Most CMOs and their CEOs would agree that brand equity is a valuable corporate asset because it contributes to revenue growth, margin, and stability that would otherwise not materialize. If so, growing brand equity with a high ROI should be the governing objective of brand strategy.
This requires a brand measurement system that gets brand equity and brand ROI metrics right. But just as important, you have to be able to quantify the link between brand strategy and brand equity in a consistently predictive way. Otherwise, you leave brand managers with their gut to guess at the likely impact of a brand strategy on brand equity, and then to guess again at the actual impact of that strategy in the real world.
A big part of the problem is the wide range of what “brand strategy” means. Here are just three examples:
- “A long-term plan to achieve a series of long-term goals that result in the identification and preference of your brand by customers.”
- “A framework that determines how businesses present themselves to customers and stand out among competition.”
- “What you stand for [and] a promise you make to consumers.”
Each definition sends us down a very different path in terms of what we need to measure brand strategy.
Even worse, none of them are explicitly guided by the governing objective to grow brand equity with a high ROI.
The twin pillars of brand strategy
Marketers know that a brand’s positioning in the minds of consumers is the foundation of its ability to compete in the marketplace. The most successful brands automatically and immediately convey the distinct benefits they offer, to whom they offer them, and why they matter. By doing so, they capture market share, gain pricing power, forestall commodification, and earn recurring, sustainable revenue growth. This demands metrics that explicitly capture the extent to which consumers in your target audience understand your positioning. Do they see your unique purpose beyond profit, the emotional resonance and connection of your brand to their real or hoped-for identities, the functional benefits you provide, and the experience they might have with you?
Most companies capture some form of data on these questions that are colorful and interesting. But they’re not particularly useful on their own. They have to be connected to the range of investments your company makes. These are factors that are often discussed as brand “activation” tactics or levers – and they touch every aspect of a firm, across five buckets: product (features, quality, packaging, appearance), price (setting list prices and offering discounts, special offers, allowances, financing, and leasing options), promotion (including advertising, in-store displays, and performance marketing activities), place (including choice of store locations, in-store placement, channel partners, market coverage, internet, and mobile), and people (including sales reps, service staff, ambassadors, and influencers).
These five brand “levers” have an enormous impact on your brand positioning and equity. When you have data on them, you have the information, analysis, and insights you need to determine which investments support your brand equity and to optimize those investments accordingly. And when you share that in the company, you make clear that brand equity is everyone’s job.
All this is to say that positioning and activation together drive brand equity. That makes them the twin pillars of brand strategy. You need the ability to measure them, predict their impact on brand equity, and monitor their in-market performance to optimize your brand strategy for your particular target audience.
That requires a brand measurement system which looks like this:
Three essential capabilities
The brand management system pictured above has to have three essential capabilities to get brand strategy metrics right. The first is structural equations modeling to measure the direct and indirect effects of brand strategy variables on brand equity. Here’s a visual of what this means:
This is, of course, a highly simplified image of the causal pathways between positioning, activation, and brand equity. Effects like those depicted above can work at multiple levels (attribute, factor, composite) and in different directions of causality. There are hundreds – if not thousands – of interactions between the dozens of positioning and activation variables that drive brand equity in the real world. They all have to be accounted for to produce a holistic understanding and accurate quantification of the link between brand strategy and brand equity.
Sadly, the typical data – for example, category-centric research – and statistical modeling approaches – such as bivariate correlation analysis – used in brand measurement utterly fail to capture the rich, complex interdependencies between brand positioning, activation, and equity in a world where every brand competes with all other brands for the consumer’s heart, mind, and wallet.
This is where structural equations modeling – or SEM – comes in. SEM is a model-fitting technique that combines many multivariate techniques, such as factor analysis from psychology, path analysis from epidemiology, regression modeling from statistics, and simultaneous equations from econometrics. It is the most effective technique for isolating and quantifying the true impact of variables on a higher-order variable, such as brand equity, when those variables both predict and depend on each other.
Using SEM to quantify the link between brand strategy variables and brand equity is a foundational capability because without it, the next two are impossible. One of these is identifying which strategy metrics matter most to brand equity for your target audiences. That will vary a lot by brand depending on its strengths, weaknesses, country, and category, but here’s an example of what it looks like for a childcare brand:
The target audience for this brand is women with one- to three-year-olds. And they love it. It ranks at or near the 95th percentile of all brands, regardless of category!
The optimal strategy for this brand is to build more meaning and familiarity while maintaining its already-high regard and uniqueness. The company’s brand measurement system is very clear on exactly how to do that through positioning and activation – where to prioritize and invest and where to save on time, attention, and money.
By sharing this strategy with the entire organization, not just Marketing, the managers of this brand act as true stewards of a corporate asset – brand equity – that everyone benefits from and has a part in fortifying.
The third capability is explaining changes in your brand equity based on changes in your brand strategy metrics. Here’s what that looks like for the childcare brand highlighted above:
The numbers quantify the individual contribution of each brand strategy metric to changes in brand equity over the last 12 months. It gives brand managers a cornucopia of rich, invaluable insights into the link between their strategy and brand equity. For example, the results above tell the brand managers how much of their growth in brand equity is due to positioning (70%) versus activation (30%), how much of their positioning gains came from the brand’s purpose (40%) and emotional performance (60%), and that product performance contributes more than half of its activation performance. (Again, this will vary a lot by brand.)
Even more important, though, this enables the brand managers to compare the strategy’s actual results (in the image just above) to its intent (as described in the table farther above). This shows where the brand strategy is working and where it needs to be improved. For instance, the strategy called for building more Excitement while maintaining its perceived Competence and Sincerity. So far, so good. But the strategy also called for building the brand’s Price and Promotion attributes. Here, more work is needed.
All this eliminates the guesswork typically involved in understanding “how well is my brand strategy working?” and “how can I improve it?” That’s gold for brand managers. It helps them to optimize their own efforts and their agencies’ work as well as to rally all their relevant stakeholders, including the performance marketers, product developers, sponsorship leaders, heads of brand partnering, CFO, and anyone else who has an impact on brand equity or benefits from it.
What’s in it for you?
Consider two examples: The first comes from a fast food brand whose core customer is Gen X males. They love the brand. It ranks higher than 90% of all brands. But the brand was struggling to grow because its success with Gen X males leaves little headroom for growing through further penetration of that group.
The seemingly obvious idea of adding women to the brand’s target audience ran into resistance in the C-suite. Leaders were understandably reluctant to expand its target audience for fear of diluting the brand’s appeal to its core audience. But their brand strategy metrics revealed that doubling down on three positioning attributes – cheerful, exciting, and reliable – would grow their brand with women who have families and reinforce their brand equity with Gen X males. Since then, it successfully transitioned from a male-dominated brand to a multi-gender family brand and increased its revenue KPI by eight percent.
A second example comes from a wine label. It has very strong brand equity with a very select group of wine drinkers in the 35- to 48-year age range. The imperative for scaling this brand was to entice more people to get to know it by building its meaning and uniqueness beyond its core age group. But with whom?
Their brand strategy metrics revealed that fortifying three particular positioning attributes – authenticity, hard-working, and inclusive – through two very targeted activation tactics – product (packaging innovation) and place (channel innovation) – would have the biggest impact on their brand’s equity in the younger age group and enhance its appeal to its core customer, 35- to 48-year-olds. As a result, it achieved the rare feat among wine labels of transitioning from a niche brand to a mainstream brand without losing its distinctiveness.
In both cases, brand strategy is now the result of data-driven positioning and activation choices that are informed by their predicted impact on both brand equity and brand ROI.
That is the power of getting brand strategy metrics right.
Ready for more? Request BERA’s free brand assessment to learn more about how we can help you achieve your brand goals.