Managing brand equity: a look at the impact of attributes

An executive summary for
managers and executive
Managing brand equity: a look
readers can be found at the
end of this article
at the impact of attributes
Chris A. Myers
Assistant Professor of Marketing, Texas A&M University-Commerce,
Commerce, Texas, USA
Keywords Brand equity, Brand loyalty, Consumer behaviour, Brand image,
Conjoint analysis
Abstract Brand equity continues to be one of the critical areas for marketing
management. This study explores some of the consequences attributes may have on brand
equity such as the bias on consumer preference. For comparative purposes, a
longitudinal study is conducted on the high involvement soft drink category using the top
nine national soft drinks brands. In addition to brand equity and the top attributes being
measured, overall preferences and the impact of other variables were included. Attributes
are examined from a tangible and intangible perspective and both are found to be
important contributors to brand equity and brand choice.
Introduction
Intangible assets of brands
Brand equity has been described as the added value endowed by the brand to
the product (Farquhar, 1989). The idea of using a name or symbol to enhance
a product’s value has been brought to the forefront in recent years. Brand
managers realize that parity exists in most categories as a result of ``copy
cat’’ or look-alike advertising and the proliferation of me-too brands (Aaker,
1991; Cobb-Walgren et al., 1995). Price competition through the overuse of
short-term price promotions has led to a reduction in the profitability of
brands (Aaker, 1991; Cobb-Walgren et al., 1995). This has led retailers and
manufacturers to examine ways to enhance loyalty or brand equity toward
their brands. Other issues such as the escalation of new product development
costs and the high rate of new product failures has led firms to acquire,
license, and extend brand names to a degree that was once unimaginable
(Aaker, 1991). The focus of corporate mergers over the last decade has been
more about the intangible assets of brands or brand equity versus the prior
period’s focus on synergies to be gained by economies of scale (Cobb-
Walgren et al., 1995).
Extensive agreement as to
Wall Street and Madison Avenue know the difference between the terms
what is meant by brand and
``product’’ and ``brand’’, although most consumers use them
brand equity
interchangeably. But a product is something that tends to offer a functional
benefit, whereas a brand is a name, symbol, design, or mark that enhances
the value of a particular product or service (Farquhar, 1989; Cobb-Walgren
et al., 1995). A review of the literature on brand equity shows that at the
conceptual level there is extensive agreement as to what is meant by brand
and brand equity. Most authors provide definitions of brand equity that are
generally similar to Farquhar’s (1989) definition of equity as the value added
by the brand to the product (e.g. Srinivasan, 1979; Aaker, 1991; Kamakura
and Russell, 1993; Keller, 1993; Simon and Sullivan, 1993).
Unlike developments at the conceptual level, the literature does not address
satisfactory coverage of a number of additional pressing issues such as the
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impact of attributes, and the results of these and the impact on preference.
The use of attributes both intangible and tangible could lead to a favorable
bias in attribute perceptions and thus an increase in brand equity. An
understanding of the source of a brand’s equity for the firm’s and
competitors’ brands is highly essential for a brand manager to enhance the
brand’s equity relative to those of competitive brands. For example, in some
categories, a branded product’s name is considered by consumers as the
name of a category such as a ``Coke’’ for a consumer wanting to request a
soft drink. Does the name endear the brand to consumers because of a
particular attribute such as the sugar content or because it is derived from the
sweetness or flavor?
Further understanding of
The purpose of this study is first, to measure the equity of brands, which vary
brand equity
along selected criteria and in relation to attributes; and second, to investigate
the impact of brand equity and the attributes on brand preferences. This study
examines products from a low involvement, consumer products category.
We include brands, which are highly similar on measurable attributes such as
caloric content, but vary significantly on intangible attributes such as
sweetness. Our reasoning is that the nature of the competitive marketplace
offers many brands within distinct subcategories and this may provide
further understanding of brand equity relating to present market conditions.
Literature review
Measuring and antecedents of brand equity
There have been numerous ways of measuring and estimating brand equity
over the past since the term ``brand equity’’ emerged in the 1980s. Both
academicians and practitioners have been most concerned with definitional
issues, but numerous authors have stressed the need to provide accurate
measurement in order to assist managers with guidance on ways to enhance
or build brand equity (Green and Srinivasan, 1978, 1990; Crimmins, 1992).
Measuring brand equity
Listing of world-wide brand
The methods for measuring brand equity usually are financial or consumer-
valuation
related. The most common financial measures focus mostly on stock prices
or brand replacement. Simon and Sullivan (1993) used movements in stock
prices to capture the dynamic nature of brand equity, on the theory that the
stock market reflects future prospects for brands by adjusting the price of
firms. Mahajan et al. (1991) used the potential value of brands to an
acquiring firm as an indicator of brand equity. Another financial measure
(applicable only when launching a new product) is based on brand
replacement, or the requirements for funds to establish a new brand, coupled
with the probability of success (Simon and Sullivan, 1993). Finally, one of
the most publicized financial methods is used by Financial World (FT) in its
annual listing of world-wide brand valuation (Ourusoff, 1993). FW’s formula
calculates net brand-related profits, then assigns a multiple based on brand
strength (defined as a combination of leadership, stability, trading
environment, internationality, ongoing direction, communication support,
and legal protection).
In the marketing literature, operationalizing brand equity generally falls into
two groups: those involving consumer perceptions (such as awareness, brand
associations, or perceived quality) and those involving consumer behavior
(such as brand loyalty and the focus on paying a price differential). On the
perceptual front, one measurement technique Aaker (1991) uses is consumer
preference ratings for a branded product versus an unbranded equivalent.
Many other authors (Louviere and Johnson, 1988; Yovovich, 1988; Sharkey,
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1989; MacLachlan and Mulhern, 1991) treat brand equity as brand name
importance, since the name of a brand is often its core indicator. Here the
researchers are attempting to understand the underlying attitudes behind
brand equity, which is the basis for the brand equity construct. For a
manager, these attitudes will and do reflect the underlying motivation or
incentive for the eventual actions of consumers. The downside is that these
measures only do not provide/lack a relationship to actual marketplace
behavior, which is essential for managers to draw conclusions relative to
other brands and their positioning.
Three components of brand
The focus on consumer behavior has led to an offering of measures such as
equity
overall preferences, perceived value and a measure of utility or satisfaction
that is an intangible value. Kamakura and Russell (1993) in the use of
scanner panel data utilized three components of brand equity:
(1) perceived value;
(2) brand dominance; and
(3) intangible value.
Perceived value was defined as the value of the brand, which cannot be
explained by price and promotion. Their second measure, brand dominance
ratio, provided an objective value of the brand’s ability to compete on price.
Their third measure ± intangible value ± was operationalized as the utility
perceived for the brand minus objective utility measurements.
Srinivasan (1979) defines brand equity (which he calls brand-specific effect)
as the component of overall preference not explained by objectively
measured attributes. He estimates brand equity by comparing actual choice
behavior with those implied by utilities obtained through conjoint analysis
with product attributes, but no brand names. His method avoids the problem
of unrealistic product profiles mentioned previously with the conjoint
method, but has a limitation of providing, at best, segment-level estimates of
brand equity. An attractive aspect of this method is that the researcher
obtains brand equities from all consumer choices in the marketplace rather
than by relying on survey-based subjective methods. Kamakura and
Russell’s (1993) approach is limiting in offering only segment level
estimates of brand equity, and the method of computing brand equity as
residuals in a regression equation tends to understate the actual variation of
equities across brands. For example, if there were as many attributes as the
number of bands, all their brand equities would be zero.
Perceptual and behavioral
Aaker (1991) is one of the few authors to incorporate both perceptual and
dimensions
behavioral dimensions. He suggested using a brand-earnings multiplier that
is based on a weighted average of the brand on five key components of brand
equity:
(1) awareness;
(2) associations;
(3) perceived quality;
(4) loyalty; and
(5) other proprietary assets such as patents and trade marks.
The advantage of combining both consumer perceptions and actions into a
single marketing measure of brand equity is that it is well documented that
attitudes alone are generally a poor predictor of marketplace behavior.
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Consumer perceptions clearly underlie behavior and preferences of brand
equity. As Biel (1992) observed:
Consumer behavior is, at root, driven by perceptions of a brand. While behavioral
measures of purchase describe the existence of equity, they fail to reveal what is in
the hearts and minds of consumers that is actually driving equity.
Thus the focus of the present study relies on both a perceptual look and
behavioral-based examination of brand equity.
Managers need to be
In summary the importance of measuring and managing brand equity cannot
convinced of brand equity’s
be fully appreciated until we understand not only how equity is formed but
impact on bottom line
also how it affects attitudes and behavior. Managers clearly need to be
convinced of brand equity’s impact on the bottom line. This research is a
step in that direction. Our method divides brand equity into tangible-based
(measurable) and intangible-based (non-measurable) components, thus
providing the brand manager with an indication of different plausible bases
of brand equity. The tangible-based component of brand equity captures the
impact of brand-building activities on consumers’ attribute perceptions. In
other words, the tangible-based equity incorporates the difference between
subjectively perceived and objectively measured attribute levels. The
intangible-based component of brand equity captures brand associations
unrelated to product attributes (e.g. the masculine image conveyed by the
``Marlboro Man’’).
Method
Subjects
Limitation is recognized
The respondents were drawn, on a voluntary basis, mostly from graduate and
due to the use of a student
undergraduate courses at a small, traditional university in the southwest of
sample
the USA. The vast majority worked either full- or part-time during this
longitudinal study. Individuals were approached and screened for being
familiar with the soft drink category. Students who expressed infrequent
usage were asked not to participate and the project sample consisted of 43
participants (with 1,175 purchase occasions). The participants ranged in age
from 19 to 48 and there were 23 women and 20 men who indicated they
would have reasonable attendance at the university during the summer
months (at least three times per week). A limitation is recognized due to the
use of a student sample. The use of the soft drink category and a longitudinal
approach should offer managerial insights for this relevant segment of the
population.
Study design
Absolute measures can be
Brand equity can be measured in relative or absolute terms. From the firm’s
virtual y meaningless
perspective absolute measures are probably more useful. Managers have an
interest in maximizing their brand’s equity. Thus, they need the ability to
determine benchmarks and objectives for individual brands, which can then
be contrasted with competitive offerings and industry norms. However, when
comparing a very limited number of brand equity scores (as in the present
study), absolute measures are virtually meaningless. Furthermore, not all
operationalizations allow the calculation of an absolute score. Therefore, this
investigation relied on a relative measure. The study was designed in two
phases using nine of the top market share brands of soft drinks with nine
previously studied attributes (Table I) in order to capture the information
required on preference behavior. The first phase was to measure the effect of
brand equity (adaptive conjoint analysis) and overall perceptions (constant
sum scale) on consumer preferences. Adaptive conjoint analysis is a
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Attribute
Attribute levels
1 Brand name
Coke, Pepsi, Dr Pepper, Sprite, 7-Up, Mountain Dew, Diet
Coke, Diet Pepsi, Diet Sprite
2 Calorie content
0, 140, 150, 165
3 Sugar content
No, low, medium, high
4 Sodium content
Low, medium, high
5 Caffeine content
No, low, medium, high
6 Fizz/carbonation
Low, medium, high
7 Flavor/taste
Cola, citrus
8 Sweetness
Low, medium, high
9 Price
$0.40, $0.50, $0.60
Table I. Conjoint analysis soft drink attributes and attribute levels
multivariate technique, which determines the relative importance of a
product’s multidimensional attributes (Green and Wind, 1975). We were
interested not so much in the respondent’s preference for predetermined
attribute combinations (which is a common application of the conjoint
technique) as in which brand yielded the higher preference/utility. Conjoint
analysis allowed us to measure the importance of brand name relative to
other brand attributes. Aaker (1996) has suggested that the brand name is the
core indicator of the brand for communication efforts and it assists in
generating associations which serve to describe the brand ± what it is and
what it does (i.e. ``the name is the essence of brand concept’’). Overall
preference was obtained through the use of a constant sum scale for the nine
brands. This scale preference involves asking subjects to distribute 100
points across a list of brands according to their preference for brands. The
scaled preference is a vector of probabilities that sum to 1.0. This method has
been found to predict a subject’s relative frequency of purchase of brands
(Pessemier et al., 1971).
Al impossible
To determine the attributes included in the conjoint analysis, a pretest was
combinations removed
conducted among a separate sample of 25 users of soft drinks. In the
pretest, subjects were asked to rank the attributes listed in previous
studies of soft drinks. Blank spaces were provided to allow the insertion
of alternatives that were not included in previous studies. The top nine
attributes were included in the study, with brand name being one of them.
Attribute levels were chosen to reflect industry practice and past studies.
The final list of attributes and levels shown in Table I were screened
through one additional pretest to ensure they all accurately convey
meaningful, informative, and realistic information about current soft
drink products. A common difficulty with conjoint analysis method in the
context of brand equity measurement is that the conjoint task can lead to
unrealistic product profiles (i.e. given that consumers have prior
perceptions of brands on multiple attributes, orthogonal designs that
combine brand name with attributes are likely to result in some unrealistic
profiles). Thus we removed all impossible combinations (this may be
misplaced). The second phase was a preference task using the same soft
drinks. Protocol was consistent with previous soft drink studies
(Pessemier et al., 1971; Bass et al., 1972). It was felt that the participants
would be motivated to behave in the choice task similar to their
marketplace behavior if the setting and environment resembled a
``normal’’ shopping situation and they were spending, in a sense, their
own money through the use of an account to which their daily purchases
were credited.
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Results
Validity and reliability
Correlations were not
We are interested in determining the nature of the strength of the relationship
extremely high
between brand equity and preference measures. This represents a reliability
and validity check of the consumer behavior with that of consumer attitudes.
It is of paramount importance that, when possible, managers attempt to
corroborate, through additional data, the consumer behavior in which they
are most interested. Table II shows the correlation for each of the different
preferences previously discussed. A thorough look at the Table reveals some
key results for this longitudinal study. First, all Table values are significant at
p < 0.0001, which indicates an important relationship between these
measures. Brand equity as measured using brand name is correlated with
actual choice frequency and overall preferences. That is the brands that
consumers believe offer superior or enhanced value are the brands they
weight as the most preferred as well as the brands they actually choose most
often. This reveals inherent and expected validity for the participants in the
study. Of particular note is that the correlations are not extremely high,
which may suggest that there are other factors such as measurement error
and variation in choice behavior that will occur in the marketplace.
Brand equity measures
Brand equity shows larger
We present the average aggregate-level brand equity measures in Table III for
variations across the
tangible and non-tangible attributes for each brand in the study. This Table is
brands
presented to help managers understand the nature of the variation on particular
attributes. For example, compared with the average of the soft drink brands
considered, Coke has a positive equity of 2.14 followed by
7-Up at 1.43. The brand equity for all diet drinks was the lowest measure in
the study. A few other interesting findings emerge from the results. First, the
non-tangible-based components of brand equity show larger variations across
the brands than the tangible component. This may suggest that brand equity in
this product category is driven less by favorable attribute perceptions than by
brand associations unrelated to product attributes. (It should be noted that, to
the extent that important product attributes may not have been included, there
would be a downward bias in the attribute-based component and a
corresponding upward bias in the non-attribute-based component.) Also, there
is face validity to the results in this category because brands with high equity
tend to have large market shares. It should be noted that, this need not be the
case, because large market share can result merely from a product that has
objectively superior attribute levels. The fact that brands with high equity also
have large market shares suggests a high degree of product parity (i.e. a high
degree of similarity in overall effectiveness of the brands in terms of
``objectively’’ measured attribute levels) in this category.
Preferences
Finally, we present regressions using individual choice model and comparing
brand equity and overall perceptions on the attributes used in the study. In
Overall preference
Brand name
Total ACF
Overall preference
1.00
Brand name
0.37
1.00
Total actual choice frequency (ACF)
0.49
0.27
1.00
Notes: n = 387; all Table values are significant at p < 0.0001
Table II. Correlation matrix for brand equity measures
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Table IV, we note some interesting contrasts with earlier findings. The
correlations revealed that there was validity between the different measures
of brand equity and that of preference. The aggregate-level perceptual
measures revealed the variability in the intangible attributes was higher than
the tangible attributes. For comparison purposes, we use a linear model with
price as a benchmark (Model 1), followed by one with overall preferences
(Model 2), and finally a model with brand equity and specific attributes
(Model 3). We note that, for the multinomial logit models, the reference
brand is Diet Sprite, which is the brand with the lowest market share
nationally. The individual brand constants represented by the specific brand
names represents the unobserved and unmeasured intrinsic value of the
particular brands. The base model shows that, if price is the only major
difference, respondents still make choices based on the differences in brands.
However, when we account for the differences in overall preferences for the
brands, we see an improvement in the model. We also see that the inclusion
of overall preferences affects the importance of 7-Up and Sprite. To improve
further, we add the impact of brand equity and attributes to understand the
impact on choice. Brand equity is highly significant. The attributes are all
Base plus
Base plus
Base model
overall
individual
price only
preference
attributes
Model 1
Model 2
Model 3
Variables
­
­
­
Brand
Coke
1.014****
0.959****
0.535****
Pepsi
0.950****
1.033****
0.555****
Dr Pepper
1.244****
1.310****
0.846****
Sprite
0.243
0.420***
±0.033
Mountain Dew
0.334**
0.482***
0.415***
7-Up
0.085
0.237
±0.345***
Diet Coke
0.631****
0.726****
0.455****
Diet Pepsi
±0.848****
±0.697****
±0.699****
Diet Sprite (reference brand) price
±6.73****
±6.78****
±7.74****
Overall preference
0.808****
Individual attributes (total attribute utility (linear))
Brand name
0.127****
Flavor
0.089****
Caffeine
0.042****
Calories
±0.055****
Fizz (carbonation)
0.008
Sugar
0.295****
Sweetness
0.102****
Sodium
0.060****
Log likelihood
±2,255.7
±2,241.3
±2,019
U-sq*
0.130
0.136
0.222
Likelihood ratio tests (LLR)
(±2[LLR1-LLR2])
Comparison with Model 1 (base
model)
Model 1
29.0
473.4
Model 2
444.4
Note: *All LLR tests are significant for the following chi-square values,
À28.05 = 15.51; **All t-statistics are significant at p < 0.05 if greater than 1.96 or less
than ±1.96; *** = p < 0.01; **** = p < 0.001
Table IV. Multinomial logit models for brand equity measures with alternative
specific constants
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significant and important to the choice situation. Both tangible and
intangible attributes are equally important, but carbonation is insignificant.
Models with brand equity and attributes are much more significant than a
model with price alone or with price and overall preferences. From a
managerial perspective, this would suggest that differentiation through
attributes and specifically brand equity are an important part of the choice
process. One additional finding may be that pricing mechanisms may have a
limited impact judging from the models here. Managers must consider a
wider context when promoting brands on a frequent basis. Finally, a look at
specific attributes ± we see that all contribute with varied importance.
Intangible attributes and tangible attributes alike are instrumental in the
choice process, although carbonation is not significant. We test for
significant differences in the models using the log likelihood ratio tests [-
LLR1-LLR2] and see that Model 2 and Model 3 are a major improvement to
the choice process over a base model with price only. This adds further
evidence of the contribution of attributes and brand name to the
choice process.
Discussion and conclusion
Need to gain an
This study examined the effect of intangible and tangible attributes on brand
understanding of the
equity as well as its relationship to consumer preferences. There is a strong
separate impacts
relationship between brand equity and each of the preference measures
utilized in the study. Across this category, the brand with the greater market
share yielded substantially higher levels of brand equity. In turn, the brand
with the higher equity in the category generated significantly greater
preference. The findings highlight the need to gain an understanding of the
separate impacts of both intangible and tangible attributes and their
contribution to brand equity and preference.
Difference in attributes
It might have been expected that brand name may have greater importance
than overall preference for these brands, given the less abstract nature of this
product category. Our results did bear this out. This finding should be viewed
with caution, however, since the products used in the study were low
involvement. Low involvement products, such as consumer products, may be
viewed differently from high involvement products. Low involvement
products such as consumer products are advertised and promoted frequently
and thus consumers are likely to have formed a more objective view of the
nature of the attributes, even those that are more abstract. We postulate that
this may be an explanation for the difference in attributes in this study.
Managerial implications and limitations
Al diet soft drinks received
From a manager’s perspective, this paper offers valuable insight. Knowledge
relatively low ratings on al
of the relationship and contribution of the category attributes, intangible
attributes
versus tangible, can provide managers with a basis for comparison and
possibly competitive advantage. This study reveals that higher market share
does not translate into higher aggregate level ratings on any particular
attribute. For managers, it may be important to consistently remind the target
segment of all of the beneficial attributes of the brand. Second, the study also
reveals that knowledge and use of a subcategory may be critical to creating
greater brand equity and preference. Of particular note is that the diet soft
drinks all received relatively low ratings on all attributes. This is interesting
owing to the fact that Diet Coke is one of the top four brands in the category.
Thus, managers may be able to create high brand equity and reasonable
market share for a brand with one major attribute change from the category.
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Other variables besides the ones used in the study could account for the
differences in brand equity measures. This is a limitation of the study. While
we tried to control for some of the variables, there is no way to control every
conceivable dimension, especially in a field investigation. Also, we used
other soft drink studies as a basis for establishing a baseline of
understanding. For example, we did not take into account additional
advertising or promotion, which may have biased the results. However, we
did confirm that there were no special on-campus promotions or advertising
at the time of the study.
Target profile for each
An additional limitation of this project concerns the use of a convenience
brand not confirmed
sample made up of students. This was not viewed as an overwhelming
problem since students are frequent users of this product category. However,
it could be argued that overall sample in each case was not the primary target
for the individual brands. We did not confirm the target profile for each
brand. An improvement in the study for future research would be to include a
reasonable demographic of the target market for all brands to drive brand
equity from the target demographic. This may provide additional insights to
compare and contrast as a general comparison for firms.
Further empirical evidence
In conclusion, the measurement and management of brand equity have
needed
become top priority marketing issues in recent years, as evidenced by the
growing literature on the subject. Most articles automatically assume that
brand equity has an impact on a brand’s performance; ergo brands should do
everything feasible to increase their equity. However, it does not make sense
economically to invest a firm’s scarce resources in strategies to add value if
the value does not translate into preferences and purchase behavior. Firms
need empirical evidence of the consequences of brand equity. The present
study demonstrated that intangible attributes might contribute more to brand
equity than intangible attributes of low involvement categories and that
brand equity may be influenced by attribute knowledge more than consumer
preference. Future studies should examine more closely the antecedents of
brand equity, particularly the role that intangibles play in adding value to the
brand and in helping great brands live forever.
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