Brand Equity Modeling and Measurement
|School||Dongbei University of Finance|
|Keywords||Brand Equity Asset Measurement brand loyalty Brand Influencing Index Brand Strength|
World business market witnessed rapid development in 1980s and inevitably it triggered a new wave of merges or acquisitions of brand names. Consequentially brand viewed as an equity has been sought after fervently as a main source for gained competitive edge and a key factor for sustainable growth of business organizations around the globe. As a research topic, brand equity has been given increasing attention ever since by both marketers and researchers. Systematic researches have also been undertaken and well documented in attempt to conceptualize measure and manage brand equity.By 1990s market competition and globalization in China intensified more than any time before and directly contribute to the frequent occurrences of a series of economic activities such as divestitures, merges & acquisitions, financing needs for IPOs/LBOs etc. Branding starts manifesting itself as a major power affecting economic decision making activities. Because of lack of familiarity to the concept systematic researches or organized real-world practices, management of brand as an asset on the professional level could not keep abreast with the actual need. So few companies have yet realized the importance of the construct, measurement and influencing elements of brand equity that a critical bottleneck formed to prevent healthy development of domestic businesses and entails more studies in this area to equip business entities with competitive advantages in marketing programs. How to define, quantify and manage brand equity carries not only tremendous strategic significance but wields crucial impacts in tactical decision making. This article provides a new model and approach to measure brand equity and will be theoretically enriching previous literatures in this regard while simultaneously benefiting practitioners in assisting their marketing efforts to sustain branding competitiveness and premium returns from brand equity.Built upon researches from previous literatures, this thesis aims to create its own new methodology with the help of such analytical tools as comparative analysis, questionnaires, mathematical modeling, empirical study and system engineering concepts. Discussions and results will be reported in following sequence. First conceptual theories of branding and brand equity are reviewed and related definitions are brought up to serve as guidance throughout this research project. Next valuation constructs and map consumers’ mindset are explored within the background of China’s domestic markets through extensive personal interviews from geographically organized focus groups and more detailed analyses on the psychological brand knowledge of individual consumers as a group. Thirdly a brand equity model is developed based on Chinese consumers and a follow-up hypothesis about enormous difference in values between world famous brand names and variety of domestic fledgling brands. Our research proceeded with hypothesis test and went on to summarize 5 dimensions in measuring brand equity (Brand Awareness, Brand association, Perceived quality, Perceived value, Brand loyalty). After introducing and reviewing published measuring approaches 3 major valuation philosophies based on consumer mind-set, product-market outcomes, financial-market outcomes are compared and discussed respectively. Finally our new approach for measuring brand equity is presented incorporating not only parameter-influencing elements previously documented on firm level but individual perspective as well. An empirical study is then performed on a real domestic product.Some of the highlights of the 8 chapters in this dissertation are as follows:Chapter 1 starts laying out research background to be followed by thesis objectives, contributions and methodology.Chapter 2 goes through primarily literatures published so far concerning branding and brand equity. Starting from a historical review on wide variety of theories, the chapter first presents its own definition about branding of products/services as (1) a combination of their brand names and symbols assembled with their designs; (2) an intangible asset formed from long-term interaction between enterprises and their customers; (3) a summation of all perceptions by all users. This leads to an important finding that conceptualization of brand equity helps grasp the true meaning and quantify the true value of the brand as an asset. Establishment of a successful brand means additional profitability and will bring future steady premium changes to firms. Moreover consumers’ psychological bounding formed from enterprises’overall marketing effort will have decisive impact on brand equity.The third chapter reviews various brand equity models including those proposed by Keller, Aaker, and Biel. The kernels of all these theories are discussed in details and then will provide conceptual guidance in creating a new model about brand equity next.Chapter 4 focuses on creating a conceptual model of customer-based brand equity that is associated with brand knowledge formed under different cultural environment. To develop brand equity model in the context of China, it is the most important task to understand more about the content and structure of consumers’ brand knowledge in its geographical areas. This chapter first collected data from face-to-face interaction with consumers organized in focus groups in an effort to map the overall contour of their brand knowledge. After drawing lessons from existing theories by Aaker, Keller, Yoo and Donthu and combining with results obtained through focus groups, a conceptual brand equity model is then proposed to include 5 dimensions of brand equity:Brand Awareness, Brand Association, Perceived Quality, Perceived Value, and Brand Loyalty. Hypothesis tests are next identified followed by empirical researches containing industry selection, sample determination, measurement form development and questionnaire design. SPSS14.0 software package is adopted to implement content analysis, reliability analysis, correlation and variance analyses (ANOVA). Finally hypotheses and model proposed earlier proved their reasonability under empirical analysis.In chapter 5 theories and methods previously developed to measure brand equity are to be reviewed with basic principles and methodology introduced in the first place. The chapter goes ahead to go over 3 common measuring approaches with detailed analyses separately:the approach based on consumer mind-set, product-market outcomes, and financial-market outcomes. Such research lays the theoretical foundation for next chapter and leads to the conclusion that best methodology in measuring brand equity should comprehensively consider integrating elements associated with activities from both firm and consumer level.Building upon previous discussions, chapter 6 deals with actual development of new combinational measuring method viewed as an improvement on a high profile valuation model published first by Interbrand Corporation. Used to be considered exclusively determined by organization-wide decisions of any business entities, definitions of brand influencing index used to calculate residue earnings and brand strength are both expanded to be weighted averages of factors attributed to both external consumers and internal organizational units. Analytical Hierarchy Process (AHP) and algorithms used to rank importance of multiple indices are adopted respectively to calculate the weights for both of aforementioned parameters. Later on fuzzy synthetic evaluation on multiple influencing factors about the new parameters is also introduced to enhance the accuracy of this new method.An empirical study on the best known beer brand in domestic market Qingdao Beer is undertaken to put new integrative method in use in 7th chapter.The final chapter dedicates to summarize major conclusions and contributions of the thesis. Areas for future research are also identified. Major conclusions are drawn as follows:1. Brand equity should be defined as an intangible asset that embodies overall image of a business organization and can earn steady abnormal returns. The true value of a brand depends on the one hand all business related efforts enterprises put forth and on the other psychological association of consumers to the brand through dynamics between these two parties.2. Consumer-based brand equity derives its value from individual consumer’s brand knowledge that is influenced by market environment. The newly proposed brand equity model consists 5 valuation sets in Brand Awareness, Brand Association, Perceived Quality, Perceived Value, and Brand Loyalty. These constructs not only provides theoretical preparation for the ensuring measurement but serves as indices in the calculation of brand strength.3. A more effective mechanism used to measure brand equity needs to take into account contributing parameters from both individual consumers and business entities. One of the new improvements of this dissertation is to insert new parameters quantifying consumers’ influence and as a result one more important factor is discovered and directly contribute to a more scientific and comprehensive measuring methodology.4. Brand influencing index consists of both consumer and enterprise factors whose importance is brand-specific. Analytical Hierarchy Process (AHP) is utilized in weight ranking in order to avoid arbitrary quantification. In combination with more tools from the field of fuzzy mathematics such as fuzzy synthetic evaluation, our approach further evaluates multiple contributing factors to improve accuracy and proves its simplicity in real practice.5. Brand strength constitutes parameters from both consumers and business entities. First, consumer’s strength comprises of 5 dimensions in brand awareness, perceived qualify, brand association, and perceived value and brand loyalty. Secondly seven indices determine the influences from organizational effort and its marketing reaction. They are brand’s leadership, stability, market, internationality, trend, support and protection.6. An empirical study about Qingdao Beer’s brand equity evaluation is provided to show new method’s robustness and easy applicability.Aiming to further assist the domestic effort of standardizing brand equity valuation for practitioners, our research’s major contributions carries both theoretical and empirical significance and can be summed up as follows: 1. New definitions on branding and brand equity are presented based upon historical review and anatomical discussion on earlier publications.Various definitions on branding and brand equity have been published historically and these different research perspective inevitably lead to their own theories and conclusions. Therefore this article first and foremost establishes its theoretical foundations for ensuing modeling and empirical study through proposing its own new definitions on branding and brand equity after in-depth literature review.2. Delineation of overall image on brand knowledge by domestic consumers as a whole group and development of a new consumer-based brand equity model.Through face-to-face interactions with real consumers in designated focus groups, this thesis successfully presents an overall image of Chinese consumers’ brand knowledge. Using published research models as references combined with information obtained from consumers in various focus groups,5 brand equity dimensions are firstly proposed for further hypothesis testing. A follow-up empirical analysis utilizing variety of statistical methods such as content analysis, reliability analysis, correlation and variance analyses (ANOVA) is undertaken to test the accuracy of the model. Results corroborate the newly proposed model.3. A New Method for Measuring Brand EquityDrawing lessons from some previously published high profile valuation models regarding brand equity, the new approach improves methods developed by InterBrand Corp. In addition to the firm-level elements already incorporated, factors from external consumers are creatively introduced into the 2 key parameters in the model: brand strength and influencing index used to calculate residue earnings.4. The followings are some scientific methods adopted in the thesis:Development of pertaining questionnaire and feedback collection from markets and consumers. An empirical analysis utilizing variety of statistical methods is undertaken to test the accuracy of the model. Use of AHP and method of rank importance in determining brand influencing index and brand strength. Fuzzy Synthetic Evaluation of multiple influencing factors in calculating upgraded parameters. Empirical analysis on Qingdao Beer’s brand equity evaluation.