Brand Equity Management

From the buyer's (or user's) perspective, brand equity can be considered to be the "guarantee of satisfaction" they feel your brand name conveys to them. As such, it represents the likelihood that, all other things being equal, they would prefer to choose your brand rather than your competitor's whenever the needs arises.

From the brand owner's perspective however, brand equity is the strength the brand name itself has as a guarantor of future cash flows, from whatever products or services it is associated with.

And as is immediately obvious, these two are inevitably linked, with the latter stemming directly from achieving the former.

Our Brand Equity Management service (BEM) is designed to provide you with the data, tools and knowledge to continually deliver these two mutually dependent objectives. Delivering on the one hand, the maximum preference for your brand and on the other, the maximum expected financial income from the brand and thereby, the maximum expected benefit to your stakeholders.

How It Works

Brand Equity is a simple concept yet devilishly difficult to put a single formula on. This is because it is a mix of both rational and emotional dimensions.

Over the years we have seen many alternative variants proposed and used. Some tend to be inherently more 'attitudinal', focussing on the emotional elements. Unsurprisingly these tend to be the types of measures favoured by market research agencies. Some are strongly financially based, and consider the strength of the brand in terms of its expected future cash flows.

Our BEM service respects these different perspectives and differing stakeholder needs and we adopt a flexible and holistic approach to fit with our client's individual circumstances. The service comprises three key components.

Firstly, our Effective Net Preference measure (ENP) is used to summarise the probability that, other things being equal, buyers/users would choose your brand, rather than your competitor's, as the solution to their current need. For a fuller explanation of ENP, visit Effective Net Preference .

The data to do this assessment normally comes from your existing U&A, Brand Tracking or Media Tracking surveys but if you do not have sufficient data we can collect it for you. An initial Feasibility Study of between 2 and 3 weeks at the very start will confirm sufficient data exists and what the project plan should be.

Secondly, volumetric analysis of the brand's market size and share growth potential coupled to a straightforward DCF financial model converts the strength of preference measure (ENP) into a value measure that both marketers and non-marketers can relate to. Moreover, the same analyses are applied to your competitor brands so that the results can be seen in relative as well as absolute terms.

Finally, we then compare the relative strength of preference for your brand compared to your competitors with the brands current relative price. This trade-off is represented in diagram 1 below. This comparison enables us to see whether the current price being charged is too high, too low, or about right, relative to buyer/user perceptions of the relative guarantee of satisfaction they feel your brand is providing.

The ultimate aim is to ensure that your brand is achieving the right balance between relative price and relative preference now and into the future.

Benefits

The information the service provides thereby enables marketing management to know how to increase brand value - not just volume share - and whether, and by how much, this needs to come from managing price or preference or some combination.

What's more, progress can be tracked over time by updating the analyses, plans adapted to meet changing market conditions and various "What if...?" scenarios carried out to determine the most profitable brand strategy.

In addition, given the fact that many brand managers are immersed in the daily detail of designing and delivering marketing programmes, having an objective external annual or bi-annual review of whether and how brand value is being built or maintained is a highly useful tool in itself.

The ultimate value of the service, however, comes from the gains in preference, revenue and profit - both current and expected - that using (the knowledge provided by) the service enables. It does not take the decisions for you but it does provide a robust and justifiable way to know where to focus your efforts and know what the "size of the prize" will be. One of our existing clients summarised it as follows:

"RedRoute have reliably evaluated the likely impact of alternative marketing strategies and tactics for us on repeated occasions, which has enabled us to meet and overcome numerous new and challenging marketing conditions. Their predictions have proved to be very reliable, enabling us to feel confident we are making the right decisions for the right reasons every time."
Andrew Smith, Regional CEO, Olayan Group


Another example is for a major office supplies company where, in 2009, we identified that brand equity was being held back by a mixture of weak brand awareness and a relative price that was out of line with the company's relative ENP position.

Following this assessment the company relaunched the brand, including using TV advertising for the very first time. They also took steps to manage their pricing more effectively, reigning-back where possible.

After a sustained two year campaign, their ENP had risen x points adding £ym to sales and £xm to the value of the brand.

Process

Using the RedRoute BEM service begins with initial assessment of your brand's current ENP and relative equity value. This consultancy exercise takes 4-6 weeks to complete. To check that sufficient data exists to enable the assessment to be done an initial 2-3 week Data Feasibility Study is usually undertaken. This ensures that the assessment results will be robust and identifies any data gaps that may need to be filled before it proceeds.

The second phase of the service is scenario planning where we work with you to evaluate alternative marketing options to identify both the most profitable strategy and also the most appropriate way to implement it - marketing investment to improve buyer/user preference, price management, or some combination.

The final phase is an annual or bi-annual refresh of your brand equity position including diagnostics on your brand's relative competitive strength across each of the five key drivers of ENP (Relevancy, Brand Identification, Accessibility, Value and Confidence - for more details on the drivers of ENP see Effective Net Preference ). This provides you with quantifiable data on the opportunities and threats to increasing brand value and a means to evaluate alternative options.