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Executive Summary

"Brand value is very much like an onion. It has layers and a core. The core is the user who will

stick with you until the very end."

Edwin Artzt

Branding is that valuable point that acts as a point of connection between

consumers and an organization. It is a tool used by marketers to sell products

to consumers. Brands can express vision, mission, and process in addition to

communicating differentiation, relevance and value. By doing so, branding

can continue to extend its relevance beyond the world of marketing and take its

rightful place as an asset to the CEO. However, to realize its operational and

strategic potential, branding must evolve beyond its “jargon” and artificial models

to play a more dynamic and inclusive role that bridges the connection between

the various

The tools used for understanding customer data have grown in sophistication.

This growth is complemented by improved methods for collecting that data,

managing a continuing relationship with consumers. However, just as Moore’s

Law (suggesting that computing power would roughly double every 18 months)

has applied to marketing sophistication and it is similarly true for consumer

expectations, which are being transformed by new possibilities for interaction and

communication. Generating and sustaining its competitive advantage resides

in a company’s ability to push the boundaries of conventional thinking and by

setting standards that are more ambitious.

The measurement and management of brand value has become a major issue

for marketers and marketing researchers over the last several years. The

concept of brand value and brand equity goes well beyond the legal concept

of a trademark or the accounting concept of goodwill. Brand equity

encompasses a gamut of intrinsic values, or equities that adds to the tangible,

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measurable benefits delivered by a particular product or service. These intrinsic

values may include things such as the image imparted to the purchaser,

advertising quality, advertising quantity, and trust, long-term reputation for

reliability, customer support, social responsibility, and so forth

The challenge to both marketers and marketing researchers is determining

how we measure and manage the intrinsic value of a brand (its equity) and how

do we tie that value and our attempts to improve value to customer loyalty.

Is Market Value a reflection of Brand Value?

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Crisis in Marketing

Traditional methods for brand building and marketing have lost their

effectiveness.

According to a study published by Krober-Riel, as much as 90% of the

information provided to the consumer is ignored. An average person is

exposed in a normal day to an estimated 3,000 commercial messages. This

information overload is compounded by an unalterable shift in consumers’ media

consumption and leisure patterns. Consumers today are more easily distracted

and spend more time engaged with personal media, such as iPods, video

game consoles, and Internet browsers, than they do with traditional sources

such as TV, Radio, and Films. Due to the inherent interactivity and

customizability of these new media platforms, the ground rules and expectations

for how consumers will interact with brands are changing. Consumers now

expect marketing messages to be more relevant to their interests and needs,

less obtrusive and invasive, and inherently valuable themselves.

Meeting these consumer expectations is harder than it may sound. The problem

is that traditional marketing methods are deeply rooted in a much simpler

world where three television networks are all that separated marketers from their

potential consumers.

With extremely broad appeal and consumers’ undivided attention, television

(and radio before it), provided marketers with a medium in which they could

carefully and directly communicate the existence and benefits of their products.

This uniqueness and the longevity of the dominance of these media platforms

means the basic underpinnings of consumer marketing have remained relatively

unchanged for nearly 100 years. This deep-seeded bias towards a “one-to-

many” broadcast approach to marketing, where a message developed for a

mass audience is prominently displayed in places where the right people will

come across it, is visible in all forms of marketing today. Even progressive

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marketing strategies that incorporate new media platforms like webisodes,

banner ads, and pod casts are still defined by this flawed broadcast marketing

mentality.

Because these practices inherently do not meet consumers’ need for relevance,

subtlety, and value, they are being tuned out by the consumers today. The

response from marketers has been to create broader, louder, and marketing with

messages that are more superficial in an attempt to rise above the clutter. The

only way out of this predicament is for a shift in the marketing area that breaks

the hold of a one-to-many broadcast marketing mentality and moves towards a

more innovative approach of engaging consumers. With many traditional

marketing techniques exhausted, the time has come for marketers and their

agencies to look to fields outside of the traditional marketing disciplines in order

to identify business practices that will engage the consumer, enhance the brand,

and encourage a purchase.

What is Value?

"Any damn fool can put on a deal, but it takes genius, faith and perseverance to create a brand." -

David Ogilvy

In general, the economic value of something is how much a product or service

is worth to someone relative to other things (often measured in money)

It can be either an assessment of what it could or should be the price (valuation),

or an explanation of its actual market value (price).

Financially, it could be market capitalization plus the market value of debt. Also,

referred to as "Total Market Value".

Value of a product within the context of marketing means the relationship

between the consumer's expectations of product quality to the actual amount

paid for it. It can be expressed as the equation:

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Value = Benefits / Price

or alternatively:

Value = Quality received / Expectations

Value in marketing can be defined by both qualitative and quantitative

measures. On the qualitative side, value is the perceived gain composed of

individual's emotional, mental and physical condition plus various social,

economic, cultural and environmental factors. On the quantitative side, value

is the actual gain measured in terms of financial numbers, percentages, and

Dollars/Rupees.

For an organization to deliver value, it has to improve its value: cost ratio. When

an organization delivers high value at high price, the perceived value may be

low. When it delivers high value at low price, the perceived value may be high.

The key to deliver high-perceived value is attaching value to each of the

individuals or organizations -- making them believe that what you are offering is

beyond expectation -- helping them to solve a problem, offering a solution, giving

results, and making them happy.

What is Brand?

A brand includes a name, logo, slogan, and/or design scheme associated with

a product or service. Brand recognition and other reactions are created by the

use of the product or service and through the influence of advertising, design,

and media commentary. A brand is a symbolic embodiment of all the

information connected to the product and serves to create associations and

expectations around it. A brand often includes a logo, fonts, color schemes,

symbols, and sound, which may be developed to represent implicit values,

ideas, and even personality.

Branding Concepts

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Marketers engaged in branding seek to develop or align the expectations behind

the brand experience, creating the impression that a brand associated with a

product or service has certain qualities or characteristics that make it special or

unique. A brand image may be developed by attributing a "personality" to or

associating an "image" with a product or service, whereby the personality or

image is "branded" into the consciousness of consumers. A brand is therefore

one of the most valuable elements in an advertising theme. The art of creating

and maintaining a brand is called brand management.

Concept of “DNA” and Brand Equity

"DNA" refers to the unique attributes, essence, purpose, or profile of a brand

and, therefore, a company. The term is borrowed from the biological DNA, the

molecular "blueprint" or genetic profile of an organism, which determines its

unique characteristics

Brand Equity measures the “Total Value” of the brand to the brand owner, and

reflects the extent of brand franchise.

For a firm to deliver value to its customers, they must consider what is known as

the "Total Market Offering." This includes the reputation of the organization,

staff representation, product benefits, and technological characteristics as

compared to competitors' market offerings and prices. Value can thus be defined

as the relationship of a firm's market offerings to those of its competitors

Factors that affect a Brand

Quality

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Quality is a vital ingredient of a good brand. The “core benefits” – the things

consumers expect. These must be delivered well, consistently. The branded

washing machine that leaks, or the training shoe that often falls apart when wet

will never develop brand equity.

Positioning

Positioning is the position a brand occupies in a market in the minds of

consumers. Strong brands have a clear, often unique position in the target

market.

Positioning can be achieved through several means, including brand name,

image, service standards, product guarantees, packaging and the way in which it

is delivered. In fact, successful positioning usually requires a combination of

these things.

Communications

Communications play a key role in building a successful brand. All elements of

the promotional mix need to be used to develop and sustain customer

perceptions. Initially, the challenge is to build awareness, then to develop the

brand personality and reinforce the perception.

First-mover advantage

In terms of brand development, by “First-Mover” advantage means that it is

possible for the first successful brand in a market to create a clear positioning

in the minds of target customers before the competition enters the market. There

is plenty of evidence to support this.

Leading consumer product brands like Pepsi and Hindustan Unilever Ltd. that,

in many ways, defined the markets they operate in and continue to lead.

However, being first into a market does not necessarily guarantee long-term

success. Competitors – drawn to the high growth and profit potential

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demonstrated by the “market-mover” – will enter the market and copy the best

elements of the leader’s brand

Long-term perspective

There should be a need to invest in the brand over the long-term. Building

customer awareness, communicating the brand’s message and creating

customer loyalty takes time. This means that management must “invest” in a

brand, perhaps at the expense of short-term profitability.

Internal marketing

Finally, a firm must market itself “internally” as well as externally. The whole

business should understand the brand values and positioning. This is important

in service businesses where a critical part of the brand value is the type and

quality of service that a customer receives.

Measuring Brand Value

Consider an example of two "unbranded" Salts. Both may have the exact same

set of features in terms of Price, Quality, Quantity, etc. As long as these two

products remain unbranded, they will be undifferentiated and therefore

equivalent to the user/purchaser. However, if one label is "TATA Salt" and the

other "XYZ”, most users/purchasers will attribute additional, intrinsic, value to the

TATA product. The two branded Salts are no longer undifferentiated. The same

concept applies to service industries such as telecommunications.

The key challenges in Brand Value/Brand Equity measurement are to:

Measure the importance of "brand" in the consumers product selection

process

To dissect that measure of "brand" and determine its key contributing

components

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A brand's equity becomes part of the tradeoff a consumer considers as they first

select their consideration set, and then decide which product or service to

purchase. That is, purchasers actively trade off both the perceived tangible

benefits and the perceived intrinsic benefits delivered by products in their

consideration set, against price, to arrive at their value hierarchy, and ultimately

their purchase decision.

Brands that have high-perceived value are always included in a purchaser's

consideration set. If a brand's combined tangible and intrinsic equities 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 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 benefits, or

equity, in the long term

Questions asked while measuring Brand Value.

Given a set of tangible product features, what is the price premium a

consumer is willing to pay for my brand compared to a competitor' brand or

an unbranded product?

What are the intangible product attributes and image features that lead to

consumer willingness to pay a premium price?

Who are the customers that are willing to pay that premium for my brand?

Who are the customers that are willing to pay that premium for the

competitive brand?

How do they differ from each other?

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With regard to these attributes and features, how does my brand compare

to the competition?

How does the equity of my brand(s) develop over time?

Which activities will increase (or decrease) my brand's equity?

What activities of my competitors will cause/have caused their brand equity

to increase or decrease?

Does the equity of my brand carry over to other products and services? If

yes, what are these products and services to which equity of my brand

extends?

What is the proportion of "brand loyal", "price sensitive", or "feature

sensitive" consumers?

Answers to the above questions reflect the "Brand Image", "Brand

Awareness", "Brand Loyalty", and other concepts and when combined

together give a score called "Brand Value". Different markets, products and

product categories will result in different brand value profiles.

In addition, a brand's value is directly related to customer loyalty. That is, if a

particular brand maintains a significantly higher perception of value to a

consumer than any other brand does in the category, that consumer will

consistently purchase that brand and consistently recommend that brand to

others. Conversely, as brands in a category become less differentiated in

terms of both tangible and intrinsic features, price becomes the major

differentiator of value, and thus, there is little loyalty.

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How to calculate Value of a Brand Name.

From Net Income to Operating Income and Equity to Value

The profits margins for firms can be stated in terms of net income or in terms

of operating income (EBIT). If pre-tax operating margins are used, the

appropriate value estimate is that of the firm. In particular, if one makes the

assumption that

Free Cash Flow to the Firm = EBIT (1 - tax rate): Net Capital exp. and working

capital needs are zero.

Then the Value of the Firm can be written as a function of the after-tax operating

margin= (EBIT (1-t)/Sales

Where,

g = Growth rate in after-tax operating income for the first n years

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gn = Growth rate in after-tax operating income after n years forever (Stable

growth rate)

WACC = Weighted average cost of capital

Rural Consumers – Some Insights

A brief mention of the fact that rural India makes up close to three-fourths of

India’s population and 51% of the total disposable income is enough to

ascertain that this market holds a significant amount of potential.

Some indicators that represent their characteristics as of today:

1. Increase in potential market size - Close to 96% of the Indian rural

consumers fall in the category of low income and very affluent groups.

Out of these, low-income households represent close to five-sixths of

the total with the rest being very affluent households. The chart given

below highlights the growth in the number of low income and very

affluent households in India. These facts make it easy to infer that this

segment of the market is fast presenting a lucrative business

opportunity.

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2. Increase in incomes – As highlighted by the graph above, the incomes

for the relevant groups, i.e. low income and mass affluent is also on the

rise signifying a greater purchasing power.

3. Mindset - Rural consumers upgrading from locally made substances to

(e.g. sand mix for washing hands) to convenience products (e.g. soaps)

which may be unbranded. This signifies an effort to move towards better

and easy to use products. However, this change is only reflected in the

buying patterns of the younger sections of the family. The elders still

prefer to use age-old natural solutions.

4. Awareness – Several modes of communication, both conventional and

unconventional, have made their way through the hinterlands of India.

The rural consumers are today exposed to a variety of entertainment

sources and other stimuli because of the extensive media reach and

scope. Around 35% of rural India watches television, which attempts to

influence consumer patterns.

5. Consuming potential – According to the Central Statistical

Organization (CSO), India is a consumption led economy because of

its high private final consumption expenditure (PFCE) levels of 60% of

its GDP. The chart below highlights the share of the rural market in

terms of consumption of various products and services. It is evident that

contribution of the rural markets cannot be ignored (their PFCE is

31.7% of GDP).

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6. Position in the consumption chain – This relates to their income levels

that determine the category into which the additional income generated

will fall. For the urban consumer, it could be entertainment or some

investments. However, in rural households, a small part of the

additional income is saved and the rest will goes into consumption.

7. Consumption pattern – The pie chart given below gives a depiction of

the expenditure heads of a rural household.

Challenges faced in purchase stages

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1. Low prices – The cost of the inputs, i.e. both materials and labor make

it possible for unbranded goods to be sold at much cheaper rates than

their branded counterparts do.

2. Local aspect – Many unbranded goods are manufactured by regional

players and hence the products are tuned to the local preferences of

the region.

3. Derived benefits – The rural consumer used to be more price-

conscious than value-conscious. The mindset for securing quality for an

extra additional price, i.e. value consciousness has now seeped in. e.g.

MARICO claims that its brands of low cholesterol oils have penetrated

rural areas largely.

4. Rural income levels – The incomes in rural areas are not as much as

compared to urban areas. Hence, many items fall out of the purchasing

capacity of the rural consumers

5. Rural income generation – Even if rural consumers do have the

aggregate monthly income to purchase branded products, they do not to

have enough money at one point of time to purchase the item. This is

why in areas where branded products are available, they are often sold in

loose quantities since they fall into the purchasable range.

6. Counterfeits – Even though these counterfeit products would be

branded, if a consumer is not satisfied with the value that he is getting

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out of the product, his buy in into the branded products will take a

downturn.

7. Mindset for quality – As soon as the rural consumer is convinced that

branded goods are expensive because of their quality, which is

beneficial to him, he will switch over thereby becoming a part of the

branded goods purchaser category. It is important to realize that all

brands need to reinforce a quality mindset into the rural consumer in a

concerted manner.

8. Lack of awareness – It is the lack of information about products that

can add convenience to the life of a rural consumer. This lack of

awareness can be a result of a company’s insufficient promotional

efforts or even illiteracy of rural consumers. E.g. Mobile phones,

medicinal items etc.

Action orientations

Dividing the product categories based on the action orientation that branded

product categories should follow to generate greater returns from the rural

market. These action orientations are aimed at targeting the different sections of

the consumer pyramid and will eventually lead brands to the bottom of the

pyramid:

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1. Drive visibility and trial – These would be feel-good items such as

jewellery, apparel, furniture & white goods etc. Interestingly, penetration of

brands in these product categories in urban areas is not as high as FMCG

goods & other items.

2. Drive penetration – This category is again host to a wide range of FMCG

goods. Other categories under this purview would include building

materials etc.

3. Drive up gradation and consumption – This is for product categories

that already have a high level of penetration in the rural markets. These

would include mostly very basic FMCG goods.

Conclusion

How much one can expect to pay for the creation of a brand?

The answer is that the fee does not have to be astronomical, but it can be

depending on whom one decides to do business.

Creating a brand is often a classic case of getting what one pays for. A

person may create a name and commensurate logo (without applications like

letterhead, signage and packaging) for $500 or pay for an international identity

and branding company $100,000. In theory, that $100,000 should give higher

quality images and plenty of targeted branding theory, but that is not always

the case.

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A small business probably will never have a globally recognized "power

brand" simply because it may not have (and for that matter don't need) the

marketing resources that would fuel that level of awareness.

But it can be the most powerful brand in its target market. All it takes is

Knowing the brand image that it wants to project

Having commitment and discipline to project itself well

Spending what's necessary to get the message to its target market

Managing the marketing so that it makes a consistent impression that

etches the desired brand image into the minds of its target prospect

Hence, Market Value need not necessarily always be a reflection of Brand

Value.

References:

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Websites:

http://pages.stern.nyu.edu

http://www.allaboutbranding.com

http://www.allbusiness.com

http://en.wikipedia.org

http://www.fastcompany.com

Papers:

Brand Licensing – A misunderstood piece of the marketing mix. - By Ramez Toubassy, Senior Vice President, Brand Sense Partners

A new approach to loyalty reveals hidden opportunities- By VITTORIO RAIMONDI