BRAND EQUITY GEORGE ROSSOLATOS http://grossolatos.blogspot.com/
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The Bath Foams market is characterized by intense new product development
(more than 15 new products/line extensions are introduced every year) on
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behalf of all competitors in their effort to enhance their competitive position in
the market. New products’ elements include new fragrances, end benefits
(advanced moisture, relaxation, sensuality, exfoliation etc.) and pack
aesthetics. With an increased interest in personal treatment, consumers appear
to be keen on trying new products and adopting those that offer innovative
attributes or enhancement of existing offerings. In addition, consumers appear
to be repertoire purchasers, being influenced by media communication and
value-adding promotions2.
With regard to media support, the category is highly advertised, considering
that the media to sales ratio is more than 15%, with reported media
expenditures of around 6.000.000 $ in 2004. Various communicative vehicles
are used to communicate the category by the majority of competitors, such as
television, radio, the internet, magazines, outdoor.
2.5 Conclusion
This chapter provided the frame of reference for this dissertation in terms of
market structure and characteristics. Insofar as the market is characterized by a
proliferation of new products and fragmentation, the sustainability of
distinctive product propositions in terms of brand equity is an issue that merits
exploration, as the next chapter will attempt to illustrate.
2 These behavioral characteristics stem from company funded Usage & Attitudes studies.
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CHAPTER 3: Literature Review
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=3.1=Introduction
This chapter provides an overview of the main perspectives whereby brand
equity has been conceptualized. It opens up with a brief definition of “brand”,
which constitutes the very foundation of brand equity and proceeds with an
exposition of the concept of brand equity, how it emerged and why it is useful
to a wide range of business-related professions, including accountants and
marketers.
Pursuant to the definition of brand equity, the chapter hinges upon the three
broad perspectives that have been used so far by academics and practitioners
alike in the process of conceptualizing and putting brand equity in practice.
Since the main area of practice with which the authors are concerned is
marketing, particular emphasis is laid on the consumer-based brand equity
perspective. K.L.Keller’s Brand Knowledge Structure and Brand Equity
Pyramid are drawn upon in greater detail.
3.2 What is a brand and why is it relevant to brand management?
According to the American Marketing Association, a brand is “a name, term,
sign, symbol or design or a combination of them intended to identify the goods
and services of one seller or group of sellers and to differentiate them from
those of competition” (quoted in Keller, 1998, p.2).
The key concept in the above definition is differentiation. Hence, a brand is
primarily what makes otherwise undifferentiated commodities look different to
the eyes of consumers and more importantly, being perceived as such. This
constitutes the integrated definition of a brand, as “a mechanism for achieving
competitive advantage through differentiation” (Wood, 2000, p.667). Insofar
as differentiation is a key source of sustainable competitive advantage, the
importance of branding can hardly be overlooked by today’s businesses. “The
strongest brands are those brands that have developed unique, meaningful
differences that set them apart in the mind of the consumer” (Biel, 1997).
“Brands, especially strong ones, have a number of different types of
associations and marketers must account for all of them in making marketing
decisions” (Keller, 1998, p.5).
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Hence, insofar as branding is concerned with sustaining differences among
otherwise similar products and given that these differences are substantiated in
the form of the associations that consumers make about them, the management
of a brand should be concerned with systematically managing brand
associations. As Kapferer (1999, p.25) notes, “the value of a brand comes from
its ability to gain an exclusive, positive and prominent meaning in the minds of
a large number of consumers”. Pursuant to the definition of “brand”, the
concept of brand equity is explored in the ensuing sections.
3.3 The emergence of the concept of brand-equity
“The origins of measuring brand equity as a corporate asset lie in the takeover
battles of the 1970s, where a ledger value was found useful as a way of
recording intangible assets on the balance sheet” (Morgan, 1993).
“In a wave of mergers and acquisitions, triggered by attempts to take up
advantageous positions in the single European market, market transactions
pushed prices way above what could have been expected” (Kapferer,1999,
p.15).
Flat growth rates and the increasing concern with cost cutting initiatives and
aggressive market share acquisition paved the way for new ways of corporate
thinking, while the need for leveraging brands for enhancing profits emerged
to the forefront. “As support for this alternative, studies of consumer brands in
different markets found that successful brand extensions spent less on
advertising than comparable new products” (Pitta & Katsanis, 1995, p. 51). As
these rather extensive methods of reducing costs reached their apex, profit
boosting mechanisms were actively sought by businesses. One of the
mechanisms that were put forward was the application of financial measures to
corporate assets, both tangible and intangible. In this context, marketing
managers and researchers alike sought to attach a monetary value to brands
(Dyson, Farr, and Hollis, 1996). Prior to that critical turn, the concept of brand
image was peripheral; it was seen by many advertisers and researchers as of
little relevance to the real task of brand communications, that is to
communicate brand messages, induce brand switching or retaining the current
consumer franchise and increase sales. The emergence of the brand equity
concept was inextricably linked to the recognition of brands as primary agents
of cash generation.
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Feldwick (1996) suggests that brand equity has three different aspects, that is
the value of a brand as a separable asset when sold or included in a balance
sheet, the string of associations, beliefs and feelings consumers have about the
brand and the strength of consumers' associations about a brand. In a nutshell,
the three main dimensions of brand equity, according to Feldwick, consist in
brand value, brand strength and brand image.
Despite the proliferation of research papers and models that have been
constructed in order to tackle this complex topic, there is no one widely
accepted definition of brand equity (Keller, 1999; Ehrenberg, 1997). The term
means different things to different companies and brands. However, there are
several common characteristics of the many definitions that are used today.
The following definitions are an attestation of the fact that brand equity is
multi-dimensional.
• The Marketing Science Institute (1998) defines brand equity as, "The set of
associations and behaviours on the part of the brand's customers, channel
members, and parent corporations that permit the brand to earn greater volume
or greater margins than it could without the brand name and that gives the
brand a strong, sustainable, and differentiated advantage over competitors"
(quoted in Srivastava & Shocker, 1991, p.5).
• According to David A. Aaker (1991), brand equity is "a set of brand assets and
liabilities linked to a brand, its name and symbol that add to or subtract from
the value provided by a product or service to a firm and/or that firm's
customers."
• Keller (1998, p.44) stresses that “researchers studying brand equity at
least…acknowledge that brand equity provides a common denominator for
interpreting marketing strategies and assessing the value of a brand”.
There are several stake-holders concerned with brand equity, encompassing the
firm, the consumer, the trade, the financial market . However, the consumer is
indubitably the most critical component in defining brand equity. While brand
equity has come to stand for a financial concept associated with the valuation
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placed on a brand, it is useful to recognise that the equity of a brand is driven
by brand image, a consumer (or customer) concept. (Biel 1991).
The benefits potentially stemming from building and managing effectively and
efficiently the equity of a brand have been widely explored by various
researchers. According to Keller (1998), brand equity may lead to greater
loyalty, less vulnerability to competitive market actions and market crises,
larger margins, more inelastic consumer response to price increases, more
elastic response to price decreases, greater trade cooperation and support,
increased market communication effectiveness, possible licensing
opportunities, additional brand extension opportunities. Morgan (2000) adds
that a brand with a strong equity might imply the incremental cash flow from
branding vs non-branding. Complementary to the benefits of brand equity to
the producer, De Chernatony (2001, p.31) stresses that “there are significant
benefits to the consumer, such as identification, which simplifies the brand
choice decision making process, efficient risk assessment as the brand offers a
guarantee of consistent product quality and a representation framework,
satisfying hedonistic needs of embodying social status”.
According to Biel (1997), two sets of attributes distinguish strong from weak
brands, what he calls ‘output’ and ‘input’ response items. Output items reflect
consumer reaction to strong versus weak brands, and include elements such as
relative perceived quality. Input elements include characteristics, such as
length of time in business. Stronger brands are more likely to be seen as
unique, they enjoy higher perceived quality relative to their competitors and
they are more likely to evoke vivid, rich imagery among consumers. Input
factors that differentiate strong brands included a sense of history; that stronger
brands have a higher likelihood of withstanding the 'test of time'. In addition,
as Morgan (2000) points out, strong brands are normally differentiated,
carrying clear perceptions, which allow them to maintain points of
differentiation against competition. The author draws another key distinction
regarding brand attributes, between those that pertain to functionality and
performance and the softer, more emotional and intangible issues related to
branding. Softer attributes are claimed to lead to the ‘affinity’ that consumers
have for the pure branded side of the product. The above distinction echoes the
classic distinction between tangible and intangible brand elements, which has
been employed extensively by both accountants and marketers over the years
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(also rendered as product and non-product related attributes by Keller (1998)
or the ‘softer side’ of branding by Biel (1991, 1997), as will be further
discussed in the context of the consumer-based brand equity perspective).
Brand equity is built primarily via the employment of consistent aesthetic cues
and consistent messages (Keller, 1998), thus allowing consumers to distinguish
among brands and their product attributes. As consumers compare and contrast
the tangible product features in alliance with price and intangible elements
(such as projected user/usage image), they arrive at a set of products in a
category, which they consider for purchase, called the salient set. Therefore, a
brand’s equity is dependent on effective communications to the target
market(s), while it may be improved to some extent in tandem with
communications effectiveness. “The challenge of marketing communications
is to communicate the right message, in the right way, to the right people, in
the right place, at the right time” (Pickton & Broderick, 2003, p.13).
As regards the process of building brand equity on behalf of the consumer, it is
often described as a tradeoff exercise among various factors (Morgan, 1993) in
which consumers enter when they consider their salient set prior to making a
purchase decision. In particular, consumers actively trade off both the
perceived tangible benefits and the perceived intangible benefits delivered by
products in their salient set, against price, to arrive at a value hierarchy, which
forms the basis for the purchase decision. The above constitute a brief
overview of the conceptual model of the Brand Price Trade Off research
technique, which was developed by Morgan (1993) in order to explore brand
equity (which evolved into the much more complex research tool,
EquityEngine, see Morgan & Carter, 1998). Since then, a variety of models
have been coined by both academics (eg. Keller, Kapferer, Aaker, De
Chernatony) and practitioners (eg. Research International, Millward Brown,
JWT, Young & Rubicam, Brand Finance, Interbrand, EquiTrend) alike for
operationalizing the concept of brand equity.
Brands that have high perceived value have a greater likelihood of being
included in a consumer’s salient set. If a brand’s combined tangible and
intangible values are consistently higher than any other brand in the category,
that brand will have the highest customer loyalty in terms of purchase,
repurchase, and recommendation. Competing brands can only improve their
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loyalty against the brand equity leader by lowering price in the short term,
improving their product’s tangible features in the mid term, or improving their
brand’s intrinsic values, or equity, in the long term. “Although price reductions
are more commonly employed to improve perceived value, in reality they are
often more expensive than adding value through various brand building
marketing activities” (Keller, 1998, p.187).
Hence, the emergence of the concept of brand equity came in recognition of
the value of brands as assets and the importance of managing them efficiently
and effectively with view to maintaining the long term viability of a company.
The focus of this chapter will now turn to an overview of the three main
perspectives, whereby brand equity has been conceptualized.
3.4 The three categories of brand-equity measures
The delineation of methods for measuring and managing brand equity is a
challenging task to marketing managers, advertisers, marketing researchers and
accountants, as the resulting value of a brand may be leveraged in order to
increase the likelihood of brand selection and ultimately lead to brand loyalty.
This challenge is even more demanding for fragmented and repertoire driven
markets, such as Bath Foams.
Recent literature addressing brand equity indicates that there are several
different approaches to measurement, largely falling under two major
categories, that is those concerned with the financial aspects of brand valuation
and those concerned with the consumer behavior aspects of brands (Pitta &
Katsanis, 1995). The consumer behavior category is further split into those
focusing on brand equity as a springboard for brand extensions (eg. Pitta &
Katsanis, 1995, De Chernatony & Martinez, 2004, Martinez & Pina, 2003) and
those focusing on the generic consumer effects of brand equity (eg. Aaker,
1991, 1997, Keller, 1998, 2001).
Brand equity can be addressed at either the corporate level or the category
level and can also be addressed using internal data or external data. The
different strands of thought tend not to dispute the others’ definitions, but
rather they recognize them while postulating their own versions. Authors (i.e.
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Keller) often use the definitions of others as a springboard for their work,
while formulating their own definitions of brand equity.
In the subsequent sections the three different perspectives for conceptualizing
and measuring brand equity are displayed, that is the financial, the brand
extensions and the consumer-based brand equity perspective, with a focus on
the third one.
3.4.1 Financial Perspective
Exponents of the financial perspective of brand equity (Simon and Sullivan,
1993, Davis and Douglass, 1995) stress that without putting a monetary value
to each brand, companies are unable to quantify the total value of their assets.
The importance behind the need for this knowledge comes into play when a
company is incumbent on acquisition or attempts to counteract an aggressive
take over bid. Without a clear understanding of the value of each brand, the
worth of a company may be undervalued, which may lead to a financial loss
for the company’s stockholders (Cobb-Walgren, Ruble, and Donthu, 1995;
Mahajan, Rao, and Srivastava, 1994).
The financial approach to defining brand equity is largely concerned with
assigning a measurable value to every brand a company owns or produces. The
researchers and marketing managers who use the financial approach propound
that a brand is a viable asset (Davis and Douglass, 1995). Therefore, a value
must be assigned to it, while brand equity by definition is an intangible asset.
The key challenge rests with determining this value. The methods utilized so
far include the value of brand names (Cobb-Walgren, Ruble, and Donthu,
1995), and the cause and effect of advertising on brand loyalty and its
relationship to equity (Blackston, 1995; Oakenfull and Gelb, 1996). These
same mechanisms are used in the second area of financial evaluation, mergers
and acquisitions. Under or over valuations can create huge losses or excessive
profits for companies.
Kapferer (1997) reports that there are two major strands of thought for brand
valuation, the one relying on historical costs and the other on projected future
cash flows. “The financial value of the brand is the difference between the
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extra revenue generated by the brand and the asociated costs for the next few
years, which are discounted back today” (Keller, 1998, p.32).
While there are many methods for conducting this measurement, some of
which are described below, it is important to note that there is a significant
difference between an "objective" valuation created for balance sheet purposes,
and the actual price that a brand may get when sold. “A certain amount of
uncertainty and heterogeneity, which are against the rules of caution, would be
created if these were included in the balance sheet” (Kapferer, 1997, p.386).
For acquisitions, the value of a brand to a certain consumer is often estimated
through scenario planning. This involves determining what future cash flows
could be achieved by the company if it owned and took advantage of the brand.
What this means is that there is no such thing as an absolute value for a brand,
and brand value must be considered as only one component of the overall
equity of a brand.
There are several possible ways to measure brand equity in financial terms, as
reported by Kapferer (1997, pp.398-410):
1. Valuation=by=replacement=costs: By taking the various characteristics of a
brand into account (awareness, relative market share, distribution network etc.)
an attempt is made to measure brand equity as the replacement cost of the
brand over a generic equivalent, that is how much it would take to build an
equivalent brand. Alternatively, replacement value can be estimated as book
value. Allegedly, this method suffers from a high level subjectivity.
2.=Valuation= by=market= price: Drawing on valuation practices popular in markets such as real estate, the valuation by market price approach attempts to
place a financial value on brands by looking at similar brands in the market.
The problem with this approach lies with the difference in that whereas in real
estate the price of a house remains the same irrespective of the use the owner
makes of it, in the case of brands, the price-setter is the consumer, based on the
perceptions s/he holds of brands. “In abstract terms, the purchase price is not
the price paid for the brand but is the interaction between brand and purchaser”
(Kapferer, 1997, p.400). Whether a brand can command the price asked for it
in the marketplace is in large part determined by how it is perceived by the
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buyer, and whether someone continues to buy the same brand is also in large
part a function of their attitudes toward it (Dyson, P., Farr, A., and Hollis , N.,
1996).
3. Valuation=by=potential=earnings: Brand Equity is evaluated by discounting
the value of future earnings projections and adding to the value the cost
competitors would incur if they duplicated the brand.
4. Incremental=Cash= Flow= from= Branding: Brand equity is estimated by
determining the cash flows of a brand and subtracting the cash flows from an
unbranded product. The estimation challenge becomes more difficult as the
product of interest belongs to an increasingly differentiated category. For
example, it is harder to find a generic equivalent for cars than for cigarettes.
5. Price/Earnings Multiplier: Multiplying current earnings by an estimate for
P/E multiple yields an equity price. The critical step is estimating the P/E
multiplier. One approach that has been put forward is to measure brand
strength by a weighted average of seven factors (Penrose, 1989). Then, the P/E
multiplier is estimated using and S-shaped relationship between brand strength
and the P/E multiple that is based on similarities to risk free rates, industry
rates, and other factors.
In addition to the aforementioned methods, Interbrand, which calculates the
worth of the world’s most valuable brands on an annual basis, examines the
economic profit that a brand generates for the underlying business (Motameni
& Shahrokhi, 1998). This valuation process comprises three areas of brand
profitability: the future economic earnings that the branded business is
expected to generate, the role of the brand in generating those earnings and the
risk profile of the brand’s expected earnings. Essentially, Interbrand dissects a
company’s profit-and-loss statement to assign a value to the business’s brands.
Morgan (1993) illustrates Interbrand’s brand valuation process as follows:
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Table=2- Interbrand’s brand valuation process
Branding=multiple Brand=earningsProfit before tax Subjective marks for:
Less profits from own label market leadership
Weighting from previous years market type
Disregards future profits trend
investmentprotection
Brand=valuation==
(some=multiple)=x=brand=earnings
Adapted from Morgan, R.P., 1993, p.6
The author criticizes Interbrand’s model as a subjective process that dwells on
past performance at the expense of future profits.
The major disadvantage with the financial approach of defining brand equity is
that it focuses on maximizing short-term goals at the expense of long-term
growth (Aaker, 1992; Davis and Douglass, 1995). “This is not to say that the
‘accountancy’ driven definition is wrong, merely that its usefulness is
elsewhere, and that any attempt to understand individual patterns of purchasing
behaviour must grapple with the way individuals perceive brands, and the way
in which these perceptions lead to some kind of brand standing or strength”
(Morgan, 2000, p.4).
3.4.2 Brand Extensions Perspective
The second major perspective in conceptualizing and measuring brand equity
is concerned with brand extensions (Pitta and Katsanis, 1995; Baldinger,
1990). In this context, brand equity is approached in terms of a brand’s ability
to act as a springboard for the development of similar brand types (extensions).
“Recent history shows that more than half of the new brands marketed during
the 1980s were extensions of existing products, marketed under existing brand
names” (Pitta & Katsanis, 1995, p. 51).
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The main thrust that transverses the argumentation in the relevant literature is
that the more equity a brand holds, the more capable it is of expanding into
relevant territories. The parent brand may effectively act as a springboard for
stretching into the same, similar or different product categories. Based on the
parent brand associations stored in consumers’ memories, it is less cost
effective to gain awareness, favorability and brand salience (Keller, 1998).
Brand extensions may revitalize the parent brand, yield incremental sales,
enlarge the scope of the existing consumer franchise; however, extensions may
also alienate an existing consumer base, cannibalize parent brand sales and
dilute its image (Martinez & Pina, 2003). Extending a brand essentially entails
enlarging the breadth and depth of parent brand associations, in such as way as
to enable the extension to gain in brand salience and the favored associations
of the parent brand to migrate into its kernel.
According to Keller (1998, p.472) the benefits of an extension will depend
primarily on the following three main factors:
- how salient parent brand associations are in the minds of consumers in the
extension context
- how favorable any inferred associations are in the extension context
- how unique any inferred associations are in the extension category
By assessing current brand value and past performance, a prediction can be
made about potential future growth (Pitta and Katsanis, 1995). The same holds
for brand extensions. As Keller (1998) and Aaker (1996) remark, the costs of
introducing new brands into the market are significantly higher than they were
20 years ago. Barwise (1993) explains that brand extensions generally have
lower start-up costs than do brands introduced with new names. Furthermore,
calculations of existing brand equity can be used to determine what
contributing elements can be transferred to the brand extensions (Baldinger,
1990), by focusing on key structural elements of a brand, such as name, slogan,
symbols etc.
Despite the fact that the brand extensions approach takes into account the
consumer-based perspective, it is still largely grounded in economic theory. In
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the next section, the third major perspective, that is consumer-based brand
equity, is described.
3.4.3 Consumer-based Brand Equity Perspective
The third major perspective consists in a consumer-based perspective of brand
These attributes have been found to be the most relevant for the category in the
context of preceding qualitative surveys (company-funded).
3.6 Consumer-based Brand Equity and market performance
As may be gathered from the literature review so far, brand equity is a
condition sine qua non for strong and viable brands. Morgan (2000), among
others, contends that brands with a strong equity cherish increased market
share, premium pricing, reduced promotional expenses. Insofar as these
marketing variables are central to brand management, we intend to first explore
whether there is a relationship between brand equity and market share and
value/volume sales. For most brands, their equity is a strong indicator of their
market share (Khandelwal, M. and McKinney, C., 2003). Therefore, in order to
drive future market performance, understanding the specifics of brand equity in
conjunction with marketing fundamentals is a critical step.
When brand equity and market share are proportional, frequently the specific
sources of the respective brand equity indices, i.e., brand familiarity and
imagery can provide a clear understanding of how to continue to strengthen
market share. “Weaknesses in brand familiarity indicate awareness and trial
building strategies for share growth, while weaknesses in brand imagery
indicate positioning issues, a need to refocus on favourable and unique brand
associations or potentially the need to explore target consumer issues”
(Khandelwal, M. and McKinney, C., 2003).
Which of these different scenarios envisioned by the authors prevail in the
Bath Foams category? Is there sufficient differentiation among the key brand
players for creating sustainable associations, brand equity and competitive
advantage? These questions, alongside others that emerge from the respective
literature will be further consolidated in the next chapter in the context of the
research objectives.
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3.7 Measuring consumer based brand equity
Pursuant to the delineation of the components of consumer based brand equity,
what it means (in terms of brand associations) and what are the structural
elements that make up its conceptual edifice (in terms of logos, symbols,
packaging), a brief mention on methods of measurement is deemed necessary
prior to proceeding with the exposition of the research methodology.
Keller (1998) distinguishes between two types of measurement, that is those
concerned with the sources and those concerned with the outcomes of brand
equity, as well as between qualitative and quantitative research methods. In
addition, Morgan (2000) draws a distinction between descriptive and
prescriptive consumer-based brand equity research methods, that is between
methods that yield brand diagnostics, as a snapshot of a given time period
(similar to the one that is pursued in this study) and methods that yield brand
prognostics, based on longitudinal studies and methods, such as time series
analyses and multivariate regression.
Quantitative methods of measuring sources of brand equity “employ various
types of scale questions so that numerical representations and summaries can
be made” (Keller, 1998, p.325). They may be used to “better assess the depth
and breadth of brand awareness and the strength, favourability and uniqueness
of brand associations” (Keller, 1998, p.325). Awareness may be gauged by
asking consumers which brands they know of in the context of a given product
category, either spontaneously or in a prompted fashion. As regards the
strength of brand associations, it may be gauged by either asking consumers to
simply state whether an attribute matches a brand (eg. “Do you agree with the
following list of statements regarding brand A”?) in a Yes/No fashion or by
asking them to give a score on a Likert scale (eg.1-7) reflecting the degree to
which they associate an attribute with a brand or rating a brand on a semantic
differential scale with bipolar adjectives (eg. No smell 1 2 3 4 5 6 7 Intense
smell) (Keller 1998).
As regards quantitative methods for measuring outcomes of consumer-based
brand equity, Keller (1998) reports two major trends, that is comparative
(brand based and market based) and holistic methods. “Brand based
comparative approaches use experiments in which one group of consumers
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responds to an element of the marketing program or some marketing activity
when it is attributed to the target brand and another group responds to that
same element or activity when it is attributed to a competitive or fictitiously
named brand. Marketing based comparative approaches use experiments where
consumers respond to changes in elements of the marketing program or
marketing activity for the target brand or competitive brands” (p.345). Holistic
methods (Keller, 1998) attempt to place an overall value for the brand in either
abstract utility terms or concrete financial terms. Holistic methods tend to
either produce a single brand value (or equity score) in the context of a single
study (for example see Morgan, 1993 on how a brand equity score may be
produced from discreet utility values that emerge through a process of conjoint
analyses from partial equity variables, including attributes and attitudes, along
with price) or by combining attribute based components (gauging the sources
of brand equity) and non attribute based components (eg sales or market share
figures).
Qualitative studies of brand equity draw largely on the similar conceptual
constructs as quantitative studies; however the methods used vary, as expected.
As regards qualitative methods for exploring sources of consumer based brand
equity, Keller (1998) cites free association3 (asking consumers what comes to
mind when thinking about a brand) and a series of projective techniques, which
be illustrated further in Chapter 4.
The following paragraphs report relevant research studies that have attempted
to measure either sources or outcomes of consumer based brand equity or both.
Khandelwal and McKinney (2003) bore on AC Nielsen’s WinningBrands
model, which has been constructed on the grounds of equity attributes. The
authors draw on Keller’s conceptual framework and coined a proxy variable of
emotive brand loyalty (based on the extent to which consumers would
recommend their preferred brand). They combine emotive loyalty with
consumers’ willingness to pay a price premium for their preferred brand, while
applying multivariate regression analytical methods in order to produce a
Brand Equity Index (from 1 to 10) for each brand. Their research in various
product categories indicated that brand equity correlates with market share in 3 Also see Chen (2001) for an application of quantitatively measured free association in determining brand equity
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most categories, however with some exceptions. These exceptions were found
to be largely attributed to a lack of differential positioning of brands. In
addition, various research studies conducted by Morgan (2000), also echoing
work done by Jones and Sasser (1996) pointed out that the size of the gap
between high equity ranking brands and the probability of choosing them is
highly category specific.
Lassar, Mittal and Sharma (1995) produced a brand equity model based on 17
attributes, which were reduced to five equity dimensions (image, value, trust,
performance, attachment) through exploratory factor analysis and the
concomitant application of discriminant analysis for measuring the
discriminant validity among factors. After confirming the hypothesis that
brand equity correlates with price perceptions they drew on the widely-held
assumption that brand communications aid in the creation and sustenance of
brand equity in order to point out that promotions techniques may help in
ameliorating equity factors, in which brands underperform.
Hollis, Farr and Dyson (1996) developed the Consumer Value model, which
developed into the Brand Dynamics system (later evolving into Millward
Brown’s brand equity tracking method, BRANDZ). Brand Dynamics is
displayed in a pyramid format, similar to Keller’s conceptual construct. The
factors taken into account for the construction of the model are consideration
of inclusion of a brand in the salient set, brand size, price responsiveness,
which gauges in crude terms the price sensitivity of consumers towards certain
brands in their salient set. The model’s approach is predictive and has been
applied in numerous tracking studies in order to point out to brand’s potential
share of requirements4. A brand’s consumer value was found by the
researchers to correlate highly with the brand’s share of requirements,
following a holistic approach, as previously explained, that is combining
primary research data with objective (eg. AC Nielsen’s) metrics to arrive at a
validated consumer based brand equity model. Pursuant to the validation of the
relevance of the concept of brand equity in terms of responsiveness, size and
price they proceeded with the operationalization of the components of brand
equity, by bearing on Aaker’s conceptual constructs. The culmination of their
4 Share of requirements is a term coined by ACNielsen in the context of analyzing Home Panel consumer tracking data, denoting the percentage of a brand’s volume sales based on consumers’ category purchase patterns
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research was the portrayal of brand equity in terms of the Brand Dynamics
pyramid.
Figure=4- Brand Dynamics Pyramid
Adapted from Dyson, P., Farr, A., and Hollis , N., 1996, Figure 2
According to the authors, presence is exhibited in unaided awareness of the
brand name (similar to our definition of brand salience as the bottom of the
Equity Pyramid for the Bath Foams market); relevance consists in
demonstrating how a brand is capable of fulfilling at least some of the key
criteria the consumer has for the intended purchase. Then, the brand’s
performance must deliver the intended benefits against the standards set by the
competition, while demonstrating that is has a competitive advantage over the
competition against criteria that are deemed to be relevant. Ultimately, having
passed successfully through the preceding stages, a brand gains bonded
consumers, resulting in identification of the consumer franchise in terms of
match between high ranking category criteria (or key value drivers) and the
brand’s deliverables, in terms of benefits, attitudes, associations. A micro-
modelling approach is followed in this model (that is focusing on individual
Informant data, similar to the one advocated by Morgan, 1998,2000). Since
this a proprietary research model, the analytics that take place behind the
model are not open to scrutiny. For example, it is not clarified whether the five
equity dimensions were produced via factor analysis (as is the case of Lassar,
Mittal and Sharma’s above cited research model) or whether the category
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specific key value drivers that constitute the relevance dimension are produced
by a direct questioning method or an indirect method .
Leuthesser, Kohli & Harich (1995) produced a very interesting brand equity
research, by showing how the effect of ‘brand size’ may distort equity data, by
drawing on the much discussed phenomenon of ‘halo effect’. They drew on the
method of double-centered normalization for purging data of the halo effect,
thus providing brand managers with a more accurate reading of quantitative
data5 .
Finally, Low and Lamb (2000), among other research objectives, sought to
explore whether the degree of dimensionality of brand associations varies
depending on a brand’s familiarity, where they found a positive correlation
(77%) between the successful discriminant validity tests for each surveyed
brand and the level of brand familiarity (measured on a 1-7 scale). Brand
familiarity essentially denotes the same phenomenon as presence (as coined by
Andy, Farr and Hollis) or brand salience and may be approximated by using
spontaneous brand awareness (as quoted in Keller’s model).
3.8 Conclusion
As this chapter illustrated, brand equity is a polymorphic concept, while a
string of perspectives have been coined over the past twenty years for coping
with the sheer complexity of this construct. While recognizing the usefulness
of the financial and brand extensions approaches, the consumer-based brand
equity perspective has been found to be the most relevant for the purposes of
the study at hand. The consumer-based brand equity perspective aids in
systematically unearthing consumer associations that underpin brand equity
and allows for the determination of the extent to which there is sufficient
differentiation among brands. Keller’s and Davey’s conceptual constructs are
deemed to be the most comprehensive and practical for the purposes of this
study. Their work is largely drawn upon the rendition the Brand Equity
Pyramid for the Bath Foams market. Last, but not least, circumstantial research
evidence was found to be suggestive of a clear relationship between brand
5 cf.4.6, Objective 3
39
equity and market share, which merits exploration in the selected target
market.
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CHAPTER 4: Methodology
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4.1 Introduction
The previous chapter illustrated the various strands of thought pertaining to
brand equity. Having focused on the perspective of consumer-based brand
equity as the most dominant and relevant among them, this chapter lays out the
research objectives, the methodological framework, and the respective methods
of data collection and analysis.
4.2 Purpose of the study/Research Objectives
The purpose of the study is to draw on the existing brand equity literature and
provide a descriptive overview of sources and outcomes of key brands’ equity
in the bath foams market. “Measuring sources of customer-based brand equity
requires measuring various aspects of brand awareness and brand image that
potentially can lead to the differential customer response that creates brand
equity” (Keller 1998, p.310)
More specifically, the research objectives consist of the following:
1. To determine the most important equity dimensions (category’s key value
drivers) in the Brand Equity Pyramid.
2. To determine the relationship between brand equity and market performance in
the Bath Foams category in the Greek market.
3. To identify differences among the key competitors in the Greek Bath Foams
category in terms of consumer-based brand equity.
4. To provide a descriptive overview of the primary and secondary brand
associations of key brand players, in terms of attributes, benefits, attitudes and
on the grounds of the key equity dimensions making up the Brand Equity
Pyramid.
4.3 Research Approach
4.3.1 Overview of Research Methodology
The research methodology consists of a combined quantitative/qualitative
approach. The pursuit of a combined methodology endows the study both with
the robustness of quantitatively collected and analysed data, as well as the
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depth of the insights that is mandatory for such a delicate research subject
matter as brand equity. In addition, they complement each other in terms of
responding to the disadvantages inherent in each approach.
Overall, both indirect and direct methods for gauging sources and outcomes of
brand equity were employed. According to Keller “an indirect approach can
assess potential sources of customer-based brand equity by identifying and
tracking consumers’ brand knowledge structures. A direct approach, on the
other hand, could measure customer-based brand equity more directly by
assessing the actual impact of brand knowledge on consumer response to
different elements of the marketing program” (Keller, 1998, p. 308).
Finally, the methodological approach of this study is descriptive and not
prescriptive. Malhotra & Birks (1999, p.79) define descriptive research as
“describing something, usually market characteristics or functions”, among
which lies the determination of the degree to which marketing variables are
associated, as displayed in subsequent sections.
4.3.2 Quantitative Research
“Quantitative measures of brand knowledge can be employed to better assess
the depth and breadth of brand awareness and the strength, favourability and
uniqueness of brand associations” (Keller 1998, p.325). Quantitative
methodology mainly addresses issues of validity and reliability, however it is
insufficient in addressing latent consumer associations (Objective 4), which
may be unearthed via the employment of a qualitative methodology, as
discussed in the ensuing section. Quantitative research in this study yielded the
background against which primary qualitative research took place, in order to
gain an elaborate perspective on the insights generated through the former. In
particular, secondary quantitative research data were employed additional
analyses were conducted on raw data with view to meeting the first three
objectives of this study.
4.3.3 Qualitative Research
“Qualitative research techniques are often employed to identify possible brand
associations and sources of brand equity. Qualitative research techniques are
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relatively unstructured measurement approaches whereby a range of possible
consumer responses are permitted” (Keller 1998, p.311)
Objective 4 primarily seeks to systematically describe brand associations;
associations gathered through quantitative methodologies are elicited verbally
and reside in the conscious part of perception, whereas verbal representation is
only a mode among many (eg verbal, visual, sensory, emotional) (Supphellen,
2004). Given that brand associations reside more often than not in the spheres
of the pre and unconscious (Supphellen, 2004), then a qualitative research
methodology may allow for an elucidation of these latent perceptions and help
construct a system of brand associations. The pursuit of a qualitative
methodology may aid in, if not overcoming, at least mitigating consumers’
“unwillingness or inability to reveal true feelings, which are particularly
evident when consumers are asked about brands characterized by non-product
related image associations” (Keller 1998, p.314), such as those under scrutiny.
The disadvantages of qualitative research methodology consist of the high
level of subjectivity inherent in the process of eliciting brand associations out
of verbal and non-verbal (eg pictorial, such as those gathered via collage
exercises) representations. However, instead of disregarding the voice of
consumers in the elicitation of brand associations, Supphellen (2004) contends
that researchers should focus on how to ask better questions, or rather on how
to help consumers express their brand associations.
4.4 Research Design
4.4.1 Quantitative method
In order to meet the first three objectives identified in 4.2 and on the grounds
of previous studies employing similar methods as illustrated in 3.7, a string of
analyses were conducted on the grounds of secondary equity-related attribute
data that were collected during a company-funded equity research in 2004. The
category specific attributes (cf.3.5) that were included in the respective battery
of attributes in the research questionnaire were validated regarding their
relevance through extensive qualitative past research studies, commissioned by
the company.
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The structure of the question from which the attributes evaluation was elicited
by the consumers who participated in the study was formed in an associative
fashion, asking consumers to state whether Attribute A matches Brand A (cf.
3.7), and so forth for the attributes/brands matrix under scrutiny.
In order to meet the second objective in particular, concerning the relationship
of equity scores with market performance (the holistic aspect explained in 3.7)
additional data from AC Nielsen’ ScanTrack database (market shares,
volume/value sales, weighted distribution figures, pricing, promotional
intensity) and Media Services (advertising expenditures and share of voice)
were used, spanning the same period as the equity data (that is annual 2004
figures). All of the analyses on secondary equity data, discussed in 4.6 were
conducted by the authors of this study. “Examination of available secondary
data is a prerequisite to the collection of primary data. Start with secondary
data. Proceed to primary data only when the secondary data sources have been
exhausted or yield marginal returns” (Malhotra & Birks, 1999, p.99).
The target group profile where the equity research was conducted consists of
Women, ABC1C2 S/E, aged between 18 and 44 years old who are primary
household consumers (primary characteristics of Bath Foams category users).
660 face-to-face interviews were conducted in a nationally representative
group of Informants via the employment of a structured questionnaire. Specific
quotas were set in terms of brand usage, while all respondents must have used
at least two of the investigated brands in the bath foams category (Palmolive,
Dove, Lux, Sanex, FA, Nivea, Papoutsanis, Badedas) in the past six months
prior to that study. Quotas based on brand usage were set in order to ensure
that respondents’ level of familiarity with a brand does not rest solely with
name recognition, but a set of brand related associations will have been formed
through brand usage (as explained in the Literature Review, brand usage is a
major source of forming primary and secondary brand associations).
4.4.2 Qualitative method
In order to gain additional insights into consumer based brand associations
(Objective 4) and a further understanding of the differential positioning of
brands, ten in-depth interviews were conducted among women, ABC1C2 S/E,
aged between 18 and 44 years old who are primary household consumers.
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“Personal interviews are preferred [authors’ note: over focus groups] because
of their superior potential to delve deeply into the memories of Informants by
means of long, personal and individually adapted probing (Zaltman 1997;
Malhotra 1999)” (quoted in Supphellen, 2004).
In terms of sample selection, specific filters were used during the screening
phase of the selection process in terms of brand usage and brand awareness. In
particular, the recruited consumers must have been main users of one of the
key brands under investigation, that is Palmolive, Dove, Lux, Sanex, FA,
Nivea, Papoutsanis, Badedas Also, they must have used Palmolive during the
past year and not being rejectors of the brand. Particular emphasis was laid
during the determination of our qualitative research sample on the Palmolive
brand, insofar as it constitutes the focal point of our research.
The research design took place on the grounds of a discussion guide, in order
to allow consumers to express themselves in as a natural way as possible. In
the context of the in-depth interviews, projective techniques were used for
tapping into consumers’ latent brand associations. “Projective techniques go
beyond language to capture other ways in which we encode our experience- as
sensations, an ambience and atmosphere, visual memories, treasured instances”
(Branthwaite & Cooper, 2001, p.3). Hence, an array of techniques was
employed for eliciting latent perceptions pertaining to brand associations (as
illustrated in Supphellen, 2004) such as the following:
Free=Association: It provides a “rough indication of the relative strength,
favourability and uniqueness of brand associations” (Keller 1998, p.312).
Metaphors/Analogies: What would a brand be if it were a woman, a planet, a
movie, an actor/ress? With the employment of such Object Projective
Techniques (OPT), “impressions of brands are largely represented in memory
in terms of metaphors because this is an effective way to understand and store
impressions about brands (Supphellen, 2004). Also, given that the ultimate
purpose of the study (cf. Chapter 6) is to pin down equity particularities of the
two main brands in the category, Palmolive and Dove, a social interaction
technique was employed. This technique enables the elicitation of associations
as to what equity elements might act as a bridge between the two brands, such
as “What kind of discussion these two brands would enter if they met in a
bar?”.
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Moodboard= technique: Informants were instructed to select any kind of
pictures (people, objects, colors, landscapes etc.) from magazines or
newspapers that represent what they think or feel about the brand.
Probing: Progressively digging deeper into latent perceptions on the grounds
of asking for qualification of primary associations (snowballing technique).
For example, when common places are referred to, such as “it is a quality
brand”, “it is a premium” brand, then consumers were probed into defining
what these terms mean to them. This process effectively allows for the creation
of links between perceived brand values (which are also highly dependent on
the variable extent of use and familiarity with a brand) and consumers’ own
belief systems.
Brand= Mapping:=On the grounds of the two category benefits consumers
deemed to be most important to them, they were asked to create a two-
dimensional map and position the brands of which they are aware according to
the level of proximity each brand has to the respective axis (each axis
corresponding to a category criterion).
The following section lays out the discussion guide and the interviewing
process that was followed during the qualitative phase.
4.4.2.1=In-depth interviews Discussion Guide
The discussion guide contains the main research areas and the guidelines that
governed the flow of the interview process. The process started with more
generic, category-wide questions and proceeded to more in-depth, brand-
specific elicitation techniques.
Stage=1
Perceptions / Habits in relation to Bath Foams (in brief)
Free= Association= Technique:=Informants were asked to state anything that
came to their mind when they think of the category, including:
- Words / phrases / adjectives
- Feelings / emotions
- Perceived benefits
- Role this product category plays in their life
- Characterization of role
Consumption pattern
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- Brands they know of
- Personal consumption history (brands)
- Frequency of purchase
- Reasons for using / not using any more brands they know of
- for buying – own initiative, advertising, word of mouth
7 This analysis constitutes a holistic approach (cf.3.7), combining the overall equity score for each of the examined brands (that emerges from averaging the four basic dimensions making up the Brand Equity
pyramid) with non-attribute based components, that is marketing performance, such as share of market,
sales, weighted distribution, pricing, advertising expenditures, that have been collected through independent
research audit firms, such as AC Nielsen and Media Services.
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In the case of (i) the correlation coefficients were quite low, as may be
gathered from Tables 7-9.
Table 7- Correlation between Average Brand Equity and Market share
Sources: AC Nielsen Scan Track database (share of market), Media Services (share of voice)
Note: Share=of=market is calculated by dividing the sales of each brand with ttl Bath Foams
market sales. Accordingly, Share of Voice is calculated by dividing the advertising expenditures
for each brand (across the key above the line advertising media, that is TV, radio, print, outdoor)
with ttl market expenditures.
Based on this dataset, a correlation figure of 68% was returned, which points
clearly to a positive relationship between the level of advertising expenditure
as an enabler of market share sustainability.
The same holds in the case of weighted distribution.
Table=11- Share of market/Weighted distribution of key brands in 2004
Weighted Distribution Share of marketDOVE 94,5 10,8LUX 92,9 7,3BADEDAS 92,1 7,8SANEX 90,8 5,1J.&.J 97,0 13,8PALMOLIVE 95,0 11FA 86,8 4,9NIVEA 76,8 2,8 Source: AC Nielsen Scan Track database 2004
8 This is also in line with J.P.Jones’ finding, published in his seminal book “When Ads work: New Proof that Advertising Triggers Sales” (Lexington 1995), where there was ample evidence about high correlation between market share growth and advertising intensity (p.95); advertising intensity is used by the author interchangeably with share of voice, denoting the same metric).
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Based on Table 11 data a correlation figure of 86% was returned, pointing to a
clear relationship between the achievement of market share and the build up of
distribution, even more so than in the case of advertising expenditures. The
positive relationship between market performance and key marketing
parameters as above illustrated (distribution, pricing, advertising expenditures)
is pretty much self-explanatory. As Ehrenberg et al (1998) contend, the
number of consumers to whom a brand is salient tends also to correlate with
just about everything in the marketing-mix that contributes towards purchasing
and market share.
The above more often than not verified remark by the authors, which
constitutes a consolidation of longitudinal studies across more than 50 product
categories is a forceful attestation of the findings of our research so far. Hence,
despite the fact that (i) brand salience correlates positively with all equity
dimensions (ii) market share and value/volume sales correlate positively with
almost all key marketing mix elements, yet key brand equity variables have a
mild positive correlation with value/volume sales and share of market. This is
attributed to the low level of discrimination among the key players, with the
exception of Dove, which manages to charge a considerably high premium (cf.
Table 6)9.
The above point to the conclusion that whereas the relationship between
market share and the marketing mix variables is pretty much linear, yet some
brands are more effective than others in building equity. Also, as already
differentiated consumer perceptions that lead to brand equity. Insofar as
building equity may only be attained at the interface between the brand and the
consumer, then gaining in equity and long lasting consumer perceptions may
be attained by enhancing the effectiveness of brand communications (all other
marketing mix variables held equal, as already explained in the preceding
analyses and on the grounds of the positive relationship among key marketing
variables). This standpoint is further discussed in Chapter 6.
9 A similar finding regarding high brand equity for Dove and its ability to command a price premium was found by A.Chaudhuri (1995) in “Brand Equity or Double Jeopardy?”, Journal of Product and Brand Management, Vol.4, No1.