What Brand Value Diagnostics can do for your bottom line

The previous issue let us gaze at the crystal ball to watch the new media landscape in Australia unfold. The picture is now getting clearer as the key players place their cards on the table.

This issue will focus on brand value diagnostics. It will give marketing executives a powerful tool to monitor the fitness of their brands relative to their category peers. And it will recommend an individual fitness program to keep your brand at the peak of its performance.

Our featured article by Dr. Max Sutherland , author of "Advertising & the mind of the consumer" was well received. Today, he's offering a unique perspective on brand health: Google: $ Billion Brand in Peril?

Price elasticity uncovers untapped brand value

ddThe utility and Petroleum companies have long used the concept of elasticity to measure the price sensitivity in their commodity markets at a particular point in time. Price Elasticity of Demand (PED) measures the responsiveness in the demanded quantity relative to changes in the current price. Inelastic brands can increase revenues by raising the price, elastic brands by lowering it.

The 4-Ps of the marketing mix (product, place, promotion and price) are the marketer's primary tool to create value for their brands. Ultimately, this value comes from differentiation and targeting, i.e. satisfying consumer needs in a unique way. To the consumer, the perceived value of the brand is the sum of its benefits - the brand experience. Individual benefits can be positive or negative and so, add to, or deduct from the brand's value over time. Consumers derive benefits from individual brand attributes that satisfy physical, economical, psychological or social needs. Consumer research shows that the price itself is but one of these attributes.

For instance, think about your preferred brand in each of the following retail categories: consumer electronics, travel, durable goods and FMCG.

If the perceived value of a brand exceeds its current price that value premium is accumulated in the brand equity. Contrary, if the price exceeds the perceived value the brand equity is eroded.

Marketers can capitalize these "untapped value pockets" in two ways, by:

  • adjusting the price in the short-term (up or down depending on the elasticity!)
  • increased consumption through brand loyalty. i.e. extended product lifecycle (medium-term)

    It is important to note that this loyalty is not to the brand itself, but to the brand experience - i.e the perceived value from consuming it. Unique brand positioning and targeting thus become the primary antidotes to prevent brand switching and strengthen the brand's immunity to value attacks from category challengers.

    Brand Value Diagnostics

    ddBrand value diagnostics are the heart of marketing effectiveness research. Consumer markets move quickly. Keeping track requires regular and frequent monitoring of the brand's value, positioning and targeting. Both, absolute and relative to the category.

    Brand value diagnostics don't stop at tracking the category share, brand awareness, image and preference. They monitor the primary value drivers of the brand by attribute and alert the marketer to shifts in consumer behaviour, preference and competing brands. Furthermore, brand value diagnostics must quantify the potential impact of the detected market movements or trends to the business and guide the marketer through the required changes to the marketing mix.

    In consumer markets opportunity windows close quickly as competitors become aware of them. To capitalize on these first-mover opportunities marketers must act swiftly and decisively - and execute with precision. Current, reliable and robust market insight information is a primary competitive advantage.

    In our cat-scan Market Beat Research identified several brands with significant potential for value extraction in their categories. The research measured the brand's elasticity in its category and traced the premium back to the value drivers, the brand attributes.

    The price elasticity, or inherent value of the brand, responds not only to variations in the marketing mix (internal), but also to uncontrollable external factors. These include shifts in consumer behaviour or preference and changes in the marketing mix of competing brands. To exercise their brands at peak performance marketers must claim their space on the value positioning map. To create inelastic demand they must "own" their unique set of attributes for which their brand stands. Otherwise they will be forced to create generic value by lowering the price (elastic demand).

    As discussed in the previous issue, advertising plays a key role in this process. Brand building campaigns aim to create inelastic demand while demand building campaigns promote instant consumption.

    Brand Value Diagnostics combine consumer behaviour (what) and attitude (why) information to provide a more complete and robust picture of the brand's performance and its opportunities. The behaviour is measured through price elasticity from POS data. The brand attitude and the perceived value are measured through consumer research¹.

    Combined, behaviour and attitude information allow the marketer to reconcile the consumer's actual behaviour with his or her perception of the brand – that motivates their purchase behaviour.

    Marketing insights:
    Your MBR Team

    Notes:
    1) Primary field research using CAPI methodology to track consumer behaviour and brand image in shopping centres, including Westfield, AMP, QIC, Gandel and other primary retail outlets and public venues in Australia.
    2) "Advertising and the mind of the consumer ", Dr. Max Sutherland & Alice K. Silvester, Allen & Unwin 2000, Australia.

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