Alternative marketing thinking

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Understanding The Real Value Of Brands. Comparing The Best In Class Measuring Tools.

It is in downtime times like these that the true value of brands start to get questioned. Managers and marketers start to look at ROI numbers and how they are delivering for the brands they own.

Jonathan Knowles of brand consultancy Wolff Olins has a detailed post on the state of brand measurement and draws our attention to some of the most well established brand measurement tools. He lists out two kinds of outcomes when it comes to measuring brand equity.

He writes
There are two promising candidates for how this equity can be measured:
>> The first type of approach measures equity in terms of “outcomes,” such as the extent to which customers are prepared to stake their personal or professional
reputation behind a brand by recommending it to others or the price premium they
are prepared to pay;
>> The second type of approach measures equity in terms of the scale and nature of
the utility that the brand delivers to customers.

In the first case the measurements tend to be simple, according to Knowles. As simple as asking people their “willingness to recommend to a friend”. Simply understand a brand’s net promoter score (number of people willing to recommend a brand) to understand the growth prospect of a brand. You can read more about this approach in the book The Loyalty Effect by Fried Reichheld here.

Another well worn approach is understanding how many people are “willing to pay a price premium” advocated by Columbia University Professor Donald Lehmann. You can read an excerpt of this approach as you scroll down.

While the author loves the simplicity of the “outcomes” approach, he thinks that these approaches are limited in their ability to provide insights into what really creates this equity.

He moves on to compare the second lot of measurement tools. Ones that try to identify the size, scale and sources of equity. These well established tools include EquityEngine from Research International, EquityBuilder from Ipsos, Y&R’s BrandAsset Valuator, Brand Equity Model from Kevin Lane Keller, Brand Dynamics pyramid from Millward Brown and WinningBrands from AC Nielsen.

Jonathan Knowles concludes: Of potentially greater importance than a credible ROI model for marketers is the development of a robust methodology for defining and measuring brand equity in a way that meets the financial requirement for an asset, namely that it represents a source of incremental cash flow over time. This means that the focus needs to be on the metrics that capture and explain customer behavior, not simply customer attitudes. Such a measure of brand equity will represent, to quote Tim Ambler of the London Business School, “a reservoir of cash flow, earned but not yet released to the income statement.

Read the article in full here.

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One thought on “Understanding The Real Value Of Brands. Comparing The Best In Class Measuring Tools.

  1. Thank you for referencing this article (which was originally published in 2005). Brand equity remains as important a topic as ever. You may be interested in my most recent article on the topic (August 2008) which reviews the differences between the marketing, finance and accounting perspectives on brand equity – it can be downloaded from http://www.brandequitymeasurement.com

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