of a new competitor had on a us analgesic brand. Absolute endorsements on the key effectiveness measure did not decline, but the extent to which this was a unique property dropped considerably, followed by market share. Brands can have perceived advantages which are unrelated to the physical or sensual aspects of the product delivery, and relate more with the emotional appeal of the brand and the sense of belonging which comes from being a buyer of that brand. In many respects this is an extension of the brand presence dynamic, except that that presence is converted into a relevant advantage only if it fits with the consumer's emotional needs. Levi's would simply be another well-made pair of jeans without the Americana images from the advertising that give it stature and identity. It is this which provides Levi's wearers with the additional value which makes the brand worthy of its price tag. Swindells and Branthwaite (5) argue that advertising creates a halo in the viewer's mind of excitement, uniqueness and supremacy - such advertising creates interest in and status for the brand. However, a key point is that it is not the brand that is interesting but the consumable advertising. If this is the case, and I think there is a strong evidence that it is, then to anticipate the effects of such campaigns we should be looking to the target group for the level of involvement with the creativity. For example, 16-34 year-olds found the Tango campaign actively involving to a much greater extent than most advertising. Swindells & Branthwaite also argue that this type of advertising is not actively processed at the time of viewing, but rather stored as an audio-visual memory. This is then assimilated onto the brand by association and repetition. Hence, it is imperative that advertising working in this way is uniquely associated with the brand creatively, because there is no unique product feature or benefit to provide the link. This was also true for the Tango campaign, with 95 per cent of 16-34 year-olds saying that they could not fail to realise it was an ad for Tango. It is no surprise that advertising which is effective via this mechanic almost always has an above average ability to cut through and generate both the short and long-term branded advertising associations. An analysis of IPA 'longer and broader effects' winners reveals that all of those where Millward Brown had advertising awareness data, achieved above-average advertising awareness levels. There may be a direct link between the two processes, with advertising associations acting as the vehicle for storing and encoding the message. However, the link does not have to be a direct one. The correlation may result because the factors which generate a high level of advertising memorability and cut-through are the same as those which ensure that the advertising is capable of creating a halo of excitement, uniqueness and supremacy about the brand in the viewer's mind; namely, that the advertising is actively involving, distinctive, often enjoyable (but not exclusively - advertising may be effective by being highly challenging) and linked to the brand. The proof that the advertising is creating emotional brand advantages will, in the long term, be increases in brand appeal or affinity, and measures of high brand opinion such as quality, trust and worth, coupled with a growth in long-term brand associations. However, in the short term we can anticipate the effects of such advertising by understanding the relationship between the target group and the advertising. Measures of advertising such as the Awareness Index can act as a barometer for the advertising's creative power and hence potential long-term effectiveness. Ultimately, the trust and affinity derived from the brand's advantages can result in some consumers becoming bonded to the brand to such an extent that they do not actively consider any other brands for purchase. This latter state does not preclude the consumer trying new products for a change but is likely to provide some insulation from the activity of others. For example, an analysis of the brand leaders in the tea, coffee, toothpaste and yellow fats markets, demonstrates that, on average, 36 per cent of those who would consider it for purchase would only consider that brand. For the second brand in the market the figure falls to 22 per cent and for other brands it falls to 17 per cent. Students of the Dirichlet model would argue that this is purely a function of brand size. While we would not disagree that big brands will have more 'bonded' or loyal consumers, this ignores the fact that many consumers do have genuine emotional bonds with the brand they buy. These more loyal or bonded consumers represent the future profit stream for the brand. Work in the us by the Coalition for Brand Equity (6) has demonstrated that, in some cases, all of a brand's profits are derived from just the 10 per cent of consumers who are most loyal - hence less likely to switch on the basis of price promotion. As a measure of the effectiveness of the advertising, we should look to see trends in brand affinity and consumer commitment - the degree to which the brand has attained the status in the consumer's repertoire where no other brand is being actively considered for purchase. However, in mature markets these movements are likely to be slow trends rather than rapid uplifts, and as likely to follow the creation of brand presence and advantages - or the introduction of a unique product innovation. This article has attempted to set out a framework within which we can evaluate the likely short and long-term effects of advertising which is capable of long-term brand building. While such a framework is not definitive, it is the case that increases or declines on dimensions relating to the brand presence, its relevance to the market place, its perceived product and emotional advantages and ultimately brand preference, status and commitment, will be indicative of a brand's strength or weakness. However, because by its nature a long-term effect only occurs over a one to five year window, we need to consider what short-term measures are precursors to long-term brand building. These fall into two categories. First, the effects on a brand due to the immediate challenge effect of innovation, which should produce immediate changes in awareness, trial or consideration and sales, or definite purchase intent on longer purchase cycle markets. Second, for advertising which is working via the mechanics of product enhancement or interest/status, an understanding of the response to the advertising is key. In the case of enhancement it is important that the advertising is accurate about what the brand/ product can deliver, and that the images, messages and claims from advertising are remembered and linked with the brand.In the case of interest and status brand advertising, because the effect is driven by the consumable advertising we should be looking to the target group for the level of involvement with the creativity, and because the advertising is the element creating brand differentiation, it is imperative that it is uniquely linked to the brand. In both of these two dynamics, the role for involving advertising creativity is key for long-term effects. However, this needs to be harnessed to the brand in order to be effective. (1) Justin Sargent. Building brands in the UK. , January 1995. (2) Nigel Hollis. Persuasion: The Millward Brown Perspective, February 1995. Available on request from Millward Brown. (3) Paul Feldwick & Francoise Bonnal. Reports of the death of brands have been greatly exaggerated. ESOMAR Seminar, Prague, November 1993. (5) Alan Swindells and Alan Branthwaite. Capturing the complexity of advertising perceptions. ESOMAR Seminar, Amsterdam, December 1995. (6) Larry Light & Richard Morgan. Brand loyalty marketing. Coalition for Brand Equity, November 1994.

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