How Well Does Consumer-Based Brand Equity Align with Sales

How Well Does Consumer-Based Brand

Equity Align with Sales-Based Brand

Equity and Marketing Mix Response?

Hannes Datta

Kusum L. Ailawadi

Harald J. van Heerde

12 December 2016

• Product preference and response to marketing effort a product enjoys

because of its brand versus if that same product did not have the brand (Keller 1993)

• Intangible asset → needs to be measured

What is Brand Equity?

vs.

Price: 3.50€Size: 500gFlavour: Raisins

Price: 3.50€Size: 500gFlavour: Raisins

Two Measures of Brand Equity

Sales-Based Brand Equity (SBBE):

Brand’s core attraction

e.g., Brand Equity Ten (Aaker 1991);CBBE Pyramid (Keller 2001);Brand Asset Valuator (Young & Rubicam)

Market share after removing contribution of marketing mix and attributes

Consumer-Based Brand Equity (CBBE):

Perceptual Measures

• Companies..

• spend millions of dollars each year to build brand equity

• reap its benefits in product-market and financial-market outcomes

• pay consulting companies substantial amounts to track, analyze, and value it

• Academics…• develop frameworks to define and measure brand equity

• study its origins, consequences

• …but have not yet assessed

• how well the different measurement approaches (CBBE vs SBBE) align

• whether strong consumer perceptions translate in

• equity in the market place and

• stronger marketing mix effectiveness

Brand Equity: Central theme in marketing

1. What is the association between the major dimensions of CBBE and SBBE?

2. Are there differences between categories in the CBBE-SBBE association?

3. What is the association between the major dimensions of CBBE and marketing mix effectiveness?

Research Questions

Outline of the approach

CBBE

Role of Brand in Category

IRI Marketing ScienceConsumer perceptions

(Brand Asset Valuator)

SBBE

Data: Consumer-Based Brand Equity

Source: Young & Rubicam’s Brand Asset Valuator (BAV)

KNOWLEDGE

ESTEEM

How appropriate is the brand to you?

An intimate understanding of the brand

How do you regard the brand?

A brand’s uniqueness and ability to adapt to future consumer needs

Data: Sales-Based Brand Equity (I)

Source: Symphony/IRI data provided by Bronnenberg, Kruger and Mela (2008)

Category No. of Brands

Beer 59

Carbonated Soft Drinks 27

Cigarettes 25

Coffee 30

Cold (RTE) Cereal 23

Deodorants 19

Disposable Diapers 6

Household Cleaners 15

Ketchup 5

Laundry Detergents 20

Margarine & Spreads 13

Mayonnaise 7

Category No. of Brands

Milk 19

Mustard 12

Peanut Butter 11

Frozen Pizza & Dinners 26

Razors & Blades 5

Salty Snacks 17

Shampoo 28

Soup 8

Pasta Sauce 15

Sugar Substitutes 10

Toilet Tissue 10

Toothpaste 15

Yogurt 16

TOTAL 441

• 25 FMCG categories• 441 brands• 2002-2011; 290 with CBBE measures

Sales-Based Brand Equity

Data: Sales-Based Brand Equity (II)

Total Market Share(based on

scanner data)

SBBE = market share after removing contribution of marketing mix and attributes

Physical attributes

Regular Price

Price promotions

Advertising

Distribution

Feature/Display

Brand A Brand B

Sales-Based Brand Equity

Physical attributes

Regular Price

Price promotions

Advertising

Distribution

Feature/Display

• Brand Intercept in Market Share Model

Estimating SBBE

Model requirements:• Logical consistency• Substitution effects• SBBE = Time-varying brand

intercept• Heterogeneous response

parameters• Dynamic advertising effects• Control for attributes• Control for seasonality• Endogeneity correction with

Gaussian Copulas (Park and Gupta 2012)

• Autocorrelation

Multinomial Logit Attraction Model:

MSbt =Abt

σj=1m Ajt

Abt

= exp ቆ

ቇ

y=1

Y

αby · DumYearty + βb1RegPricebt

+ βb2PriceIndexbt + βb3FDbt + βb4Distrbt + βb5AdStockbt

+ a,l

γalAttrbal + q

κbqQuarterqt + βb1RegPricebt∗

+ βb2PriceIndexbt∗ + βb3FDbt

∗ + βb4Distrbt∗ + βb5Advbt

∗ + εbt

Estimating SBBE





• Autocorrelation


MSbt =Abt

σj=1m Ajt

Abt

= exp ቆ

ቇ

y=1

Y

αby · DumYearty + βb1RegPricebt


+ a,l

γalAttrbal + q




∗ + εbt

Estimating SBBE





• Autocorrelation


MSbt =Abt

σj=1m Ajt

Abt

= exp ቆ

ቇ

y=1

Y

αby · DumYearty +βb1RegPricebt


+ a,l

γalAttrbal + q




∗ + εbt

Estimating SBBE





• Autocorrelation


MSbt =Abt

σj=1m Ajt

Abt

= exp ቆ

ቇ

y=1

Y



+ a,l

γalAttrbal + q




∗ + εbt

AdStockbt = λ AdStockb,t-1 + (1-λ) Advertisingbt

Estimating SBBE





• Autocorrelation


MSbt =Abt

σj=1m Ajt

Abt

= exp ቆ

ቇ

y=1

Y



+ a,l

γalAttrbal + q




∗ + εbt

Estimating SBBE





• Autocorrelation


MSbt =Abt

σj=1m Ajt

Abt

= exp ቆ

ቇ

y=1

Y



+ a,l

γalAttrbal + q




∗ + εbt

Xbt∗ = Φ−1 H Xbt , where Φ-1 = inverse CDF of standard normal,

H(·) = empirical cumulative distribution function of Xb.

Estimating SBBE





• Autocorrelation


MSbt =Abt

σj=1m Ajt

Abt

= exp ቆ

ቇ

y=1

Y



+ a,l

γalAttrbal + q




∗ + εbt

εbt = ρbεbt−1 + ubt

Results

DSMS 201617

• Relevance

RQ1: Association between CBBE and SBBE?

=.39 (p < .01)

• Esteem


=.35 (p < .01)

• Knowledge


=.53 (p < .01)

• Energized Differentiation


=-.14 (p < .01)

• Measures a brand’s uniqueness and ability to

stand out from the competition, as well as its ability to adapt to and meet consumer needs in the future.

• Only CBBE pillar which correlates negatively (-0.14) with SBBE.

• High energized differentiation does not necessarily appeal to the masses.

• Upside: these brands charge higher prices

RQ1: The role of Energized Differentiation

RQ2: Category differences in CBBE-SBBE Association?

Pillars of CBBE

• PCA (89% variance explained)

• EnDif• Energized

Differentiation• RelStat (relevant stature)

• Relevance• Esteem• Knowledge

Relevance of Brand in Category

• Social Value• Hedonic Value• Functional Risk Reduction

• Information Cost Reduction

SBBE

RQ2: Category moderators (1/4)

• Social value

(Steenkamp and Geyskens 2014; measured

on Mturk with N = 752)

• “You can tell a lot about a person from the

brand of category X he or she buys”

• “The brand of category X a person buys says

something about who they are.”

Highest Social Demonstrance

1Beer 3.4

2Cigarettes 3.1

3Coffee 3.1

4Shampoo 2.8

5Carbonated Soft Drinks 2.7

…… …

21Margarine & Spreads 2.2

22Soup 2.2

23Mayonnaise 2.2

24Mustard 2.1

25Ketchup 2.1

Lowest Social Demonstrance


• Hedonic value

(Voss, Spannenberg, and Grohmann 2003;

measured on Mturk with N = 752)

• “Please rate category X on how not fun/fun it

is”

• “Please rate category X on how

unenjoyable/enjoyable it is”

Most Hedonic

1 Beer 6.0

2 Coffee 5.5

3 Carbonated Soft Drinks 5.3

4 Salty Snacks 5.2

5 Cold (RTE) Cereals 4.7

… …

21 Razors & Blades 2.6

22 Toilet Tissue 2.4

23 Lundary Detergents 2.4

24 Household Cleaners 2.2

25 Diapers 2.1

Least Hedonic


• Functional Risk

(Steenkamp & Geyskens 2014; measured on

Mturk with N = 752)

• “There is much to lose if you make the wrong

choice in category X.”

• ”In category X, there are large differences in

quality between the various products.”

Highest Functional Risk

1Diapers 3.7

2Razors & Blades 3.7

3Coffee 3.6

4Toilet Tissue 3.6

5Shampoo 3.6

…… …

21Milk 2.8

22Sugar Substitutes 2.8

23Margarine & Spreads 2.7

24Ketchup 2.6

25Mustard 2.5

Lowest Functional Risk


• Concentration (cf. information cost)

(calculated from the data)

• C4 = market share of four largest brands in the

category

Highest Concentration

1Ketchup 1.00

2Diapers 0.99

3Razors & Blades 0.99

4Soup 0.98

5Mayonnaise 0.93

…… …

21Carbonated Soft Drinks 0.56

22Deodorants 0.51

23Cold (RTE) Cereals 0.48

24Beer 0.47

25Frozen Pizza & Dinners 0.47

Lowest Concentration

RQ2: Differences between Categories in the CBBE-SBBE Association?

Independent Variable Effect on SBBE

Energized Differentiation -0.08*

Energized Diff. x Category Social Value -0.05

Energized Diff. x Category Hedonic 0.13**

Energized Diff. x Category Functional Risk -0.08

Energized Diff. x C4 0.72***

Relevant Stature 0.52***

Relevant Stature x Category Social Value 0.29**

Relevant Stature x Category Hedonic -0.09**

Relevant Stature x Category Functional Risk -0.01

Relevant Stature x C4 -0.50*

Secondary market -0.60***

Category Social Value -0.21

Hedonic 0.03

Category Functional Risk -0.08

C4 0.27

Constant 0.64

R-squared 0.47

Number of brands 290

Number of observations 2423*** p< 0.01; ** p< 0.05; * p<0.10

Relevant stature effect is weaker for more hedonic categories

Energized Differentiation effect is stronger for more hedonic categories

Energized Differentiation effect is stronger for more concentrated categories

Relevant stature effect is weaker for more concentrated categories

Relevant Stature effect is stronger for stronger social value categories

• Elasticity estimates

RQ3: Association between CBBE and marketing mix effectiveness?

Marketing Mix ParameterElasticity

estimate

90%-interval of

estimated

elasticities

Mean

Regular price elasticity-.79* [-2.74,.53]

Promotional price elasticity-2.59* [-5.64,-.45]

Feature/Display elasticity.02* [-.04,.19]

Distribution elasticity.40* [-.10,1.03]

Advertising elasticity.001* [-.02,.04]

* p<.1

RQ3: Association between CBBE and marketing mix effectiveness?

0.02

0.140.16

-0.19

0.07

-0.08 -0.09

0.08

0.03

0.08

-0.20

-0.15

-0.10

-0.05

0.00

0.05

0.10

0.15

0.20

|Regular PriceElasticity|

|Promotional PriceElasticity|

Feature/DisplayElasticity Distribution Elasticity Advertising Elasticity

*

******

***

* *

*** p< .01; ** p< .05; * p<.10

Overachieving versus underachieving brands

SBBE

CBBE

Overachievers

Underachievers

Brands which have higher SBBE than expected.

Brands which have lower SBBE than expected.

Top Brands: High CBBE and High SBBE

Overachievers: Higher SBBE than expectedbased on CBBE

Underachievers: Lower SBBE than expected based on CBBE

Strugglers: Low CBBE,low SBBE

Overachieving versus underachieving brands: Cereals

Overachievers

Higher on SBBE than expected based on

CBBE

The high SBBE is not mirrored by a high CBBE.

These brands experience an unusually low brand perception.

What is causing this unexpectedly low CBBE?

Sales-Based Brand Equity (SBBE)

Consumer-Based Brand Equity (CBBE)

Underachievers

Lower on SBBE than expected based on

CBBE

The medium CBBE is not mirrored by a medium SBBE.

Those who do not buy these brands have an unusually high

opinion of them.

What is stopping those with a medium opinion of these brands from making the

decision to purchase them?

Sales-Based Brand Equity (SBBE)

Consumer-Based Brand Equity (CBBE)

1. Overall, moderate association between CBBE and SBBE

2. Energized Differentiation is different

3. Association differs across categories in line with brand role

• Social Value, Hedonic Value, Information Cost Reduction

4. Nuanced association between CBBE and marketing response

• Price promotion and Feature/Display more effective for brands

high on Relevant Stature, not Energized Differentiation

• Distribution elasticities are smaller for brands high on Relevant Stature

• Advertising response is stronger for both dimensions

Key Takeaways

Do investments in CBBE pay of in terms of SBBE?

• High Relevant Stature → SBBE but far from perfect alignment

• Energized Differentiation no direct payoffs, even slightly negative

• Social demonstrance categories

• Utilitarian categories

• More competitive categories

• Hedonic categories

• Concentrated categories

Is CBBE a Marketing mix booster?

• Relevant Stature brands: focus on advertising & (non-) price promotions; less need to focus on distribution

• Energized Differentiation brands: focus on advertising; less on price promotions

Managerial Implications

Invest in Relevant Stature

Invest in Energized Differentiation

Managerial Implications

• Get in touch with us? [email protected]

Thanks!

Documents

How Well Does Consumer-Based Brand Equity Align with Sales