Brand Equity and Associated Metrics - Literature review Example

Brand Equity and Associated Metrics University Course: Instructor’s Name: Student’s Name: 1.0 Introduction Branding discourse occupies central role in most marketing literatures and real life business situation. In the ever growing competitive market where there is consistent proliferation of new brands, brand equity becomes a core phenomenon in outwitting competition. Brand equity and associated metrics is critical in delivering competitive advantage through formulation of customer centred strong brands as result of the premise that it empowers organisations to differentiate their products and establish the impact of brand awareness on consumer response. In this regard, the purpose of this paper is to assess why marketing management might and might not use brand equity and associated metrics. The article argues that marketing management might use brand equity and associated metrics since they are integral in formulation of customer-centred strong brands, formulation of product line and extension strategies, for accounting & merger purposes, critical in creation of barrier to entry and so on. On the other perspective, the paper argues that marketing management might not use brand equity and associated metrics owing to the challenges of not being able to convert raw data into insightful information and difficulty associated with choosing right metrics. 2.0 Measuring Marketing Activity Marketing plays an integral role in ensuring market leadership of an organisation by informing organisations in customer needs and the best way to address them through various strategies so as to deliver demand driven value. Petersen et al. (2009) notes that more than ever there has grown a significant need by marketers to justify marketing expenditures to the firm. Such aspiration is only plausible if a direct nexus between marketing metrics and future customer value and firm performance can be measured (p.95). Measurement of marketing impact can be established through various metrics such as brand equity and other associated measurements such as market share, perceived product/ service quality, segment/ lifetime value, brand value metrics, customer value metrics, word of mouth and referral value metrics, retention and acquisition metrics, cross-buying and up-buying metrics, multi-channel shopping metrics and product return metrics (see for example Petersen et al., 2009, p.97; Barwise & Farley, 2004, p.254). 2.1 Brand Equity In almost every sector of the economy there has been continual proliferation of brands. Brand is a significant phenomenon in empowering producers to differentiate their products from other competitors (Wood, 2000, p.662; Tuominen, 1999, p.65). This is anchored on the realisation that it presents an intangible asset that affirm can leverage on (Aaker, 2009). This implies that brand management has to be of considerable interest to firms as strong brands are sure path to unrivalled performance (Kim, 2008, p.88). Brand managers have to be in a position to determine or measure brand significance in a market and this is possible through brand equity. Brand equity concept is usually deconstructed within the domain of customer-brand relationship and as such, Wood (2000, p.662) is of the view that brand equity consists of three integral parameters which are total value of a brand as a separable asset when sold, measure of the strength of consumers attachment to a brand and associations and beliefs that consumers have about a brand. Lassar, Mittal, & Sharma (1995, p.11) conceptualises brand equity in regard to brand strength and brand value. Brand strength is an indicator of brand association held by consumers while brand values “are the gains that accrue when brand strength is leveraged to obtain superior current and future profits”. On the other hand, Kohli & Leuthesser (2001, p.74-75) conceptualises brand equity as “the differential effect of brand knowledge on customer response”. In his conceptualisation, absence of differential effect implies that a given brand is not able to distinguish itself from other competitors and as such the customers cannot seek premium. The second aspect of their definition is awareness that allows the customers to appreciate the significant of differentiation and lastly response capability and in particular positive response that would elicit brand loyalty and repeat purchase. Ultimately this can be through approaches such as cojoint analysis, tradeoffs between brands and brand preferences (Ulrich & Reibstein, 1998, p.356). 2.2 Associated Marketing Metrics Petersen et al. (2009, p.95) observes that there are myriad of marketing metrics to choose from. Kumar (2008) identify one of the metrics as customer lifetime value. Barwise & Farley (2004, p.254) identify metrics such as market share, perceived product quality and segment lifetime value. On the other hand Petersen et al. (2009, p.97) identify metrics such as retention and acquisition metrics, customer value metrics, cross-buying and up-buying metrics, brand value metrics, multi-channel shopping metrics, word of mouth and referral value metrics and product return metrics. Other metrics include, loyalty/ retention, sales volume/ value, number of complaints, customer satisfaction, number of new customers, marketing spend, profitability, brand/ product knowledge, awareness and so on (Solcansky, Sychrova & Milichovsky, 2011, p.1325). 3.0 Why marketing management might and might not use brand equity and associated metrics 3.1 Using brand equity and associated metrics Lassar, Mittal, & Sharma (1995, p.11) summarises the whole justification of why a firm might employ brand equity. According to them, brand equity is an integral concept in marketing literatures and in business environment owing to its core role in delivering competitive advantage as it ensures opportunity for successful product line extensions, aids in resilience against competitors, protect the firm against promotional pressures and it constitute integral tool for creating barrier to competitive entry. Use of brand equity can either be customer or financial based (Lassar, Mittal, & Sharma, 1995, p.12; Keller, 1993, p.1). Solcansky, Sychrova & Milichovsky (2011, p.1325) notes that marketing metrics are integral in pointing at financial indicator, measurement of market, measurement of customer behaviour, measuring customer movement, measurement of direct customers and measuring innovation. As such, this section examines why marketing management might use brand equity and associated metrics. 3.1.1 Integral in building strong brands Firms exist to deliver value to customers. However, firms cannot effective deliver value to customers is they do not know their brand value. Madden, Fehle & Fournier (2006, p.225) established that “most valued brands lists and reported a positive relationship between financial brand values and market-to-book ratios”. In spite of such realisation, one cannot build a strong brand or establish performance of the brands in the market so as to inform marketing mangers on how to strengthen the brand if they are not in a position to measure it. Indeed, brand equity offers a platform for measuring brand value and thus, informing brand managers on possible blue prints that can be adopted to solidify of strengthen the brand in the market (Petersen et al., 2009, p.95). Indeed, the question that would linger in one’s mind is how such requisite strong brand can be attained or what is the role of brand equity determination in informing formulation of strong brand or development of blue prints for attaining strong brands? The answer lies in the realisation that brand equity is a sure path in establishing consumers’ attachment to a brand and description of the association and belief the consumer has about the brand (Wood, 2000, p.662). Brand equity would allow firms to establish brand responses – what customers think or feel about their products and brand relationship/ association – connection customers would like to have (Keller, 2001, p.71). As such, brand equity is significant in aiding firms to develop blue prints for creating strong brands which is a sure way of gaining financial rewards and market dominance (Keller, 2001, p.68). 3.1.2 Accounting & merger purposes In another perspective, Keller (1993, p.1) advances the rationale why marketing management might use brand equity as being informed by two core advantages. In his perspective, firms are likely to employ brand equity as driven with financial motivation that seeks to establish the value of brand in a precise manner for accounting purposes. In this regard, total value brand is regarded as a separable asset when sold or considered in a balance sheet (Wood, 2000, p.662). Secondly, marketing mangers might use brand equity since it is integral during the process of merger, acquisition or divestiture purposes. For instance, Lassar, Mittal, & Sharma (1995, p.11) observes that “90% of the total price of $ 220 million paid by Cadbury-Schweppes for the Hires and Crush product lines of Procter& Gamble is attributed to brand assets. 3.1.3 Establishing product-line strategy and brand extensions Product line strategy is an important competitive function the firms have to pursue in order to differentiate from competitors and deliver value to consumers. A company can decide to invest in economy or premium high quality product. However, the concern for a brand manager especially within a firm with diverse portfolio is the impact of adopting economy or premium high quality products on the brand equity associated with the other products in the line (Randall, Ulrich & Reibstein, 1998, p.356). Out of a strong brand equity, affirm can engage in brand extension by leveraging on the good name (Kim, 2008, p.91). 3.1.4 Customer centred relationship management and creating competitive resilience Under the porter’s competitive model, threats to the existence of an existing business stem from existing competitors and new entrants. Ability to effectively contain such threats is critical in ensuring market leadership. Knowing the capability of competitors in terms of customer value that competitors create is integral since it empowers a firm to launch a counter strategy through value innovation that can be used to capture new demand. One way of creating the required competitive resilience is by locking in customers and locking out competitors. To attain such aspirations, marketing metrics are central as they can be used for long or short term purposes and predictions. For instance, the goal of a firm can be to create awareness of a brand (Petersen, 2009, p.97). Petersen et al. (2009, p.97) notes that marketing metrics can be utilised for strategic & tactical marketing purposes. This rests on the fact that a marketing personnel in applying marketing metrics can be in a position to manipulate customer’s predicted referral value score so as to establish which customer to target next time with referral incentives. Additionally, a brand manger can tactically utilise each customer’s predicted value to outline which select customers should qualify for a particular marketing drive that encourages cross-buying, up-buying and or multi-channel shopping. 3.2 Not using brand equity and associated metrics Why marketing managers might not use brand equity and associated metrics is anchored on the premise that conversion data into actionable insight is not easy encounter and such this challenge might act as an impediment to utilising brand equity. Data is only important if it can be converted to information that can be acted upon. If the information cannot be acted upon then it becomes redundant and a pure clutter. For instance Rogers & Sexton (2012, p.5) notes that “39% of marketers say they cannot turn their data into actionable insight”. The above problem is compounded by the fact that in certain circumstances even though they are able to collect data, the greatest obstacle lies on the fact that most organisations might not be sharing and utilising the said data effective. For instance, Rogers & Sexton (2012, p.6) established that “51% of all marketers say that a lack of sharing customer data across their organisation is an obstacle to effectively measuring their return on investment”. The next rationale why marketing managers might not utilise brand equity and associated metrics rest on the challenge that choosing right metric is not devoid of challenges thus presenting fraught and pitfalls. For instance, if a firm does not adopt customer centred metrics, they might find themselves addressing wrong issues. For instance, in a given study, a credit card company strived to produce cards with no blemish. However, after review, they found out the customers were not interested in the blemish in the plastic card so long as the magnetic chip was functioning. As such companies might find themselves diverting resources from issues that matter most to customers (Hauser & Katz, 1998, p.518). The issue of choosing right metrics is corroborated by Seggie, Cavusgil & Phelan (2007, p.838) who notes that it is difficult to find amongst the metrics suitable one that is able to address the seven critical parameters which include financial, forward looking, long-term, micro, relative, causal and objective. Hauser & Katz (1998, p.519-526) identifies various pitfalls that could lead to counter-productive metrics as including delaying rewards, using risky rewards, making metrics hard to control, choosing metrics that are precisely wrong and thinking narrowly. 4.0 Conclusion The concern of the article was to examine why marketing management might and might not use brand equity and associated metrics. The paper established that brand equity and associated metrics might be used by marketing managers as path towards building strong brands, as indicator for financial & merger purposes, for brand extension purposes and for developing customer centred relationship. On the other hand, the paper established that marketing metrics might not be utilised by marketing managers owing to challenges such as difficulty in converting data into insightful realms, sharing of information and choosing most appropriate metrics. References Aaker, D. A 2009, Managing brand equity, Simon and Schuster. Barwise, P & Farley, J. U 2004, Marketing Metrics: Status of Six Metrics in Five Countries, European Management Journal, Vol. 22, No. 3, p. 257-262. Hauser, J & Katz, G 1998, Metrics: you are what you measure!. European Management Journal, Vol. 16,No. 5, p. 517-528. Keller, K. L 1993, Conceptualizing, measuring, and managing customer-based brand equity, The Journal of Marketing, p. 1-22. Keller, K 2001, Building customer-based brand equity: a blueprint for creating strong brands (pp. 68-72), Marketing Science Institute. Kim, W. G 2008, Branding, brand equity and brand extensions, Handbook of hospitality marketing management, p. 87-118. Kohli, C & Leuthesser, L 2001, Brand equity: Capitalizing on intellectual capital. Ivey Business Journal, Vol. 65, No. 4, p. 74-82. Kumar, V 2008, Customer lifetime value: The path to profitability, Now Publishers Inc. Lassar, W., Mittal, B & Sharma, A 1995, Measuring customer-based brand equity, Journal of consumer marketing, Vol. 12, No. 4, p. 11-19. Madden, T. J., Fehle, F & Fournier, S 2006, Brands matter: an empirical demonstration of the creation of shareholder value through branding, Journal of the Academy of Marketing Science, Vol. 34, No. 2, p. 224-235. Petersen, J. A., McAlister, L., Reibstein, D. J., Winer, R. S., Kumar, V & Atkinson, G 2009, Choosing the right metrics to maximize profitability and shareholder value, Journal of Retailing, 85(1), 95-111. Randall, T., Ulrich, K & Reibstein, D 1998, Brand equity and vertical product line extent. Marketing science, Vol. 17, No. 4, p. 356-379. Rogers, D & Sexton, D 2012, Marketing ROI in the Era of Big Data, London. Seggie, S. H., Cavusgil, E & Phelan, S. E 2007, Measurement of return on marketing investment: a conceptual framework and the future of marketing metrics, Industrial Marketing Management, Vol. 36, No. 6, p. 834-841. Solcansky, M., Sychrova, L & Milichovsky, F 2011, Marketing Effectiveness By Way of Metrics, Economics and Management, Vol. 16, p. 1323-1328. Tuominen, P 1999, Managing brand equity. LTA, Vol. 1, No. 99, p. 65-100. Wood, L 2000, Brands and brand equity: definition and management, Management decision, Vol. 38, No. 9, p. 662-669. Read More