How to Measure Branding?
“The most effective way to cope withchange is to help create it” -I.W. Lynett
Brand is probably the most valuable marketing asset that has unique marketing power for many well known large consumer product companies. Companies spend years and millions of dollars to build and develop brands. Unfortunately, when it comes to measuring the power and effectiveness of a brand, there are no easy answers.
Marketing experts have suggested various approaches to measure the value of a brand, most of which are based on quantifying the perception of customers through market surveys. A few of more common and well accepted metrics are as follows:
1. Brand Awareness:
Brand awareness is a simple metric used to quantify the popularity of a brand among the prospective customers. It measures the effectiveness of brand campaigns. The measurement is based on a scoring system developed through customer surveys. The questionnaire asks customers typical questions like:
Based on the statistics obtained through surveys, a comparative brand awareness chart can be developed for own brand and that of closest competitors. The surveys provide meaningful results to measure the effectiveness of a brand campaign if carried out before and after the campaign.
2. Brand Equity:
There are various approaches suggested by various marketing experts how to measure brand equity. One approach suggested by Roger J. Best, Emeritus Professor of Marketing from the University of Oregon, is to consider the brand equity like owner’s equity on a balance sheet. He suggests the following formula:
Best sees brand as comprising of five primary assets: Brand Awareness, Market Leadership, Quality Reputation, Brand Relevance and Brand Loyalty. He suggests companies to compare their own brand to that of an average brand in their market and score each of the five brand assets on a scale of 1 to 20. This should give a maximum possible score of 100.
He suggests a similar framework for Brand Liabilities which he identifies as: Customer Dissatisfaction, Environmental Problems, Product or Service Failures, Lawsuits and Boycotts, and Questionable Business Practices. Similar to brand assets, these liabilities have to be scored against the benchmark brand or company. To compute an index for Brand Equity, the brand liabilities have to be subtracted from brand assets.
Other simpler approaches suggested by other experts include taking the market value of a company and subtract the book value of assets as shown on the balance sheet. The residual reflects several important intangible assets like intellectual property, human capital, profit potential etc. but a large portion of that value can be ascribed to the brand or reputation of the company.
An even more financially focused valuation model suggests subtracting all the marketing costs from the total revenue to result in a value that is considered a fair representation of the magnitude of brand value. This valuation model may cater to the needs of those who want to see a financial value for this most critical and important marketing asset.
3. Response Rate:
With increasing pressure on companies to improve the productivity and efficiency of the overall operations, marketers are under pressure to improve the productivity of their campaigns wherever possible. One of the metrics to measure the effectiveness of short term direct marketing activities is to measure the response rate. Response rate is also considered a barometer of the long term popularity of a brand.
This response rate describes the leads generated only and is not a guarantee of purchase. The leads converted into actual purchases are measured as Conversion Rate (explained next). The responses from a campaign are dependent upon ‘call of action’ as described in the offer. The offer may not necessarily be to buy something. It may simply be for a trial or motivating to request more information from the seller. But the response rate shows the interest of the prospects as well as the popularity of the brand.
Response rates vary based on the medium used for marketing campaigns. Depending upon the costs involved, a higher or lower response rate may be acceptable. In recent years with the advent of internet, online direct marketing has established a prominent place in the overall marketing mix. With its minimal costs, it is now possible for marketers to build the confidence and trust with the customers with multiple email campaigns in a phased approach. This however requires a progressively positive response rate from such campaigns.
4. Conversion Rate:
Conversion rate is an important metric that measures the conversion of leads into actual purchases. It is the next metric after Response Rate to measure the success of a campaign. Conversion rate is also impacted by the popularity of a brand. For example, a promotional offer from Apple is expected to yield a much higher conversion that an unknown or lesser known brand.
Companies always strive for higher conversion rates. However, for a prospect to respond to a promotional offer as well as actually buy the product or service requires not only a strong and persuasive campaign but also a compelling value proposition through a good balance of price, quality, features etc.
Another means to achieve higher response and conversion rate is to target a quality list of prospects. If the proposed product or service is customized to the needs of the target prospects, the chances of response and conversion are higher.