Brand Equity Basics - Part 3: How to Measure Brand Equity

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Posted Oct 12, 2011
Susan Gunelius

Now that you know what brand equity is and how to build brand equity, it's time to learn how to measure it in Part 3 of the Brand Equity Basics series. Both qualitative and quantitative brand research as well as performance tracking should be used to measure equity and performance to ensure brand equity is growing over time.

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You can use in-person or virtual one-on-one interviews and focus groups to gather exploratory data related to your brand's performance as well as research surveys to track brand equity growth among larger sample audiences.

Of course, research should be conducted with existing customers as well as former and prospective customers to get a full picture of the equity the brand holds. At the same time, measuring that research data against financial performance is critical for strategic planning and decision making.

Using these various methods to collect and analyze data, you can measure performance in three core brand equity drivers: financial, strength, and consumer.

Financial Brand Equity Metrics

While financial metrics are always the first thing that executives want to see to confirm that a brand is profitable and should live to see another day, financial metrics should actually be the last part of the brand equity measurement process. That's because financial metrics result from the brand strength and consumer metrics described below. With that said, your financial brand equity metrics should gather the following data:

  • Market share
  • Price sensitivity
  • Profitability
  • Revenues
  • Marketing investments
  • Growth rate
  • Cost to acquire new customers
  • Cost to retain customers

Of course, this is just a short list of the financial metrics you should track. Look for anomalies and trends so you can identify initiatives that drive positive results and ensure your brand is building positive equity over time. Use this data to demonstrate how important the brand asset is to your organization, to support brand extensions, to secure marketing budgets, and more.

For example, a brand that can prove to the leadership team that it's growing, bringing in positive revenue, and adding to the organization's bottom line is far more likely to secure a higher marketing budget and live another day than a brand that can only show negative growth and earnings.

Strength Brand Equity Metrics

The power of a brand is a key driver of brand equity, so it's imperative that you measure that strength. Brands like Playboy are perfect examples of how a strong brand can survive despite changing consumers and markets.

Earlier this year, I was interviewed by The Guardian in the days leading up to the opening of a new Playboy Club in London. In the interview (you can read the article from The Guardian here), I explained that as Playboy enters new markets, the brand is being introduced quite differently from the Playboy brand consumers in the United States have come to know over the past half-century. In China, the brand is considered to be cute like Hello Kitty. Globally, women buy more Playboy merchandise than men, and merchandise sales is the biggest revenue generator for the Playboy company. This is a company that was struggling for years, and without the strength of the Playboy brand, such expansion might not have been possible.

Measuring brand strength should also be done on an ongoing basis. Following are some of the factors to track:

  • Accessibility
  • Awareness and knowledge of the brand
  • Loyalty
  • Licensing potential
  • Retention
  • Aided and unaided recall
  • Buzz

The social web has provided an amazing place for companies to track and measure brand buzz through engagement, reach, and influence. Use these metrics to demonstrate your brand's strength to support positive financial metrics or communicate that positive financial metrics will come in time based on the brand's growing strength.

Consumer Brand Equity Metrics

As I explained in both Parts 1 and 2 of the Brand Equity Basics series, consumers build brands, not companies. Therefore, it's essential that you track consumer sentiment and behaviors related to your brand to get a complete understanding of brand equity.  If consumers believe in a brand, it has far more equity than a brand that consumers don't care about or believe in.

Use the following factors to track and measure consumer sentiment and behavior related to your brand:

  • Relevance
  • Emotional connections
  • Differentiators
  • Value
  • Perceptions

Ask questions through surveys and research that provide insight into how people feel about your brand and how they make purchase decisions. Use that data along with the information you gather through social media monitoring to create a measurement of your brand equity from consumers' perspectives.

Whatever you do, don't ignore the importance of building brand equity and tracking your brand's equity to ensure it's growing in a positive direction. It adds more to your company's bottom line than you might think. Just ask executives at companies like Disney or Coca-Cola if they'd be willing to give up the equity their brands hold. I'll guarantee you the answer will be no.

If you missed earlier parts of the Brand Equity Basics series, you can follow the links below to read them now:

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