Brand equity analysis

Brand equity analysis

Brand equity represents the intrinsic value derived from a recognised brand name. Due to the high premium consumers place on such brands, they tend to command a strong loyal following.

Consumer loyalty, in turn, is synonymous with repeat-purchase or long-term sales behaviour. This is reflected in the evolution of the underlying sales baseline and is a core component of modern marketing mix modelling.

At Marketscience Consulting, the long-term baseline is modelled simultaneously as part of the marketing mix model, placing brand equity analysis at the heart of the process.

Conventional analysis

Conventional brand equity analysis monitors current and future brand strength via the impact of marketing strategy on brand perception consumer survey data. However, this misses the important role played by the brand experience – such as product performance and pricing. Furthermore, little attention is paid to linking primary research survey findings to sales outcomes and financial performance.

A brand equity eco-system

At Marketscience Consulting, we improve on conventional analysis by constructing bespoke simultaneous equation models linking marketing, brand survey data and base sales.

Successful marketing investments shift awareness, consideration and brand perceptions which drive repeat purchase behaviour, directly impacting base sales evolution. Firstly, this can feed back into brand perceptions via positive brand experience. Secondly, it can lead to shifts in price elasticity, as changing equity alters demand sensitivity to price change enabling higher price premia.

This flow is captured in a self-contained eco-system structured around long-term equilibrium relationships between brand survey data and base volumes.

Brand equity analysis

Advanced Vector autoregression (VAR) and Vector Error Correction Model (VECM) techniques are used to estimate the underlying relationships between the variables.

For accurate models, it is critical to control for all relevant long-term baseline drivers such as manufacturer regular selling price, macroeconomic factors, PR and long-term selling distribution.

Marketscience Consulting brand equity models allow a complete understanding of the long-term behaviour of the business, providing the basis of three core client solutions.  

  • Long-term marketing effects

Successful marketing can exert highly persistent and enduring effects on brand perceptions and consumer tastes. Genuine long-term marketing effects, therefore, stimulate trend-setting behaviour and reside in the sales baseline. The brand equity eco-system is specifically designed to test for and measure such effects. 

Combined with short to medium-term effects this delivers total ROI to marketing investments and identifies which brand perceptions are integral to long-term brand building. More on long-term marketing effects

  • Customer retention analysis

A full explanation of baseline evolution provides a complete understanding of loyal consumer demand. Base demand increases as the brand acquires new loyal customers and shrinks when they leave the market or switch to competing products. Consequently, brand equity models explain the long-term dynamics of customer retention. This is particularly important for contract or subscription based businesses, where marketing strategies often differ for acquiring and retaining consumers.

Brand equity models, in conjunction with customer equity modelling, assist clients in designing marketing strategies for maximising customer retention. 

  • Regular pricing
Whereas promotional price reductions are part of short-term volume, regular (shelf) price is a natural driver of baseline volumes. As such, it plays an integral role in brand equity models providing accurate regular price elasticities.
 
Combined with promotional elasticities and strategic pricing analysis, this delivers a complete view into short and long-term price response.