Brand Equity Index – Must Read for Every Brand Manager

So, what are you really measuring?

KK ChandanWe call it Brand Equity. Most brand managers spend hours on the Brand Equity Scores/Index/Indices – in effort to really understand what the Equity Index or Score really means or indicates; and more often than not – questions remain unanswered. This document aims to shed some light on what Brand Equity really indicates – and for that, let us understand the various constructs we have in market today. Yes – all for the very same Equity we’re talking about, but various constructs, each claiming to be superior and more meaningful than the other.

So here’s for insight into the Construct – and what exactly they mean and indicate.

Let’s start with the start of Brand Equity definitions –

In 1989, Farquhar defined Brand Equity as the “added value endowed by the Brand to the Product”

In 1991, Aaker defined Brand Equity as a “set of brand assets or liabilities that add to or subtract from the value provided by a product or service”

These definitions make sense and are believable; Brand Equity is the Value endowed – positively or negatively, as an asset or a liability! Yes, it does work adversely too as a liability. The liability part, I believe in the first place it’s really important to know where how and what around it; and next, the liabilities associated with competition – for its part of competitive intelligence after all to tap into competition’s space taking them on gaps and opportunities!

Most Brand Equity measurement agencies do talk about competition not just while talking about competition, but also, in explaining incidents of decline of your Brand’s Equity; so the Question is – if Equity is about Asset or the Strength or the Value of the Brand – then, how can competition change my Equity, that too, suddenly?

“We do understand, competition can creep in, change things – and Equity can change over a period of time, but what we do not understand is – Equity changing in the blink of an eye or as close — because of Competition! My recent research shows that Yes, sharp rise & fall in Brand Equity is possible (R1) – only by changing the Experience the Brand delivers – exceptionally Great or Poor Experiences; not by competition; Whatever you are tracking or measuring, if competition is credited for your sudden shifts, it can only be true when the Construct of scores is largely attached to Awareness & Impulse; and Awareness is just a starting point of building Equity – and it clearly cannot make any significant to anyone’s Equity; and Impulse – is driven by other factors than Brand itself; hence – it cannot really be attributed to Equity”

While we are at this, let us quickly look at a Brand Equity model (from MB used by many globally including Vodafone) the scores of which are read in terms of percentage; as a result of which one’s gain is another’s loss to balance the “sum=100” equation. While we may accept that one’s gain is another’s loss – it is worth arguing ‘not always’!

We’ve seen how some Brands have launched into ultra-premium and affordable categories creating new market segments than playing on existing grounds. Further, looking into the Construct of the model – and how the scores are arrived at – it’s weighted average of Perception scores on a list of imagery elements.

Now – I can agree that Perceptions build Equity – and Perceptions are built by a gamut of things – everything seen, heard, read and experienced; and Perceptions drive behaviour; so this does seem to be a good indicator of the possible Behaviour towards the Brand – at least, theoretically; so what’s critical is to get the ‘imagery elements’ which really drive Consumer to Brand. A miss here leaves everything else unexplainable!

My concern around this model or construct is however on the utility or usability; run on “sum of scores of brands=100” equation, it can never be a true reflection of the Strength or the Value of the Brand! but only a ‘share’ of strength of perceptions. Further, how can this score be really actionable?

Whether to work on Awareness of the Brand or to establish Relevance or building emotional relationship – these questions won’t be answered; hence the Action-ability is a concern!

Leaving this here, let us look at the very reputed Keller’s interpretation of Brand Equity (1993) – “it is the differential effect of Brand knowledge on consumer response to marketing of the Brand – given by the difference between consumer response to marketing of branded and unbranded product” –

Well, let me say, today’s consumer is evolved enough to review or check prior to purchase decision, and surely, we’re moving well past the stage of driven by Brand-lead-communication! So it’s not just ‘response’ to Brand marketing anymore; Consumers are not just bound to respond to Brand marketing today, they are free to respond to every experience – everything they hear or see or feel – not necessarily ‘response towards’ the Brand; but about the brand, directed ‘towards the consumer world’!

And further, it’s not just about ‘response’ – it’s a lot more – what I think and feel and do with the Brand, yes, even, falling in love with the Brand – being swept off the floor by the Brand!!

So let me tweak Keller’s definition to take it to the closest possible – “response” to Brand – not just to marketing activities; and “response” – if we should define starts with I may have heard or never heard of this brand to .. I totally love or hate this Brand!

Since Keller’s philosophy is widely adopted in the market through Nielsen, let us get a step deeper into the Construct; Keller defines Consumer based Brand Equity at individual level, taking Brand knowledge as a starting point, which is conceptualized as an associative network, where the associations are nodes. The score or index generated on this model takes ‘Preference, Recommendation and Price Premium Willingness’ as input – and is said to reflect ’emotive loyalty & price premium willingness’ for the Brand.

So the ‘Response’ Keller talks about is basically at the height of Brand relationship – emotive loyalty and price premium! This does sound right and yes, it sure is from this more actionable than the construct earlier discussed with pointers on where to act made possible by applying advanced analytics on the construct.

However, concern with this is that only certain elements of relationship (Preference, Recommendation, Price Premium Willingness) go into input; and the rest is derived; and today, especially for non-FMCG verticals, where Experience is the most important component, Experience being left out of the Equation makes this not so suitable, surely for non-FMCG verticals. Another concern is the subjectivity and low relate-ability with Price Premium, which is a key input element for the index.

Acknowledging the need for a more robust measurement framework, TNS recently introduced buying habits and situational factors into the framework; and Ipsos too, included market conditions such as availability as part of the Brand Equity Framework. However, question is – how is this really going to help?

The score or index – does it truly show the Value – the Strength of the Brand in market place today and can the system pinpoint what exactly to do to go where you want to go?

As innovation in this space happens – let me close by reminding your Brand Equity is about the Strength or Power of Your Brand name, independent of competition; and the Construct should be Diagnostic to be actionable, and so should reflect various dimensions – Loyalty, as introduced by Yoo & Donthu in 2001; Experience delivered by Brand, Prevailing Perceptions, Strength on Decision Drivers including Rational evaluations, and of course, Quality of Awareness!

About the Author – The author serves as Consultant in the Space of Branding and Customer Experience, with TransformCX, and is doing a research program in association with North California University. Perspective shared is out of experience working as Specialist on Keller’s Brand Equity model, and as Consultant on other Brand Equity frameworks for over a decade.