Successful branding is the reason that people automatically associate fashions by Georgio Armani with qualities of style, exclusiveness, and desirability. For the same reason, many believe that Energizer batteries are long-lasting or that owning a Harley Davidson motorcycle makes a statement about the owner's lifestyle. In business, branding serves to link positive attributes with products that carry the brand name.
In business, branding serves to link positive attributes with products that carry the brand name.
The English word brand comes from the old Germanic Brennen, "to burn." Branding was the practice of burning the owner's distinctive symbol into the hides of animals. As a result, animals carried the brand for life—indelible proof of ownership. In business today, branding essentially means "burning" an identity into companies, products, and services.
Branding works by establishing automatic, reflex-like associations in the minds of customers. Brand owners know that a brand is well-established when customers automatically link together...
- The brand name and brand logo.
- The company name and its branded products or services.
- Attributes such as desirability, reliability, popularity, style, design, quality, or exclusiveness.
- A positive emotional response.
With an established brand, customers hear the brand name or see the brand logo and think immediately of specific products. With stronger brand awareness, the identity also evokes positive attributes such as desirability, quality, or exclusiveness. Strong branding ultimately pays off in terms of customer loyalty, competitive advantage, and brand equity (the ability to charge premium prices for branded products)
Sections below show how brand owners create the brand identity, market the brand, and track branding progress upward through higher brand awareness levels: recognition, recall, association, and ultimately, brand franchise. Some colorful names for the stronger forms of brand franchise are brand love and brand passion.
Why Build the Brand? Branding is Key to Meeting Business Objectives
Companies pursue branding for themselves and their products because successful branding…
- Differentiates branded products from the competition. The brand itself becomes a reason for choosing one firm's products over competitors.
- Enables brand owners to charge premium prices for products and services. This branding benefit is called brand equity. Premium pricing, in turn, means the firm earns higher margins than competitors with weaker brands.
- Builds customer demand, customer loyalty, and customer retention.
As a result, companies selling goods or services generally view branding issues as crucial issues that shape the firm's high-level competitive strategy.
How Brand Owners Establish Brands and Measure Success
This article further explains branding in context with related concepts. Sections below show…
- How branding objectives flow from strategic business objectives.
- How brand owners establish and grow brands. Branding becomes more effective as they achieve higher brand awareness levels: brand recognition, brand recall, brand association, and brand franchise.
- How to measure branding success, step-by-step.
Branding begins with the people responsible for the organization's high-level business strategy.
Firstly, the top-level strategy exists to set targets for the organization's strategic objectives—crucial for business survival and growth.
The top-level strategy has another purpose: to answer this question: Exactly how does the firm plan to reach these objectives? For firms selling goods and services in competitive markets, answers to the "how?" question start with specific branding goals and branding activities.
Making Competitive Strategy Work
For businesses in highly competitive markets, the top-level business strategy is rightly called competitive strategy. A competitive strategy defines "success" with performance metrics on factors such as market share or competitive win rates in sales contests. Should anyone ask how the firm plans to score high on these metrics, the answer begins with ts branding strategy—branding activities, branding objectives, and branding metrics.
Branding Sharpens the Competitive Edge
The competitive strategy sets target rates, or percentages, for market share and sales wins. Branding supports these goals by differentiating the brand from others, usually in terms of attributes or qualities that matter to customers.
Companies differentiate their brands on attributes such as these:
- Product quality, reliability, durability, longevity
- Product features and capabilities.
- Ease of use
- Superior performance
- Superior design, style, aesthetics
- Exclusiveness, rarity, privileged status
- Desirability, popularity
- Low purchase cost, low operating cost
Branding Grows Business Volume and Profits
Most private industry companies that sell goods and services intend to grow over time—growing business volume, increasing sales revenues, and growing earnings. High-level strategies usually target minimally acceptable growth percentages in these areas. A company that does not grow does not keep up with inflation and is probably seeing shrinking margins.
Strong branding can grow business volume, sales revenues, margins, and earnings in several ways by…
- Increasing customer demand.
- Building brand loyalty and customer retention.
- Creating brand equity. Companies with brand Equity can charge higher prices for products, while competitors with weaker brands have to charge less.
Branding is the process of creating and strengthening brand identity. In some cases, a company's marketers create product brand names and brand images. In other cases, companies hire consultants specifically to create brand names and images. In still other cases, marketers try to strengthen branding for the existing company name as the brand.
Sometimes, of course, products benefit from both a product brand name and the impact of the company name. Familiar examples of company and product names working together include "Microsoft Windows" and "Apple iPhone."
Branding Success through Brand Awareness and Brand Desire
Strong brand identity means that the brand has achieved high levels of (1) brand awareness and (2) brand desire. These are high-level terms for the twin objectives of the overall branding process. Brand owners measure progress towards both goals in terms of specific customer behaviors.
Brand owners create initial brand awareness and then aim to achieve progressively stronger levels of awareness. Branding Steps 1-6 below explains awareness levels known as brand recognition, brand recall, and brand association.
When the brand name and image evoke positive emotions, the brand achieves brand franchise--sometimes called brand love or brand passion.
Build Brand Awareness Through Promotion
Brand owners typically pursue brand awareness with promotional campaigns.
- All of the traditional media work for this purpose: broadcast media, internet promotion, print media, direct mail, billboards, in-store displays, posters.
- Brand owners pursue brand awareness by sponsoring popular events—entertainment events and sporting events, for instance.
- They can pursue brand awareness by sponsoring community organizations, recreational facilities (such as parks or playgrounds), or cultural resources (such as museums).
- Brand owners can also pursue brand awareness by participating in special sales events, such as trade shows and other exhibitions.
Also, marketers try to catch the attention of writers and speakers they do not pay for promotion. These may include professional critics, industry analysts, product reviewers, trade press reporters, and even news reporters. Brand owners sometimes refer to positive reviews from these sources as "free advertising."
Brand Desire through Positive Emotional Response (Positive Affect)
If the brand itself is to evoke positive affect (positive emotion), customers must first associate the feeling with the brand.
- Branded products that sell with high customer satisfaction will naturally build the association over time.
- Marketers, however, try to accelerate and strengthen this association through promotions designed for that purpose.
Most people have seen commercial advertisements that carry very little factual information but show branded products with attractive people who are having fun, being admired, winning sports events, or otherwise enjoying themselves. Some brands are well known for using ads that feature cute animals, young children, or celebrities—all of which tend to evoke warm, positive feelings.
In the language of experimental psychology, these ads try to build a conditioned emotional response to the brand name or brand image. One famous example from the early 1970s is the Coca-Cola ad series featuring the song "I'd like to teach the world to sing, in perfect harmony."
Marketers in competitive industries work aggressively and spend heavily, pursuing branding goals. Successful branding is indispensable, In most cases, for reaching high-level objectives for market share, revenues, margins, and customer retention.
As a result, brand owners track brand-building gains and losses more or less continuously throughout the brand's life. The five steps below show how to use several mainstream measures of branding success for this purpose. Marketers across industries find these metrics essential for evaluating ad campaigns, justifying marketing budgets, and making competitive strategies work.
The five-step plan below assumes that branding succeeds first in the primary forms of brand awareness—brand recognition and brand recall. After these qualities take hold in the market, marketers try to claim the higher brand awareness levels—brand association and brand franchise. The final step in the plan targets brand loyalty, the highest form of brand franchise..
How to Measure Branding in Five Steps
Step 1. Define Brand Identity and Target Market
Step 1 in branding measurement lays the necessary groundwork for the actual branding measurements that follow in steps 2-5.
Step 1 has two parts:
Define the Brand Identity.
Elements of this definition communicate the essential nature of the identity for branding.
Define the Market.
The market definition makes it possible to draw conclusions about the overall market population from sample group data.
Step 1, Part 1
Deine the Brand Identity
Think of brand identity as a collection of items selected, packaged, and linked together under a given brand name.
Define a new brand identity by choosing and describing the package contents:
- Brand name and brand logo.
- Specific products, services, or companies...
- Attributes and qualities to link with the brand, such as desirability, high quality, reliability, popularity, superior design, style, leading-edge technology, or exclusiveness.
To get started with a new brand identity, consider two elements that stand out in the company's high-level strategy: The founder's vision statement for the business and the firm's customer value statement. Expect these statements to propose some of the core reasons customers desire the brand and buy from the company. That information should suggest attributes and qualities that may serve well in the brand identity package. For more on vision and value statements, see Business Strategy.
Step 1, Part 2
Define the Market
Marketers measure progress in building brand strength by observing or surveying real customers in the target market. This almost always means studying small sample groups selected from the larger market population.
Can you draw trustworthy conclusions about branding success in a market of, say, 50 million, from a market sample group of, say, 1,000 customers? The answer is Yes!—but there is an essential qualification: The group studied must represent a statistically valid sample from a well-defined population. In market research—as in political polling, epidemiology, and social science research—this means selecting a stratified random sample.
Preparing a stratified random sampling plan is relatively straightforward and easy, but only if you first define the market by describing clearly (1) the customers, (2) the accessible market, and 3) key strata in the market population.
Who are the Customers?
Begin defining the market by listing the classes or types of people, organizations, or businesses you consider prospective customers for the branded products.
- The potential market for baking ingredients includes consumers and businesses: all people who bake at home, bakeries, other businesses that produce baked goods, restaurants, restaurant suppliers, cooking schools, and institutional kitchens.
- The consumer market for personal care products includes nearly all people of both genders and all ages. Market segments for specific products within this market may be limited to one gender or the other, or concentrated in particular age ranges, or limited to certain personal income levels.
This list describes the potential market.
What is the Market? How Much of That is Accessible?
The question "What is the Market?" asks for market size. Market "size" usually means "Total sales revenues" for one year, or sometimes "Units sold" or another measure of business volume. The 2021 global market for personal care products, for instance, is estimated at US$ 227 billion. That figure is the potential market for personal care products.
Most brand owners have to accept that they cannot target or serve the entire potential market. Some of the potential market may be inaccessible due to ...
- Geography or Location.
Part of the potential market may lie beyond the firm's geographic reach. Independent service providers such as plumbers, hair salons, and electricians, for example, are limited to customers in their locality. Many domestic businesses lack international distribution or sales channels.
- Language Barriers or Cultural Differences and Preferences
Starbuck's Coffee and Domino's Pizza have had to face cultural barriers in trying to establish business in Italy. Italians much prefer their own coffee and pizza cultures.
- Customer type.
Firms selling only to consumers have a different accessible market than firms that sell the same products or services to businesses.
When planning a branding campaign or branding measurement, the most useful figure for the market size is the is the firm's estimated accessible market.
Market Strata Are Key to Predicting Buying Behavior
Some products appeal to customers of one gender more than the other. For such products, male and female are market strata (layers), and gender is a stratification attribute.
Other products may appeal primarily to consumers in some age groups, but not others. In such cases, age groups are market strata, and age is a stratification dimension.
Significant market strata may also exist for other demographic attributes, such as income level, education level, occupation, special interests, ethnicity, primary language, and other factors.
Before selecting a sample group for study, marketers first ascertain which stratification attributes matter for their market and how the market population is distributed for each attribute. For this, most turn to third-party market research sources such as Statistia, Grand View Research, or Mordor Intelligence (to name a few). Such sources provide (for a price) detailed, in-depth breakdowns of individual markets and market segments.
Consider, for example, a very large market population with two significant stratification attributes: (1) Gender and (2) Age. The overall market is predominately female (80% of the market) under 40 (70%). Exhibit 1 shows the population distribution among gender/age categories.
Use Exhibit 1 to find the number of sample group members for each gender/age category. For a sample of size n =1,000, the sample should include 360 female subjects aged 20-29. The calculation for this category is 1,000 x 0.36 = 360.
Exhibit 2 shows the results of making this calculation for all categories. Exhibit 2 represents the makeup of a statistically valid stratified random sample from the Exhibit 1 Population.
How to Measure Branding in Five Steps
Step 2. Measure Brand Recognition
What is Brand Recognition?
Brand recognition is the minimal form of brand awareness.
Brand recognition simply means that customers in the target market know the brand exists. They automatically associate the brand name with particular products and services or with the brand-owning company.
Example: Given a brand name (e.g., "Windows"), a customer exhibits brand recognition by naming the company that owns the brand ("Microsoft") or the nature of the product ("Computer operating system.")
Why Brand Recognition Matters
Brand owners value brand recognition for these reasons:
- Customers with brand recognition usually choose products with brand names they recognize over unbranded products or unfamiliar brands. This preference holds, whether shopping in stores in person, online, or from catalogs.
- Brand recognition is a prerequisite for higher levels of brand awareness. Brand owners cannot immediately build brand recall, association, or franchise with customers who are not aware of the brand.
Testing and Measuring Brand Recognition
Use the brand recognition metric to estimate the percentage of the market that passes one of these recognition tests:
- The market researcher may test brand awareness by showing the customer a simple list of airline names or airline logos: British Air, Air Canada, American Airlines, Iberia, Alitalia, Qantas, Japan Air, and Lufthansa. The research then asks: "Which of these do you recognize?" or, "Which of these are you familiar with?"
- Researchers can also test recognition by presenting customer groups with brand names and simply asking which products or services they associate with each name.
Researchers present such questions to all test group members, a representative sample of the market population. The brand recognition measure is the proportion of the market sample that passes the recognition test. For more on specific survey methods, see Research Methods below.
In a stratified random sample of 1,000 customers from the market population, 450 passed the brand recognition test.
With n =1,000 and x = 450 the brand recognition measure for the sample is:
p = 450/1000 = 0.45
The estimated P for the population is:
P = p = 0.45
The Standard Error of Estimate is
SEp = √(0.45 (1 - 0.45 ) / 1000 ) = 0.015732
This SE is useful for constructing confidence interval estimates for P or forecasting the likelihood of other p values in future samples1.
How to Measure Branding in Five Steps
Step 3. Measure Brand Recall
What is Brand Recall?
Brand recall occurs when customers recall the brand name when they see or hear another part of the brand identity. Brand recall is a stronger form of brand awareness than brand recognition.
Example: Given a product or service category (e.g., International Airline), the customer shows brand recall by producing a brand name (e.g., "British Air, American Airlines, Qantas, Lufthansa, Iberia, or Air Italia").
Why Brand Recall Matters
Brand owners aim to establish brand recall for their products and services for these reasons:
- Customers in stores and shops may seek out specific brands by name. Merchants know this and organize store displays accordingly. Department stores, for instance, feature small brand-specific boutiques for cosmetics. Shoppers often visit specific stores known to carry their preferred brands.
- Online shoppers often use search phrases that include a brand name they recall and a product category. A customer searching for "Havianas Sandals," for instance, is more likely to end up buying that brand than a customer who begins the online search only with "Sandals."
Testing and Measuring Brand Recall
Use the brand recall metric to estimate the percentage of the market that passes one of these recall tests:
- A customer from the target market is given the product category and asked to list brand names they recall. Customers may recall one or several brands. When asked to recall brands for "shaving razor," for instance, a customer might demonstrate recall by responding with "Gillette," "Schick," or "Bic," or all three. When testing for brand recall, specifically for Bic razors, only answers that include "Bic" score as recall success.
- A customer is given a slogan or attribute uniquely associated with one brand and asked to recall which brand the slogan brings to mind. A correct answer scores a recall "success," while answering with the wrong brand is not a recall success. When asked which airline comes to mind when hearing "Fly the Friendly Skies," the answer 'United Air Lines" scores a recall success. Naming any other brand is not a success.
Researchers present such questions to all test group members, a representative sample of the market population. The brand recall measure is the proportion of the sample that passes the recall test. For more on specific survey methods, see Research Methods below.
In a stratified random sample of 1,000 customers from the market population, 3000 passed the brand recall test.
With n =1,000 and x = 300 the brand recall measure for the sample is:
p = 300/1000 = 0.30
The estimated P for the population is:
P = p = 0.30
The Standard Error of Estimate is
SEp = √(0.30 (1 - 0.30 ) / 1000 ) = 0.014491
This SE is useful for constructing confidence interval estimates for P or forecasting the likelihood of other p values in future samples.
How to Measure Branding in Five Steps
Step 4. Measure Brand Association
Measure Brand Association
Brand association is arguably the core principle in branding. After all, branding aims to create associations in customer minds linking the brand name to clusters of related positive attributes, qualities, and emotions. Marketers design communication themes that evoke these associations through graphic images and audio-video messages.
Why Do Brand Associations Matter?
Well-established brand associations…
- Differentiate branded products from the competition.
Energizer batteries claim world-record battery life to differentiate their products in customer minds from Duracell, Panasonic, and "no-name" brand batteries.
- Become reasons for buying branded products.
Customers are buying "personal image," for instance, when they shop for Armani or Gucci fashions.
- Create positive attitudes towards the brand and its products.
Positive attitudes translate into market share and a competitive edge. Apple Computer Inc benefits from healthy positive customer attitudes about the brand.
Test and Measure Brand Associations
Measuring brand association is, in principle, simply a matter of finding out which associations the brand name evokes, how often, and in which parts of the target market. Brand owners apply the principle with direct customer surveys, focus-group studies, and observing online search behaviors.
However, the brand-association researcher's core problem s that human customers can use quite a few different words and terms to communicate a single concept. As a result, this research has to rely mainly on statistical correlation methods to identify clusters of words and terms that brand names evoke and then identify the underlying concept, or attribute, responsible for these responses.
- Direct Survey Research.
Direct survey research methods test for association presence by giving customers the brand name and asking for the first words or terms that come to mind.
- Focus Group (Qualitative Research)
In focus group research, groups of 10-20 customers participate in round-table discussions, recorded and observed by the study sponsors who remain hidden behind one-way mirrors. The sessions are led by skilled facilitators who probe individuals and the group as a whole to elicit brand association responses.
- Online Search Behavior
Search engines, social media, online merchants, and market research organizations that work with them have access to the search phrases people use when shopping online, doing online research, or simply browse the internet. In some (but not all) cases, they can also link search phrases to the searcher's identity, location, demographic information, and online browsing history.
These abilities serve as a rich source of detailed, precise, and comprehensive branding association data. Search engines and social media, for instance, can often take note of all search terms an individual uses to search for branded products. For many online searchers and shoppers, these practices are unacceptable invasions of personal privacy. Understandably, many make it difficult to collect their personal data by using Virtual Private Network (VPN) connections, browser private browsing modes, and other measures.
Twenty customers are surveyed to study terms they associate with the battery brand name "Energizer." Each person lists the first five words or terms that come to mind when hearing or seeing "Energizer." Here are the group results:
- Seven frequently-appearing terms are consistent with the concept "Long Battery Life": Long life, Long Lasting, Extended Life, Durable, Longevity, and Long Running. These terms account for 64 of the 100 responses. This cluster of related terms is strong evidence that customers reliably associate the "Long Battery Life" concept with the brand name.
- One term appears in 6 responses naming a competing brand, Duracell. Because Duracell also has a well-established association with "Long Battery Life," these responses are also evidence that associate "Long Battery Life" with the Energizer brand.
- Thirteen responses suggest that customers associate the brand name with the advertising themes: "Bunny" and "Going, Going." Two responses indicate that not all customers have the same view of the brand's price positioning: Expensive and Cheap. And three additional terms show that customers may associate the brand name with product uses (Toys, Camera) and product appearance (Silver Battery).
- Conclusion: The brand scores high in brand recognition, brand recall, and brand association for the attribute "Long battery life."
In reality, studies of this kind record many thousands of customer responses or online search histories. With enough data, researchers can apply multivariate statistical analysis to identify underlying association attributes.
How to Measure Branding in Five Steps
Step 5. Measure Brand Franchise, Brand Loyalty
Brand franchise is the ultimate achievement in brand building. "Owning the franchise" means that the name or symbol evokes a positive emotional response with customers.
The brand franchise response is different from the customer brand awareness response. Brand awareness refers to what they know about a brand, while brand franchise refers to customer feelings about a brand. To emphasize the emotional nature of these responses, marketers call the stronger forms of brand franchise brand love and brand passion.
Brand owners can expect to achieve some level of brand franchise naturally, over time, by :
- Making their business easy to work with
- Focusing on product quality.
- Delivering excellent customer service.
For more on other steps brand owners take to accelerate franchise status—to create brand love—see the section above: Branding for Positive Emotional Response.
Why Brand Franchise Matters
Brand owners aim for brand franchise because franchise status…
- Sharpens brand differentiation.
In competitive markets, customer feelings can work as an additional brand-differentiating attribute. Differentiation with an emotional component should bring measurable increases in competitive win rates, market share, and customer demand.
- Builds brand loyalty.
Customers show brand by insisting on their preferred brand when re-purchasing. When their brand is out of stock at one source, brand-loyal customers will either postpone buying or seek out another source that does have the brand in stock. Tangible evidence of brand loyalty includes increases in return-customer rates, customer retention rates, and lower cost of sales.
- Creates brand equity.
With brand equity, sellers can charge premium prices for branded products and services, while competitors with lesser brand equity must charge lower prices for similar products. For evidence of increasing brand equity value, brand owners turn to pricing analysts for customer price/demand forecasts. The estimated price/demand curves provide evidence that brand equity is either building or decreasing
Track and Measure Brand Franchise
Achieving brand franchise is a high priority for those bringing new brands into competitive markets. They learn quickly, however, that measuring franchise strength is not easy. Several methods for measuring brand love and brand passion directly have appeared recently,3 but these are difficult to apply and are not yet widely accepted. Instead, brand owners make inferences about franchise strength by observing buying behaviors that reflect franchise strength.
Brand Loyalty Follows Brand Franchise
Brand loyalty is the ultimate payoff for achieving brand franchise. This is the propensity of customers to buy the brand again and again, even when other brands are more accessible or less expensive. Parents of very young children, for instance, are generally brand-loyal when buying baby food or diapers. When their brand is out of stock in one place, they may search elsewhere until they find another source with their brand in stock.
In the same way, cigarette smokers, fast food diners, and travelers who stay in branded hotel chains tend to postpone buying until they find their brand. On the other hand, many mobile phone users and cable television subscribers readily switch service brands when another provider offers better pricing for practically the same service.
Marketers measure brand loyalty using several approaches.
- Brand loyalty usually is often taken as the percentage of customers who buy the brand consistently, even when other brands are available. Some merchants and service providers encourage brand loyalty by rewarding customers with "frequent flier miles," "preferred customer points," or other incentives.
- Subscription services measure brand loyalty as their customer retention rates. Some service providers discourage disloyalty by requiring long-term contracts that substantial penalties for early cancellation.
- Researchers also measure loyalty with focus group studies or direct surveys. In these cases, brand loyalty is the percentage of customers who claim they insist on their preferred brand when re-purchasing.
- Brand loyalty may be inferred in some cases from the average time between purchases of the branded product.
Brand Equity Follows Brand Franchise
Brand Equity is a valued benefit that brand owners can certainly "take to the bank." Brand equity means that brand owners can charge premium prices for branded products or services, while competitors with weaker brands have to price lower. Customers see value they are willing to pay for in the brand name itself.
Measuring brand equity is an exercise in market pricing analysis. Marketers usually set new product prices after developing customer price/demand curves. These curves show the sales revenues, gross margins, or units sold they can expect at different price points. Depending on their specific sales objectives, they may set prices to maximize any of these—revenues, margins, or units.
Brand owners interested in tracking brand equity improvements can track changes in the price/point that maximizes expected gross margins for individual products. For more on brand equity, see the section " Brand Equity is a Valuable Asset." For more on using customer price/demand curves in setting prices, see the article "Pricing Strategies, Pricing Models, Demand Curves."
Brand owners normally maintain some level of ongoing brand research by their marketing specialists.
However, they often hire third-party consultants or firms specializing in market research for contacting customers and measuring branding success. Outside consultants are generally preferred for this purpose because they can be more objective than brand owners researching their own products.
Working with customers, for instance, outside researchers may not even tell customers which company sponsors the study. This practice stems from a belief that sponsor anonymity leads to more objective, unbiased customer responses.
How Do Brand Researchers Obtain Branding Data?
Researchers typically use several different methods for obtaining customer branding data. These may include one or more of the following:
Direct Customer Surveys
Researchers can interview customers directly or present them with survey questionnaires. Those selected for this purpose may include customers who are:
- Shopping at the business site, either before or after purchase.
- Shopping online, immediately after they make an online purchase.
- Members of the target market reached by telephone or email surveys.
The challenge with this approach is to select customer groups that represent a statistically valid sample of the overall market. One problem in this regard is that survey participation is—and must always be—voluntary. Often, the majority of customers who volunteer as survey participants are those with strong positive or strong negative opinions about the brand owner.
Online Search Queries and Click-Through Rate
Search engine consultancies and the search engine providers themselves provide statistical summaries of online search queries.
- Summaries may include the number of searches in a designated period for keywords that are brand names, such as Nikon, Armani, or Mercedes Benz.
- They may also report the number of "views" or click-throughs resulting from search engine responses.
- Search summaries may also log search phrases that reveal reasons for asking about specific brands. Marketers will want to know how many people search with phrases like these: "Where can I buy the latest Nikon camera?" Or, "Where is the nearest repair shop for my 1990 Mercedes Benz ?"
Search summaries of this kind can serve as an accurate indicator of overall brand awareness—at least for the population of active internet users in geographical areas served by the major search engines.
Beyond this, however, brand owners are well aware that market information they can extract from search summaries has—or should have—limits. At the same time, search users are becoming increasingly sensitive to personal privacy risks in online shopping and browsing. .
Focus Group Qualitative Research
The focus group study is the best known qualitative approach to branding research. The focus group is a group discussion, in which a skilled facilitator directs probing questions to individuals and the group as a whole. Brand owners sponsor focus group studies in order to assess customer attitudes—likes and dislikes—about their companies and their products and services. Often, the sponsors are also interested in learning customer attitudes toward their competitors.
A typical focus group study may have these characteristics:
- The focus group provider invites about 10 to 20 customers to participate in a discussion. The provider confirms first that invitations go only to customers in the sponsor's market. Participants must belong to the sponsor's market, but they do not have to be customers of the sponsor.
- Participants learn in advance the nature of the product or service they will discuss. They may be told, for instance, that they will discuss their attitudes about "Courier delivery services."
- They also know from the start some or all of the brands or companies they will discuss. Participants may be told, for example, they will discuss "FedEx, United Parcel Service, and "DHL." They are not told, however, which of these sponsors the focus group study.
- Participants meet around a boardroom-style table for a 1-2 hour discussion. A skilled facilitator leads the discussion, structured to bring out customer likes and dislikes for each of the companies or brands in view.
- Sponsor company representatives observe and record the discussion from behind a one-way mirror. Participants know, of course, they are being observed and recorded. But they never see or hear the observers and they do not know the sponsor's identity.
Test Marketing Studies
Brand owners who are close to launching a new product may first conduct a test market study of the brand and product. The primary purpose is to assess the competitive strength of the brand owner's products against competitors. They will adjust or "fine tune" their own branding messages based on what they learn about brand strengths and weakness in the test market study..
Test marketing usually involves new products just before launch into well-established markets. New mobile phones, laundry detergents, and personal care products, for instance, are well known test-market subjects.
A typical test market study has these characteristics:
- The test market itself covers a small geographical area—one city or a part of a city. The city of Auckland, New Zealand, for instance, is a popular test market for mobile phone providers. In large cities such as London, New York, or Tokyo, the test market may cover only a single borough, or even a just a few neighborhoods.
- Brand owners choose particular test markets because their demographics match those of larger markets they will ultimately target. Auckland is an ideal test market because its demographic profile is very similar to that of larger markets in Europe, Asia, and the Americas.
- Brand owners sell and promote new products in the test market for a test-marketing period. Note that selling and promotion are restricted entirely to the test market. During the testing period, the test market population continues to receive marketing messages from competitors, but also brand owner messages for the new product.
- Brand owners carefully track product unit sales, sales revenues, competitive win rate, and market share, throughout the testing period. They may supplement this information by inviting test market customers to participate in focus group studies (qualitative research).
Brand equity enables brand owners to charge premium prices for products that competitors with weaker branding must sell at lower prices. Apple, for instance, sells a simple electrical charging cable for about US$ 29, while other sources must sell essentially the same cable for about $10. The price difference is arguably due to Apple's strong brand equity.
The value of brand equity is apparent to everyone familiar with names such as Coca-Cola, Apple, IBM, BMW, Ericsson, Armani, Louis Vuitton, and Disney. These firms have built successful brand names over many years and their brand names are powerful assets for market pricing and selling.
Brand Equity vs. Balance Sheet Assets
These firms work and spend extensively to protect their own trademarks, logos, patents, copyrights, and names, from use by others, from damage and from slander. In so doing, they confirm the aptness of referring to their brands as valuable assets.
Their undisputed value notwithstanding, however, brands do not always qualify as balance sheet assets. To accountants, a Balance sheet asset is a tangible or intangible item that meets several criteria:
- Firstly, the owner acquires the asset at a measurable cost.
- Secondly, the item is in service for several years or more, with a designated useful lifespan. Owners expense asset acquisition costs year to year across the asset life through depreciation (for tangible assets) or amortization (for intangible assets).
- Thirdly, the asset serves the firm's normal line of business.
Firms that use brands or branding components that meet these criteria can indeed appear on the Balance sheet as intangible assets. Brands or branding components that fail on one more of these criteria cannot.
Brand Names, Brand Components Not on the Baflance Sheet.
Brand names belonging to the firms above fail to meet the first and second criteria for status as Balance sheet asset—at least for the brand owners themselves. Coca-Cola, for instance, built the brand itself with internal efforts over many years. The company did not purchase the brand from another owner, nor did the brand come with a measurable cost. The Coca-Cola brand, moreover, is not used up or expensed over a designated useful life.
Brand Names, Brand Components That Are on the Balance Sheet.
Certain intangibles, however, sometimes do qualify as Balance sheet assets—including some that are arguably "brand " components.
- One firm may purchase the right to manufacture and sell products using another firm's patents, or another firm's copyrighted material.
- Or, one firm may purchase a franchise to operate a business using another firm's brand name and logo. Examples include franchise owners for restaurant firms such as McDonald's, or Domino's Pizza.
In such cases, the brand components in use are purchased at measurable cost, used for a designated number of years, and expensed annually by the purchaser. These brand components do qualify as intangible assets for the purchaser's Balance sheet.