brand eq·ui·ty | noun | The value of your customers’ perception of your organization.
Brand equity is the market capitalization of a company that isn’t defined by assets, liabilities, revenues, or intellectual property. If your company calculates its total market value and deducts each of these other measurable factors, the balance is your brand equity. Brand equity is the reason world-renowned brands like Apple can command premium price points for products (Forbes estimates Apple's brand value is $154.1 billion, or nearly three times its total annual revenue).
Brand equity may be relatively inelastic. If your organization has a quarter with negative financial growth, your brand equity may not suffer. Your sales can be affected by complex factors that aren’t related to the quality of your branding or customer satisfaction, including complex economic factors like the consumer confidence index. Brand equity is driven by the quality of customer experience, including branding and marketing. It's built by emotion and impacts customer behavior; it's the reason why customers still line up to buy the iPhone 7, even if it gets mediocre reviews.
Why Brand Equity Matters to Multi-Location Brands
The way customers perceive your brand is closely tied to your value as an organization. Great brand equity influences customer loyalty. For multi-location, distributed brands, brand equity can also produce the following benefits:
- Drive purchase decisions
- Build customer loyalty
- Increase market share
- Protect pricing decisions
- Support global growth
- Increase word-of-mouth referrals
Customers who are booking travel worldwide know that Marriott will provide comfortable, high-quality accommodations in any country, which may inform their decision to book with Marriot instead of comparing competitor pricing. Similarly, they know a meal at any of the Melting Pot’s locations will be a fun and delicious experience, and may purchase gift certificates for Mother's Day. These types of positive customer perceptions inform purchase decisions, which in turn influence brand profitability. Building brand equity influences your sales through positive customer associations, which can increase spend across locations.
Learn how brands like The Marriott, The Melting Pot, and Polaris boost brand equity through local marketing. Read: Distributed Marketing on Steroids: The Brand Manager’s Guide to Designing and Managing Local Marketing Assets Without Breaking a Sweat
Distributed Brand Equity: Why Measurement Matters
Multi-location brands don't operate the same way that centralized organizations do. This influences how brand managers at these companies must think about brand equity. Why? Well, your local marketers play a big role in how your customers perceive your brand. In stores or dealerships at the local level, it's these local affiliates that are the face of the brand in interactions with your customers every day.
If your franchisees don't understand your brand values, they'll struggle to model them in customer interactions. If your dealers don't prefer your brand, they're unlikely to promote your products as much as your competitors'. For distributed brands, local marketing matters just as much – if not more – when it comes to brand equity. Measuring brand equity is crucial for any organization, but especially for distributed brands. Developing a toolkit of metrics to understand whether you're building equity can reveal important information about how your brand marketing, local marketing, and in-store experience are influencing customer perceptions.
Measuring brand equity isn’t quite as simple as other performance metrics. However, measurement is possible, and provides insight into the value of your branding efforts, marketing execution and the quality of your global customer experiences. Without tools for measurement, it's impossible to understand whether your various marketing efforts are reliably building your equity. This piece is inspired in part by Kissmetrics' analysis of three types of brand equity measurement; however, we believe that for distributed brands there are actually six types of equity measurements that matter. In this article, we dive into the importance of brand equity for distributed brands, how to measure brand equity, and how to build it.
Part One: 6 Ways to Measure Distributed Brand Equity
Without an understanding of your brand's current equity, your organization will struggle to set metrics for improvement. Brand equity can be measured in a number of ways, from how aware customers are of your brand to the financial numbers that shareholders care about. The six distinct factors that enable a comprehensive understanding of distributed brand equity are detailed below.
1. Brand Awareness
Customer knowledge of your products and services is an important part of brand equity. But even better than customers knowing you is customers not being able to avoid thinking about your brand. A leading indicator of the consumer's awareness of your company is “conversation share,” or the amount of time your brand comes up in everyday conversations about the products and services you offer.
Measuring awareness of your brand among your target customers can take many forms. Some methodologies used to understand how aware your ideal customers are include:
- Surveys and focus groups
- Web traffic
- Search volume for your brand and products
- Social mentions and reviews
2. Preference Metrics
Consumer preference is a powerful factor in daily purchase decisions; it’s the reason a customer may decide to travel further and spend more money to access a product or service they really like. Aspects of customer preference that can be measured through focus groups, sales data and surveys can include:
- Brand relevance: The extent to which your customers agree your brand provides unique and specific value that is not offered by your competitors.
- Accessibility: The ability to provide your target market with your products or services.
- Emotional connection: Your strength in forming emotional connections with customers, a key factor in loyalty.
- Value: A measure of how much your customers are willing to pay for your products and services.
3. Financial Metrics
Financial metrics surrounding brand equity are directly tied to sales performance. If these indicators, related to the financial value of your brand, are increasing your revenue is likely to be moving in the same direction. Ways to measure the financial aspects of your brand equity include:
- Price premium over competition
- Average transaction value
- Customer lifetime value
- Rate of sustained growth
4. Output Metrics
What if your brand is investing time and budget into equity-building and you don’t see results? Output is a measure of marketing activity, which measures the marketing materials that get released to the public. Output looks at how often marketing materials are released, and the type of asset released to the market place. Output can also be measured through the impact of your brand-created offers in local markets. Local activity impacts brand equity because assets that aren't being utilized by a local store owner can't influence sales. Similarly, poor-quality output – such as a direct mail offer that's amateurishly edited by a local franchisee – may have a serious negative impact on your brand equity.
Three ways to determine how your assets for local marketers are translating into output are:
- Local marketer campaign and asset utilization
- Sales on promoted products
- Customer adoption of loyalty programs
With some technologies, such as Local Marketing Automation, brand managers can also conduct A/B testing between similar markets to compare output and subsequent results.
5. Local Marketer Perception Metrics
For distributed brand management teams, there’s value in thinking of your local marketers as customers. Your local representatives all have influence over your brand equity metrics; their local advertising and in-store customer experience shapes awareness, preference and financial habits. These factors influence their success and local customer experiences – a dealer who doesn't prefer your brand is less likely to have success selling your products to a customer. A franchisee who doesn't have an instinctive connection to your brand may use your marketing assets improperly.
Your local outlets are directly responsible for the way your customers experience the brand. By monitoring local marketers' sentiment, you can further understand whether your equity is increasing or decreasing and improve the quality of your support to local representatives. Ways to measure local perception of your brand include:
- Focus groups
- Software adoption rates
- Campaign deployment rates
6. Competitive Metrics
Your competitors’ brand equity has a direct influence on how your brand equity trends. If your competition doubles-down and launches a campaign advertising a pricing adjustment, your customer preference could dip for reasons that have nothing to do with the work you're doing – and everything to do with your competitor's brand.
Competitive metrics can reveal areas where your competition is not providing value to customers, such as missing products, poor customer experiences, or pricing. It can also reveal tactics and campaigns that have resonated with your consumer base. Metrics here include, but are not limited to:
- Customer Acquisition Rate
- Market Share
- Sales Lift
- ROI of Channels of Distribution
- Sales Lift of Pricing, Discounts, and Annual Specials
Final Thoughts on Distributed Brand Equity Measurement: Think Qualitatively and Quantitatively
Measuring brand equity is certainly complex and involves many variables, but it’s wholly possible. For brand managers to truly understand the value of their brand-building activities, understanding brand equity from the perspective of both local marketers and customers is crucial. The “full story” of your brand’s value lies in thinking qualitatively and quantitatively about customers and local marketers.
There are aspects of brand equity that can be measured quantitatively, such as average transaction value or your stores' sales performance. Others require more qualitative methods of measurement, such as evaluating your franchisees' knowledge of the brand mission. At the intersection of these two methods of measurement, you’re best able to capture true brand equity. Use this knowledge to build your brand’s value among all of your stakeholders.
Part Two: 3 Ways to Go Beyond Measuring and Actually Build Brand Equity
Brand equity is built through every "touch" or interaction with the customer. Your advertising at the national and local level supports your brand equity, but so do your local marketers' face-to-face interactions with customers on a daily basis. By understanding that every outbound communication and in-store experience is an opportunity to add to a positive brand impression, brand managers can take control and not just measure their brand equity but actually build it in the process.
1. Build Your National Brand
Distributed brand managers don't have direct control over local marketing execution, though they do have control over national-level campaigns. Using traditional, proven methodologies for building your brand on a national scale can increase your value to consumers and local affiliates. Strategic tools for expanding your value include:
- Improving your brand positioning
- Telling your brand story
- Improving your tools for international brand consistency
- Using consumer and local marketer feedback to improve messaging
2. Create Equity by Improving Local Marketing Performance
Brand equity at the local level is influenced by the quality of the customer experiences and consistency. If your customers see a product in your national advertisements, go to buy it, and have a great experience, you're on the way to building lasting brand equity. Just as easily as you build equity through good execution, poor local execution will undermine all those gains.
Delivering consistently great experiences at local storefronts requires brand management teams to define expectations clearly and establish processes, often by using technology, that make it easier for two-way communications between local marketers and brand management teams to occur.
3. Support Local Innovation, Within Reason
How boring would it be if your brand released the exact same direct mail flier with no updates every summer? Pretty boring. Brands need to recast the same ideas in new and interesting ways to keep their customers excited. To achieve balance, brand managers need to understand the two primary types of brand consistency:
- Repetition: The same thing over and over again.
- Innovation: The same idea expressed repeatedly, in a different way.
Semantic consistency is what keeps your brand exciting, while rote consistency builds customer trust. Achieving a balance of these two factors is important to building your existing equity. For distributed enterprises, successfully balancing the two types of consistency requires supporting the right kind of innovation at the local level, making it easy for locals to comply with brand guidelines, and using a mixture of tools and strategic tactics like:
- Brand Guidelines
- Brand Voice and Tone Guidelines
- Digital Asset Management Technologies
- Local Marketing Automation (LMA) technologies
- Two-Way Communications
Elevating Your Distributed Brand Equity
Distributed brand equity is hard-earned and easily lost. It may take just one bad experience at their favorite store to turn a long-time, loyal customer off to your brand. Building on the equity you've already created by delivering a consistently great experience is a challenge. Doing that when you manage a network of thousands of affiliates, can feel next to impossible.
Brand equity is traditionally measured through customer knowledge, preference, and financial metrics. Distributed brands can also determine equity factors by measuring output, local marketer metrics, and competitors. With a solid baseline understanding of distributed brand equity, your organization will be positioned to build equity through national efforts, improving local marketing performance, and support for local innovation.
The key to understanding how your brand is executing against your promise is to understand that your consumers aren’t the only factor to monitor. Your local marketers' perceptions are tied to action, and working to improve their equity measures will have a direct influence on your local execution and equity.
Looking for creative ways to enable local marketers to execute local marketing? Get The Local Marketing Playbook for new ideas, tactics, to inspire your local team: Get the free playbook here.