The EDGE, 27 June 2005
Seeing how your brand is faring in the marketplace is somehow missing from the boardroom agendas of many companies. Many top management teams look at the number but not at the reasons behind them. Consumer feelings and other intangible items are just ignored. This is especially true of local companies compared with multinationals.
But before I explain what is involved in tracking and valuation, letís deal with some terminologies as there are two terms that are often used in connection with this topic Ė brand equity and brand valuation.
Brand equity studies look at the relationship and perceptions that exist between consumers and the brand in question. Brand valuation takes this one step further and calculates the dollar value of the brand name.
Brand equity studies can take various forms and have various objectives, but they are concerned with what people think about your brand verses the competition. For instance, if youíve just launched a new brand, you need to establish awareness among the target audience you are trying to reach, and will be looking at the extent of brand awareness.
If you have an established brand, you will no doubt be watching market share, but you may also need to look at brand preference. Consumers normally have a repertoire of brands that they consider and may have one preference, but if that is not available or alternative choices have special promotions, they may switch easily to another brand. In addition to looking at these issues (and what drives the associated behaviours of consumers), it many be worthwhile to look at the strength of loyalty that your brand has, what your customers might switch to and why.
Tracking brand attributes can be important, for example, in the food and beverage categories. With companies, issues relating to the competitiveness of your service quality may be needed. Companies also track their brand against competitors on brand values and personality characteristics, particularly if they are trying to re-position themselves. For instance, a company may be trying to change consumer perceptions as to whether or not it is being seen as more innovative, or more friendly.
Where corporate brand image is concerned, it is vital to track its strengths and weaknesses as a poor or deteriorating image can result in a poor or deteriorating market share, share price and profitability if the company is listed. If the company is preparing for a listing, it is vital to raise brand image so that analysts and investors will look more favourably on its initial public offering. So again, you need to know where to improve.
Another important area is to assess the value to the brand image of various advertising and promotion activities and campaigns. With an on-going tracking mechanism in place, you can clearly see the impact of sponsorships, events, promotions and other media campaigns.
Brand valuation is becoming more important to companies. Indeed, the value of some brand names can be worth multiples of a companyís net tangible assets. During the last five years, brand valuation has become a mainstream business tool used for the following purposes:
merger and acquisition planning
licensing and franchising
brand portfolio reviews
marketing budget determination
strategic marketing planning
A particular trend has been the increasing use of brand valuation as a tool to aid marketing management. The focus here is to increase the effectiveness of the marketing effort and to aid brand management. A prime benefit is that a brand valuation model is linked to the companyís business model and provides a financial measure that is understood throughout the organisation and by investors.
A well-constructed brand valuation pulls together market research, competitive data and forecasts of future performance. This increases the understanding of the brandís value and its contribution to demand in each segment, and identifies opportunities for leveraging the brand. A dynamic brand valuation model can be used for scenario planning purposes.
The ability to place a financial value on a brand within each key market segment is not the only output of a valuation study:
Research into the drivers of demand yields information that aids a range
of decision, including portfolio planning and product positioning. It can
help define the focus of the advertising message.
An identification of causal relationships within the business model facilities
an increase in advertising effectiveness
The competitive benchmarking study that forms part of an assessment
of the risk attached to future earnings provides a gauge of the brandís
strength, in relation to competitors, from segment to segment.
Most market research companies carry out ďbrand healthĒ studies to track all the aspects of a brandís equity, but rarely do they carry out valuation studies. There are only a few consultancies that have the expertise and operate in Southeast Asia, such as Brand Finance plc.
Whatever you decide to do, ask the professionals, but keep a constant eye on your brandís health, just as you would your own.