Branding Strategy Insider

Brand Equity Risk: Linking with Big Retail

Eight years ago, Thorntons, the 98-year-old chocolate company, found itself in a very sticky situation. New chief executive Peter Burdon announced a three-year plan to turn the company around and, remarkably, through a major consolidation of stores, product portfolio and finances, he has done just that.

Burdon also recognised from the outset that his greatest asset was the Thorntons brand. With prompted recall levels of more than 90% in a large and very profitable category, this was perhaps not a remarkable discovery.

But Burdon also realised that, despite a high level of awareness, the brand associations of Thorntons were increasingly fuzzy and undercommunicated.

In 2002, all of Thorntons' 4000 employees participated in a specially devised brand-training programme in which they learned that Thornton's brand equity was based on 'the art of the Chocolatier'. Rather than simply embark on a new ad campaign or, God forbid, a rebrand, Thorntons built its brand from the inside out and back to the premium position it once occupied.

But Burdon's boldest move has been the widespread revision of Thorntons' retail strategy. With a core base of 400 Thorntons-owned stores, he also encouraged an expansion of Thornton franchisees, of which there are now 180. More radical still was his decision in 2001 to start selling in Sainsbury's and later through most of the major chain retailers and supermarkets.

Initially, at least, selling through Big Retail made a lot of sense.

Brand Equity Can Taint Perceptions

A couple of years ago I was invited to make a series for the BBC about brands. In one episode we went to a London pub to recruit brand-loyal drinkers in a London pub who claimed that they drank only one particular beer.

Invariably these drinkers cited the taste of their chosen beer brand as the reason for their loyalty, and when asked if they could identify their choice without the aid of the logo, each was certain they could.

We took these drinkers to the corner of the pub, where we had set up a blind-taste test. Three pints of beer marked A, B and C were set out on a table and the drinker was given one minute to identify their favoured brand from two imposters.

What the drinker did not know was that not only were all three beers identical, but they were all from a rival brand to the one they usually drank.

Exclusivity: Brand Equity Power

I have always been a working smoker. While I never touch the evil weed at home, I accept the occasional one when I am consulting, for a very simple strategic reason: you can learn more from a fellow smoker in five minutes outside headquarters than you could glean in three weeks with the chief executive.

I am currently in Shanghai, where my professional smoking routine is pushing me to the edge. Rarely does a break, meal, or drink pass here without a five-minute session of mass inhalation. True to form, my dirty habit has not been in vain. Over the past week I have learned a lot about an impressive luxury brand: Panda cigarettes.

Perhaps we have been too quick to assume that the flow of brands and branding expertise is all heading East. The Shanghai Tobacco Corporation, which produces Panda, could teach many marketers a thing or two about building brand equity.

For starters, Panda understands the importance of dynamic targeting. The real art to this is more like dominoes than archery: an initial small, influencing segment can often have more success in bringing others to a brand than a more obvious attempt to reach everyone immediately.

The Language of Branding: 'Brand Equity'

Brand Equity is the commercial value of all associations and expectations (positive and negative) that people have of an organization and its products and services due to all experiences of, communications with, and perceptions of the brand over time.  This value can be measured in several ways: as the economic value of the brand asset itself, the price premium (to the end consumer or the trade) that the brand commands, the long term consumer loyalty the brand evokes, or the market share gains it results in, among many others. From an economist’s perspective, brand equity is the power of the brand to shift the consumer demand curve of a product or service (to achieve a price premium or a market share gain).

To use a metaphor, brand equity is like a pond.  People may not know how long the pond has been around or when it first filled with water, but they know that it supports life, from fish and frogs to ducks and deer.  It also may be a source of recreation, irrigation and possibly even human drinking water.  Clearly it is a valuable resource.  But many people take the pond for granted.  It seems as if nothing can diminish its supply of water, but yet we sometimes notice that it rises with the spring rains or lowers after a long draught or excessive overuse for irrigation.  Brand equity is a reservoir of goodwill.  Brand building activities consistently pursued over time will ensure that the reservoir remains full while neglecting those activities or taking actions that might deplete those reserves will reduce the reservoir, imperceptibly at first, but soon all too noticeably until it is too late and all that is left is mud.

Brand Equity Measurement

Brand equity studies should measure the following for your brand and each of its competitors, with responses reported separately for different user segments:

• Awareness
• Convenience/accessibility
• Perceived value (including quality and price sensitivity)
• Rank in consideration set
• Preference
• Usage
• Relevance
• Differentiation
• Vitality
• Emotional connection
• Loyalty
• Multiple personality attributes
• Other brand associations

Sponsored By: Brand Aid

Case Study: Brand Equity in the Insurance Industry

The findings from our comprehensive brand equity study of the insurance industry has implications for many industries. Here is what we found:

•While there are over 100 insurance brands whose names people have heard of, few achieve widespread top-of-mind awareness (first recall).

•The insurance industry is highly fragmented with a low dominance of usage and preference by a few brands.

•Very few companies are aggressively claiming relevant differentiating benefits in consumer communication. The few that are, are rapidly gaining market share (witness GEICO which is claiming price/value leadership in auto insurance with substantial advertising support).

•Prices/rates are cited as one of the top differentiating benefits, suggesting that the category is commodity-like for many consumers.

•While behavioral loyalty is high, attitudinal loyalty is much lower, indicating a consumer's propensity to switch companies when the switching becomes easier (something the Internet might facilitate).

•Emotional connection to insurance brands is very low. Less than one in five consumers say that their insurance brand has never disappointed them. (The top brand on this measure disappointed two thirds of its customers at some time. All brands below the top eight on this measure disappointed over 90% of their customers.)

•Our analysis of the most powerful differentiating benefits indicate that many of them lie with the way in which insurance agents/representatives and the claims adjusters interact with customers.

•Our data would indicate that the industry is ripe for consolidation or strong niche marketing.

Three opportunity areas emerged for insurance companies:

1.Reinventing the process by which they interact with their consumers.
2.Claiming a highly relevant, unique point of difference (focusing on a product category, a consumer benefit or both).
3.Increasing emotional connection with their consumers.

The study provides the following lessons that are applicable to other industries:

Exploring Brand Equity Measurement

"You can’t manage what you don’t measure.”

This is especially true of a brand and its equity. A robust brand equity measurement system will accomplish the following objectives:

•Measure the brand’s equity across a variety of dimensions at different points in time over time
•Provide diagnostic information on the reasons for the changes in brand equity
•Gauge and evaluate the brand’s progress against goals
•Provide direction on how to improve brand equity
•Provide insight into the brand’s positioning vis-à-vis its major competitors including its strengths, weaknesses, opportunities and threats
•Provide direction on how to reposition the brand for maximum effect

The Blake Project has identified the following five attributes that drive customers to insist upon specific brands: awareness, relevant differentiation, value, accessibility and emotional connection.

These brand insistence drivers work together to move customers from being aware of your brand and preferring your brand to purchasing your brand and being loyal to your brand. Our chart demonstrates how this works...
(click on the image for a larger view)
 

A Brand is a Friend

People often ask me, “What is brand equity?” There are many ways to answer this. Some would say it’s everything associated with the brand that adds to or subtracts from the value it provides to a product or service. Others would emphasize the financial value of the brand asset. Still others stress the consumer loyalty or price premium generated by brand equity. Some even talk about the permission and flexibility a brand gives an organization to extend into new product and service categories. While all of these are very important parts of brand equity, I think a story is the best way to illustrate what brand equity is.

Imagine you are having lunch with a long-time and very good friend. Several times throughout the lunch, she makes disparaging and sarcastic remarks that make you feel bad. You think to yourself, “This just isn’t like her. She must be having a bad day.” You meet with her again a week or two later, and again she acts ornery and negative. You think to yourself, “Something must be going on in her life that she’s really struggling with.” You might even ask her if everything is all right. She snaps back, “Of course it is.”

Your interaction with her continues in this vein over the next couple of months. You continue to try to be supportive, but she’s definitely getting on your nerves. After many meetings and much interaction, you finally decide that she’s a changed person and someone with whom you prefer to spend less and less time. You may get to this point after a few months, or perhaps even after a year or more. She doesn’t change, and eventually the relationship peters out.

Measuring Brand Equity

We are often asked about brand equity measurement.  This is one of our favorite topics.  We just completed an omnibus cross-industry brand equity study as well as an insurance industry brand equity study.

When people talk about measuring brand equity they usually mean one of two things:

(a) measuring the value of the brand as a financial asset
or
(b) measuring brand equity

Measuring the financial value of the brand usually converts the CFO to a staunch brand supporter and gets the organization to view brands as assets that must be maintained, built and leveraged.  In his book, Managing Brand Equity, David Aaker writes about several approaches to valuing a brand as an asset.  Interbrand has a methodology to help public and private companies measure their brands’ values.  Financial World, a recently defunct publication, annually ranked top brands by their financial values  (estimating the Coca-Cola brand to be worth $48 billion in 1997). 

Measuring brand equity helps you to maintain, build and leverage brand equity  (that is, it helps you to understand how to increase both the “A” and the “R” in the brand’s “ROA”).  I will spend the remainder of this post expounding on (b) measuring brand equity.

To better understand how to build brand equity we must first agree to a definition of brand equity.  My favorite definition is as follows: brand equity is the value (positive and negative) a brand adds to an organization’s products and services.  Brand equity may ultimately manifest itself in several ways.  Three of the most important ways are as the price premium (to consumers or the trade) that the brand commands, the long-term loyalty the brand evokes and the market share gains it results in.

The Blake Project’s brand equity model is most interested in one thing, moving consumers from brand awareness and brand preference to brand insistence.  To do this, we have identified the major factors that lead to consumer brand insistence.  We call them brand equity drivers: