Marketing and Reasons for Metrics Selection - Case Study Example

Table of Contents Introduction 02 Brand Equity 02 Metrics associated with Brand Equity 03 Importance of Brand Equity and Associated Metrics 05 Why Brand Equity and Associated Metrics must not be used 07 Brand Impact 07 Conclusion 08 References 09 Introduction ‘What’s not measured is not managed.’ Understanding of this catchphrase proves that to complete the process of marketing and its management the studying of brand equity and proper evaluation of the same becomes very important for any organisation. Brands are becoming very important in the modern era of business and the customers are becoming more and more brand conscious and loyal towards particular brands from which they have previously attained use satisfaction. With the increasing technology, unlike the traditional ways of business, firms today are armed with reams of data, sophisticated tools and rising evidences proving that old tricks are simply getting obsolete and out of work has induced organisations to follow the path of brand awareness and brand equity. In this assignment we study about brand equity and associate metrics which are used by companies and how they are measured. Further we come across the importance it adds to both the organisation and the customers and also the barriers in its way. Then we come across the brand impact which gives a complete reasoning for the firms to use the concept of branding and brand equity to add advantage to its marketing strategies and also complete the process. Brand Equity Brand equity is actually the value of the brand in the marketplace. It is a brand power which has been derived from the goodwill and recognition earned over the years transforming into higher sales volume and profit margins against the competing brands. It is a critical part of building the business and takes time and tests the patience, also involving a great deal of effort to build positive brand equity. Products with higher brand values are capable of creating positive differential response in the marketplace by adding a significant value to any product in the mind of the consumer. The ability of such brands which generate more value due to associations made by the customers is referred to as brand equity. The brand assigned to a product is just a name or symbol used for its identification but brand equity is something attainment of higher level of importance through proper management (Lee, Lee and Wu, 2011). Brand equity and brand valuation are one of the important metrics used by most organisations for the assessment of brand strength. Some of the brand equity metrics are relative perceived quality, loyalty or retention, total number of customers, satisfaction of customers, relative price, market share, and awareness and distribution ability. Metrics Associated with Brand Equity Brand equity is a combined measure of brand strength and includes three sets of metrics, namely knowledge, preference and financial metrics (Ambler, Kokkinaki and Puntoni, 2004). The metrics are used by different companies globally to evaluate the exact performance of their brand and also reap many more benefits. They are further discussed in detail: Knowledge Metrics: This is the measure of a brand’s awareness and association through the various stages of recognition, aided, unaided and top of mind recall. It is very important for a brand to score high on both awareness and association attributes for developing a strong presence in the market. Preference Metrics: This metric measures the brand’s awareness in the market and how it sets benchmark to other competing brands. Customers make a brand more preferential through from just a mere brand to a strong loyalty for it. A strong brand has the capacity to build strong customer loyalty through brand equity. Financial Metrics: The monetary value of a brand is measured through various parameters of market share, the price premium which a brand commands, revenue generation capability of the brand, transaction and lifetime value and the rate at which the brand sustains growth. A measure of some of them are as follows: a) Price Premium: The ability of a brand to command a price premium in the market is its financial advantage. Measuring different prices of different brands helps in value-creation and thus adding premium to the overall brand equity. b) Transaction Value: The average transaction value per customer is attained by dividing into segments, product segments and geographical markets. This calculation ensures a brand’s rise over other products through cross-selling or up-selling. c) Lifetime Value: The extraction of transaction value helps to find out that how much a brand extracts more value from the customers throughout their life cycle. d) Growth Rate: The level of brand strength and the loyalty of the customer towards the brand help in determining the future growth opportunities of the brand. The above described metrics helps in ensuring that the brand and its strength are valued in totality and helps in building the brand equity. Apart from these metrics there are few other core dimensions of brand equity and brand valuation, which are as follows: Brand Awareness: This is an important but sometimes undervalued component of brand equity. It is the ability of a product to create a place in the customers mind and that the customer recognises and recalls the brand form a certain category of similar products (Erdem, and Joffre, 2004). Perceived Quality: This is the quality of the product to meet the expectations of the customer. If a product does so than it increases the perceived value and makes a brand preference for the customer over the others. Loyalty: Loyalty is the attachment of the customer towards a brand. The loyal customers are a base for the organisation which helps in creation of price premium; respond to competitive innovations and cost saving for the company. Other Proprietary Brand Assets: This asset includes patents, trademarks, favourable channel relationship, etc. They are just the starting point of building a brand image for obtaining of competitive advantage. It is not a serious inclusion in brand equity but certainly does provides some hand to it. Importance of Brand Equity and Associated Metrics The brand of a product influences both the company and the customer adding advantages and are create value for both. There lies a special relationship between the companies and their brands. The brand equity adds advantage to the companies and we further discuss it in detail. A brand encompasses everything that is related to vision, mission, business strategy, and marketing and communication program. It is a serious long term investment and must deliver return on investment like other activities. The reasons why brand equity should be considered by marketing management are as follows: Premium Pricing and Higher Margins: Branding provides the company with a way out of commoditization and consequent profit erosion and the demand created option for higher prices. This is possible when the brand equity and its metrics are properly evaluated to create premium for price and higher level of margin increasing profitability. Increase the Value of the Company: The brand value adds to the market capitalization of the company which helps in exceeding the book value during mergers, acquisitions, licensing, joint ventures and other financial negotiations. Thus evaluating the brand equity adds to the brand value helping in increasing the value of the company (Doyle, 2001) Stock Market Performance: There exists an obvious link between branding and shareholder value creation. After passing out the risk factor, the companies with strong brand image are likely to outperform the market on several financial dimensions. Improved Financial Ratios: There is a significant impact of brand image on the financial ratios of the company, specially the liquidity ratios like current ratio and quick ratio which assists in measuring the ability of a company to meet its cash needs as they arise. Thus brand adds to the financial calculations for a company adding more stability to it. Improves Distribution: Brand equity is the value that the customers usually associate with the stores where such products are available providing a significant competitive advantage to the particular brand. With better distribution of a brand builds a better brand equity for the product and vice versa. Thus the above stated advantages prove that evaluating the brand equity and other metrics are very helpful for a firm to gain edge over the others in the same field or business. Apart from these the measurement metrics of brand equity helps the organisation to track marketing effectiveness giving them important information and can be converted into knowledge for future marketing campaign and referencing (Kapferer, 2008). These metrics are helpful in showing the marketers the exact content customer segments through customer trends and preferences. Brand equity is necessary from the prospective of the customer also as it enhances the customer’s perception of interpretation of the information which a brand delivers, gets more confident in purchasing decision regarding a particular brand and overall is satisfied after the use of the product which is the ultimate goal for the marketing team as a satisfied customer always is a loyal customer to the company which directly enhances the sales and profit (Martensen and Gronholdt, 2004). Why Brand Equity and Associated Metrics must not be used With a large number of organisations understanding the use of brand equity and associated metrics have started focusing on collection of large number of customer specific data. But it has been found that merely 5% of the entire data is ever analysed. So the best marketing performance requires not just assimilation of data but identifying the correct metrics and practice. Branding is considered as an expensive activity and the add-on costs are to be finally borne by the buyer or consumer. This makes the price of the product high and also a little imperfect evaluation shall lead to wrong results. Advertising adds maximum to the costs that is involved in promoting a new brand and not all companies find it suitable to apply all metrics of brand equity and proper measures of branding. Brand Impact Companies globally are realising the importance of brand and measuring of brand equity as the most important corporate asset. A strong brand has the power of attracting the maximum number of customers, warding off competitors, attaining favourable treatment from distributing channels and commanding a higher price (Baldauf, Cravens and Binder, 2003). The companies which have understood are investing more in activities that enhance the equity of a brand and the others should learn from the same. Marketing managers are required to measure the impact of marketing activities on brand equity and customer relationships like brand awareness, brand switching and brand loyalty. For example a bank, Standard Chartered Marathon Singapore, may not gain instant sales but community events would leave positive impact on a customer’s perception of the bank and increase brand awareness resulting in enhanced brand equity. This impact could be measured through the financial metrics. Thus it is commendable that companies should look positively in this direction to accept the process for better results of sales and profits keeping in mind the possible disadvantages and deriving plans as per to counter those problems and outshine with better and effective results. Conclusion Branding today is not a luxury and is a necessary for local, regional and global companies which look forward towards successful competence in the future. Brands are converting into major assets for the companies and so management of brand equity and other successful associated metrics are becoming very important for the marketing management team. The measurement of brand equity helps in providing the companies with an internal framework for strategic management and more accurate understanding of customers being brand driven effecting the long term profitability and loyalty. As studied in the project we come across some major advantages that a brand adds to the company and evaluating the brand equity is a direct valuation of brand. The barriers are always there in every aspect of management which has been studied and derived over the years but the impact proves that brand equity should be recommended to firms to improve their marketing as well as financial management. References Ambler, T., Kokkinaki, F. & Puntoni, S., 2004. Assessing Marketing Performance: Reasons for Metrics Selection. Journal of Marketing Management, Volume 20, pp. 475-498 Baldauf, A., Cravens, K. & Binder, G., 2003. Performance consequences of brand equity management: Evidence from organizations in the value chain. Journal of Product & Brand Management, 12(4/5), pp. 220-234. Doyle, P. 2001. “Building Value-Based Branding Strategies”, Journal of Strategic Marketing, Vol. 9 No. 4, 1 December, pp. 255-268. Erdem, T. and Joffre, S. 2004. “Brand Credibility, Brand Consideration, and Choice”, Journal of Consumer Research, 31 (June), 191-198 Kapferer, J.-N., 2008. The New Strategic Brand Management: Creating and Sustaining Brand Equity in the Long Run. London: KoganPage. Lee, H.-M., Lee, C.-C. & Wu, C.-C., 2011. Brand image strategy effects brand equity after M&A. European Journal of Marketing, 45(7), pp. 1091-1111. Martensen, A. & Gronholdt, L., 2004. Building Brand Equity: A Customer-Based Modelling Approach. Journal of Management Systems, 16(3), pp. 37-51. Read More