The Metrics Of Brand Equity

Martin RollApril 27, 200916962 min

There are several stakeholders concerned with brand equity, such as the firm, the customer, the distribution channels, media and other stakeholders like the financial markets and analysts, depending on the type of company ownership. But ultimately it is the customer who is the most critical component in defining brand equity as it is his/her choices that determine the success or failure of the company and the brand.

Customer knowledge about the brand, the perceived differences and its effects on purchase behavior and decisions lies at the heart of brand equity. The knowledge and associations attached to the brand result in choices which have a direct impact on the brand’s financial performance and shareholder value.

Brand equity is the combined measure of brand strength and consists of three sets of metrics: knowledge, preference and financial. Each of the measures under these three metrics is critical and the boardroom must ensure that the brand portfolio scores high in each of these parameters to optimize the financial outcome from strong brands.

Knowledge Metrics measures 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. It is crucial for brands to score high on both awareness and association attributes to establish and sustain their presence in the market place.

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 towards the brand which ranges from mere awareness and familiarity to strong loyalty and recurrent revenues from the customer base. A strong brand has the brand equity to move its customers through the preference funnel towards 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 facilitate a company to estimate an accurate financial value of brand equity.

A comprehensive evaluation of brand equity involves measuring all the above three metrics as it ensures that the brand and its strength is valued in totality.

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Martin Roll

2 comments

  • Peter Thomson

    April 27, 2009 at 2:30 am

    Your categories of Knowledge, Preference and Financial metrics are broadly similar to design metrics that track progressive changes in:

    1. Attitudes
    2. Behaviour
    3. Outcomes

    We’ve found that companies do need to keep on top of all three categories as they develop their brands. Many have a tendency to focus only on one area.

  • Eric Tsai

    April 29, 2009 at 12:00 am

    Excellent points on brand equity. I would add to it that brand equity fluctuate and perceived value shift just like your reputation. In this economy there has been a disruption of confidence and trust and brand equities are being tested in all 3 areas.

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