How well does consumer-based brand equity align with sales-based brand equity and marketing mix response?

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How Well Does Consumer-Based Brand

Equity Align with Sales-Based Brand

Equity and Marketing Mix Response?

Hannes Datta

(2)

• 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?

(3)

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):

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• 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

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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?

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Outline of the approach

CBBE

Role of Brand in Category

IRI Marketing Science Consumer perceptions

(Brand Asset Valuator)

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Data: Consumer-Based Brand Equity

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

K N O W L E D G E E S T E E M How appropriate is the brand to you?

An intimate understanding of the brand

How do you regard the brand?

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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

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Sales-Based Brand Equity

Data: Sales-Based Brand Equity (II)

Total Market Share

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• 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:

MS_bt = Abt σ_j=1m A_jt A_bt = expቆ ቇ ෍ y=1 Y αby· DumYearty + βb1RegPricebt

+ β_b2PriceIndex_bt + β_b3FD_bt + β_b4Distr_bt + β_b5AdStock_bt + ෍

a,l

γ_alAttr_bal + ෍

q

κ_bqQuarter_qt + β_b1RegPrice_bt∗

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Estimating SBBE

• Autocorrelation

MS_bt = Abt σ_j=1m A_jt A_bt = exp ቆ ቇ ෍ y=1 Y αby· DumYearty + βb1RegPricebt

a,l

γ_alAttr_bal + ෍

q

(12)

Estimating SBBE

• Autocorrelation

MS_bt = Abt σ_j=1m A_jt A_bt = exp ቆ ቇ ෍ y=1 Y αby· DumYearty +βb1RegPricebt

+β_b2PriceIndex_bt +β_b3FD_bt +β_b4Distr_bt +β_b5AdStock_bt + ෍

a,l

γ_alAttr_bal + ෍

q

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Estimating SBBE

• Dynamic advertising effects

• Control for attributes • Control for seasonality

• Autocorrelation

+ β_b2PriceIndex_bt + β_b3FD_bt + β_b4Distr_bt +β_b5AdStock_bt

+ ෍

a,l

γ_alAttr_bal + ෍

q

+ βb2PriceIndexbt∗ + βb3FDbt∗ + βb4Distrbt∗ + βb5Advbt∗ + εbt

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Estimating SBBE

• Dynamic advertising effects

• Control for attributes • Control for seasonality

• Autocorrelation

+ β_b2PriceIndex_bt + β_b3FD_bt + β_b4Distr_bt + β_b5AdStock_bt +෍

a,l

γ_alAttr_bal +෍

q

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Estimating SBBE

• Autocorrelation

a,l

γ_alAttr_bal + ෍

q

κ_bqQuarter_qt +β_b1RegPrice_bt∗

+ βb2PriceIndexbt∗ + βb3FDbt∗ + βb4Distrbt∗ + βb5Advbt∗ + εbt

X_bt∗ = Φ−1 H X_bt , where Φ-1 _{= inverse CDF of standard normal,}

(16)

Estimating SBBE

• Autocorrelation

a,l

γ_alAttr_bal + ෍

q

+ βb2PriceIndexbt∗ + βb3FDbt∗ + βb4Distrbt∗ + βb5Advbt∗ +εbt

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Results

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• Relevance

RQ1: Association between CBBE and SBBE?

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• Esteem

RQ1: Association between CBBE and SBBE?

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• Knowledge

RQ1: Association between CBBE and SBBE?

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• Energized Differentiation

RQ1: Association between CBBE and SBBE?

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• 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

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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

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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

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RQ2: Category moderators (2/4)

• 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

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RQ2: Category moderators (3/4)

• 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

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RQ2: Category moderators (4/4)

• 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

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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

• Elasticity estimates

RQ3: Association between CBBE and marketing mix effectiveness?

Marketing Mix Parameter Elasticity estimate

90%-interval of estimated elasticities

Mean

Regular price elasticity

-.79* [-2.74,.53]

Promotional price elasticity

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RQ3: Association between CBBE and marketing mix effectiveness?

0.02

0.14

0.16 -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 Price Elasticity| |Promotional Price Elasticity| Feature/Display

Elasticity Distribution Elasticity Advertising Elasticity

*

*** ***

***

* *

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Top Brands: High CBBE and High SBBE

Overachievers: Higher SBBE than expected based on CBBE

Underachievers: Lower SBBE than expected based on CBBE Strugglers: Low CBBE,

low SBBE

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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)

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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)

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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

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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

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