Value Creation: The Power of Brand Equity

Citation

Kilian, K. (2009), "Value Creation: The Power of Brand Equity", Journal of Product & Brand Management, Vol. 18 No. 3, pp. 234-235. https://doi.org/10.1108/10610420910957870

Brand equity is still one of the hot topics today. One reason is that more than 50 approaches are now in use, each one bearing methodological weaknesses and/or proprietary restrictions. As a consequence, no widely agreed‐upon approach exists so far. Instead, various approaches coexist. Thus, when I was asked to review Value Creation by William Neal and Ron Strauss, I eagerly agreed, hoping to perhaps find a book on the next level of brand equity measurement. Unfortunately, this book falls short and is not easy to read. Nonetheless, it does contain valuable insights for advanced branding experts which are scattered throughout the book. Fortunately, most of them can be found in the “Technical Addendum”.

The following is my “readmap” for this book: Enjoy the introductory story about a new CEO getting three advisory envelopes from the previous boss, which he is asked to open one after the other whenever difficulties arise. The envelope story has a lot of truth to it, and the envelope story is quite illustrative of poor CEO behaviour. The rest of Chapter 1 and the following four chapters are rather negligible. My advice is to skip a little more than 100 pages and continue reading on page 105 where chapter 6 starts. What you might be missing by skipping? Statistics on how long managers keep their job on average, the fact that we are moving towards a knowledge‐based society, innovation being the key for value creation, that today's customers are searching for meaning – a potpourri of thoughts.

The two weakest weak parts of the book, in my opinion, are chapter 2 “What's the Solution?” and chapter 15 “The Solution”. The two authors use 49 pages of their book to describe a made‐up “outside‐in‐council” that gives advice to the fictitious CEO Jack F. Eli. The idea of a parable to illustrate value creation within companies is good, however, the actual style, in my opinion, gets too close to “value creation for dummies”.

Chapter 6 is much more helpful as the authors provide brief one‐to‐three page introductions to the following five well‐established brand equity measures:

1. 1.

   Harris Interactive's EquiTrend.

2. 2.

   Young & Rubicam – BrandAsset Valuator.

3. 3.

   Interbrand.

4. 4.

   Prophet (David Aaker) – Managing Brand Equity.

5. 5.

   Research International Equity Engine.

Each description ends with a commentary note by the authors, with which they set ground for their own approach.

Chapters 6 and 7 both lead to the following formula: Brand Value =  Tangible Benefits+Intangible Benefits −Costs. What the authors explain then are two relevant components of brand equity: perceived performance (trust) attributes and brand image attributes. Interestingly, brand awareness as a prerequisite of brand equity does not play a role here. For Kevin Lane Keller, David A. Aaker, and other branding experts, it does though. So far, there is nothing new if you are somewhat familiar with branding.

Finally, on p. 133 the two authors reveal their approach to measuring brand value: conjoint or discrete choice models, two similar approaches dating back to the late 1980s. While conjoint models are mainly used to understand and model customer preferences, discrete choice models are used to understand and predict customer choices. I myself already used these research tools with respect to pricing and branding about ten years ago. So, what they present is not really a new approach. At the same time I have to admit, that it is probably still the best approach to brand valuation available today. The authors finally caught my full attention.

They move on to explain “their” approach using a simple example of four brands of automatic bread makers, which they come back to throughout the book. What most books on conjoint measurement do not explain is how individual select weights (p. 136) and absolute and relative price premiums (pp. 167f.) are calculated. They do. Great!

Chapters 9 to 15, again, should be skipped. I recommend to directly move on to the “Technical Addendum” on pp. 319‐343. It provides further details on the methodology for advanced statistical and branding experts. Why skip another seven chapters? Chapter 9 poses the rather introductory question “What is Branding?” What follows is a conglomerate of thoughts on brand identity, the quality‐based process of branding, a core ideology, an envisioned future, the brand experience, and the role of the CEO hereby. In Chapter 10, the two authors (mainly) “use companies' websites as a way to gain insight into their ‘soal’, or corporate culture and brand practices” (p. 187). Among others, we are shown 19 screenshots of the following four companies “analyzed”: Kellogg Company, Starbucks Coffee, Mayo Clinic, and Cascade Engineering Company.

Chapter 11 takes a look at value‐based market segmentation. One of the authors, William Neal, who has founded SDR Consulting, refers to one of his colleagues as follows: “A quicker, less complex, and often more accurate method for classifying customers/prospects into values‐segments was developed by David Feldman at SDR Consulting. Essentially, Feldman's procedure involves making the database of customers/prospects richer by taking advantage of existing segmentation schemes that are commercially available, such as those developed by PRIZM (Claritas), Personix (Acxiom), or P$YCLE” (p. 224). I was just wondering at this point, what all the other companies using these databases do with the data. Anyway, three pages later the authors apply the classical SWOT analysis to branding, turning it into a “Brand value SWOT analysis”. Next are perceptual maps, target market selection, and marketing mix optimization.

Then follows my favorite subtitle in this chapter: “Take a break”. I did. A few days later I continued with chapter 12, learning about new product failures, brand performance tracking systems, and financial interfaces for resource allocation and strategic financial analyses. We then briefly get to know “The corporate asset value monitoring system” and “The brand performance monitoring system”. Chapter 13 talks about “Salient lessons for marketing service providers” and Chapter 14 about “The value creation process”, especially keys to putting the branding process into practice. Chapter 15 needs no further explanation.

All in all, these seven chapters are a collection of thoughts, not well structured and only rarely helpful. So, as recommended, skip them. My advice to people still interested in the book? Read the book very selectively. There are really good pieces to be found in the book, relative to the volume of the book however, they are just not enough. If you read anything at all, read chapters 6 to 8 and the “Technical Addendum”. These 89 pages provide you with all relevant insights to be found in this book. I would recommend the authors to cut down their book accordingly. This could then really become not only a book on “value creation” but create value itself.