Millward Brown Model

PAUL DYSONANDY FAKKANDNIGEL S. HOLLIS

UNDERSTANDiNG,iVIEASURiNG, AND USINGBRAND EQUITY

PAUL DYSONGroup StatisticianMiliward Brown International

ANDY FARREuropean Research &

Development DirectorMillward Brown Internationa!

This paper describes a survey research system designed to place afinancially related value on the consumer-based equity of brand im-ages and associations. The two components of the system, the Con-sumer Value model and the BrandDynamics'^' Pyramid, identify thevalue of individual respondents to a brand based on their predictedloyalty and explain the variation in that loyalty based on each per-son's attitudes toward the brand. The paper demonstrates how find-ings from the system can be used to help marketing decision makersmanage their brand's equity and so maximize the value of theirasset.

NIGEL S, HOLLISGroup Research &

Development DirectorMillward Brown International

I t is a well-recognized conceptthat there is a financial valuewhich attaches to a brand

name, but there is little agree-ment on how to measure thatvalue, in this paper we will sug-gest a consumer-driven defini-tion of brand equity, and pro-pose a new system for under-standing, measuring, and usingthat equity.

A brand can and should be anenduring and profitable asset forits owners. Recognizing this fact,many brand owners have soughtto place the monetary value of abrand on the balance sheet, inthe same way that they wouldthat of a capital asset, such as afactory.

A brand, however, does nothave foLmdations built of con-crete and steel. When John Stu-art, then Chairman of QuakerOats Ltd., stated, "If ihe businesswere split up, 1 xvould take thebrands, trademarks, ami goodwill,and you couhi have all the bricksand mortar—and I would fare betterthan you." he was recognizingthat brands exist in the minds oftheir potential consumers andthat what those consumers think

of a particular brand determinesthe value it has to its owner. Abrand's foundations are, there-fore, composed of peoples' in-tangible mental associationsabout it. In placing a value on abrand, we are placing a value onthe strength and resilience ofthose associations. Up untilnow, however, there has beenno systematic means of assign-ing to this consumer equity afinancial value that is related tothe overall worth of the brand.Nor has survey research offereda consistent way of understand-ing and assessing that consumerequity. This has impaired theability of decision makers toproperly manage their brand'sequity to maximize the long-term profit realized from theirasset.

This paper reports on the re-sults of a Research and Develop-ment (R&D) program aimed atusing survey research data toplace a financially related valueon the consumer-based equity ofbrand images and associations.We wili document the empiri-cally derived theories underlyingthe final system and describe the

JoLirnal of ADVERTISING RESEARCH—NOVEMBER/DECEMBER 1996

B R A N D E Q U I T Y

individual components wbichcomprise it. We will then sbowhow by translating research datainto simple descriptive conceptsit can be made accessible to mar-keting decision makers and,hence, provide a key input intostrategic thinking and action'.

Measuring Brand Equity:The Need for aSystematic Approach

The objective of many re-search techniques is to providedecision makers with guidanceon how to improve tbeir brand'scompetitive strength in the mar-ketplace. Wby tben tbe need fora new approach?

We have identified four basiclimitations of research tech-niques which have been de-signed to meet this overall objec-tive. Tbese limitations are asfollows:

1. Failure to identify the valueof a consumer to a brand in away that it can be relatedback to the balance sbeet.

2. Inability to explain why thatvalue is high or low, in termsof a consumer's fundamentalattitudes toward the brand.

3. Lack of a consistent set ofconsumer equity measureswhich can easily be appliedacross brands, categories, andcountries. Without tbis, learn-ing is limited to individualcases.

4. Lack of a clear hierarchy of"importance" to tbe con-sumer equity measures, basedon tbe extra value likely to bederived from someone en-dorsing the brand on a partic-ular measure.

'Atl data on specific brands presented inthis paper was taken from surveysfunded solely by Millward Brown Inter-national unless otherwise specified.

Our R&D program, therefore,sought to address these tradi-tional problems, witbin tbe con-text of a unified survey researchtool.

Where Financial andConsumer Equity Meet

So bow could we address thefirst of tbese issues? We neededa way of bridging the gap be-tween the intangible perceptionsof a brand and the revenues re-ahzed from it.

Tbere is an obvious point atwhicb financial and consumerequity meet, and that is when atransaction occurs in tbe market-place. We were in agreementwitbj. Walker Smith (1991)when he said tbat economicvalue is created in transactionsand that transactions are tbesource of equity. Whether abrand can command tbe priceasked for it in the marketplace isin large part determined by howit is perceived by tbe buyer, andwbetber someone continues tobuy the same brand is also inlarge part a function of their atti-tudes toward it.

It was our belief that if wecould successfully predict trans-actions from survey data wewould bridge tbe gap betweentbe intangible perceptions of abrand and the tangible revenuesgenerated from it. In otherwords we will have taken animportant step toward identify-ing and measuring the value ofbrand associations. Thus tbestarting point for our analysiswas to identify a survey researchmeasure, or combination of mea-sures, wbich reflected the poten-tial sales value of each consumerto the brand. This we havetermed tbe Consumer Valuemodel.

The ConsumerValue Model

The Consumer Value modelwas created from survey datacollected from 750 U.K. consum-ers and calibrated against theiractual purchasing bebavior (re-corded by diary) across the 12weeks following the interview.The model was then applied tosurvey data collected using thesame questionnaire in theUnited States and Spain.

In the United Kingdom fourcategories were included: tooth-paste; coffee; margarine; and tea.

. . loyalty alone does notdetermine the value of a

purchaser to a brand.

The market shares calculatedfrom the diary panel for the 33brands in the four categoriesmatched those reported byNielsen very closely (see Table1), reassuring us that we coulduse the panel data as the depen-dent variable in our analysis. Acontrol group of 250 respondentswho were not interviewed aboutthe brands prior to the paneldisplayed no difference in be-havior from the remainder. Theresearch methodology used tocollect both the survey andpanel data is described in moredetail in papers available fromMillward Brown International.

The variable predicted by theConsumer Value model is thevalue sbare of requirements de-rived from the panel, that is, theproportion of an individual's cat-egory expenditure that went to-ward each brand. Thus we werenot seeking to explain how muchpeople spent on a category, butwhat proportion of that expendi-

10 Journal of ADVERTISING RESEARCH—NOVEMBER/DECEMBER 1996

B R A N D E Q U i T V

Table 1Correlations for Categories Covered in R&D Program

UK, panel Brand CL vs. Brand CV vs.value shares panel share of Nielsen/IRI

Country Category vs. Nielsen requirements value shares

UK

UK

UK

Coffee

Toothpaste

0.99 0.98 0.99

0.99 0.99 0.96

Tea 0.98 0.97 0.97

UK Margarine 0.87 0.98 0.91

US

US

Analgesics

Shampoo

NA NA 0.99

NA NA 0.90

US Rice NA NA 0.55

Spain Instant coffee NA NA 0.99

Spain Carbonated beverages NA NA 0.98

Spain

Spain

Toothpaste

Analgesics

NA NA 0.90

NA NA 0.90

Spain Ground coffee NA NA 0.85

ture went to one brand or an-other. We feel that the valueshare of requirements measure isa key indicator of brand equity,since it will reflect both the pro-portion of volume sales and thedegree to which people are pre-pared to pay a premium price(which itself is a strong indicatorof a brand's equity). By estimat-ing value share of requirementsfrom an individual's attitudestoward the brand we will be ac-cessing their underlying or po-tential value to the brand—acleaner measure of true con-sumer equity than might be de-rived from panel data alone.

The Consumer Value modelworks by estimating value shareof requirements for each brandfor each respondent. We call thisthe Consumer Loyalty (or CL).In effect the Consumer Loyaltytells us, in percentage terms,how a consumer is likely to di-vide up their total category ex-penditure across the set of avail-able brands. As we shall reviewbelow, the model takes account

of a variety of factors to makethe prediction, including individ-ual respondents' price respon-siveness and whether or notthey are a repertoire purchaser.

When aggregated up to thebrand level the accuracy of theConsumer Loyalty prediction isgood, as shown in Figure \. Thecorrelation between the loyaltypredicted from the survey andthat measured from the panel is0.96. Correlations for individualcategories are given in Table 1.

We need to recognize, though,that loyalty alone does not deter-mine the value of a purchaser toa brand. We must also take theweight of consumption into ac-count. By asking questions aboutweight of purchase in the cate-gory, it is a simple step to con-vert the Consumer Loyalty scoreinto a Consumer Value (CV).This recognizes the fact thateven though they may beequally loyal to a brand, thosewho are heavy category purchas-ers are inherently more valuableto a brand than those who areinfrequent purchasers.

Aggregating individual Con-sumer Values across our panelallowed us to estimate valuemarket shares (we call these

Figure 1

Consumer Value Model Validation

Predicted Consumer Loyalty vs. Share of Requirements by Brand

qCO

•a

201

Predicted Brand Consumer Loyalty

Journal of ADVERTISING RESEARCH—NOVEMBER/DECEMBER 1996 11


Brand CVs) for each of the 33brands in the study. As arguedabove, our estimate of valueshare, being based on attitudes,represents an underlying shareestimate and as such may notreflect short-term share whichcould be affected by marketingactivity. However, Table 1shows a strong relationshipwithin each category betweenthe estimated value share fromthe Consumer Value model andactual Nielsen value share overthe 12 weeks of our U.K. panel.The lowest correlation is formargarine, a crowded and ill-defined category.

A similar program to that inthe United Kingdom was fol-lowed in the United Stateswhere consumers were inter-viewed about their purchasingbehavior in three categories: an-algesics, shampoo, and rice. Thebase size was 300 for each sur-vey; however, the sample defini-tion for each was matched totracking studies already runningin those categories (as we shallsee, with hindsight this was notan ideal decision). The samequestionnaire was used as in theU.K. work, but we did not fol-low up to monitor actual pur-chase behavior. Instead, weused the U.S. data to see howwell the BrandDynamics'" ques-tions added to our understand-ing of the brands and categories.However, once we had createdthe Consumer Value Model werealized the U.S. data could alsoprovide an out-of-sample valida-tion by using the model derivedin the United Kingdom to proj-ect up to dollar market share inthe United States. Where thesurvey data could be comparedon a like-for-like basis with theshare data, the projection was asaccurate in the United States asin the United Kingdom (seeTable 1).

The exception was the U.S.rice category. Originally the sur-

veys in the United States hadbeen set up with the objective ofcomparing results to existingtracking surveys, not Nielsen orIRl share data. The existingstudy definitions allow a reason-ably direct comparison for anal-gesics and shampoo (the factthat only women were inter-viewed may account for thelower correlation for shampoothan for analgesics, which wasmore representative). However,this was not true for rice. Whilethe failure to match the rice cate-gory definition reported by thescanner companies resulted in afailure to properly verify theBrand CVs for that category, itdid serve to highlight the impor-tance of matching the two in fu-ture work (if validation is re-quired). Subsequent liveBrandDynamics"' studies haveachieved correlations more con-sistent with the analgesic andshampoo categories.

Since the U.K. and U.S. sur-veys were completed we havenow conducted another study,this time in Spain (see Table 1).Again, the results from the Con-sumer Value Model match theactual market share figures rea-sonably well, suggesting that themodel is robust and that it canwork well across categories andcountries.

While further refinements willbe made to the mode! as moredata becomes available, we be-lieve that it currently meets ourrequirements of predicting indi-vidual respondents' potentialloyalty based on survey dataalone. The following pages ex-plore the underlying assump-tions of the Consumer Valuemodel in more detail.

Factors Taken intoAccount by theConsumer Value Model

1. Consideration. Our experi-ence of tracking brand perfor-

mance in many different catego-ries has shown that claimed con-sideration has a strongdirectional relationship with ac-tual sales over time. That rela-tionship, however, is often dis-guised at a point in time by boththe purchase cycle in the cate-gory and the influence of priceand other key factors that affectpurchase behavior.

The specific considerationscale used within the ConsumerValue model takes account ofthree aspects of purchasingbehavior.

• People often maintain an openmind with respect to brandsthey might possibly purchaseand can have a wide consider-ation set.

• People often do not just buyone brand; they may regularlyswap between a repertoire ofbrands in certain categories.

• Even if it is part of a reper-toire, a brand that is boughtfor a specific purpose will bebought more frequently thanothers in the same repertoire,which may be more easily sub-stituted for one another.

2. Brand Size. In every cate-gory there is a clear relationshipbetween brand size and theprobability of purchase. This isthe Double Jeopardy effect, firstnoted by McPhee in 1963 andconfirmed in subsequent workby Ehrenberg (1995) and his col-leagues. This empirically basedfinding suggests that the biggera brand is the more loyal itsbuyers will be, and it has beenobserved to influence purchasingbehavior in virtually all catego-ries studied. While Double Jeop-ardy has proven to be a robustand reproducible empirical gen-eralization, its effect is often ig-nored in both marketing andmarket research practice. How-ever, it still plays an important



Figure 2

Foundations of Consumer Equity: The BrandDynamics" Pyramid

Bonded

part in determining the actualoutcome of peoples' purchasingbehavior. The Consumer Valuemodel explicitly takes account ofthe Double Jeopardy effect byincluding a survey-based mea-sure of brand size.

3. Consumer Price Respon-siveness. Price has two influ-ences on purchase behavior, onegeneral and one specific. Thegeneral perception of a brand'sprice relative to others helps de-termine whether or not a brandis included in an individual'sconsideration set. The specificprice asked at the point of pur-chase will determine whichbrand in the consideration set isactually chosen. The ConsumerValue model takes account ofthis by identifying an individu-al's price responsiveness andthen including the actual aver-age market price in the model inthe f(jrm of an index against the

category or relevant competitiveset.

This is accomplished by allo-cating consumers to one of threeclusters: Brand Loyal, Reper-toire, or Price Driven. Individu-als are assigned to a specificcluster based on their answers toa limited set of questions cover-ing areas such as satisfactionwith the category or the influ-ence that price discounts mighthave on their decision. In theoriginal validation work thePrice Driven consumers exhib-ited six times the responsivenessto price compared to the BrandLoyal group. Typically, thegroups display different brandpreferences and the proportionof people that fall into each clus-ter differs from one category tothe next.

Using Consumer Loyaltyand Value

The Consumer Value modeluses all of the factors describedabove to predict Consumer Loy-

Figure 3

BrandDynamics Pyramids across Categories

Mortgages Coffee ClothingRetail

Bonding 3%

Advantage

Productperformance

Relevance

Presence

12%



alty—an individual respondent'svalue share of requirements. Toderive a measure of the value ofa consumer to the brand wethen factor this loyalty predic-tion by the claimed weight ofcategory purchase. To makemarket share predictions (likethat shown in Table 1), we mustuse this Consumer Value mea-sure aggregated across respon-dents. In so doing, we have suc-ceeded in identifying the valueof consumers in a way that canultimately be related to the valueof the brand on the balance sheet.

We have satisfied our first ob-jective using the ConsumerValue measure. We now turn toour remaining objectives: ex-plaining the variation in a per-son's value to the brand basedon their fundamental attitudestoward it; using a consistentframework of consumer equitymeasures; and incorporating aclear hierarchy of effect. To ac-complish this we must use theConsumer Loyalty measure. Cat-egory consumption is dependenton many more factors thanbrand associations, and it is out-side the scope of this paper toexplore them. Loyalty, however,is in large part dependent onbrand associations, and it is thisthat we seek to predict using theattitudinal data gathered in ourpre-survey.

The Foundations ofConsumer Equity:The Development of theBrandDynamics" Pyramid

Our objective in developingthe BrandDynamics™ Pyramidwas to find a way of systemati-cally diagnosing the factors un-derpinning the brand's Con-sumer Loyalty. In other wordswe wanted to identify why oneperson might have a high loyaltyfor a brand while another mighthave a low loyalty.

. . . successful brands aredistinguished from the

competition because they areseen as active and dynamicbeyond their stature in the

market.

As a result of our experienceof monitoring brand health, andextensive R&D work, we identi-fied five conceptual stages in aperson's relationship with abrand as reviewed by Hollis(1996). We then developed abroad set of questions which wehoped would discriminate be-tween these stages and appliedthem in the pre-survey describedpreviously. The development ofthe BrandDynamics™ Pyramidinvolved analyzing the resultsfrom our questions to see whichones did discriminate betweendiffering degrees of loyalty.

The key evaluative attributesidentified from our analysis aresummarized by the Brand Pyra-mid shown in Figure 2. Each

level of the pyramid repre-sents an increased level of famil-iarity and involvement with abrand. The rationale for eachlevel is described below.

A brand must create an activepresence in the market. WhileAaker (1991) suggests awarenessis important because people willoften select a recognized brandover an unknown one, simplebrand awareness failed to pro-vide discrimination in terms ofConsumer Loyalty. A review ofbrand tracking data collected byMillward Brown demonstratedthat, even very early on, suc-cessful brands are distinguishedfrom the competition becausethey are seen as active and dy-namic beyond their stature inthe market. At the most basiclevel this is exhibited in unaidedawareness of the brand name,remembered trial, or an activeunderstanding of the brandpromise.

To progress beyond presence,the brand's promise must be ofrelevance to the needs and aspi-rations of potential buyers. Abrand must show that it is ca-

Figure 4

Average U.S. Packaged Goods Brand

Proportionof Consumers

ConsumerLoyalty

43%Relevance

76%Presence



pable oi fulfilling at least someof the key criteria the con-sumer has for the intended pur-chase. This could be in terms offunctional performance or im-age to match the identity andself-presentation of thebuyer, but an acceptableprice is always an additionalrequirement.

A brand's performance mustlive up to its claims and deliverthe intended benefits against thestandards set by the competi-tion. It is important to note thatperformance in this context re-fers to a generic perception ofproduct acceptability. Innovationis clearly an important means forany brand to sustain its positionin the market by ensuring thatits product is better than thecompetition.

The brand must demonstratethat it is more relevant than oth-ers by creating some advantageover its competition. If a brandis to thrive, it must offer aunique proposition to consum-ers. In the crowded markets ofthe 1990s many brands have lit-tle functional product differentia-tion, but successful brands man-age to develop a distinctiveproduct positioning or personal-ity through advertising. Work byFarr and Brown (1994) hasshown that advertising can beused to enhance the product ex-perience by raising expectationsand focusing selective perceptionon the rewards of the brand.Branthwaite and Swindells(1995) have described the psy-chological mechanisms by whichadvertising can also raise thestatus and interest of a brand bycreating a halo of excitement,uniqueness, and supremacy.

Finally, it is the ability of thebrand to create a bond with itsusers that ensures loyalty in thefuture. Ultimately, a successfulbrand forges a special relation-ship with the consumer throughits unique combination of per-

Figure 5

Comparison of Tylenol to Category Average

Tylenol

Bonded

49%Advantage

Presence

Relevance

100%

Category Average

ceived attributes. At this level,acceptability is taken for grantedand the consumer bonds to thebrand so that it is the only oneto be considered. The relation-ship has moved from conscious-ness of the brand (Presence),

through acquaintance and check-ing out (Relevance and Perfor-mance), then experience (Advan-tage), to become bonded as theonly brand to be considered.

While for logistical reasons theoriginal research was confined to

Figure 6

Cluster Sizes Vary by Category

Pain Retievers Shampoo

44%

28%

50%

29%

23%

27%

39%

35%

26%

Brand Loyal

Repertoire

1 1 Price Driven

Journal of ADVERTiSING RESEARCH—NOVEMBERyDECEMBER 1996 15


Figure 7

Predicted Source of Revenue by Cluster

Predicted Revenue by Cluster

60% T

50% -

4 0 % •

3 0 % •

2 0 % •

1 0 % •

Brand Loyal Repertoire Price Driven

fast moving packaged goods,the concepts and questionsdeveloped as part of the Brand-Dynamics"* Pyramid appear towork well across differentbrands, categories, and coun-tries. Following its intro-duction in April 1996 the Brand-Dynamics^'' system has beenused to study impulse pur-chases, carbonated and alcoholicbeverages, financial services, re-tail, over the counter drugs, per-sonal care, and automotivebrands in Europe, North Amer-ica, and elsewhere. In Figure 3we contrast three Pyramidsbased on the brand averagewithin three very differentcategories.

The results seem to make intu-itive sense. Most of us can nameour favorite clothes store, butnot many would claim to beemotionally bonded to our mort-gage provider, financially boundmaybe!

A Hierarchy of ConsumerEquity Measures

In the BrandDynamics"' sys-tem we have identified a consis-

tent set of measures for eachlevel of the pyramid, such thatthe combination provides a clearcut between that level and theone below in terms of the aver-age Consumer Loyalty of peoplewho attain that level.

Figure 4 shows how the aver-age Consumer Loyalty increasesfor each level.

In Figure 4 we see the averageU.S. BrandDynamics® Brand,and next to it the average Con-sumer Loyalty of the people

who attain that level. Peoplewho attain the Presence level arelikely to spend 13 percent oftheir category expenditure onthe brand in question, comparedto only 2 percent for whom thebrand has no Presence (note:lack of presence in itself doesnot preclude the probability ofpurchase). People who progressto the Bonding level are likely tospend an average of 38 percentof their category expenditure onthe brand. Why do they notspend a greater proportion than38 percent? This figure, likethose for the other levels, willvary from brand to brand, andcategory to category. In thiscase, we are looking at fast mov-ing packaged goods brands,which are commonly bought aspart of a repertoire, so peoplecan be bonded to more than onebrand and split their purchasingbetween them. The exact CL foran individual consumer couldrange from under 38 percent, incases where the person is attitu-dinally predisposed to severalbrands, up to a theoretical maxi-mum of 100 percent, in whichcase the person is completelyloyal to one brand.

At this stage we have

Figure 8

Price Elasticity Depends on Consumer Price Responsiveness

Price/Demand Curves

e

I6

_ _ Aussie

^ ^ Suave

10%


li K A N D L- Q U I r Y

Figure 9

Brand Pyramids

Gold Blend Kenco

8%

achieved the goal of addressingthe four limitations of traditionalresearch techniques. It is per-haps worth noting at this pointthat the comprehensive natureof the BrandDynamics'" systemdoes not necessitate a complexor unusual methodology. Boththe Consumer Value model andBrand Pyramid can typically becollected within the course of a15-minute interview, making thesystem easy to implement, eitherin the context of an ad hoc sur-vey or tracking study.

In the remainder of the paperwe examine how the Brand-Dynamics'" system can be usedto guide marketing decisions.

Translating ResearchData intoMarketing Action

As we implied at the outset, itis our belief that for any systemmeasuring brand equity to betruly valuable it must do morethan just measure equity. Itmust be capable of providinginsights into the brand's under-lying strengths and weaknesses,and so guide strategic marketing

action to strengthen its com-petitive position. In order todo so, the findings must bereadily accessible to nonre-searchers and be presented in away that is consistent with theintuitive insights of the market-ing team.

This is best demonstrated bymeans of examples. First, a briefexample from the U.S. analgesiccategory, then another from theU.S. shampoo category, and fi-nally an example describing two

competing U.K. brands of pre-mium instant coffee.

Category Leader Tylenol:The Need toMaintain Bonding

Figure 5 compares Tylenol'sconsumer equity profile in theUnited States to that of the aver-age analgesic brand. The darkpyramid relates to the propor-tions of the total sample that fallinto each level of the pyramidfor Tylenol, and the gray pyra-mid at the front shows the aver-age analgesic brand profile.

Tylenol captures more peopleat each level, but the differenceis particularly pronounced in thecase of Bonding. Over threetimes as many people arebonded to Tylenol as the aver-age brand. The brand strategyfor Tylenol would appear clear.Reinforce commitment to thebrand through advertising andconsumer loyalty programs, le-verage its current position ofdominance, and, where possible,continue to innovate and leadthe category in terms of productperformance.

Figure 10

Gold Blend Conversion Profilepyramid

Bonding

Advantage

Product performance

Relevance

Presence

ConversionProfile'

'Difference from expectedconversion ratio



Figure 11

Kenco Conversion Profile

Pyramid ConversionProfile*

Bonding

Advantage

Product performance

Relevance

Presence -2

'Difference from expectedconversion ratio

Premium and Value U.S.Shampoo Brands:Source of Revenues

Suave is the biggest-sellingU.S. shampoo brand. It has al-most universal presence in thecategory and converts peoplewell through to relevance. His-torically the brand has been ad-vertised with well-branded andvisible copy that positions thebrand as having parity productperformance with more expen-sive brands, while costing less.In fact, the brand's retail price iswell below the category average.The strong conversion throughto Relevance is due to the factthat many people see the basicproposition as appealing, andanalysis shows that the pricepositioning is also a majorsource of conversion from Per-formance to Advantage.

By contrast, Aussie is a lesserknown brand within the cate-gory, but it sells at a premiumprice.

Given the segmentation ofbrands by function and benefitwithin the category, it is not sur-

prising that consumers withinthe U.S. shampoo category tendto be more brand loyal than inthe others looked at. Even so.Figure 6 shows that the Price

. . . the more people buy thebrand, the more people arelikely to mention it on any

favorable attribute.

Driven group is still the largestoverall.

The segmentation of consum-ers into different typologies al-lows us to do more than simplyfocus on which categories havethe most brand-loyal buyers; wecan also use it to understand thesource of a brand's revenues andhow price sensitive it is likelyto be.

Figure 7 shows the percentageof each brand's revenue that willbe derived from the three clustergroups (predicted revenues arecalculated from the respondentlevel CVs).

Given its price positioning, itis to be expected that Suave willdraw the majority of its reve-nues from the Price Drivengroup. Aussie, on the otherhand, gets 53 percent of its reve-nues from the Brand Loyalgroup and only 15 percent fromthe Price Driven. These differ-ences have important implica-tions in terms of the two brands'price sensitivity and their vul-nerability to competitive pricingactions. Suave is the biggest ofthe two brands, but this analysissuggests that it will be muchmore responsive to pricechanges—either their own orcompetitors—since a large pro-portion of sales are from thoseconsumers who are looking forthe best deal. By feeding hypo-thetical price changes throughour Consumer Value Model andconverting these into marketshares we can compare the priceresponsiveness of Suave andAussie, as shown in Figure 8.

The graph in Figure 8 con-firms that Suave is much moreprice sensitive than Aussie. Thisanalysis also makes the pointthat while we often refer to abrand's price elasticity, the de-gree of elasticity observed is ac-tually determined by the natureof consumers buying that brand.

U.K. Premium instantCoffee: ContrastingBrand Strengthsand Weaknesses

Current Standing. In theUnited Kingdom, at the time ofour research. Gold Blend en-joyed nearly twice the Nielsenvalue market share (12.9 percentvs. 7.1 percent) and ConsumerValue (12.8 percent vs. 6.7 per-cent) of Kenco. This exampleshows how the consumer equityframework can identify corebrand strengths and weakness



for each brand. It then outlineshow the current status of thebrands can be explained by pastmarketing action and conditionsin the marketplace. Finallyit demonstrates how theBrandDynamics^"* system can beused predictively to investigatethe potential outcome of differ-ent "what i f scenarios.

Analysis of both of the brands'pyramids (see Figure 9) showsGold Blend's market share to beunderpinned by greater strengthon all the dimensions of the pyr-amid. However, the DoubleJeopardy principle suggests thatthis is exactly what we shouldexpect—the more people buy thebrand, the more people arelikely to mention it on any fa-vorable attribute. The key ques-tion is then; what are thebrand's relative strengths andweaknesses?

In order to highlight the keyareas of strength or weakness itis necessary to construct a rela-tive profile of the brand againstthe other brands in the category(a more rigorous approach thanthe one used in the Tylenol ex-ample). Figure 10 shows the re-sult of such an analysis. Theconversion profile measures theextent to which the brand carriesrespondents up from one levelof the pyramid to the next, rela-tive to the other brands in thecategory.

Gold Blend's profile showsthat the brand has a higher levelof presence than the average cof-fee brand and then succeeds inholding more than its fair shareof consumers through to theperformance level. But the brandthen has both lower levels ofadvantage and bonding thanexpected.

in some respects Kenco (seeFigure 11) is a mirror image ofGold Blend. The strength andweakness profiling demonstratesthat the brand has a below-aver-

age level of presence, but moreimportantly a much lower thanexpected conversion from pres-ence to relevance. In otherwords, the brand loses moreconsumers than other coffeebrands because of a lack of per-ceived relevance. In the case ofKenco this is largely driven bynegative price perceptions. How-ever, Kenco is then highly suc-cessful at converting relevanceinto both advantage andbonding.

Understanding theImpact of PastMarketing Activity

In order to understand how toincrease or maintain the brand'scurrent strengths, we need tounderstand how its current mar-ket positioning has been devel-oped. It is beyond the scope ofthis paper to discuss all the pos-sible marketing avenues avail-able, and we have restricted our-selves to illustrating the factorslikely to have been instrumentalin the development of GoldBlend and Kenco's current brandprofiles and how they might beleveraged in the future.

Gold Blend. The brand'sgrowth surge started with a se-quence of highly visible and in-volving ads charting the devel-oping romance between the"Gold Blend couple" (the samecampaign was used for TastersChoice in the United States).This advertising had the twinbenefit of giving the brand con-siderable presence in the market-place—the advertising really wasa source of consumer and mediainterest, with each new execu-tion eagerly awaited and her-alded in the mass media. It alsohad the benefit of making thepremium coffee sector appearmore accessible to the consumer.Sales modeling conducted dur-

ing this campaign demonstratedboth a positive short-term adver-tising effect and, more impor-tantly, a clear positive underly-ing trend in sales.

However, as we can see fromthe brand's pyramid (see Figure10), there is an indication thatthe brand may be suffering froma lack of distinctive advan-tages—it has an advantage butthese are shared with otherbrands for those who buy it.Again this fits with both themarketplace realities and the na-ture and style of the advertisingitself.

Thinking firstly about the mar-ketplace, the brand has to someextent have been a victim of itsown success. As sales havegrown, a plethora of store brandme-too products have beenlaunched, with names and pack-aging bearing a marked resem-blance to the Nestle product—thus making the term "Gold" anincreasingly generic term forany premium freeze-dried in-stant coffee and eroding theuniqueness of the brand'spositioning.

While other product launchesmay have led to some dilution ofthe brand's advantage, it mayalso be true that the nature,style, and content of the adver-tising is a factor. While unques-tionably successful for thebrand, the campaign is a classicexample of the interest-statusgenre of advertising. As Swin-dells and Branthwaite (1995) ob-serve, in the case of such adver-tising, it is not the brand whichis the focus of interest but theadvertising itself. This createsthe potential long-term problemthat the brand is sustained notby core product values but by ahalo of advertising fame. And,as such, the need for this fameto be maintained and refreshedcontinuously is ever present. Wewill return to this point when


B R A N D i; Q t I

examining some potential "whatif scenarios," but first let us turnto Kenco.

Kenco. Kenco's lower level ofpresence relative to Gold Blendis a reflection of the fact that thebrand has been launched morerecently than Gold Blend andhistorically had a lower level ofadvertising support. However,superficially the difference inrelevance is less readily ex-plained. Both brands operate atsimilar premiums and, therefore,if price is the limiting factor itdoes not explain the differencebetween the brands. However,the difference is entirely under-standable if we consider theKenco's heritage and the natureof its advertising. Kenco's heri-tage is that of a ground coffeebrand, and this has been effec-tively communicated by some ofthe brand's initial launch adver-tising and by a highly impactfulseries of executions. This back-ground has the effect of narrow-ing the brand's perceived rele-vance because, historicallywithin the United Kingdom,ground coffee has been seen assomething of a luxury product.However, at the same time thisheritage has been beneficial inenhancing the brand's strongproduct credentials, leading togreater advantage and bonding.

"What If" Scenarios

It is our general belief that theterm prediction is often misusedin the context of brand equitysystems. The coffee examplesdemonstrate that both client andcompetitive marketing activityhad a major influence on theequity of those brands. How-ever, only brand owners can an-ticipate actions taken on behalfof their brands. Ordinary con-sumers can only respond tothese actions, they cannot antici-

pate them, and responses to asurvey will be based on consum-ers' current knowledge of themarketplace. Predictions madefrom that data, therefore, mightbetter be referred to as extrapo-lations, estimates of unknowndata made on the basis of avail-able data. If new brands, adver-tising, or pricing policies are in-troduced, then consumers'brand perceptions will change,along with their marketplacetransactions. In other words,marketing actions determine fu-ture market share, and the rightactions grow brands. It is theauthors' belief, therefore, thatthe most valuable form of pre-diction is that which enables theclient to evaluate the possibleeffects of different marketing

. . . marketing actionsdetermine future market

share, and the right actionsgrow brands.

actions and so make the rightchoices.

The BrandDynamics'" systemachieves this by using theBrandDynamics™ Pyramid tounearth and highlight the cur-rent status of a brand. Thenthrough the linkage to the valueof each consumer we can exam-ine the potential in-market effectof affecting the different levels ofthe Pyramid.

For example, as we have seen.Gold Blend is underpinned byan above-average level of pres-ence. However, this is highlydependent upon continued ad-vertising input for its mainte-nance. What would happen ifNestle were to reduce the levelof investment and allow thebrand's presence to fall back to

the market average? Because wecan calculate the value, in themarket, of a consumer at eachlevel of the pyramid, we canpredict the effect, all otherthings being equal, of increasingor decreasing the number ofpeople at each level on thebrand's underlying sales eq-uity—the CV. In this case thebrand's CV, and by implication,its underlying share would de-cline by about a third from 12.8percent to 8.9 percent. It is afairly straightforward analysis torelate the decrease in revenueand profit to the media savingand hence evaluate the cost ef-fectiveness of this route. On thesurface it would appear to bevery unlikely that the saving inmedia costs would be sufficientto offset the dramatic decline inshare, thus ruling this optionout. However, there may be al-ternative strategies which areworth considering. For example,the media expenditure may bedeployed to reduce the brand'sretail price, thus bringing morepeople into the brand. In thiscase a combination of the pyra-mid and Consumer Value modelcould be used to evaluate theeffect. Or there may be otherbrands within the client portfoliowhich might benefit to a greaterextent from increased invest-ment. Such cross-brand evalua-tions are possible because of thesystematic way that the data hasbeen collected.

Secondly, if we run a what ifscenario for Kenco based on thebrand successfully moving itsrelevance level to be in line withthe expected for the market, themode! predicts an increase inshare of over 40 percent, from6.7 percent to 9.6 percent. Farr(1996) describes a number of dif-ferent advertising and product-related mechanics relating toeach level of the Brand Pyramid.However, it is beyond the scope



of this paper to discuss the mostappropriate marketing mechanic,except to say that we have seenother brands achieve increases intheir perceived relevance by anumber of different routes.

Conclusion

There are two key conclusionsto be drawn from this paper,both of which relate to the pre-mises we stated initially.

First, we set up the idea thatwhat consumers think of abrand that ultimately determinesits value to its owner. We be-lieve that the findings reviewedabove confirm that a consumer'svalue to the brand is under-pinned by a consistent set of ra-tional, emotional, and saliency-based drivers.

Second, we suggested that thelack of a systematic approach tothe measurement and diagnosisof brand equity has impaired theability of decision makers toproperly manage their brands.Before developing our approachwe highlighted a number of tra-ditional problems associatedwith consumer equity researchand then sought to addressthem within the context of theBrandDynamics'" system.

To this end we created theConsumer Value model whichbridges the gap between con-sumer and financial equity. Theaggregation of individual re-spondent CVs allows us to pre-dict market share, a familiarsales measure with a direct rela-tionship to a brand's revenuestream. Variation in the respon-dent level CL scores can then beexplained using the Brand Pyra-mid, a consistent set of con-sumer equity measures whichcan easily be applied acrossbrands, categories, and coun-tries. As we have illustrated, theBrand Pyramid offers the poten-

tial to not only diagnose abrand's current standing but topredict the effects of futureactions.

By combining both the mea-surement and the understandingof brand equity in one researchtechnique, we hope to improvethe ability of decision makers toproperly manage their brand'sequity and so maximize its valuein the long term. •

PAUL DYSON, a Chartered Slatistician, isMillward Brown Infernalional's Group Slalisti-cian He joined the company in January1985 to Stan up a sales modeling depart-ment after graduating Irom York Universitywith a 1st Class Honours degree in economics and statistics In 1985 he moved frombeing the head of the UK Statistics Depari-ment of Millward Brown's Research & Oevel-opmenl team involved in the deveiopmeni otMillward Brown's products and services

Paul s main experience lies in economet-ric modeling and, m particular, isolating theeffects of advertising on sales, brand imagfand advertising awareness

ANDY FARR is Millward Brown Internation-al's European Research & Development Di-rector, He joined the company in 1985 andhas worked in a wide range of categoriesincluding packaged goods, media, andautomolive, specializing in advertisingresearch

He is now part of Millward Brown's globalResearch & Development team which is re-sponsible for the deveiopmeni of new tech-niques m the areas of advertising and mediaresearch Andy has been closely connectedwith the cfeaiion of Millward Brown's PrintLink pre-test and has published experi-mental work looking at immediate persua-sion and long-term enhancement effects otadvertising

NIGEL S. HOLLIS is the Group Researcfi &Development Director at Millward Brown In-ternational In his current role he has globalresponsibility for all proiects related to im-proving Millward Brown's current services ordeveloping new ones Over the last twoyears Nigel has worked on projects con-cerning brand equity, and interactive andon-line research.

Nigel started work in market research atCadbury Schweppes in the United Kingdomand joined Millward Brown in 1983 There hehad a key role in the development ot Mill-ward Brown's successful TV Link pretest In1988 he transferred to the United Statesand, until moving to his current role, workedon a variety of client businesses, mostly related to the analysis of tracking research

Nigel has spoken al a variety of differentconferences in North America and Europeand has had papers published in the Jour-nal of Advertising Research, Admap. pla-nung und analyse, and the Journal of theMarket Research Society.

References

Aaker, David. Managing BrandEquity. New York; The FreePress, 1991.

Branthwaite, A., and A. Swin-dells. "Capturing the Complex-ity of Advertising Perceptions."Presented at the ESOMAR Semi-nar, Paris, 1995.

Ehrenberg, A. "Empirical Gener-alizations, Theory and Method."Marketing Science 14, 3 (1995):G20-28.

Farr, Andy. "How AdvertisingBuilds Brand Equity." Presentedat the ASI Advertising Effective-ness Symposium, Lisbon, 1996.

, and Gordon Brown."Persuasion or Enhancement?An Experiment." MRS Confer-ence Papers 69-77, 1994.

Hollis, Nigel. "Integrating Infor-mation Sources to UnderstandShort and Long Term Advertis-ing Effects." In Proceedings of the19% AMA Attitude and BehavioralResearch Conference. Chicago:American Marketing Associa-Hon, 1996.

McPhee, W. Formal Theories ofMass Behavior. New York: TheFree Press, 1963.

Walker Smith, J. "Thinkingabout Brand Equity and theAnalysis of Customer Transac-tions." In Proceediiigs of the ARFAdvertising and Promotion Work-shop. New York: Advertising Re-search Foundation, 1991.


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