Recently we’ve been asked about measuring brand equity. This metric is increasingly important given the brand impact of social media, word of mouth, social networks, etc. As are result, we turned to some of the pioneers in the brand measurement space to provide a foundation for how to measure brand equity in a customer-driven environment.
Longtime marketing veterans may recall that in the early 1990s David Aaker grouped brand equity into five categories:
- Perceived quality,
- Brand loyalty (the degree to which a buying unit concentrates its purchases over time on a particular brand within a product category; that is, buyers’ intentions to buy a brand as their primary choice),
- Brand awareness (the ability of a potential buyer to recognize or recall a brand as a member of a certain product category),
- Brand association (anything “linked” in memory to a brand), and
- Proprietary brand assets (such as patents, trademarks, channel partners, etc.). K.L.
Brand equity-related research defines strong brand equity as: customers have high brand-name awareness, maintain a favorable brand image, perceive the brand to be of high quality, and are loyal to the brand. According to Aaker, brand loyalty adds considerable value to a firm because it provides a set of habitual buyers for a long period of time. In 1993, Kevin Lane (K.L.) Keller coined the term customer-based brand equity as the “differential effect of brand knowledge customer response to marketing the brand.” Customer-brand equity occurs when buyers have a high level of awareness and hold some strong, favorable and unique brand associations in their memories. In 2004, W. G. Kim and H. Kim found that strong, positive customer-based brand equity has a significant influence on the financial performance of the firm.
Research continues to suggest that in our customer-centric environment the two dimensions that have the most significant effect on brand equity are:
- Brand association/image
- Brand loyalty
Since most marketers will continue to have limited money, time, and people, it is important to be able to prioritize and allocate resources across the brand equity dimensions. So while according to BtoB Magazine, brand awareness is the second leading objective of US B2B marketing efforts, if your resources are constrained, your time and money might be better spent on improving and measuring brand loyalty and brand image. These two dimensions will have the greatest impact on improving brand equity and are therefore the best leading key performance indicators. As brand loyalty and brand image move to the right, so will brand equity.
Measuring Brand Loyalty
In 2006, Alain Samson, from the London School of Economics and Political Science, published an article in the International Journal of Market Research, “Understanding the Buzz That Matters: Negative vs. Positive Word of Mouth.” He suggested a new equation for measuring brand loyalty that includes both Positive (P) and Negative (N) word-of-mouth (WOM), He argues that PWOM is a good measure to capture both loyalty and advocacy among existing customers, and that NWOM may also have a strong effect on purchase decisions by potential customers. His new metric is called the “LSE Net Advocacy Score.” and combines the Net Promoter Score with reported NWOM, and is calculated as follows:
LSE Net Advocacy Score = NPS – NWOM
(NWOM refers to the percentage of customers reporting making very negative comments in the past 12 months.)
According to Samson, a two-point increase in the Net Advocacy Score roughly corresponds to a 1 percent increase in revenue growth.
Measuring Brand Image/Association
There are a number of ways to measure brand image/association including personality list (Jennifer Aaker 1997), projective techniques, laddering methods (Reunolds and Gutman 1988), and the Zaltman Metaphor Elicitation Technique (Zaltman and Higie 1993). All of these techniques are designed to help you evaluate the strength of, and favorability to, an association with a brand.