CHAPTER 8:
DEVELOPING A BRAND EQUITY
MEASUREMENT AND MANAGEMENT SYSTEM
Kevin Lane Keller
Tuck School of Business
Dartmouth College
8.1
The New Accountability


Virtually every marketing dollar spent today
must be justified as both effective and efficient
in terms of “return of marketing investment”
(ROMI).
Some observers believe that up to 70% (or even
more) of marketing expenditures may be
devoted to programs and activities that cannot
be linked to short-term incremental profits, but
yet can be seen as improving brand equity.
8.2
The Brand Value Chain


Broader perspective than just the CBBE model
The brand value chain is a structured approach
to assessing the sources and outcomes of brand
equity and the manner by which marketing
activities create brand value.
8.3
The Brand Value Chain

The brand value chain has several basic
premises. Fundamentally, it assumes that the
value of a brand ultimately resides with
customers.
8.4
The Brand Value Chain




Based on this insight, the model next assumes that the brand value
creation process begins when the firm invests in a marketing program
targeting actual or potential customers.
The marketing activity associated with the program then affects the
customer mindset with respect to the brand – what customers know and
feel about the brand.
This mindset, across a broad group of customers, then results in certain
outcomes for the brand in terms of how it performs in the marketplace
– the collective impact of individual customer actions regarding how
much and when they purchase, the price that they pay, and so forth.
Finally, the investment community considers this market performance
and other factors such as replacement cost and purchase price in
acquisitions to arrive at an assessment of shareholder value in general
and a value of the brand in particular.
8.5
The Brand Value Chain

The model also assumes that a number of linking factors intervene
between these stages.

These linking factors determine the extent to which value created at one
stage transfers or “multiplies” to the next stage.

Three sets of multipliers moderate the transfer between the marketing
program and the subsequent three value stages: the program quality
multiplier, the marketplace conditions multiplier, and the investor
sentiment multiplier.
8.6
Brand Value Chain
VALUE
STAGES
- Product
- Communications
- Trade
- Employee
- Other
FILTERS
Customer
Mindset
Marketing
Program
Investment
- Awareness
- Associations
- Attitudes
- Attachment
- Activity
Program
Multiplier
- Clarity
- Relevance
- Distinctiveness
- Consistency
Market
Performance
- Price premiums
- Price elasticity
- Market share
- Expansion success
- Cost structure
- Profitability
Consumer
Multiplier
Shareholder
Value
- Stock price
- P/E ratio
- Market capitalization
Market
Multiplier
- Channel support
- Market dynamics
- Consumer size and profile - Growth potential
- Competitive reactions
- Risk profile
- Brand contribution
Value Stages

Marketing program investment


Customer mindset


In what way have customers been changed as a result
of the marketing program?
Market performance


Any marketing program that can be attributed to
brand value development
How do customers respond in the marketplace?
Shareholder value
8.8
Marketing Program Investment



Any marketing program investment that potentially can be attributed to
brand value development, either intentional or not, falls into this first
value stage.
Specifically, some of the bigger marketing expenditures relate to
product research, development, and design; trade or intermediary
support; marketing communications (e.g., advertising, promotion,
sponsorship, direct and interactive marketing, personal selling,
publicity, and public relations); and employee training.
The extent of financial investment committed to the marketing
program, however, does not guarantee success in terms of brand value
creation. Many marketers have spent billions of dollars in marketing
activities and programs but due to questionably strategic and tactically
ineffective campaigns., have seen competitors steal key market
positions. The ability of a marketing program investment to transfer or
multiply farther down the chain will thus depend on qualitative aspects
of the marketing program via the program quality multiplier.
8.9
Program Quality Multiplier

The ability of the marketing program to affect the
customer mindset will depend on the quality of that
program investment. There are a number of different
means to judge the quality of a marketing program
and many different criteria may be employed. To
illustrate, four particularly important factors are as
follows:
8.10
Multipliers

Program quality multiplier

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Customer multiplier


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The ability of the marketing program to affect customer
mindset
Must be clear, relevant, distinct, and consistent
The extent to which value created in the minds of customers
affects market performance
It depends on factors such as competitive superiority, channel
support, and customer size and profile
Market multiplier


The extent to which the value generated through brand market
performance is manifested in shareholder value
It depends on factors such as market dynamics, growth
potential, risk profile, and brand contribution
8.11
Program Quality Multiplier
1. Clarity: How understandable is the marketing program? Do consumers
properly interpret and evaluate the meaning conveyed by brand
marketing?
2. Relevance: How meaningful is the marketing program to customers?
Do consumers feel that the brand is one that should receive serious
consideration?
3. Distinctiveness: How unique is the marketing program from those
offered by competitors? How creative or differentiating is the
marketing program?
4. Consistency: How cohesive and well integrated is the marketing
program? Do all aspects of the marketing program combine to create
the biggest impact with customers? Does the marketing program relate
effectively to past marketing programs and properly balance continuity
and change, evolving the brand in the right direction?
8.12
Customer Mindset

A judicious marketing program investment could result in a
number of different customer related outcomes. Essentially,
the issue is,



in what ways have customers been changed as a result of the
marketing program?
How have those changes manifested themselves in the customer
mindset?
Remember that the customer mindset includes
everything that exists in the minds of customers with
respect to a brand: thoughts, feelings, experiences,
images, perceptions, beliefs, attitudes, and so forth.
Understanding customer mindset can have important
implications for marketing programs.
8.13
Customer Mindset
A host of different approaches and measures are available to assess value at
this stage. One simple way to reduce the complexity of the brand
resonance model into a simpler, more memorable structure is in terms of
five key dimensions. The “5 A’s” are a way to highlight key dimensions
of the brand resonance model within the brand value chain model as
particularly important measures of the customer mindset:
1. Brand awareness The extent and ease with which customers recall and
recognize the brand and thus the salience of the brand at purchase and
consumption.
2. Brand associations The strength, favorability, and uniqueness of
perceived attributes and benefits for the brand in terms of points-ofparity and points-of-difference in performance and imagery.
3. Brand attitudes Overall evaluations of the brand in terms of the
judgments and feelings it generates.
8.14
Customer Mindset
4. Brand attachment How intensely loyal the customer feels toward the
brand. A strong form of attachment, adherence, refers to the consumer’s
resistance to change and the ability of a brand to withstand bad news
(e.g., a product or service failure). In the extreme, attachment can even
become addiction.
5. Brand activity The extent to which customers are actively engaged with
the brand such that they use the brand, talk to others about the brand,
seek out brand information, promotions, and events, and so on.
8.15
Customer Mindset

An obvious hierarchy exists in these five dimensions of the brand
resonance model: Awareness supports associations, which drive attitudes
that lead to attachment and activity. According to the brand resonance
model, brand value is created at this stage when customers have
1. deep, broad brand awareness;
2. appropriately strong and favorable points-of-parity and points-ofdifference;
3. positive brand judgments and feelings;
4. intense brand attachment and loyalty; and
5. a high degree of brand engagement and activity.
8.16
Marketplace Conditions Multiplier
The extent to which value created in the minds of customers affects market
performance depends on various contextual factors external to the
customer. Three such factors are as follows:
1. Competitive superiority: How effective are the quantity and quality of the
marketing investment of other competing brands.
2. Channel and other intermediary support: How much brand
reinforcement and selling effort is being put forth by various marketing
partners.
3. Customer size and profile: How many and what types of customers (e.g.,
profitable or not) are attracted to the brand.
8.17
Marketplace Conditions Multiplier

The competitive context faced by a brand can have a profound effect on
its fortunes. For example, both Nike and McDonald’s have benefited in
the past from the prolonged marketing woes of their main rivals, Reebok
and Burger King, respectively. Both of these latter brands have suffered
from numerous repositionings and management changes. On the other
hand, MasterCard has had to contend for the past decade with two
strong, well-marketed brands in Visa and American Express and
consequently has faced an uphill battle gaining market share despite its
well-received “Priceless” ad campaign.
8.18
Market Performance

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The customer mindset affects how customers react or respond in the
marketplace in a six main ways.
The first two outcomes relate to price premiums and price elasticities.
How much extra are customers willing to pay for a comparable product
because of its brand? And how much does their demand increase or
decrease when the price rises or falls?
A third outcome is market share, which measures the success of the
marketing program to drive brand sales. Taken together, the first three
outcomes determine the direct revenue stream attributable to the brand
over time. Brand value is created with higher market shares, greater price
premiums, and more elastic responses to price decreases and inelastic
responses to price increases.
8.19
Market Performance

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The fourth outcome is brand expansion, the success of the brand in
supporting line and category extensions and new product launches into
related categories. Thus, this dimension captures the ability to add
enhancements to the revenue stream.
The fifth outcome is cost structure or, more specifically, savings in terms
of the ability to reduce marketing program expenditures because of the
prevailing customer mindset. In other words, because customers already
have favorable opinions and knowledge about a brand, any aspect of the
marketing program is likely to be more effective for the same
expenditure level; alternatively, the same level of effectiveness can be
achieved at a lower cost because ads are more memorable, sales calls
more productive, and so on.
When combined, these five outcomes lead to brand profitability, the
sixth outcome.
8.20
Investor Sentiment Multiplier

The extent to which the value engendered by the market performance of
a brand is manifested in shareholder value depends on various
contextual factors external to the brand itself. Financial analysts and
investors consider a host of factors in arriving at their brand valuations
and investment decisions. Among these considerations are the following:
8.21
Investor Sentiment Multiplier
1. Market dynamics What are the dynamics of the financial markets as a
whole (e.g., interest rates, investor sentiment, or supply of capital)?
2. Growth potential What are the growth potential or prospects for the
brand and the industry in which it operates? For example, how helpful
are the facilitating factors and how inhibiting are the hindering external
factors that make up the firm’s economic, social, physical, and legal
environment?
3. Risk profile What is the risk profile for the brand? How vulnerable is
the brand likely to be to those facilitating and inhibiting factors?
4. Brand contribution How important is the brand as part of the firm’s
brand portfolio and all the brands it has?
8.22
Shareholder Value


Based on all available current and forecasted information about a brand
as well as many other considerations, the financial marketplace then
formulates opinions and makes various assessments that have very direct
financial implications for the brand value.
Three particularly important indicators are the stock price, the
price/earnings multiple, and overall market capitalization* for the firm.
Research has shown that not only can strong brands deliver greater
returns to stockholders, they can do so with less risk.
* Market capitalization (often market cap) is a measurement of size of a
business enterprise (corporation) equal to the share price times the
number of shares outstanding (shares that have been authorized, issued,
and purchased by investors) of a publicly traded company.
8.23
Brand Equity Measurement System

A set of research procedures that is designed
to provide timely, accurate, and actionable
information for marketers so that they can make
the best possible tactical decisions in the short
run and strategic decisions in the long run
8.24
Brand Equity Measurement System


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Conducting brand audits
Developing tracking procedures
Designing a brand equity management system
8.25
Designing Brand Tracking Studies

Tracking studies involve information collected
from consumers on a routine basis over time

Often done on a “continuous” basis

Provide descriptive and diagnostic information
8.26
What to Track
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Customize tracking surveys to address the
specific issues faced by the brand
Product-brand tracking
Corporate or family brand tracking
Global tracking
8.27
How to Conduct Tracking Studies
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Who to track (target market)
When and where to track (how frequently)
How to interpret brand tracking
8.28
Sample Brand Tracking SurveyMcDonald’s
Assume that McDonald’s was interested in designing a short tracking survey to be
conducted over the phone. How might you set it up? Although there are a number of
different types of questions, it might take the following form:
Interviewer: We are conducting a short phone interview concerning consumer opinions
about quick-service or “fast food” restaurant chains.
BRAND AWARENESS
Recall (unaided)
a)
What brands of quick service restaurant chains are you aware of?
b)
At which brands of quick service restaurant chains would you consider using?
c)
Have you eaten in a quick service restaurant chain in the last week? Which
ones?
d)
If you were to eat in a quick service restaurant tomorrow for lunch, which one
would you go to?
e)
What if instead it were for dinner? Where would you go?
f)
What if instead it were for breakfast? Where would you go?
8.29
g)
Which are your favorite quick serve restaurant chains?
Sample Brand Tracking SurveyMcDonald’s
BRAND AWARENESS
Recognition
Now, we want to ask you some questions about a particular quick service
restaurant chain, McDonald’s.
a) Have you heard of this restaurant? [Establish familiarity]
b) Have you eaten at this restaurant? [Establish trial]
c) When I say McDonald’s, what are the first associations that come to
your mind? Anything else? [List all]
8.30
Brand Tracking Survey-McDonald’s
BRAND IMAGE
What are the top five words that come to mind when you think of "McDonalds" (This
should take less than 30 seconds)
Brand Attributes
How well do the following words describe McDonalds? (1= not at all, 5 = very much)?
McDonald’s ...
a)
Is convenient to eat at
b)
Provides quick, efficient service
c)
Has clean facilities
d)
Is for the whole family
e)
Has delicious food
f)
Has healthy food
g)
Has a varied menu
h)
Has friendly, courteous staff
i)
Offers fun promotions
j)
Has a stylish and attractive look
k)
Has good prices
8.31
Brand Tracking Survey-McDonald’s
Brand Personality (note this might also include user imagery, usage imagery as
breakout questions)
How well do the following traits describe McDonalds (1= not at all, 5 = very much)?
 Sincere
 Exciting
 Competent
 Sophisticated
 Rugged
 Peaceful
 Passionate
8.32
Brand Tracking Survey-McDonald’s
Judgments of Quality
 What is your overall opinion of McDonald’s?
 What is your assessment of the product quality of McDonald’s?
 How good a value is this McDonald’s?
 Is McDonald’s worth a premium price?
 What do you like best about McDonald’s?
Judgments of Credibility
 How innovative is McDonald’s?
 How much do you admire McDonald’s?
 How much do you respect McDonald’s?
Judgments of Consideration
 How likely would you be to recommend McDonald’s to others?
 To what extent does McDonald’s offer advantages that other brands cannot?
 How personally relevant is McDonald’s to you?
8.33
Brand Tracking Survey-McDonald’s
Judgments of Superiority
 How unique is McDonald’s?
 To what does McDonald’s offer advantages that other brands cannot?
 To what extent is McDonald’s superior to other brands in the quick service restaurant
category?
Feelings
Does McDonald’s give you a feeling of … (1= not at all, 5 = very much)
 Warmth
 Excitement
 Trust
 Awe
 Fear
 Calm
 Intensity
8.34
Brand Tracking Survey-McDonald’s
RELATIONSHIP
If McDonalds came to life as a person, what type of person would s/he be? This should
take less than 30 seconds.
If McDonalds came to life as a person and was at a party with you, what would s/he say to
you? This should take less than 30 seconds.
Loyalty
 I consider myself loyal to McDonalds.
 I eat at McDonalds whenever I can.
 This is the one brand of fast‐food restaurant I would most prefer to visit.
 If McDonalds were not an option, it would make little difference to me if I had to eat
elsewhere.
 I would go out of my way to go to McDonalds
8.35
Brand Tracking Survey-McDonald’s
Attachment
 I really love McDonalds.
 I would really miss this brand if it went away.
 McDonalds is special to me.
Engagement
 I really like to talk about McDonalds to others.
 I am always interested in learning more about McDonalds.
 I would be interested in merchandise with this brand’s name on it.
 I like to visit the website for McDonalds.
 Compared to other people, I follow news about McDonalds closely.
Community
 I really identify with people who use this brand.
 McDonalds is often frequented by people like me.
 I feel a deep connection with others who use this brand.
8.36
Brand Equity Management System

A brand equity management system is a set of
organizational processes designed to improve
the understanding and use of the brand equity
concept within a firm:
Brand equity charter
 Brand equity report
 Brand equity responsibilities

8.37
Brand Equity Charter


Provides general guidelines to marketing
managers within the company as well as key
marketing partners outside the company
Should be updated annually
8.38
Brand Equity Charter Components






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Define the firm’s view of the brand equity
Describe the scope of the key brands
Specify actual and desired equity for the brand
Explain how brand equity is measured
Suggest how brand equity should be measured
Outline how marketing programs should be devised
Specify the proper treatment for the brand in terms of
trademark usage, packaging, and communication
8.39
The Knicks Brand Charter
The
Knicks
The Fans
Emotional Bond
•Uniquely authentic
•An incomparable event, scene
and energy
•Relentless, resourceful, and
tough
•Championship caliber
•A vital part of New York City
•Unlimited in its possibilities
An intensely passionate,
professional, unparalleled
New York City experience
•Sensory fulfillment
–Looks, feels, and sounds
•Visceral thrill
– Eager anticipation/excitement
– War: winning/losing
•Psychological benefits
– Personal identification (with heroes)
– Social currency/belonging
•Emotional awards
– Intense experience
– Childhood
– Sustaining
– Exceeds
8.40
Brand Equity Report



Assembles the results of the tracking survey and
other relevant performance measures
To be developed monthly, quarterly, or annually
Provides descriptive information as to what is
happening with the brand as well as diagnostic
information on why it is happening
8.41
Brand Equity Report

In particular, one section of the report should
summarize consumer perceptions on key
attribute or benefit associations, preferences,
and reported behavior as revealed by the
tracking study. Another section of the report
should include more descriptive market level
information such as:
8.42
Brand Equity Report
1) Product shipments and movement through
channels of distribution.
2) Relevant cost breakdowns.
3) Price and discount schedules where appropriate.
4) Sales and market share information broken
down by relevant factors, e.g., geographic
region, type of retail account or customer, etc.
5) Profit assessments.
8.43
Brand Equity Responsibilities

Organizational responsibilities and processes
that aim to maximize long-term brand equity

Establish position of VP or Director of Equity
Management to oversee implementation of Brand
Equity Charter and Reports

Ensure that, as much as possible, marketing of
the brand is done in a way that reflects the spirit
of the charter and the substance of the report
8.44
Internal Branding

Internal brand management makes sure that employees and partners
appreciate and understand basic branding notions and how these can
affect the equity of the brands that they are working with. The ultimate
goal is to make everyone in the organization, from the CEO to the
trainees, to become passionate brand advocates. This can be achieved,
according to Davis, by following a threestep course: “Hear It, Believe It,
Live It”. To get employees to “live the brand”,
8.45
Brand Assimilation Process-Scott Davis
Principle 1: Make the Brand Relevant
One of most critical principles is to make sure the brand is relevant to
employees. Each employee in each functional group or unit of the
company must understand not just what the brand stands for, but how
they as individuals can embrace its meaning and represent it publicly.
Only employees who understand the brand can help support it and use it
to guide decision making.
Principle 2: Make the Brand Accessible
If employees are to live and breathe the organization’s brand, they must
be equipped with the information and tools they need to understand it.
Giving employees the ability to make brand-supporting decisions means
that they must have ready access to answers to questions. Without
creating that kind of access, the organization risks creating employees
who are disinterested or frustrated with the task.
8.46
Brand Assimilation Process-Scott Davis
Principle 3: Reinforce the Brand Continuously
For brand to become a cultural underpinning of the organization,
employees must be continuously exposed to its meaning, far beyond the
initial rollout of the internal branding program.Take Southwest Airlines
as an example. In seeking to internally apply the attributes of its brand
promise,“A symbol of freedom,” Southwest’s people (or HR)
department teamed with other such departments as public relations and
marketing to create an internal branding campaign around employee
freedom.As part of the campaign, support was fostered through tactics
such as having the carrier’s in-house publication highlight employee
freedoms, having employees write about how they personally took
advantage of freedoms, and renaming the intranet site “Freedom Net.”
Newsletters and the intranet can be invaluable communication tools that
help keep brand identity elements, successes, and updated information
on the brand strategy top-of-mind for employees. Other tactics can
include the rollout of such brand-related tools as laminated identity cards
8.47
and brand trading cards.
Brand Assimilation Process-Scott Davis
Principle 4: Make Brand Education an Ongoing Program
It’s particularly important that new employees are grounded in the brand
culture and inspired to believe in what the brand represents. Putting
these processes in place helps newcomers better understand the brand’s
role and impact on the business, and it gives them the tools and the
frameworks they need for their day-to-day decision-making.
Additionally, the investment the company makes in training new
employees speaks volumes about its level of commitment to them. The
hotel chain has emphasized training because its top priority was the
satisfaction of its guests—and it knew that employees were critical to
delivering on that promise. Each new employee went through an
intensive orientation called The Gold Standard, which was comprised of
principles created to support the brand. These brand precepts were
reinforced in daily departmental meetings attended by all employees. The
Gold Standard provided the basis for all ongoing employee training. Not
so coincidentally, Ritz-Carlton became a hospitality industry leader in
training, providing 120 hours of training per employee per year. 8.48
Brand Assimilation Process-Scott Davis
Principle 5: Reward On-Brand Behaviors
An incentive system rewarding employees for exceptional support of the
brand strategy should be tied to the rollout of the internal branding
program. This not only helps create and maintain excitement in the
program, but it underscores, through individual recognition, the kinds of
behaviors that need to be supported. Rewards also help demonstrate the
organization’s commitment to the brand and the program while creating
a tangible model that helps employees better understand how they, too,
perform on-brand. Continental Airlines created an employee reward
program called “Working Together” under its new emphasis of
promising on-time service as a key component of its brand promise to
customers.
8.49
Brand Assimilation Process-Scott Davis
Principle 6: Align Hiring Practices
Because the success of a brand assimilation program hinges on
employees’ ability and capacity to embody the brand spirit, it’s also
important that HR and marketing work together to develop basic
screening procedures that ensure new hires will fit with and support the
company’s brand culture. This can be accomplished through a variety of
tactics, starting with the incorporation of the core and extended brand
identity elements into the process of evaluating prospective employees.
Over time, job descriptions should be rewritten to incorporate these
same brand identity traits into the list of expected employee behaviors.
8.50
Rate Your Firm's Marketing Assessment
System
1. Does the senior executive team regularly and formally assess marketing
performance?
(a) Yearly - 10
(b) Six-monthly - 10
(c) Quarterly - 5
(d) More often - 0
(e) Rarely - 0
(f) Never - 0
2. What does the senior executive team understand by 'customer value'?
(a) Don't know. We are not clear about this - 0
(b) Value of the customer to the business (as in 'customer lifetime value') - 5
(c) Value of what the company provides for the customers' point of view - 10
(d) Sometimes one, sometimes the other - 10
3. How much time does the senior executive team give to marketing issues? .........%
(a) >30% - 10
(b) 20-30% - 6
(c) 10-20% - 4
8.51
(d) <0% - 0
Rate Your Firm's Marketing Assessment
System
4. Does the business/marketing plan show the non-financial corporate goals and
link them to market goals?
(a) No/no plan-0
(b) Corporate no, market yes-5
(c) Yes to both-10
5. Does the plan show the comparison of your marketing performance with
competitors or the market as a whole?
(a) No/no plan-0
(b) Yes, clearly-10
(c) In between -5
6. What is your main marketing asset called?
(a) Brand equity-10
(b) Reputation-10
(c) Other term-5
(d) We have no term-5
8.52
Rate Your Firm's Marketing Assessment
System
7. Does the senior executive team's performance review involve a quantified view of
the main marketing asset and how it has changed?
(a) Yes to both-10
(b) Yes but only financially (brand valuation)-5
(c) Not really-0
8. Has the senior executive team quantified what 'success' would look like five or
ten years form now?
(a) No-0
(b) Yes-10
(c) Don't know-0
8.53
Rate Your Firm's Marketing Assessment
System
9. Does your strategy have quantified milestones to indicate progress towards that
sucess?
(a) No-0
(b) Yes-10
(c) What strategy?-0
10. Are the marketing performance indicators seen by the senior executive team
aligned with these milestones?
(a) No-0
(b) Yes, external (customers and competitors)-7
(c) Yes, internal, (employees and innovativeness)-5
(d) Yes, both-10
8.54
Rate Your Firm's Marketing Assessment
System
Score yourself according to the scale below.
- If your total is greater than 90 percent, excellent.
- If your total is 70-90 percent, congratulate yourself and keep at it.
- More than 50 percent is good.
- Less than 30 percent means what you think it means.
8.55