CHAPTER:10

MEASURING OUTCOMES
OF BRAND EQUITY:
CAPTURING MARKET
PERFORMANCE

Copyright © 2013 Pearson Education

Learning Objectives
 Recognize the multidimensionality of brand equity
and the importance of multiple methods to measure
it
 Contrast different comparative methods to assess
brand equity
 Explain the basics of how conjoint analysis works
 Review different holistic methods for valuing brand
equity
 Describe the relationship between branding and
finance
Comparative Methods

Brand-Based Comparative
Approaches

Marketing-Based
Comparative Approaches

Conjoint Analysis
Brand-Based Comparative Approaches

 Competitive brands used as benchmarks by

consumers
 Example: Category leader or some other brand that
consumers feel is representative of the category, like
their most preferred brand
 Applications (blind tests, comparative tests -
chocolate)
Paired Comparison
 A respondent is presented with two objects and
asked to select one according to some criterion.
 The data obtained are ordinal in nature.

 Paired comparison scaling is the most widely

used comparative scaling technique.

 With n brands, [n(n - 1) /2] paired

comparisons are required

 Under the assumption of transitivity, it is

possible to convert paired comparison data to

a rank order.
Paired Comparison
Instructions: We are going to present you with ten pairs of shampoo
brands. For each pair, please indicate which one of the two brands of
shampoo you would prefer for personal use.
Recording Form: Jhirmack Finesse Vidal Head & Pert
Sassoon Shoulders
Jhirmack 0 0 1 0
Finesse 1a 0 1 0
Vidal Sassoon 1 1 1 1
Head & Shoulders 0 0 0 0
Pert 1 1 0 1
Number of Times 3 2 0 4 1
Preferredb
aA 1 in a particular box means that the brand in that column was preferred over the
brand in the corresponding row. A 0 means that the row brand was preferred over the
column brand. bThe number of times a brand was preferred is obtained by summing the
1s in each column.
 Paired Comparison – Blind Tests
The most common method of taste testing is paired comparison. The consumer is
asked to sample two different products and select the one with the most
appealing taste. The test is done in private and a minimum of 1,000 responses is
considered an adequate sample. A blind taste test for a soft drink, where
imagery, self-perception and brand reputation are very important factors in the
consumer’s purchasing decision, may not be a good indicator of performance in
the marketplace. The introduction of New Coke illustrates this point. New Coke
was heavily favored in blind paired comparison taste tests, but its introduction
was less than successful, because image plays a major role in the purchase of
Coke.

A paired comparison taste test

Rank Order
 Respondents are presented with several objects
simultaneously and asked to order or rank
them according to some criterion.
 It is possible that the respondent may dislike

the brand ranked 1 in an absolute sense.

 Furthermore, rank order scaling also results in

ordinal data.
 Only (n - 1) scaling decisions need be made in

rank order scaling.

Rank Order

Instructions: Rank the various brands of toothpaste in order of

preference. Begin by picking out the one brand that you like most
and assign it a number 1. Then find the second most preferred brand
and assign it a number 2. Continue this procedure until you have
ranked all the brands of toothpaste in order of preference. The least
preferred brand should be assigned a rank of 10.
No two brands should receive the same rank number.
The criterion of preference is entirely up to you. There is no right or
wrong answer. Just try to be consistent.
Rank Order
Form
Brand Rank Order
1. Crest _________
2. Colgate _________
3. Aim _________
4. Gleem _________
5. Macleans _________

6. Ultra Brite _________

7. Close Up _________
8. Pepsodent _________
9. Plus White _________
10. Stripe _________
Constant Sum
 Respondents allocate a constant sum of units,
such as 100 points to attributes of a product to
reflect their importance.
 If an attribute is unimportant, the respondent

assigns it zero points.

 If an attribute is twice as important as some

other attribute, it receives twice as many points.

 The sum of all the points is 100. Hence, the

name of the scale.

Rank Order

Instructions
On the next slide, there are eight attributes of bathing
soaps. Please allocate 100 points among the attributes
so that your allocation reflects the relative importance
you attach to each attribute. The more points an
attribute receives, the more important the attribute is. If
an attribute is not at all important, assign it zero points.
If an attribute is twice as important as some other
attribute, it should receive twice as many points.
 Rank Order
Form
Average Responses of Three Segments
Attribute Segment I Segment II Segment III
1. Mildness 8 2 4
2. Lather 2 4 17
3. Shrinkage 3 9 7
4. Price 53 17 9
5. Fragrance 9 0 19
6. Packaging 7 5 9
7. Moisturizing 5 3 20
8. Cleaning Power 13 60 15
Sum 100 100 100
Marketing-Based Comparative Approaches

 Hold the brand fixed and examine consumer

response based on changes in the marketing
program
 Price difference between the brand normally
purchased and an alternative brand (Intel x AMD).
 Applications (premium products  price sensitivity
and willingness to pay thresholds for brands;
explore potential brand extensions by collecting
consumer evaluations of a range of concept
statements describing brand extensions candidates)
Conjoint Analysis

 Survey-based multivariate technique that enables

marketers to profile the consumer decision process
with respect to products and brands
 Part worth: The value consumers attach to each
attribute level, as statistically derived by the conjoint
formula
 Applications (e.g. attributes in a product, brand x
price  buying a preferred brand and paying less
 how much their brand loyalty is worth and which
brands they would relinquish for a lower price)
Holistic Methods
Attempt to place an overall value on the brand in either abstract
utility terms or concrete financial terms. Thus, holistic methods
attempt to “net out” various considerations to determine the
unique contribution of the brand.

Residual Approach

• Examines the value of the brand by

subtracting consumers’ preferences for the
brand from their overall brand preferences

Valuation Approach

• Places a financial value on the brand for

accounting purposes, acquisitions, mergers
or other reasons.
Residual Approaches

Scanner Panel Choice

Experiments

Multi-Attribute
Attitude
Models
Scanner panel
• Researchers have focused on analysis of brand value
based on data sets from supermarket scanners of
consumer purchases.
• Some of the models used by researchers:

• Estimate that aspect of brand preference that is unique

to a brand and not currently duplicated by competitors.
• Employ actual retail sales data to calculate a “revenue
premium” as an estimate of brand equity.
• Use store-level scanner data to track brand equity and
key drivers of brand equity over time.
Choice experiments
• Equalization price: Equates the utility of a brand to
the utilities that could be attributed to a brand in the
category where no brand differentiation occurred.
Multi-attribute attitude models
• Reveals the relative sizes of different bases of brand
equity by dividing brand equity into three components:
• Brand awareness.
• Attribute perception biases: Difference between
subjectively perceived attribute values and objectively
measured attribute values.
• Examples: Consumer reports or [Link]
• Nonattribute preference: Difference between subjectively
perceived attribute values and overall preference.
Valuation Approaches
• Reasons for a price tag on a brand’s value: Mergers,
and acquisitions, Brand licensing, Fund raising and
Brand portfolio decisions
Accounting Background • Tangible assets
• Intangible assets

Historical Perspectives

General Approaches

Derived from financial market

Simon and Sullivan’s Brand Equity Value estimates of brand-related
profits.
• Brand financial performance
Interbrand’s Brand Valuation Methodology • Role of brand
• Brand strength
General approaches
• Cost approach - Brand equity is the amount of money that
would be required to reproduce or replace the brand.
• Market approach - The amount an active market would allow so
that the asset would exchange between a willing buyer and
willing seller.
• Income approach - Brand equity is the discounted future cash
flow from the future earnings stream for the brand.
• Capitalizing royalty earnings from a brand name.
• Capitalizing the premium profits that are earned by a branded
products.
• Capitalizing the actual profitability of a brand after allowing for the
costs of maintaining it and the effects of taxation.
To Sum Up..
 Brand valuation and the “brands on the balance
sheet” debate are controversial subjects
 Limitations of valuation approaches
 Require much judgmental data and thus contain much
subjectivity
 Intangible assets are not always synonymous with brand
equity
 Methods sometimes defy common sense

 Strength of the brand measures may be confounded

with the strength of the company
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