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Measuring Brand
Equity
Contents
• Need for measuring brand equity
• Methods of measuring brand equity
• Financial measures
• Customer based measures
Need for measuring brand equity
Measuring brand equity helps us in the following ways:
• If we know the value of the brand, it is easier to accurately set royalty rates
and transfer prices.
• The value of a brand can help in boosting the share price by generating
positive public relations for the company.
• It helps the management effectively measure the return on investment (ROI).
• The brand valuation process helps throw light on a number of factors such as
the performance of the brand relative to the competition; it also helps
identify the strengths and weaknesses of the brand, and the various
opportunities in the market, and the opinion of the customers. This objective
opinion gives a useful insight into the performance of the brand.
Measuring Brand Equity
• Brand equity consists of two components—brand strength
and brand value—and to understand how customers
evaluate band equity, we need to have an understanding
of both these components
• Brand value or the financial performance
• Brand strength or customer based measures
Brand value
Brand value
• Cost-based valuation
• Market-based valuation
• Royalty relief method
• Economic use method
Cost based valuation
• The value of a brand is calculated on ‘the basis of what it actually
cost to create or what it might theoretically cost to recreate’ the
brand.
• Thus, ‘historical advertising and promotion expenditures, campaign
creation cost, trademark registration cost, etc.’, are taken into
account.
• This, however, does not correctly reflect the current value of the
brand, as the cost of generating a brand does not truly reflect the
income-generating potential of the brand.
Market-based valuation
Declin
(Future performance)
ing
Brand Strength
D R E K D R E K D=differentiation
Quadrant 1: Quadrant 4:
R=relevance
Unfocused / New Eroding E=esteem
K=knowledge
Low
DR E K D R E K
High
Low
Brand Stature (Current performance)
In-class exercise
Brand asset valuator - Examples
Quadrant 2: Quadrant 3:
High
Niche / Unrealized Leadership
Declining
(Future performance)
Brand Strength
Quadrant 1: Quadrant 4:
Unfocused / New Eroding
Low
High
Low
Brand Stature (Current performance)
Aaker Model
Measuring
Brand Perceived Quality/
Leadership Measures
Associations/ Equity Perceived Quality
Differentiation Measures
Leadership
Perceived Value
Brand Personality
Organizational Associations
Awareness Measures
Brand Awareness
Quick Recapitulation
• Need for measuring brand equity
• Methods of measuring brand equity
• Financial measures
• Customer based measures
Questions?