Managing Brand Equity Through Metrics
By 2020, branding will become the most significant value driver for Asian boardrooms. Branding is already a very effective catalyst for better leadership; and branding helps the boardroom drive its shared vision. The primary objective of boardrooms is to build and sustain shareholder value and deliver competitive returns to shareholders. They must therefore manage by metrics, and balance short and long-term perspectives and performance. Brand equity is the combined measure of brand strength and consists of knowledge, preferences and financial considerations. Each of the measures under these three metrics is critical and the boardroom must ensure the brand portfolio scores highly in each to optimize its financial outcome.
Metrics Associated with Branding
Knowledge metrics: Measure a brand’s awareness and associations through the many stages of recognition, aided, unaided and top of mind recall. Similarly, the functional and emotional associations of a brand are important drivers of brand equity. Brands should score high on both awareness and association attributes.
Preference metrics: Measure a brand’s competitive position in the market and how it benchmarks to competing brands. Customers pass through various levels of preference toward the brand, ranging from mere awareness to strong loyalty and recurrent revenues from the customer base. A strong brand has the brand equity to build customer loyalty.
Financial metrics: Measure a brand’s monetary value through the various parameters of market share, price premium a brand commands, the revenue generation capabilities of a brand, the transaction value, the lifetime value of a brand and the rate at which brands sustains growth. These measures allow a company to estimate an accurate financial value of brand equity linked to marketing metrics. Some of them are examined in the following:
- Price premium: The financial advantage of a strong brand is its ability to command a price premium in the market. Measuring the differential price points between the brand and competing brands indicates the level of value-creation, and the premium adds to the overall brand equity.
- Transaction value: The average transaction value per customer divided into segments, product segments and geographical markets. The trend of this metric shows how well the brand develops its customers in the form of cross-selling and/or up-selling to other products and brands.
- Lifetime value: The average lifetime value of customers divided into segments, product segments and geographical markets. The trend illustrates whether the brand extracts more value from customers through their life cycle with the brand.
- Growth rate: The level of brand strength and its equity in the market along with the level of customer loyalty and the pipeline of prospective customers determines the growth opportunity of the brand.
A comprehensive evaluation of brand equity involves measuring all the above three metrics as it ensures that the brand and its strength are valued in totality. Based on the detailed analysis of brand equity, it should be quite clear that brand equity is not just about top-line growth but also the bottom line.
Brand equity is an evolving concept. As branding evolves as a discipline, there will be many other aspects that provide input into the concept of brand equity. But measuring and managing it is a crucial and integrated element of a successful business strategy for Asian boardrooms. It illustrates how well they are performing.
Adapted from The Jakarta Globe.