Measuring Brand Value. Is there an algorithm for that?

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The concept of brand value is one of the most debated topics in the marketing literature. While there are many methods of calculating brand value, Goldfarb et al. (2009) provide a pithy definition. The authors define brand value as the extra profit earned by a brand over and above what it would have earned based on its observable attributes. These observable attributes are product utility, size, packaging, and price. Another method is the premium-private calculation, or the difference between your brand's price and the private label substitute. These are examples of product-centric valuations of your brand,

However, those models measure brand value, and not equity. Brand equity looks at the equity the brand has built up with the customer, rather than a financial valuation calculation. And one of the most popular equity methods is Keller's (2016) Customer Based Brand Equity (CBBE) model, a maturity framework where a brand can progress through four levels with the customer, awareness, usage, judgement, and relationship. In contrast to the value centric models, this equity framework puts the customer squarely in the center of brand value. For example, first the consumer must be aware of your brand (L1; salience), and once aware they must find a need for it (L2; usage), and after using the product, form an opinion (L3; judgement) and finally after repeated usage, a loyal routine of buying it (L4: relationship). Naturally, the higher up the maturity ladder, the more brand equity and value. For instance, level 4 brands like Nike, Toyota, Coca Cola, and Apple enjoy a legion of loyal customers.

As a result, measuring this quantitatively is more of an art than a science. Measurement requires primary research to gauge the awareness of the brand, Net Promoter Score (NPS) to understand consumer usage and judgements, and finally recency, frequency, and monetary (RFM) calculations to understand lifetime value and loyalty. Many companies leverage pieces of the CBBE without attempting to measure their position in one of the maturity levels. In addition to a fragmented approach, your brand may fall into different maturity levels across your customer segments, so that adds even more complexity. So, there is no magical app to download to calculate brand equity. However, we can work with you to understand your customers better, which will help you baseline your maturity level.

JimSwallow@AnalyzeBrand.com

References:

Goldfarb, A., Lu, Q., & Moorthy, S. (2009). Measuring brand value in an equilibrium framework. Marketing Science, 28(1), 69-86.

Keller, K. L. (2016). Reflections on customer-based brand equity: perspectives, progress, and priorities. AMS review, 6, 1-16.

Sharp, B., & Romaniuk, J. (2016). How brands grow. Melbourne: Oxford University Press.