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Measure Brand Equity the Right Way

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What is it? Why do it? How does it impact your bottom line?

Brand Equity is the value — attributed by a consumer or potential consumer — of your product or service. Higher brand equity translates into consumer goodwill and their propensity to buy your particular brand of product or service. Its measurement, complemented by a traditional financial performance measurement, helps companies make strategic decisions affecting the factors that drive it.

What follows is a quick overview of some of the evidence for the correlation between brand equity measurement and operational factors like profit and success of a particular product or service, including examples of how brand perception impacted sales both positively and negatively.

A look at the impact of brand equity on the operational performance of businesses in the CPG industry indicates that there is correlation between brand equity and the operational performance of businesses. Mohan and Sequeira (2012) provided conceptual support for the relationship between brand equity dimensions and brand market performance. Tolba and Hassan (2009) concluded that brand equity constructs are correlated with brand market performance. The practical implications of these findings are that brand equity has to be effectively measured and managed in order to improve operational performance of business.

It’s clear from all the studies that in the U.S. retail market, brand equity drives where consumers fill their baskets. So as retailers strive to increase their share of their shoppers’ dollars, and ultimately grow sales, they should focus heavily on increasing their brand equity.

The brands that consumers say have a strong brand proposition and excellent advertising always grow in perceived value. So, with an increase in brand marketing follows an increase in sales, and vice-versa.

When brand equity takes a hit, there is a corresponding drop in sales. In 1999, Nike’s sales were at $9 billion, but sales fell later that year by nearly 8% and then it got worse. Increasing awareness about wages and conditions in Nike factories in places like Indonesia coincided with a huge hit in sales.

Reports surfaced that factory workers were on less than a dollar a day, working from 7am to 9pm, six days a week. Nike’s brand took a big hit, much to the joy of its rival shoemaker Reebok, who saw its own share price rise from $8 to $30 in the same year as Nike’s stock fell by 15%.

All the evidence points to the fact that measuring brand equity is key to helping you making strategic decisions that affect your bottom line. Its measurement has posed a big challenge to companies in the CPG industry that rely on it for making speedy decisions to keep their customers coming back for the right reasons. Recent advances in automation means larger databases can be used in combination with expert analysis in order to stay a step ahead.

Luckily, this automation has seen not only a boost in the ease of analyzing the data but also a reduction in the time and cost necessary to carry it out this operationally crucial research. In 2011, there were just 150 on this adtech/martech list, now there are over 5,000 providers in the space and counting: ours is not even listed here… yet.

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