BRAND
Volume 1:
Brand Equity Review
BBDOGroupGermany|BrandEquityExcellence|Volume1:BrandEquityReviewNovember01|
Brand Equity Excellence
November 01
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Brand Equity
Evaluator
Computer-aided
model for calculat-
ing specific brand
values
Modular calcula-
tion of monetary
brand values
adapted to the
purpose at hand
2002
Brand Equity
Drivers
Causal model
to explain brand
strength and
identify brand
equity drivers
Identification of
points of leverage
for brand
management
2002
Brand Equity
Benchmark
Data Envelopment
Analysis to be
used as bench-
mark tool in
taking account
of best practice
A multiple input/
output environ-
ment modeled to
"generate" brand
equity values
2003
Focus
Application
Published by: BBDO Group Germany
Königsallee 92, D-40212 Düsseldorf, Germany
http://www.bbdo.de
Telephone: +49 (0)211/13 79-82 02
Editor: Thomas Huber
BBDO Brand Equity Excellence
Brand Equity
Review
BBDO's Five-level
Model
Systematic brand
classification
Mechanism for
measuring brand
equity (today's
best approach)
Use of BBDO
Five-Level Model
of brand manage-
ment to deter-
mine brand status
Ready
Brand Equity Excellence becomes a company's most important asset. But the questions are: How much
is the brand actually worth? And how can a brand's value be boosted?
This volume, intended as the first of a four-part scientific publication on Brand Equity Excellence, will
cover the existing brand valuation models to be used as benchmarks, as well as the development of
an initial set of integrated brand equity tools which will already constitute substantial progress on the
road to achieving a comprehensive brand equity valuation model.
The project of BBDO Group Germany is intended to develop a modular model which is both theoretically
and methodologically sound, which clearly illustrates the complex dimensions in the value of a brand,
and which defines the points of leverage and the value drivers that can be used to achieve sustained
growth in the value of a brand portfolio and hence of a company.
Contents
Editorial
1. The functions of a brand
2. The challenges of brand leadership
3. Brand management
4. Dimensions of brand identity (share model)
5. Brand core development
6. Brand valuation
7. Appendix: Synopsis of existing
brand valuation models
4
9
11
12
14
15
20
31
4
Brands are growing ever more valuable. In this age of cross-border mergers
and acquisitions, the value of brands is also a key determinant of enter-
prise value and stock market capitalization. Because this is also the age of
globalization, transnational corporations now depend for their success on
global brands as well as on a professionally managed, worldwide brand
portfolio. A decade of mergers and acquisitions has clearly demonstrated
that financial markets reward consistently focussed international brand
strategies. As a result, brand management has long since grown into
a vital ingredient for success in corporate strategy. On the other hand,
managing brand portfolios spanning the world's markets is becoming an
increasingly complex business, as it entails respecting regional differences
in cultures and consumer habits without sacrificing the consistent values
and outlooks embodied in a brand.
As far as consumers are concerned, a brand plays a significant communi-
cative, informative role. It offers a compass to guide them through a
purchasing environment typified by a deluge of information. The brand is
seen by consumers as a sign of quality, helping them make their purcha-
sing decisions. Moreover, in the developed industrial and the newly
industrializing countries, brands have actually become part of how people
build up their identities and gain fulfillment in their personal lives. In an
age in which the boundaries between nations, corporations and political
Dr. Rainer
Zimmermann,
CEO BBDO Group
Germany
Editorial
5
systems have grown less important, brands have long since evolved into
free-standing institutions with a wide variety of intrinsic social and emo-
tional dimensions.
Given increasing market deregulation and the associated trend toward
ever greater interchangeability in product ranges and prices, consumers
are benefiting from increased transparency in the information available
as they develop their own, self-assured preferences for particular brands.
Yet brand loyalty and established customer relationships can no longer
be taken for granted or assumed to last forever in an environment of
intensifying competition. Brand loyalty is vitally dependent on how
the relationship between the brand and the consumer is nurtured and
specifically developed: This is an area where investing wisely is sure to
pay dividends. A strong brand brings with it the opportunity to raise the
profile of a product and the company that sells it, setting them apart from
rivals in the marketplace. That strong brand can also command a price
premium for its producer, and can reduce price elasticity. All of which
makes brand-conscious customers the more valuable customers to have.
So the value of a brand, or brand equity, becomes a company's most
important asset. But the questions are: How much is the brand actually
worth? And how can a brand's value be boosted? Especially when corporate
mergers or acquisitions are in the offing, it is increasingly important for
the "due diligence" report on a company's value to put a figure on brand
6
equity. This term originated as a business-financial concept, and consists
in "[the] net present value of all future net surpluses over his cash input
that the owner of a brand can earn".1
Such financially-oriented measurement
of brand equity is a suitable approach for expressing it as a monetary value
as required for purposes of financial statements, licensing agreements,
acquisition decisions or the assessment of damages when intellectual
property rights have been infringed. Yet the numerous brand equity
valuations carried out focussing on different quantities such as earning
capacity, profit etc. yield totally different results. There is a wide variety
of models available for placing a monetary value on brand equity, but in
some cases these are controversial, and the value of their results as an
objective statement may be limited.
The consumer-oriented perspective on brand equity breaks free from
the business-financial approach by spotlighting the judgments made by
consumers, with a view to improving the effectiveness and efficiency of
marketing measures and also brand management on a long-term basis.
The behavioral approach endeavors to reach a qualitative explanation of
the factors driving brand equity and to determine psychological constructs
of brand strength by means of operational measurement. In many cases,
these models have not attempted to link their behaviorally operationalized
brand equity with a concrete monetary value, nor have they yet led to the
development of a comprehensive valuation approach. No complete, complex
1 Cf. Bekmeier-Feuerhahn (1998), p. 30.
model to establish brand equity by combining the financially-oriented and
consumer-oriented approaches has as yet emerged.
To close this gap in scientific knowledge, corporate management and
consultancy, BBDO Group Germany and Prof. Dr. Hans H. Bauer of the
University of Mannheims Department II of Business Economics and
Marketing have set up a two-year research project at the university.
The collaborative project is intended to develop a modular model which
is both theoretically and methodologically sound, which clearly illustrates
the complex dimensions in the value of a brand, and which defines the
points of leverage and the value drivers that can be used to achieve sus-
tained growth in the value of a brand portfolio and hence of a company.
This volume, intended as the first of a four-part scientific publication on
Brand Equity Excellence, will cover the existing brand valuation models to be
used as benchmarks, as well as the development of an initial set of inte-
grated brand equity tools which will already constitute substantial progress
on the road to achieving a comprehensive brand equity valuation model.
Dr. Rainer Zimmermann
CEO BBDO Group Germany
7
8
Volume 1: Band Equity Review
Dr. Rainer Zimmermann, Udo Klein-Bölting, Björn Sander
and Tharek Murad-Aga
Scientific advisor: Prof. Dr. Hans H. Bauer

1. The functions of a brand
2. The challenges of brand leadership
3. Brand management
4. Dimensions of brand identity
5. Brand core development
6. Brand valuation
7. Appendix: Synopsis of existing brand valuation models
Dr. Rainer
Zimmermann
Udo Klein-Bölting
Björn Sander
Tharek Murad-Aga
9
1. The functions of a brand
A brand is a consistent, holistic pledge made by a company, the face a
company presents to the world. A brand serves as an unmistakable symbol
for products and services. It functions as the "business card" a company
proffers on the competitive scene to set itself apart from the rest. In addition
to differentiating in this way, a brand conveys to consumers, shareholders,
stakeholders, society and the world at large all the values and attitudes
embodied in a product or company. A brand fulfills key functions for con-
sumers and companies alike.
The functions of a brand for consumers
· Brands play a role in terms of communication and identification. They
offer guidance, convey an expectation of quality and so offer help and
support to those making purchase decisions. Brands make it easier for
consumers to interpret and digest information on products.
· The perceived purchasing risk is thus minimized, which in turn helps
cultivate a trust-based relationship.
· A brand can also serve as a social business card, expressing member-
ship in a certain group. Premium brands, for instance, can even engender
a sense of distinction and prestige.
· Consuming certain brands is also a means of communicating certain
values. By opting for particular brands, a consumer demonstrates that
he or she embraces particular values; the brand becomes a tool of
identity formation, one element in the "mosaic of the self." To wit: A brand
can be said to function as a "corporate identity of the self-design."
The functions of brands from a company's perspective
· A brand fosters brand and customer loyalty. Particularly strong brands
can establish the prevalence of premium prices on the market and sof-
ten consumer reactions to price changes. Specifically brand-oriented
buyers ­ who are more concerned with brands than prices ­ are more
resilient when it comes to changes in the competitive scenario. This
decreased sensitivity to price changes makes them more valuable as
customers.
· The reduction in perceived purchasing risk lays the groundwork for a
relationship of trust, giving brands a role to play in lashing customers
to a company.
· Brands can counter the swelling ranks of trade because dealers stock
their shelves and fill their order lists with products explicitly requested
by consumers. Strong brands in particular keep sales levels and market
share constant and considerably lessen dependence on short-term special
promotions.
· A brand unlocks great potential in terms of licensing opportunities as
well, helping companies achieve plans for international expansion.
· Finally, brands also offer companies potential for honing a clear profile
A brand is the face
a company presents
to the world.
10
and overshadowing the competition. Strong brands in particular can reduce
the risk that new product launches will flop and can be used as platforms
for successful brand stretching (also in terms of launches in completely
new product segments and sectors).
In this way, brands can help generate significant value for a company,
above all in market segments where brands have the upper hand. Thus
a brand ­ particularly a strong brand ­ represents sustainable value for
a company. Investment in a brand is hence investment in the future and
in a company's greatest asset.
A brand's significance and contribution to success are generally expressed
in terms of its monetary value. As a result, around half of the capitalized
value of companies worldwide consists of brand and name rights, which
means that a brand, or brand value, can literally be considered a company's
most valuable asset.
This new interpretation of the significance and functions of brands is clearly
demonstrated in the area of mergers and acquisitions. Where production
capacity or manufacturing technology were once the decisive factors con-
sidered during company takeovers, today brands and the space they inhabit
in the minds of consumers increasingly occupy center stage. This view or
interpretation of brands and their value can be seen particularly in the
consumer goods sector, where price/earning ratios of 20 to 25 are today
by no means a rarity. One well-known example is the takeover of Rowntree
Macintosh by Nestlé: here, the purchase price was three times the market
value and 26 times the earnings generated by Rowntree Macintosh.
According to estimates, as much as 90% of the $12.9 billion purchase price
paid out when Philip Morris acquired Kraft Foods went toward brand value.
The most recent example is Interbrew's purchase of the Beck brewery,
which up till then had only a single premium brand, Stella Artois, to its name.
Interbrew CEO Hugo Powell explained the premium of 2 500 million (for
a total purchase price of 2 1,8 billion) by saying that Beck's brand value
was much higher than that of Stella Artois.
Under current market conditions, however, marketing-oriented brand ap-
praisal and brand management in particular have gained in importance
because the non-monetary, consumer-oriented valuation of brands carries
a great deal of weight ­ alongside monetary brand value ­ from a marketing
standpoint. This is why successful brand management encompasses all
strategic brand decisions that add to a brand's strength.
Depending on the reasons for determining brand value, the focus of interest
tends to vary. Financially-oriented brand valuation aims first and foremost
to assess the monetary value of a brand for the purposes of acquisition,
licensing or accounting.
Investment in a brand is
hence investment in the
future and in a company's
greatest asset.
11
2 Cf. Bekmeier-Feuerhahn (1998), p. 46.
This approach ignores the reality of brand value in the eyes of consumers.
As a result, the consumer-driven perspective parts paths with the financially-
oriented approach and places consumer perceptions and considerations
in the spotlight. The aim is to gather the information necessary for success-
ful brand management as a way of facilitating strategic brand decisions.
Consumer-oriented brand value can be based on analysis and standardized
gauges of psychological constructs and is often referred to as brand
strength. However, there is frequently a failure to link assessments of brand
value based on the principles of behavioral science ­ and the findings of
these assessments ­ with the monetary value of a brand.
The various application areas of brand valuation on the management, mar-
keting and financial ends clearly show that both perspectives ­ the financial
and the consumer-oriented ­ must be fused if the totality of brand value is
to be faithfully described. Along these lines, Bekmeier-Feuerhahn defines
brand value as "triggered by the labeling of a brand, the economically use-
ful and monetarily quantifiable increase in the present and future value of
services for consumers and companies."2
2. The challenges of brand leadership
Brand management is today beset with challenges as a result of prevailing
market conditions. Many markets, especially in the consumer goods seg-
ment, have now reached such a degree of saturation that market potential
is virtually exhausted. Increasingly, growth can be achieved only at the
expense of competitors. This is why suppliers in competitive environments
such as this are attempting to hone competitive edge through increasing
differentiation of their brands, emphasizing how they meet the needs of
selected customer groups and market segments.
This trend is reflected by a major leap in product and brand diversity (with
registrations of brands doubling since 1988) that makes the range on offer
appear overwhelming to consumers. This brand and product inflation is
compounded by increasing internationalization, and with it, market entry
by new competitors.
On the production side, companies must also deal with dramatically shorter
product life cycles and constantly accelerating product aging. In Germany
alone, 100,000 products were launched onto the market within a period of
two years, i.e. an average of 910 new products a week. But the pressure
to innovate also means an increased risk of producing flops. The flop rate
for newly launched products is around 85%.
On such a competitive field, it becomes harder and harder for a company
to differentiate its products from those of the competition and make them
The aim is to gather
the information necessary
for successful brand
management as a way
of facilitating strategic
brand decisions.
12
stand out from the diverse range available. As brand and product diversity
rapidly increases, the volume of advertising insertions grows apace.
The number of advertising campaigns in the conventional media alone (i.e.
above the line) has more than doubled since 1980.
Ultimately, the advertising pressure this generates makes communication
measures less efficient because consumers are increasingly overloaded
with and unable to absorb brand information. What's more, media costs
are skyrocketing.
3. Brand management
Under these conditions, brand leadership ­ particularly building sustainable
brands and creating brand value ­ is becoming a strategic success factor
for companies. Within the past eight years, for instance, costs per cross
rating point (GRP) on TV have expanded by 46%.
Brand management in this sense covers all aspects of managing a branded
product. The following areas are faced with challenges:
· Brand core development
· Brand positioning
· Brand differentiation
· Brand penetration via the marketing mix
· Brand stretching
· Brand strategy/brand architecture
· Brand transfer
· Brand licensing
· Brand globalization
· Trade marketing
When it comes to establishing or supporting a brand, the monetary value
of that brand serves as a corporate planning and monitoring tool ­ for
instance, in terms of budgeting brands at companies with multiple brands.
At the same time, brand value is also used as a yardstick to measure suc-
cess and a basis for compensating brand management. Thus brand value
functions as an evaluation tool for the marketing concept as a whole.
Creating brand
value is becoming
a strategic success
factor for companies.
13
Brand value is closely lashed to brand strength, which is derived from brand
identity, brand personality and brand image. Thus brand strength goes
beyond the brand as legally protected asset; it is, rather, the product of
everything yielded in the marketing mix. This makes brand management a
matter of shaping the value of a brand into as positive a form as possible.
To this end, the drivers influencing the substance of brand value in consumer
eyes are of particular importance. Information on the determinants of brand
value and the associations consumers make with a brand provide base
information that can be used to tweak and steer brand development. In the
marketing trenches, this interpretation of brand leadership clearly has more
relevance than any other application area for brand valuation.
Strategic brand decisions can be made by brand management thanks par-
ticularly to ongoing tracking of a company's brand value and/or comparison
with the brand value of competing brands.
Consequently, brand management means shaping all aspects of a brand in
such a way that its impact on consumers in terms of knowledge structure,
decision-making and self-image ultimately boosts the brand's strategic
and monetary yield. Thus the cultivation of brand identity, for instance,
can enhance brand value.
The Ford Company, for instance, paid 2 6,2 billion for the Jaguar brand.
Such a high brand value can only be explained by the existence of know-
ledge structures that can be efficiently tapped, i.e. a brand identity that
motivates consumers to accept a higher price, remain loyal to the brand,
buy it again and again and recommend it to others.
Classic vs. closely defined brand management
Brand management in the classic sense
The components of classic and closely defined brand management contrasted
Brand management as closely defined
Brand
management
Policy toward
dealers' brands
Brand licensing
Brand core
development
Brand
globalization
Brand positioning
differentiation and
penetration
Brand
transfer
Brand
stretching
Systematic
approach
to brand
Developing
the brand core
Brand identity
and personality
Brand image
Derivation of brand strength
14
4. Dimensions of brand identity (share model)
Brand identity is composed of various shares that trigger particular res-
ponses in consumers in addition to filling the afore-mentioned functions.
These shares build on one another; the more shares a brand has, the
stronger and more positive the relationship with consumers.
At the very lowest level, mind share must be created in the consumer
consciousness (cognitive level). This means that, as a complex perceptual
and conceptual construct, the brand evokes an internal neural represen-
tation in the minds of consumers, leaving behind certain brand impressions.
The Nivea brand, for instance ­ which is associated with a message of
gentle care and simplicity (of application) ­ has achieved mind share among
many consumers and can thus be considered part of their evoked set.
Heart share has to be the next step. This refers to the emotional relation-
ship a consumer should develop with a brand. Heart share is less a matter
of a product's functional utility and more a matter of its symbolic attributes.
The buyer of a Ferrari, for instance, will not develop an affection for the car
based purely on functional attributes, but rather as a result of the values
associated with the brand and the brand environment it operates in.
Brand identity must also trigger a buying intention share in consumers.
After all, despite the importance of a brand's mind and heart share, it only
makes sense for a supplier to invest in brand identity if consumers will also
want to buy the brand.
Brand identity also contributes to self share, which means that the brand
functions as a manifestation of the self, a tangible expression of self-
image within the social environment. In this context, brands serve self-
Dimensions of brand identity
Brand identity Brand functions
Mind
share
1. 2. 3. 4. 5.
Heart share
Bying Intention share
Self share
Legend share
Addressing the rational,
cognitive plane in a con-
sumer's head
1.
Generating an emotional
attitude toward the brand
2.
Triggering a buying intention
on the consumer's part
3.
The brand's function as
a "totem of the self"
4.
Share in humanity's bestowal
of metaphysical meaning
5.
15
expression and self-design purposes, differentiating the individual within
the social group. Brands can easily serve similar ends in the realm of
business-to-business, where they bolster self-image in terms of a company
and its functions.
Next, the brand and the ethics it conveys must also capture a legend share.
Here, the brand shares in the existential search for meaning conducted by
a consumer in a world enlightened to the point of meaning-lessness and
takes on a virtually religious character. This aspect sheds light on the cul-
tural-sociological proposition that brand management is worshiping the
customer. Brands allow consumers to achieve social position or status, to
partake of cultural expression, to create mythology and shape meaning, and
as a result, to weave themselves into the social and metaphysical fabric of
the world. In this context, a loyal customer is a member of a community and
an individual loyal to that community not just a customer who makes
repeat purchases. A brand is a tool for building a sense of community and
belonging, for building the community itself.
5. Brand core development
The BBDO's five-level brand leadership model provides a systematic
approach to developing brands. This model comprises five development
stages that function as building blocks for brands to reach or be elevated
to. The "drivers" that go hand in hand with the various steps are also iden-
tified, allowing brands to be matched with the various levels. This makes
it possible to determine the current status of a brand and reveals the levers
of brand management that can be used to further develop that brand.
The first level of the model is the "ground floor" for brands: proprietary
goods. At this level, the functional aspects of a product are in the fore-
ground. Typical of a proprietary good is the fact that, though it literally has
been "branded" with a label (in the physical sense), no advertising effort
is expended for it.
At this stage of development, the primary driver is a wide (geographically
speaking) and deep (covering as many product types as possible) legal
buffer created by the law to protect such brands from intentional or
unintentional confusion with competing products. Added to this is a level
of quality that remains constant. In this context, the product is branded
to indicate its provenance and affix a "seal of quality" that comes from its
manufacturer. This quality pledge allows consumers to clearly associate
any deviation from the expected quality with a specific manufacturer. The
supplier commits itself to a pledge on which consumers can call the com-
pany at any time and which they expect ­ if not demand ­ that company
to deliver.
Brands allow consumers
to achieve social position
or status and to weave
themselves into the social
and metaphysical fabric
of the world.
16
The BBDO Five-level Model of brand management
In light of today's competitive situation, purely physical labeling/branding
and a constant level of quality no longer suffice as differentiating factors.
As a result, additional attributes are grouped at the next highest level.
The next level is occupied by branded products. In addition to the character-
istics of a proprietary good as outlined above, this level also includes
success factors as yardsticks of "major brands." Besides bearing the basic
manufacturer's mark, a branded item fulfills certain criteria such as con-
stant, above-average quality, above-average price level and a high level
of awareness created by way of advertising pressure. A branded item
is characterized by the fact that it is widely distributed and enjoys major
recognition on the market.
To develop from a proprietary good (Level 1) to this higher level of branded
goods, a brand must surpass the basic brand symbol and enter the realm
of brand status symbol. This can, for instance, be an awareness rate of 90%
or a distribution rate of 80% among the relevant trade. At this level, product
attributes and distribution efforts are characterized first and foremost by
stability and continuity. Marketing activity and investment in advertising
and distribution are also decisive as drivers. The drivers listed for Level 1
also come into play.
Thanks to the higher distribution rate and increased awareness level, con-
sumers have more contact with these brands and as a result enjoy greater
access to information and knowledge about them. A brand-name manu-
facturer with a loyal customer base cannot afford to jeopardize this kind
of market status through negligent dips in quality.
Transmitter
Transmitter/
receiver
Transmitter/
receiver in
interpretive role
Transmitter and
receiver as
"prosumers"
Transmitter of a
value-bestowing
legend
Fieldsof
influence
Progressof
thebrand
StatusExamples
Proprietary
goods
Functional status Market status Psychographic
status
Identity status Legendary status
· Almsana · Opel/Vauxhaul
· Spalt
· Ariel, Persil
· Aspirin
· Coca-Cola
· Marlboro
· Rolex
· Harley-Davidson
· Ferrari
Branded
product
Positioned
brand
Identity-building
brand
Mythological
brand
17
One characteristic of brands at this level is the fact that, while their con-
sumers have access to additional information, the quality of this information
has achieved neither mind share nor heart share. In other words, these
brands have not yet succeeded in forging emotional bonds with consumers.
Brands that have done so are relegated to Level 3 and above.
Level 3 in terms of brand development is occupied by so-called positioned
brands. The brands clustered here are set apart by their emotional and
cognitive impact on consumers in addition to their functional utility. For this
reason, these brands can be said to have achieved mind share, heart share
and buying intention share in the consumer consciousness.
In this context, brand positioning leads to "the set of associations and
behaviors on the part of brand customers, channel members and parent
corporation that permits the brand to enjoy the sustainable and differenti-
ated competitive advantages (i.e. brand strength results in barriers to com-
petition and, therefore, some degree of monopolistic power controlling the
brand)."3
At this level, brand management must pursue non-financial goals alongside
financial ones. The mechanism by which consumers process information
(e.g. attitude formation and risk reduction via trust-building) must be influ-
enced in such a way that experiences are conveyed to anchor brand loyalty
emotionally, thus creating acceptance of premium pricing.
At this level of development, consumer attitudes and associations are
extremely important. Expertise about preferences and purchase patterns,
coupled with cognitive and emotive positioning efforts, is used to evoke
certain associations (including personality-based associations) among
consumers. To this end, the consumer must, however, also interpret the
message conveyed by the brand. "This process of decoding the meaning
and value of brands and using brands correctly is active involvement of the
consumer in the brand's image,"4
i.e. the consumer must be willing to
actively engage with the brand.
To elevate a brand to this level and keep it there ­ to actively involve
consumers ­ brand management must position the brand cognitively and
emotionally by way of a brand-building program. Positioning efforts on the
part of brand management, plus integrated communication measures,
make it possible to create brand strength and cultivate brand personality.
The result of these measures can then be seen in a product's ability to
capture a certain position on the market and hold its own against the
competition.
At this level, brand
management must pursue
non-financial goals along-
side financial ones.
3 Srivastava/Shocker (1991), p. 9
4 McEnally/de Chernatony (1999), www.amsreview.org/amsrev/theory/mcenally02-99.html [20.6.01]
18
The next level up, Level 4, is devoted to identity-building brands. This
identity is the product of interplay between producer and consumer to
create a suitable brand environment. Interactive communication provides
the framework for this, a process which necessitates active involvement
on the part of the consumer. The brand is integrated into the consumer's
personality (self share), i.e. the brand exhibits an overlap with the con-
sumer's own self-image. The consumer and the brand grow together in
what can be described as a mimetic process. At this level of brand leader-
ship, consumers define themselves via the brand (and the brand via its
loyal customers), relying on it for self-expression and identity formation.
The suitable drivers at this level are communication tools with specific
attributes ­ for instance, emotionality, interactivity or virtuality ­ that support
the process of building brand identity particularly well. This socio-psycho-
logical expertise charges the brand with certain elements of emotional
and social utility that make it useful to consumers in defining and positioning
themselves in the social environment.
The consumer must not only be actively involved, but also undertake the
effort of interpretation. This is because the complex and cryptic perform-
ance pledge made by a company must first be decoded. This takes place
within the framework of an extended brand-and-consumer experience in
which both the individual consumer and consumer groups must experience,
interpret and "unpack" the brand's conceptual attributes.
The fact that brands are discussed, celebrated and criticized and that
these aspects of communication are public also results in the emergence
of so-called brand communities. These communities form because today's
consumers often move in different, emotionally charged "worlds of experi-
ence," or in alternating clusterings within their social environment.
Because conventional target groups are being replaced by hybrid or multiple-
option consumption patterns, brand communities are gaining in importance.
This makes it harder and harder for manufacturers to match consumers
with the usual segment descriptions (socio-demographic and psychographic
criteria). To achieve target marketing of potential consumers and thus
promising revenues, a supplier can focus on the epicenter of interest, the
experiential environment and the motivations that characterize the brand
communities. These communities can thus be considered new target groups,
with individual consumers in some cases occupying several at once-placing
them in multiple target groups, depending on the product range.
A brand at Level 5 of brand management has attained a mythological
brand, or legend share. As with the level of identity-building, a "mystique
brand" helps provide customers with a social orientation, and most of
all with a metaphysical orientation. Increasingly, such a brand assumes
the function of a guide or mentor offering insight into the meaning of life,
Today's consumers often
move in different, emo-
tionally charged worlds
of experience.
19
helping consumers better process the social and the existential, and offering
them support when it comes to finding their place within the "collective self."
No drivers can be identified for this level because the timeframe for brand
development is extremely long and special societal factors are indispensable.
This brand status is not desirable for all brands and can only be achieved
in isolated cases. A brand at this level, virtually having attained a cult or
"religious" status, is difficult to manage; the danger of falling down to earth
is extremely high due to the risk of disappointing followers or alienating
a portion of them. In addition, such a brand is vulnerable to potential value
shifts within a society that are completely beyond a company's control.
This five-level model clearly shows that certain drivers play a role at all
levels of brand development and shape brand development as a whole.
A constant level of quality is one example. The higher the level of develop-
ment, the more drivers that differentiate a brand. Depending on the level
to which a brand should be elevated, certain attributes, utility components
and values must be leveraged to position it. The foundation for effective
brand-building is a clear and consistent brand strategy. Using various
instruments, all brand management activities can be planned, implemented
and steered on the basis of this strategy.
The goal of these activities should be an emotion-based brand positioning
along the lines of brand personality marketing (Level 3) and a positioning
in the sense of "symbiotic" marketing to facilitate individual self-expression
(Level 4). At the highest level, a brand's emotive positioning helps create
a "brand religion" via a communication of values.
As time goes by, however, a brand's status does not remain constant.
Brands can lose their status due to external factors (though also through
internal ones such as misguided brand management) and slip from a very
high position down to a lower level. Consistent, ongoing brand leadership ­
the cultivation and care of a brand ­ is necessary if this is to be prevented.
The Coca-Cola brand is a good example of this. After the War, the brand
was considered "the beverage of freedom" and attained a mythological
status. Though Coca-Cola retains a hint of this mystique even today (in the
sense of a cult brand), it no longer exhibits the properties of a mystique
brand (helping determine "the meaning of life") as described here.
Consistent, ongoing
brand leadership the
cultivation and care
of a brand is necessary.
6. Brand valuation
In recent years, the issue of how brand value, or brand equity, can be oper-
ationalized and measured has grown more prominent in both academic
and practical debates on brands in general. This is borne out by the sheer
number of different approaches applied both in theory and in practice for
valuing brands.
However, it is interesting to note that the first moves toward quantifying the
value of brands were not driven by marketing issues. In fact, the discussion
was set in motion by corporate finance experts who needed a way of ex-
pressing brands in dollars and cents when either the brands themselves or
the whole company that owned them was up for purchase or sale. This gave
birth to the first, financially-oriented valuation methodologies.
Especially in more recent years, consumer-based perspectives on brand
valuation have also featured more strongly, as it was hoped that an
enhanced understanding of the determinants (or "drivers") of brand value
from the customer's viewpoint would yield key indicators for efficient brand
management.
The methodologies developed to date for establishing brand equity
or brand value can be classified into four groups:
· Business finance-oriented models
· Psychographic or behaviorally oriented models
· Composite financial/behavioral models
· Input/output and portfolio models
20
Classification of the models
Brand
valuation
models
Categories Characteristics
· Quantitve procedures to compute a monetary value for brand equity
· Consumer's perspective not taken into account
· Used to value brand equity in the context of
acquisitions, licensing and analysts' opinions
· Brand equity seen as a qualitative construct that can be made manifest
using scorecards
· Not empirically verifiable
· High degree of subjectivity in the choice of factors explaining brand
strength
· Endeavor to explain what goes on in the "hearts and minds"
of customers to determine a brand's value
· Provide a monetary value for brand equity
· Include variables covering earnings status, market status and
psychographic status of a brand
· Interlink qualitative and quantitantive factors
· Establish a realtive brand value index
· Determine potential changes in a product's market share
(given constant distribution)
· Identify potential for optimizing specific products
Psychographic/
behaviorally
oriented models
Business finance
models
Composite
financial/
behavioral models
Input/output and
porfolio models
The discussion was set
in motion by corporate
finance experts who
needed a way of expres-
sing brands in dollars
and cents.
21
Depending on their chosen starting point, business finance-oriented ap-
proaches to brand valuation can be divided into "bottom-up" and "top-down"
methodologies.
The former begin by measuring certain specific aspects, then combine
them to arrive at an overall brand value. The elements aggregated in this
way may be brand-relevant factors such as the product's price premium
attributable to the brand, or costs relating specifically to the brand. This
frequently used approach is found in particular brand valuation methods
such as the cost-oriented, price-oriented, capital market-oriented and earning
capacity-oriented methods.
In contrast, top-down models start out from a holistic, or global, view of
a brand's value and then endeavor to establish the contribution made by
particular attributes such as the process of product branding. Conjoint
analysis, or conjoint measurement, is one such approach. This gathers
information on global preferences with regard to product concepts and then
determines the incremental contributions to these global preferences made
by specific feature levels. The contribution made by a brand ­ in effect, its
utility value ­ is derived from the entire range of performance generated
by a product concept. Customers' overall willingness to pay for a product
is used to identify their willingness to pay for specific product features,
one of which is the brand itself, and its value can be ascertained as a result.
These business finance-oriented brand valuation approaches are used prima-
rily to determine brand equity in the context of mergers and acquisitions
(including brand acquisitions), licensing issues or financial analysts' opinions.
One of the advantages of such models, speaking in their favor as a means
of measuring brand value, has directly to do with the data sources they
tap. Because they are based entirely on figures from within the company,
there is no need for costly, time-consuming efforts to gather external data.
A further benefit is that the models are relatively easy to use, allowing brand
value to be computed swiftly and economically. For these reasons, models
in this category are used especially frequently by analysts in the investment
banking field.
However, from a brand-management angle these advantages are counter-
balanced by a number of severe drawbacks.
The result produced by all these models is the brand's monetary value from
an accounting perspective. Yet, because they ignore the consumer's role
in the generation of brand value, some important information is lost, or
rather it is not even recorded in the first place. A number of aspects that
are interesting from the perspective of brand management and monitoring
simply cannot be established by referring to the brand's current monetary
22
value. The important thing to know in this context is how a high or low brand
value actually came about. Not until this is known can decisions be taken
on how to sustain and/or enhance the value of a brand on an ongoing basis.
Another point of criticism, this time from an analyst's perspective, is that
a number of the models in this category do not take the competitive environ-
ment into account when arriving at a valuation. Brand equity calculated
in this way cannot offer an adequate basis for analysts wishing to know
what a business is worth.
To get at the information on the generation of brand value that is relevant
for brand-management purposes, new value measurement methodologies
were developed based on behavioral science, with their prime focus on
customers' judgments. The models in this second category include the brand
strength as a demand-driven parameter when operationalizing and measu-
ring brand value. In this context, brand value is viewed as an essential-
ly qualitative construct which can be made manifest using scorecards.
These models set out to explain what goes on in the "hearts and minds"
of consumers. In contrast to the financially focused models, they provide
those responsible for brand management with an understanding of where
the value of a brand actually comes from. This way, they paint a precise
picture of how brand strength is generated. The information they provide
helps to identify reasons for a loss or gain in value and to track brand-value
trends, making them much more suitable for brand management than their
counterparts based on business finance.
Nevertheless, the design of these behavioral models involves a variety of
weaknesses besides the benefits outlined. An immediately evident point
of criticism is that the psychographic recordings of brand value are not con-
verted into any objective monetary value. This rules out the behavioral
models for answering the questions that arise in the context of acquisitions,
licensing arrangements or analysts' evaluations. Another point that needs
to be viewed critically is the fact that these models completely ignore
certain aspects of business administration such as competitors' strategies
or general market developments. Yet these are factors that could easily
have a retarding impact on brand development and ought therefore to play
a role in the valuation process. Another problematic aspect of these ap-
proaches is the considerable degree of subjectivity involved in the choice
of factors used to explain brand strength or the generation of brand value.
In certain models, there is also a danger that some of the chosen variables
may not really be mutually independent, thus posing a measurement prob-
lem by breaching an important methodological assumption. This problem
can be illustrated by referring briefly to Aaker's frequently cited model.
Aaker sets out to highlight the factors influencing the generation of brand
equity by focussing on the consumer's side, considering dimensions such
as brand loyalty, brand awareness, perceived quality, brand associations
and other brand assets (the legal and institutional benefits offered by a
New value measure-
ment methodologies
were developed based
on behavioral science.
23
brand that protect its value). However, in reality it is impossible to
assess perceived quality independently of the other factors of brand aware-
ness, associations and loyalty. A further problem is that factors Aaker has
picked out as determinants are in some senses also consequences of
brand value, which means he has conflated the input and output levels in
any functional relationship of brand equity generation.
Another difficult area pertaining to these models is empirical validation,
which in some of them is actually impossible or at least inadequate. This
calls into question the models' relevance to practical issues. As such, they
are best seen as a form of heuristic procedure but it is difficult, or almost
impossible, to verify them.
In the attempt to overcome the respective disadvantages of the business
finance and behaviorally oriented approaches, a third generation of
measurement models has grown up, known as composite models. In effect,
these interlink the business financial and the behavioral approaches.
In measuring brand value, they take into account variables depicting the
position held by a brand as a result of customers' purchasing behavior which
can be aggregated into the following combined variables: the earnings
status, market status and psychographic status of a brand. These qualita-
tive and quantitative factors are drawn together in each model, in order
to compute a monetary value for the brand. The composite approach to
brand valuation has been quite well received in practice, also attracting
media attention accordingly; this is borne out by the large number of valu-
ations already carried out, e.g. by the Interbrand company.
However, a critical observation of these models is that, in combining
business-related determinants of brand equity with behavioral ones, they
tend to get tied up in a degree of confusion between the input and output
sides. The business-related factors may, in some circumstances, be better
interpreted partly as consequences of brand value rather than just deter-
minants; the result is a conflation of input and output levels in a production
function for brand equity. Another point of criticism concerns the high
degree of subjectivity involved both in the choice of factors contributing
to brand value within the various models and in the relative weightings
of the factors. The problem is compounded by the fact that the procedure
used for the actual calculation of a monetary value is sometimes undis-
closed, or may be subject to arbitrary assumptions. Yet another objection
concerns the actual weightings chosen, or a built-in imbalance between
the types of determinant when the brand value is calculated: Models tend
to be dominated either by the business (financial) determinants or by the
consumer-oriented perspective. A final, especially critical point about these
models is that they have not, to date, contained any facility for adaptation
to differing valuation needs. That is to say, the procedure applied remains
the same regardless of the purpose for which the valuation is being carried
Composite models
interlink the business
financial and the
behavioral approaches.
5 Following Bekmeier-Feuerhahn
24
out (e.g., a brand acquisition or ongoing brand management), despite the
differing requirements inherent in those situations.
To round out the overview, the procedure developed by Preißner for mea-
suring brand potential will be briefly outlined here. This input/output model
may be placed in a fourth category of approaches, known as consumer
status and market status models. Measuring brand value, or brand potential,
in this input/output approach provides a picture of the direction in which
a product's market share is likely to move relative to the competition, given
constant distribution. This allows products to be examined with regard to
efficient communication, attractive price spreads, distribution, product
performance, price-setting, etc. The advantages of this method include the
ability to forecast future developments and the inclusion of competitors.
However, the approach can be used to generate a relative brand value index
only; it does not allow an absolute monetary value to be determined. In ad-
dition, there is the problem that the identified brand value does not refer
exclusively to the value generated by branding, but rather the potential
realized via the entire marketing mix. The latter problem also arises with
some of the models in the other categories.
It is worth noting at this point that none of the models or measurement
approaches reviewed was free of criticisms, and that none stands out as
superior to all the others. However, the various approaches, which differ
substantially in their orientation, underlying philosophy and methodology,
yield up results that vary just as much. To cite an example, the BMW brand
was valued by Semion at approx. $ 6,43 billion for the year 2000, while
Interbrand came up with a figure about twice as high: $13 billion. When we
see differences such as this, the question of the usefulness of the results
inevitably arises.
Having looked at the various approaches and analyzed the models in detail,
a list of requirements will now be presented which any newly developed,
comprehensive model of brand valuation ought to fulfill to arrive at a
monetary value of brand equity and also have the capability to operate as
an effective brand management tool.5
The list is qualitative in nature, but
general prerequisites such as validity and reliability ­ though not explicitly
contained in the list ­ should also be taken as read. The requirements are:
· A balance between business financial and consumer-oriented perspectives.
· The approach must be suitable for use as a brand management tool and
hence must include a determination of brand status.
· The brand equity measured must be expressed as a monetary value.
· The model must be adaptable to different situations in which a valuation
is required.
· It must take account of the intangible asset created by the performance
of a brand, i.e. it must distinguish between the performance of the
underlying product and that of the brand as such.
None of the models or
measurement approaches
reviewed was free of
criticisms.
25
· The model must be capable of valuing any type of brand, whether
a corporate or product brand.
There now follows a description of a possible approach which, as things
stand today, best does justice to this list of demands. Rather than a detailed
presentation of a full model, this will be an outline sketch of the kind of
mechanism that will allow the type of valuation we are looking for. It will
be clear from the preceding discussion that, ideally, a comprehensive assess-
ment of brand equity should forge a link between business-oriented and
consumer-oriented perspectives. This can best be assured by a two-stage
valuation approach which concludes by placing a monetary value on
brand equity:
Stage 1: Measurement of the determinants of brand equity
Stage 2: Computation of its monetary value
The brand value determinants measured in stage 1 should be brand
strength ­ the subjective value placed on the brand by consumers ­ and
brand earnings, i.e. those attributable solely to the brand itself.
The determining factors proposed for measuring brand strength are these:
· Perceived quality
· Brand knowledge
· Brand positioning
· Brand identity
These drivers should be measured by conducting consumer surveys. Per-
ceived quality can be assessed by asking them what level of risk they
sense when they purchase a certain branded product. This perceived func-
tional risk offers insights into the extent to which a branded product fulfills
consumers' expectations as to the functional qualities of that product type.
Brand knowledge can be established by surveying brand awareness, both
aided and unaided. Consumers are asked to name the brands they spon-
taneously recall in certain product areas, and are also called upon to rate
their level of familiarity with brand names cited to them. The quantity,
quality and intensity of associations offer a further means of evaluating
consumers' brand knowledge.
The next step is to record the market positioning parameter by inquiring
into brand and product assessments. Consumers should be asked to judge
what they consider to be a brand's performance as regards a number of
emotional (symbolic) and cognitive (functional) brand features. The survey
questions may ask, for example, about technical reliability or about the over-
all appeal of a branded product. Particularly when seeking to learn more
about symbolic characteristics and a brand's "personality", it would be useful
to draw upon Aaker's brand personality inventory.
A comprehensive assess-
ment of brand equity
should forge a link
between business-oriented
and consumer-oriented
perspectives.
The final dimension, brand identity, can be measured via the prestige value
the brand conveys. A distinction should be drawn between direct and
indirect prestige value. The direct variant can be addressed, for example,
by asking survey participants to say whether brand X helps them to demon-
strate a certain social status. A possible way of assessing indirect prestige
value is to ask respondents for their verdict on certain statements about the
brand. For example, the statement may suggest that owning brand X counts
among the pleasures in life. Questions should also be worded to establish
the extent to which parallels between personal and brand identities are
actually perceived by consumers, plus the extent of their own active involve-
ment in shaping their relationship with the brand.
Once these individual determinants of brand strength have been recorded,
brand strength itself can be operationalized with the help of a number of
indicators such as consumers' willingness to pay a price premium, their
acceptance of brand extensions, their brand loyalty and the brand's future
prospects. One of the questions would thus be how much cheaper a com-
peting, unbranded product would need to be before customers were per-
suaded to switch their preference; another would be whether they might be
prepared, given the opportunity, to try out other (new) products carrying
the same brand name, or whether they intend to purchase a brand they
already own again in future.
Measurements of the latter indicators would suffice to arrive at a straight-
forward indicator value for brand strength. However, that would not yet
provide the desired insights into potential efficiency gains in brand manage-
ment. To develop these, it is necessary to take into consideration, or indeed
measure, the individual determinants discussed above. Using multivariate
statistical analysis, the indicators can then be merged with the other pro-
posed determinants to produce an overall indicator value for brand strength.
26
Drivers and indicators of brand strength
Brand loyalty
Brand's future
prospects
Acceptance of brand
extensions
Willingness to pay
a price premium
IndicatorsDrivers
Perceived quality
Brand knowledge
Brand positioning
Brand identity
Brand strength
27
The second of the main determinants of brand equity, brand earnings, is
derived from the company's own figures and metrics, and those covering
the industry in which it operates. The relatively straightforward computation
entails deducting the usual costs pertaining in the industry from the pro-
duct's revenues, weighting the difference with a rate of return typical for
that market. The monetary value this produces is then transformed into an
index value.
In stage 2 of the process, the information from the combined determinants
is used to compute a monetary value for brand equity. This involves estab-
lishing market prices ­ as required by the situation, such as the acquisition
of a brand ­ for the combined drivers of brand strength and brand earnings,
on the basis of expert opinions. These do not cite a value for a particular
brand, but for various levels or qualities of brand earnings and brand
strength, based on industry analyses. In the next step, the market prices
established for brand strength and brand earnings are multiplied by the
indicators for these determinants already identified in stage 1. The mone-
tary values thus identified for brand strength and brand earnings are finally
added together to produce an objectivized, market-driven value for the
brand in question.
In the process of establishing the determinants of brand strength, it will
also be possible to assess brand status, using BBDO's five-level model as
referred to earlier.
In the consumer surveys, a brand's perceived quality is investigated by
obtaining consumer judgments on their sense of functional risk when they
purchase the product concerned. If this functional risk is judged to be low,
this allows the conclusion that the quality of brand X is high, qualifying it
for at least level one in the BBDO model.
During the brand-knowledge portion of the consumer survey, unaided aware-
ness of brand X, built up chiefly via advertising and distribution, is recorded.
In this context, one is seeking to discover whether the brand has attained
a certain level of familiarity that can be considered the "critical mass" of
market awareness (the "quantity problem"). Once brand X is perceived by
an appropriate number of consumers as familiar to them, it will be ranked
at least on level two of the brand development model.
Similarly, brand positioning can be more precisely assessed by consumers'
judgments relevant to the brand's cognitive and emotional characteristics. If
the brand is in some way embossed in consumers' minds and its positioning
well-defined, it assumes its own personality, and is then located on level three.
Whether the brand has an established identity, which would place it on
level four of the brand management model, may be at least partly revealed
The monetary values
thus identified for brand
strength and brand ear-
nings are finally added
together to produce
an objectivized, market-
driven value for the
brand.
28
by the responses regarding its prestige value. If consumers believe that
brand X offers them a high prestige value ­ that is, the brand helps them
to make a good impression in the social arena ­ the brand's identity can
be assumed to be established, and the brand also functions as a creator
of identity.
This procedure, then, allows those responsible for brand management both
to value a brand and at the same time to establish its status and identify
potential for ongoing brand management.
Although the mechanism described here comes closest to meeting the list
of requirements presented earlier, it too has a number of aspects giving
rise to criticism.
The explicit call for the model to take into account the particular purpose
of the valuation has only actually been fulfilled implicitly, via the expert
opinions on market prices. The criticism that determinant factors are some-
times subjectively chosen also applies to this model. Further, it suffers from
another problem inherent in composite models, namely conflation of the
input and output levels: The drivers of brand earnings may, in fact, also
be consequences of the brand's value. Another problem is that the model
still needs to be fleshed out in detail, which means that it is too early to
judge the relevance of such an extensive model to practical needs, or its
functionality when in use.
29
Summary:
It is widely recognized that the brand has developed into one of a company's
most important assets, which makes effective management of the brand
a key factor in corporate success. The development and long-term enhance-
ment of brand strength has been identified as a target function in brand
management, allowing brand equity, and hence the company's enterprise
value, to be increased for the long haul.
To pursue this objective efficiently, the first step that needs to be taken is
to gain a clear picture of the status of the company's brand. Then it will be
possible to identify where the greatest leverage can be obtained in develop-
ing the brand. This can only be achieved with a standardized and reco-
gnized system of brand valuation, coupled with a mechanism for determi-
ning brand status.
The models available to date have not been able to satisfy these require-
ments fully, though they do in principle allow brands to be valued, with the
insufficiencies that have been described. In light of this, there is a need
for a new, integrated approach to brand valuation that will comprehensively
cover both the business-financial and behavioral aspects of brand equity.
The purpose of the next stage in the process (Volume II), building on the
lessons learned so far, must therefore be to develop a general, modular
system of brand valuation measures, into which BBDO's five-level model
will also be integrated for the purpose of identifying brand status. Then,
detailed model requirements need to be worked out, based on a more detail-
ed breakdown of valuation purposes. Finally, these two aspects should be
merged to give a purpose-specific, modular system of building blocks for
a model that will be valid both theoretically and methodologically.
There is a need for a
new, integrated approach
to brand valuation.
31
7. Synopsys of existing brand valuation models
7.1. Business finance-oriented models
7.1.1. Capital market-oriented brand valuation
(Simon and Sullivan)
7.1.2. Market value-oriented brand valuation
7.1.3. Cost-oriented brand valuation
(residual value according to investment theory)
7.1.4. Brand valuation based on the concept of enterprise
value (Repenn)
7.1.5. Earning capacity-oriented brand valuation
(Kern's x-time-model)
7.1.6. License-based brand valuation (Consor)
7.1.7. Price premium-oriented brand valuation
(Sander, Crimmins, cojoint analysis, Herp)
7.1.8. Customer-oriented brand valuation
7.1.9. BBDO's Brand Equitation Evaluation System
(BEES) ranking
7.2. Psychographic or behaviorally-oriented
brand valuation models
7.2.1. Aaker's brand equity approach
7.2.2. Kapferer's brand equity model
7.2.3. The Keller brand equity approach
7.2.4. The icon Brand Trek approach
7.2.5. Young & Rubicam's Brand Asset Valuator
7.2.6. The Emnid/Horiont Brand Barometer
7.2.7. The McKinsey brand valuation system
7.2.8. Psychometric brand positioning models
(Emnid//Horizont)
7.3. Composite business finacial/behavioral models
7.3.1 The Interbrand brand value approach
7.3.2. The A.C. Nielsen brand balance sheet
7.3.3. The A.C. Nielsen Brand Performancer
7.3.4. The Brand Rating valuation approach
7.3.5. The GfK brand power model
7.3.6. The Semion brand value approach
7.3.7. The Sattler brand value approach
7.3.8. Bekmeier-Feuerhahn's market-oriented brand valuation
7.4. Input/output and portfolio models
32
32
33
33
34
35
36
37
41
42
45
45
47
48
49
50
51
52
53
54
54
57
59
61
62
63
64
66
68
32
7. Synopsis of existing brand valuation models
7.1. Business finance-oriented models
Business finance-oriented models can be classified according to whether
they adopt a bottom-up or top-down approach. In the former, specific brand-
relevant aspects are aggregated to form an overall judgment of a brand's
value. Such approaches, frequently used for brand valuation, include the
cost-oriented, price-oriented, capital market-oriented and earning capa-
city-oriented methods. Top-down models first take a holistic view of a
brand before subsequently endeavoring to place a value on specific attri-
butes such as the process of product branding. This category of global
brand value measurement includes such approaches as conjoint analysis.6
7.1.1. Capital market-oriented brand valuation
(Simon and Sullivan)
As seen by the theory of markets, any brand can be assumed to be worth
the maximum amount a purchaser would be prepared to pay to acquire it.
Thus from a financial markets perspective, brand value (or "brand equity")
can be calculated from a company's stock market capitalization or market
value. The model is based on the idea that the stock price of a "brand
company" will perform so as to reflect the future potential its brands provide.
In the case of a single-brand company, brand value will therefore consist
in the company's capitalized or realized market value (stock price x number
of shares) minus its tangible and its remaining intangible assets; if a com-
pany has more than one brand, the calculation is done pro rata for each
brand's share of total revenues or profits.7
This approach was pioneered by Simon and Sullivan, who defined brand
equity as the present value of all future earnings attributable solely to
branding.8
However, it should be pointed out that this method has a number
of weaknesses. For example, the events generating market identity need
to be readily identifiable marketing measures, and the market needs to be
transparent. If the information influencing brand equity did not filter into
the capital markets, or did so only slowly, it would be impossible to attribute
stock market movements to changes in brand value, thus undermining the
fundamental logic of the model. Another problem is that it can only be used
for stock exchange-listed companies. Finally, the approach is best suited
to single-brand corporations, because the pro rata method of dividing brand
equity among a number of brands can only, at best, be an approximation.
6 Cf. Bekmeier-Feuerhahn (1998), p. 68.
7 The cost of all tangible assets is deducted from the established value of the company. The remaining intangible
assets comprise brand value plus the value of other items such as R&D and special industry factors.
See also Bekmeier-Feuerhahn (1998), p. 74.
8 Cf. Simon and Sullivan (1992), p. 29.
33
7.1.2. Market value-oriented brand valuation
In a market value-oriented approach, the value of a brand is established
by referring to the fair market prices of comparable brands. The kinds of
assets typically valued using a market-value approach include expensive
items of personal property such as used automobiles and real estate.
Taking the market value of comparable assets as the starting point, the
value of the item being assessed is adjusted upward or downward to take
account of any of its own specific characteristics that are pertinent to its
market value. This approach assumes that a market for brands actually
exists, and that transactions have been completed which can offer a frame
of reference. In reality, the latter assumption is often not fulfilled because
it is difficult to find readily comparable brands, let alone absolute equiva-
lents. On the one hand, the typical lack of transparency in the marketplace
makes it difficult to draw meaningful comparisons between brands. On
the other, its uniqueness is part of a brand's very essence, so this in itself
renders direct comparison impossible, and makes the adjustment of a
brand's value based on reference objects into a largely subjective affair,
difficult to reconstruct unequivocally. Consequently, objective reference
values are rarely available, and the method is not suitable for use as a
generally applicable model of brand valuation. Yet another problem is that
market prices may not necessarily reflect an individual purchaser's or
vendor's sense of a brand's value. Different purchasers, for instance, might
be prepared to pay differing amounts as they will not all be subject to the
same financial restraints and may be pursuing different objectives and
interests when they buy the brand. In sum, the market-value approach
appears to be an unsuitable basis for a theoretically grounded valuation of
brands. The best it can do is to point up trends in brand values.9
7.1.3. Cost-oriented brand valuation
(residual value according to investment theory)
Cost-oriented approaches to brand valuation are based on the underlying
ideas of the net asset value approach frequently drawn upon in the field
of corporate valuation. This "reconstructs" the company being valued by
aggregating all assets at cost and deducting liabilities to obtain the net asset
value. There are two variants to the net asset value approach: Depending
on the time perspective chosen, the assets may be valued either at their
historic cost or (if the focus is on the present situation) at replacement cost.
A historic cost valuation assumes that a brand is an asset based on the
resources that have been invested in it. The replacement cost perspective,
by contrast, concentrates on what it would cost today to build up an equi-
valent brand from scratch.10
9 Cf. Sander (1994), pp. 100-101.
10 Cf. Bekmeier-Feuerhahn (1998), p. 69.
11 Cf. Sander (1994), pp. 98.
12 Cf. Bekmeier-Feuerhahn (1998), pp. 69 et seq.
34
The determination of "residual" value using investment theory is one
example of a cost-oriented approach. This states the value of a brand as
the "residual value" obtained when cumulative brand costs to date are
deducted from cumulative revenues attributable to the brand:
BV =  Brand costs ­  Brand revenues
In theory, it would be possible to reconstruct valuations using this accoun-
ting approach. However, the problem lies in crystallizing out the level of
costs and revenues associated with the brand as such.
Cost-oriented approaches are appealing because they use straightforward
computations, can be implemented without the need for major personnel
and time input, and avoid the difficulties of uncertain forecasting and over-
valuation because they focus on net asset value. Nevertheless, they give
rise to a number of problems. A fundamental one is the assumption that
a brand will be all the more valuable, the more resources have been invested
in it. In reality, this link does not apply unreservedly: Some brands are
strong despite relatively low investment in them, and these would be sig-
nificantly undervalued.11
What's more, the focus on cost creates an incentive
to invest a disproportionate amount in a brand to supposedly enhance its
value. In addition, the difficulties in attributing costs to a brand can lead
to computational errors and distorted results. Another questionable aspect
is the emphasis on replacement cost: Precisely because of the unique
positioning implicit in a brand, it is almost impossible to find any other brand
truly comparable with it for purposes of establishing its replacement value.
Substantial doubt regarding the validity of the results also arises due to
the lack of market transparency and a dependence on expert opinions when
establishing replacement cost. A key weakness in cost-oriented valuation
is that it fails to take account of the future, including the potential further
success of the brand, and bases its verdict solely on historical data.
A final point of criticism is that cost-oriented approaches concentrate on
inputs whereas the value of a brand ought to be geared to outcomes, i.e.
to realized output.12
7.1.4. Brand valuation based on the concept of enterprise
value (Repenn)
Another of the classic approaches in business economics is that of enter-
prise value. Repenn is one of the authors who have applied the approach
to brand valuation, computing the "saleable value" of a brand from an
underlying value ­ the cost of creating and maintaining the brand, also
adding in development costs, patent fees incurred, etc. ­ plus the brand's
operational value. The latter, which arises from the ongoing use of the brand,
is calculated at 10% of average annual revenues during the past five
t0
t-x
t0
t-x
35
years.13
It is difficult to justify this method of estimating brand revenues
as an arbitrary 10% of revenues (the "Repenn factor"). This would imply
a 10% brand-induced price premium for the product concerned, yet the
premium in reality differs from one brand to another, and there is no
empirical evidence that the percentage factor applies (say, as a market
average).
7.1.5. Earning capacity-oriented brand valuation
(Kern's x-times-model)
Approaches geared to earning capacity establish the monetary value of
a brand by capitalizing the value of potential earnings. This entails estimating
future earnings flows and discounting them to their present value using
a predetermined interest factor. Thus, in the case of a brand, its value is
established by discounting brand-induced earnings to today's value. The
idea of earning capacity value is incorporated into all the models used in
practice which apply a multiplier of "x times" earnings or revenue to value
brands or entire companies, and also all models using a factor to determine
a present value of perpetuity. In the latter case, this factor includes both
the market rate of interest and the x multiplier for earnings. Thus the value
of a company or brand is established by applying multipliers, appropriate
to the industry involved, to the earnings or revenues generated by the
company or brand.
Kern's earning capacity model values a brand at the capitalized value of
the additional future earnings stream created. In fact, the model is based not
directly on earnings but on revenues, subsequently building in the assump-
tion that it should be possible to achieve a return on sales in line with the
industry average (4­6%). Kern also makes brand value a function of revenues
in another way, assuming that it will grow along with revenue, but on
a decelerating upward curve (using a root function). The model includes a
further, market-oriented variable in the shape of a license fee rate to reflect
the market power of the brand and its level of protection by intellectual pro-
perty legislation. The methodology is also forward-looking in that the future
revenue stream is discounted for the estimated useful life of the brand:14
13 License fee income, if any has been earned, is also added to this figure. Cf. Repenn (1998), pp. 36 et seq.
14 Cf. Kern (1962), pp. 26-27.
BV = value of the brand or trademark
R = average expected annual revenues
L = normal license fee rate in the industry
n = number of years' duration for the expected
revenue stream (the brand's useful life)
q = 1+ p/100 (annuity present value factor),
where p = the normal imputed interest rate
for the country concerned
c = qn
­ 1
(capitalization factor)
qn
· (q ­ 1)
BV =
3
 R2
· L ·
qn
­ 1
qn
· (q ­ 1)
15 Cf. Diller (2000), p. 129.
16 Cf. Herreiner (1992), pp. 38-39.
36
The value of a brand in Kern's earning capacity value approach consists in
the revenues that will be attainable by branding a particular product line.
A point of criticism on this model is that there is no proof available to back
up the assumption of the decelerating curve for the growth in brand value
in line with revenues. The assumption does not appear plausible in theore-
tical terms either. Although it might be fair to assume diminishing marginal
revenues from a brand on the price side, in line with the Weber-Fechner
law of psychophysics,15
in reality any substantial increases in revenues are
generated by increased sales volume. Growing sales volumes and market
share, though, have a highly supportive influence on a brand, so if anything
the function relating its value to revenues ought to be progressive rather
than degressive. A further problem with the approach is that the estimates
of future developments, expert opinions on the license fee rate, the arbitrary
determination of a useful life for the brand and the imputed interest rate
combine to allow subjective parameters a considerable influence on the
final outcome.16
On an overall view, the advantage of an earning capacity approach to brand
valuation lies in its being future-driven, since the intrinsic value of brands
has a strong element of future potential. However, forecasting future income
and expenditure streams does involve numerous subjective factors such
as what imputed interest rate to use for discounting purposes. In practice
the rate normally set is the capital market interest rate on long-dated bonds
in the country concerned, modified by certain premiums and discounts.
These premiums and discounts, reflecting expectations on profitability,
sometimes differ substantially from one another, however.
7.1.6. License-based brand valuation (Consor)
This approach values a brand on the basis of the license rates typical of
the industry and earned by comparable brands. That is to say, it trans-
lates the license fees attracted by a reference brand into a monetary value
of the brand being assessed. The brand valuation methodology developed
by Consor, a U.S. consultancy, focuses on brand licensing, and the value
calculated is the sum of money another company would be willing to pay
either to purchase the brand outright or to obtain a license for it. Consor
begins by assessing brand strength on the basis of 20 key drivers (or deter-
minant factors) including profit margins, the stage of brand life-cycle
reached, the brand's transferability and its international protection. For
comparison purposes, the company draws upon a data archive of more
than 8,500 actual brand licensing and sale transactions completed in the
past. The comparison provides data on the license fees normally obtain-
able in the marketplace, expressed as a range of percentages of the
product's wholesale price. Multipliers are then applied to this information,
to reflect the remaining useful life of the brand, annual growth in brand
37
revenues, current annual sales, and a discount rate as commonly applied.
The resulting formula expresses the current brand value as brand cash flow:17
One problem with this methodology is that the license fees recorded are
assumed to be an objectively correct quantity. Even though a database
of past licensing agreements is used, and even though 20 other key factors
are taken into account, it must still be considered extremely difficult to
identify a suitable reference brand to provide objective comparability.
Moreover, there have to be fundamental doubts as to whether the license
fee negotiated in practice, reflecting varying tactics and strategies used
by the parties involved, can allow conclusions to be drawn about the intrinsic
value of a brand. In fact, the more logical sequence would be to derive the
level of license fees from the underlying brand value.
7.1.7. Price premium-oriented brand valuation
(Sander, Crimmins, conjoint analysis, Herp)
Price premium-oriented approaches work on the premise that certain
characteristics such as brand quality, brand awareness or brand strength
will allow a producer of goods or services to command a price premium
for its brand. In other words, the brand is seen as generating an additional
benefit for the customer, for which he or she is willing to pay a little more.
Brand value as expressed in price premiums can thus be measured by
comparing the price of a branded product with that of an unbranded one
that is identical in all other respects. To obtain total brand value, the unit
price differential is multiplied by the quantity sold. In this approach, brand
value is regarded as the additional earnings that are achieved as a sole
result of the brand being in place.
One particular variant of brand value measurement based on price premiums
is Sander's hedonic brand valuation method. This is based on hedonic
price theory, which aims to explain product prices in terms of various
product characteristics, or rather the extent to which they are present.
Certainly, there is assumed to be a functional relationship between product
prices and characteristics. The general form of the hedonic price function
is P(l) = P(l1,..., lj...,lJ), where P(l) is the price of a product with the charac-
teristic vector l, and lj is the extent to which the particular characteristic j
is present.
17 Cf. Pimpl (1999), pp. 99 et seq.
BV = x x x
Average license
fee as a percentage
of the product's
wholesale price
Current annual
sales, discounted
at a normal rate
over useful life
Average annual
growth rate of
brand revenues
(percent)
Remaining
useful life
18 On this, see also Sander (1995), pp. 78-79.
19 Cf. Sander (1995), p. 79.
20 Cf. Crimmins (1992), p. 16.
38
If such hedonic price functions can be identified, the price changes can be
predicted which will occur if certain product characteristics are altered.
These incremental amounts are the hedonic prices of particular product
features. In the case of the brand as one such product feature, the final
price of the product can be computed both with and without branding, which
in turn shows the unit revenue generated by the presence of the brand.
This hedonic price for the brand (brand revenue per unit) is determined using
multiple regression analysis.18
When the unit revenue directly attributable
to branding is multiplied by the total quantity sold, this gives the brand-
specific revenues that would not have been earned without the brand. To
establish the actual profit, i.e. net revenue, earned thanks to the brand
(its true value added) it is necessary to deduct from these revenues the
brand-specific costs, i.e. those that would not arise for an unbranded
product. The result is the net income earned by the brand as an intangible
asset, or the value of the brand from its owner's point of view:
Sander believes the advantage of his method lies in its universal applica-
bility, which means it can be used equally well to value domestic or inter-
national brands, in services, consumer goods or capital goods.19
The problem
with the method, however, lies in how to identify brand-induced costs,
particularly how to demarcate between the costs generated by a branded
product and general marketing costs. Sander's method defines brand-related
costs simply as the cost of developing trademarks, labeling the trademark
protection, etc., and completely excludes ongoing marketing activities such
as advertising, sponsoring, public relations, POS activities etc., which in fact
are also involved in generating brand value.
Another price premium-oriented approach is adopted by Crimmins' model
of brand measurement. Crimmins points up three dimensions of brand
value: the actual amount, the breadth, i.e. the number of product categories
in which the brand can generate added value, and the content of brand
value, or the associations conjured up by a brand which are the cause
of its added value.20
In measuring the amount of value added by a brand,
Crimmins assumes this can be established by raising or lowering the price
of the branded product under examination until the point is reached
where consumers are indifferent between it and a competing product.
BV = Brand's share of revenues ­ Brand's share of costs
Earnings item Established by hedonic Established by subtracting
regression costs generated by an equivalent non-branded
product from those of the branded product
Revenue = a0 + b1x1 +  bixi x1 = Brand
xi = All other beneficial features
b1 = Hedonic coefficient for the brand
bi = Coefficients for the other features
l
i=2
39
The remaining differential between the prices of the two products is the
price premium. For example, if two branded products are equal in terms
of consumer preference when Brand A costs 2 1,80 and Brand B 2 1,50,
the added value implicit in Brand A is 20%.21
Thus the amount of value added
per unit of the branded product is derived from the price differential relative
to a reference competing brand when consumers have no preference bet-
ween the two.
A similar procedure is used to measure the breadth of brand value, i.e. to
determine the value of a leading brand in one category when it is transfer-
red to another. The reference brand used in this further category is the
market-leading or no. 2 brand in that specific market, and again, the price
differential remaining when preferences are equal is the yardstick used.
Crimmins also suggests that longitudinal studies should be carried out to
identify the determinants of brand value. This proposal focuses on the
content and the sources of brand value. "Because it is relatively easy and
inexpensive to measure the amount of value [our italics] added by our brands
in this way, we should be tracking the value added over time to better
understand the conditions that cause value to increase or diminish."22
In
Crimmins' view, measuring brand value ought to be part and parcel of brand
management and monitoring. Should brand value change, those responsible
for managing the brand may need to take action to steer it in the direction
they want.23
The comparative simplicity of Crimmins' approach (as compared to Sander's
rather laborious method, for example) is a positive feature. However, this
structural elegance is also accompanied by severe deficiencies in the
measurement concept. One weakness is that brand value is established
as a relative value, even though many of the purposes for which brand valua-
tions are carried out call for an absolute value. A further problematical
aspect is that the measurement of brand value rests upon consumers' state-
ments of their willingness to purchase at particular prices, despite it being
common knowledge that there is often a rift between consumers' stated
intentions and what they really do. However, the key criticism of Crimmins'
approach is that it does not take account of differences in product charac-
teristics. Differences in the prices consumers are willing to pay is due in
the real world to the fact that besides their brands, products also have
different features, or carry certain features at different levels. As a result,
this method does not properly filter out a pure brand value, but conflates
it with the assessment of other qualities that differ between the products
under comparison.
All in all, the price-oriented approaches make intuitive sense, are straight-
forward to use and are comprehensible in practical terms. However, they
raise problems insofar as they only take price and cost data into account
21 Cf. Sander (1994), pp. 95-96.
22 Crimmins (1992), p. 19.
23 Cf. Sander (1994), pp. 96-97.
24 Heider and Strehlau (2000), p. 504.
25 Cf. Herp (1982), p. 3.
40
and fail to consider "the many facets of the brand value phenomenon."24
What's more, the price premium approach can only be applied if there is
a real unbranded equivalent to the branded product actually available.
If not, researchers face the difficulty of defining a zero or index point as
a benchmark. However, the prime criticism of this methodology is directed
against the assumption that there is a direct link between the price premium
commanded by a product and the influence of its brand. This is not un-
reservedly true, as the price may also carry other aspects such as strategic
intentions ­ generally manifested in market-share dynamics ­ so conse-
quently, a price premium-oriented approach is not the method of first choice.
Conjoint analysis can also be regarded as a price premium-oriented ap-
proach to brand valuation, but this time on a top-down basis. Starting out
by identifying global preferences regarding product concepts, conjoint ana-
lysis aims to derive the specific utility values for particular levels of features
which go to make up the global preferences. Thus brand valuation by con-
joint measurement establishes the influence of different product features
on the preferences expressed by consumers for a product. The required
data are obtained by means of interviews or forced choice experiments.
Customers' overall willingness to pay for a product is used to identify their
willingness to pay for specific product features, one of which is the brand
itself, the value of which is ascertained as a result.
There are evident parallels between conjoint analysis and hedonic price
theory, since both focus on a supposed link between product prices and
product features that will allow the former to be explained by the latter,
each product feature having a calculable value. However, a key difference
is that the hedonic approach does not use survey data as conjoint analysis
does, and concentrates instead on price differentials between products.
Herp's approach builds upon the methods of conjoint measurement. In
this model, brand value is defined as the sum of all incremental revenues
earned as a result of branding a company's products, as Herp hypothesizes
that product branding will impact the company's sales success.25
The ap-
proach therefore endeavors analytically to filter out brand-specific effects
as a certain proportion of a product's sales, by drawing upon conjoint
BV = Price premium commanded by brand x Sales volume
Earnings item: computed using conjoint analysis
Purchase preference = b1 · x1 +  bi · xi
(measured as a used ranking, Symbols bi · xi etc. are used
switched, evoked set etc.) as in the hedonic model
l
i=2
41
analysis to break down revenue differentials between product variants into
utility values, and then calculating the effects of different product feature
profiles and variants to establish the net impacts of pure branding. So this
methodology does provide information on what price and revenue effects
are attributable entirely to brands. The results are expressed as a consumer-
specific utility of a brand relative to the product's price. The value of
the brand is obtained when this is multiplied by the total quantity of the
product sold.26
One disadvantage of Herp's approach is that it only calculates a relative
brand value. This is because of the link established between the relative
share of the product price attributable to the brand on the one hand and
relative sales results on the other. The benchmark used in this method does
not consist in the sales of unbranded products but in those of other branded
ones. Thus the value differential established is merely a floor amount for
the ultimate value of the brand "which will be all the closer to [its] full value,
the lower the absolute brand value of the reference brand."27
Another
difficulty is that Herp's model can only be applied when the brands under
scrutiny belong to the same product category and there is little difference
between the products in terms of their objective features.
In general terms, an advantage of conjoint analysis is its objective deter-
mination of the utility of a brand, since consumers' judgments are not
subjected to any external distortions such as those that occur when criteria
are imposed or weighting coefficients used. However, a weakness of the
approach is that it does not take account of forward-looking aspects.28
Moreover, the fact that conjoint analysis aggregates specific utility values
means that these specific feature profiles have to be independent of each
other. There must not be any other cross-influences between the brand,
the other product features and the product price. This requirement is un-
realistic, given that branding exerts a substantial influence on the perception
of other features, due to halo and irradiation effects.
7.1.8. Customer-oriented brand valuation
The brand valuation approach based on customer contribution margins
focuses on the fact that some products and services generate firm customer
relationships for an enduring period because they function as a system,
and as a result repeat purchases are not subject to any new purchasing
decision. The underlying assumption of this approach is that a brand's pur-
chasers are the ultimate generators of value, since their decision to commit
themselves to a product system determines the level of future earnings.
Consequently, the earning-capacity indicator used by the model is not annual
net income but the average customer contribution margin attained by a
product and the churn rate in the customer base. The churn rate is a key
26 Cf. Heider and Strehlau (2000), pp. 507-08.
27 Herp (1982); pp. 141-42.
28 Cf. Herreiner (1992), p. 58.
parameter, since the strength or ratio of customer commitment is the
competitive factor that will determine the level of future earnings promised
by a newly acquired customer ("customer value").29
Brand/customer value
is a function of the following quantities:
BV =  (customer contribution margin, initial customer base,
churn rate, interest rate, time)
The computation of customer value incorporates continual discounting of
all future customer-specific revenues, and can be formally presented as
follows:
7.1.9. BBDO's Brand Equity Evaluation System (BEES) ranking
The Brand Equity Evaluation System (BEES) by BBDO Consulting GmbH30
is a multi-phase factor model of brand valuation which takes account of
differences between industries. In the first step, the model identifies eight
determinants of brand equity as outlined below. A brand's sales perform-
ance also serves as an indicator of its future sales potential; for this deter-
minant, specific factor values are also obtained from outside the industry.
The second indicator, net operating margin (i.e., percentage return on sales),
29 Cf. Fischer, Hermann and Huber (2001).
30 Cf. BBDO Consulting GmbH (2001), pp. 13 et seq.
42
 = customer value
i = perpetual interest rate (capital market yield)
p­c = customer contribution margin
x = customer base
t = time
r = customer loyalty ratio
b = size of initial customer base
g = churn rate
(1)  = e­it
(p­c) · x(t, r) t
 =
(p­c)br
mit r­i  1
(1+i­r)
(3) x(t, r)=bre(r­1) t
 x
(2)
 t
= ­gx
Assumption: The brand will lose a certain percentage "g" of its customer base (churn rate) in each period, which is
formally expressed thus:
Substituting for g with the customer loyalty ratio r from the equation g = 1­r and resolving the differential equation
in (2) under the initial condition that x(0) = br after x(t), the development of the customer base can be expressed
as follows:
When this is inserted into (1) and the determinate integral solved, we obtain the following simplified formula for
customer value:

0
is calculated as an average value over the preceding three years; this gives
an idea of the true worth of the revenues earned. The next determinant, the
brand's development prospects, uses analysts' opinions on the prospects
for the industry as a metric for the brand's future value potential. In addition
to this view of the immediate market segment, analysts' opinions of overall
economic prospects are also factored in. The international orientation of
the brand records the proportion of revenues earned abroad and offers a
perspective on the brand's potential for international development. Adver-
tising support for the brand is operationalized on an intra-industry basis,
measuring the percentage of pretax earnings spent on advertising. The
strength of the brand within its industry measures sales relative to those
of competitors; the benchmark used is the sales figure for the market's lead-
ing brand producer. Brand image encapsulates the brand's attractiveness
to stakeholders, and is assessed taking a broader sweep beyond the brand's
own industry. The final determinant comprises earnings before taxes in
the past three years, to act as an indicator of the brand's value potential.
The actual valuation proceeds in several stages. First, the determinants that
constitute the brand environment ­ sales performance, net operating margin
and development prospects ­ are aggregated and consolidated into a joint
factor of brand quality, the subcriteria within the contributory factors being
weighted appropriately when the calculation is made. Then the new brand
quality factor is channeled together with the remaining four weighting factors
to form an overall factor value, which will subsequently be used as a multi-
plier of earnings before taxes. The monetary value of brand equity is
the product of the average pretax earnings in the last three years and this
combined weighting factor. Earnings before taxes have been explicitly
43
Brand image
International
orientation of
the brand
Brand's development
prospects
Brand sales
performance
and potential
Brand earnings
before taxes
Brand net
operating margin
BBDO BEES
Brand's strength
within its industry
Advertising support
for the brand
44
chosen for the model, to avoid any possible distorting influences on the
value of a brand that might come from the current tax system, and to
establish the model on a more uniform financial basis. In addition, when
average earnings are calculated, the model takes account of the fact that
more distant past earnings are less significant than more recent ones by
weighting them accordingly. The processes involved in implementing the
BEES model are summarized in the diagram below:
An advantage of the BEES approach is that it differentiates between indus-
tries. This is especially important with regard to advertising support for the
brand, which varies hugely from industry to industry, and a failure to take
this into consideration would substantially distort the results. The approach
also incorporates an extensive selection of relevant determinants of brand
equity, and it can be added to by adapting and integrating other appropriate
metrics. A further benefit is that it takes forward-looking variables into
account to establish the brand's development potential and prospects.
Finally, the BEES brand valuation procedure is easy to work with and relatively
BBDO BEES
Brand equity
Sales performance
Net operating margin
Development
prospects
International
orientation
Advertising
support
Brand's strength
within its industry
Image
Factor values
united to
constitute a
combined
factor value
Pretax earnings
two periods
previously
Pretax earnings
in previous
period
Weighted
average
earnings
before taxes
in the last
three years
Merging
of weighting
factor with
pretax earnings
Average earnings
before taxes
x
Weighting factor
= Brand equity
Aggregation
into the
factor of
brand quality
Pretax earnings
in current
period
45
economical to use, as the data required to do the calculations are nor-
mally readily available and easy to access.
However, there are also some points of criticism. Firstly, like other metho-
dologies, BBDO's BEES approach is unable completely to rule out subjec-
tive influences in the choice and weighting of factors. Secondly, the model's
main drawback at present is that BEES can only value corporate brands.
However, it could conceivably be evolved and adapted to allow product
brands to be evaluated also.
7.2. Psychographic or behaviorally-oriented
brand valuation models
Some ten years ago, criticism grew louder among both marketing practi-
tioners and theoreticians that financial models were failing to do complete
justice to the essential qualities of strong brands, since they concentrated
on quantities such as stock market capitalization, earning-capacity value,
license revenues, acquisition costs, price premiums or the customer con-
tribution margin. This gave rise to new concepts incorporating brand strength
as a demand-oriented component. Behavioral valuation methodologies, for
example, focus on consumer judgments and investigate brand value as an
essentially qualitative construct, but one that can be made manifest using
scoring techniques. They endeavor to explain what goes on in customers'
or potential customers' "hearts and minds" and what determines the value
of brands from their point of view.
7.2.1. Aaker's brand equity approach
Among the best-known theoretically oriented concepts in this field is that
of Aaker. Aaker regards the brand as a symbol associated with a large
number of mental assets and liabilities that serve to identify and differentiate
products. He defines brand equity as "a set of assets and liabilities linked
to a brand, its name and symbol, that add to or subtract from the value
provided by a product or service to a firm and/or to that firm's customers."31
Aaker identifies five determinants of brand equity: brand loyalty, brand
awareness, perceived quality, brand associations and other brand assets.
· Brand loyalty lies at the heart of a brand's value. This loyalty shows
through, for example, in repeat purchasing and hence in relatively stable
brand revenues.
· Awareness of a brand name may be a precondition for the product even
entering into the frame for a purchasing decision. What's more, people
31 Aaker (1991), pp. 15-16.
32 Aaker (1991), p. 85.
33 On the factors influencing brand equity, see also Schlaberg (1997), pp. 184 et seq.
46
tend to feel happier with things that are familiar to them, so they are
more likely to associate quality with names they know than with others
they don't.
· Aaker's next determinant is "the customer's perception of the overall
quality or superiority of a product or service with respect to its intended
purpose, relative to alternatives."32
From the customer's viewpoint, high
perceived quality may be a precondition for making the purchase, while
for the producer it may mean being able to command a price premium
for the branded product.
· Brand associations are characteristics that consumers attribute to the
brand. These are primarily conveyed by advertising, but need not be
related to the product itself. These associations may enrich the brand
with new perceived characteristics to generate additional benefit, provi-
ding customers with a positive feeling of, say, security, confidence or
exclusivity, which in turn will boost brand equity.
· The other brand assets consist in legal and institutional benefits which
a brand can offer and which protect its value. These include the protec-
tion of the trademark, markets and distribution channels afforded by
legislation covering intellectual property rights.33
Aaker's model is an oft-cited conceptual approach seeking to highlight
the determinants that build brand equity from a consumer's perspective.
From a measurement point of view, though, the approach is problematical
insofar as the determinants are not mutually independent. Quality, for
example, is partly also a function of awareness, associations and loyalty.
Moreover, the factors Aaker has identified are not only determinants but
also outcomes of brand equity, so in this respect they intermix the input
and output stages of a brand equity production function. Aaker's approach
also takes no account of the requirements posed by sound measurement
techniques, and the information is lacking to place any numerical value
on particular dimensions of the model. Although quantities from business
Brand equity
Name, Symbol
Name awareness Perceived quality Brand associations
Other brand assetsBrand loyalty
47
economics, such as high profit margins, are implicitly postulated as out-
comes of positive brand equity, the psychographic phenomenon is not trans-
formed into any monetary equivalent.
7.2.2. Kapferer's brand equity model
Kapferer's brand equity model is built on an underlying assumption that
the value of a brand lies in a tacit contract between the brand and its cus-
tomers, "trading" a seal of quality for automatic repeat purchasing. The
brand name generates utility by reducing transaction risk for the producer
and consumer alike. According to Kapferer, "brands identify, guarantee,
structure and stabilise supply. They draw their value from their capacity to
reduce risk and uncertainty."34
The contract between customer and brand
generates financial rewards for the producer while it reduces the customer's
cost of obtaining security. The consumer and his/her purchasing behavior
take center stage in Kapferer's brand system. Advertising and point-of-sale
product presentations incite the customer to try out the brand. Depending
on his/her experience with this purchase, and the quality and price of the
branded product, this may generate a habitual purchasing decision, or a
brand preference, which will be manifested in repeat buying. The brand's
market share, which according to Kapferer correlates positively with brand
earnings, is primarily determined by the number of consumers loyal to the
brand. Brand earnings "derive from an increment in demand compared with
that of a generic product, or from reduced production and distribution costs
resulting from overall savings and productivity gains based on the experience
curve."35
If the brand earnings are reinvested, e.g. in marketing, R&D and
productivity increases, this may well strengthen the brand system by firming
up existing contracts and creating new ones, thus further enhancing brand
equity and establishing a virtuous circle.36
As in Aaker's model, brand equity is a result of consumers' changed pur-
chasing behavior. However, in contrast to Aaker, who attributes this change
to brand loyalty, Kapferer proposes that it is due to a reduction of purchase
risk. A feature both approaches have in common is that they do not put
their hypotheses to any empirical test. An interesting point to note about
the building of value in Kapferer's approach is that it occurs in a system that
involves positive feedback. Reinvested brand earnings also create increased
long-term financial earnings, establishing a form of perpetual motion via
brand management. However, the model does not consider changing con-
sumer values, competitors' strategies or other factors that can have a
retarding effect on brand equity growth. Certainly, though, a positive feature
is that the model clearly demarcates its determining factors and outcomes,
thus ensuring it is functionally logical.
34 Kapferer (1992), p. 10.
35 Kapferer (1992), p. 191.
36 On Kapferer's brand system, cf. also Schlaberg (1997), pp. 186 et seq.
7.2.3. The Keller brand equity approach
Another psychographic approach is Keller's technique for determining
brand equity. Keller operates on the assumption that consumer-oriented
brand value ­ which he calls "customer-based brand equity" ­ is tied to
knowledge of the brand and based on comparison with an unbranded pro-
duct from the same product category. He defines brand value as "the dif-
ferential effect of brand knowledge on consumer response to the marketing
of the brand. That is, customer-based brand equity involves consumers'
response to an element of the marketing mix for the brand in comparison
with their reactions to the same marketing mix element attributed to a ficti-
tiously named or unnamed version of the product or service."37
According to Keller, brand knowledge comprises brand awareness and
brand image. Brand awareness can involve either brand recall (unaided)
or brand recognition (aided). Brand image is shaped by numerous associa-
tions made with a brand that are interconnected via a semantic network.
Keller characterizes these associations in terms of type, advantage (i.e. con-
sumer satisfaction with and positive overall image of a brand), strength and
uniqueness. Distinctions can be made between the various types of asso-
ciations as regards brand properties, brand benefits and overall impression.
Brand properties encompass product-related properties (for instance, price
and packaging) as well as those with an indirect relationship to a product.
Depending on specific user needs, the benefits of a brand can be functio-
nal, emotional or symbolic. Ultimately, the overall impression made by a
brand is determined by consumer attitudes.
37 Keller (1993), p. 2.
48
Brand knowledge
Uniqueness of
associations
Strength of
associations
Advantage of
associations
Types of
associations
Brand awareness
Recall Recognition
Overall impression
of brand
Brand
benefits
Brand
attributes
FunctionalEmotionalSymbolic
Direct relationship
with product
Indirect relation-
ship with product
Price
Conceptions of the nature
of the consumer and the
consumption situation
Packaging
Brand image
49
Keller's model approach has drawbacks similar to those directed at Aaker's
concept. Though Keller does offer an analytical and conceptual description
of brand equity development, the approach lacks a firm theoretical founda-
tion. Moreover, in view of the 14 identified drivers, the interdependence
problem grows considerably. In addition, it remains unclear how qualitatively
based brand evaluation can be converted into monetary units. Overall,
it must be noted that Keller's system is a conceptual strategy for brand
appraisal that remains as yet unconfirmed by empirical evidence.38
7.2.4. The icon Brand Trek approach
The icon Research and Consulting Brand Trek approach is yet another
(partial) model for determining brand value based purely on the tenets of
behavioral science.39
According to this model, brand strength ­ i.e. brand value ­ is derived from
brand image and brand assets. The model is often also referred to as the
"brand iceberg" model, which visualizes the value of a brand using the
analogy of an iceberg. Brand image constitutes the components of a brand
that are "visible" to consumers, i.e. the short-term measures in the marke-
ting mix ­ such as product and packaging design, advertising, promotions,
events, etc. ­ that are perceived by buyers. Brand image is shaped by brand
awareness, the clarity and appeal of internal brand image, the distinctiveness
of brand identity, the lasting impact of advertising and advertising pressure
as subjectively perceived. The brand assets make up the portion of the
iceberg that is "under water". They represent longer-term changes in con-
sumer attitudes and also include earlier investments in the brand that exist
beneath the surface more or less as assets. The brand assets encompass
brand appeal and trust in the brand (brand loyalty).40
Internal brand value
is thus the sum of internal brand image and brand assets.41
38 Cf. Bekmeier-Feuerhahn (1998), pp. 95-96.
39 The brand valuation model is often referred to as "brand status". Cf. Drees (1999), p. 20.
40 Cf. Andresen and Esch (1999), p. 1013.
41 Cf. Andresen (1991), pp. 31-32.
Short term
Brand image
· Brand awareness
· Subjective perception of
advertising pressure
· Memorability of advertising
· Brand uniqueness
· Clarity of internal image
· Attractiveness of internal image
· Brand appeal
· Trust in brand
· Brand loyalty
Brand assets
Long term
42 Cf. Esch (1999), p. 986.
43 Cf. Bekmeier-Feuerhahn (1998), pp. 98-99.
50
The contribution made by both dimensions to determining brand value
depends on the age of the brand. For example, the brand assets of new
brands are not as well developed as those of old ones. According to icon's
concept, though brand assets do have a more direct connection with the
success of a brand, they can only be influenced via brand image. The iden-
tified brand values for the individual indicators making up the brand iceberg
can be compared using icon's database, which contains corresponding
reference values for the respective sector or product area. This system
offers an indication of the realms in which a brand will be perceived more
positively or less positively than the industry average, making it possible
to benchmark.42
Several aspects of the Brand Trek approach are also problematic. First of
all, the method does not allow absolute brand value to be determined,
only relative value. The reference points for comparison are not the brand
image and brand assets of unbranded products, but rather of other branded
items. Brand value determined in this way can serve only to delineate a
floor for brand value. The lower the absolute brand value of the reference
brands, the more the floor approximates real value. As the example of Herp's
concept has already shown, this result cannot be termed very satisfactory
if the aim is to attain brand valuations of universal utility. Secondly, the
component values may not be combined to determine brand value due to
the postulated interdependence between brand image and brand assets.
In addition, the issue of brand comparison invites the question of whether
differences in strength between brand image and brand assets can be offset.
Thus, it hardly seems possible to definitively determine the impact on brand
value of brand image and brand asset indicators. Another questionable
point is whether the specific brand value is a purely brand-driven value or
whether it is actually a product-driven value. Finally, it must be emphasized
that, while the Brand Trek approach is based on principles of behavioral
science and focuses on a qualitative analysis of brand value, it does offer
a limited gauge of brand value, including at least relative score values.43
The exact methodology of this brand valuation system is outlined in sec-
tion 7.3.4. along with the Brand Rating Model, which incorporates the
"iceberg" model.
7.2.5. Young & Rubicam's Brand Asset Valuator
The Brand Asset Valuator developed by the Young & Rubicam advertising
agency is an international brand appraisal system based on the principles
of behavioral science. Like the Brand Trek approach taken by icon, this
model is meant to support brand management, which is why it does not
determine monetary brand value. As Young & Rubicam sees it, brand value
rests on four pillars: differentiation, relevance, esteem and knowledge.
"Differentiation measures how distinctive the brand is in the marketplace,
... relevance measures whether a brand has personal relevance for the
respondent, ... esteem measures whether the brand is held in high regard
and considered the best in its class, ... knowledge is a measure of under-
standing as to what a brand stands for ...".44
Determining the components
mainly involves conducting consumer surveys, asking respondents to eva-
luate various elements connected with the brand. The model clusters the
components of differentiation and relevance to brand strength, which is a
key indicator of a brand's future development. The components of esteem
and knowledge make up brand stature, which stands for a brand's presence.
Thus, Young & Rubicam sees brand value as a function of brand strength
and brand stature:
BV = f
{Brand strength (differentiation, relevance) and
brand stature (esteem, knowledge)
}
Fifty-two criteria are analyzed to determine what the individual components
are and what they add up to. However, nothing is known about the confi-
guration guidelines, i.e. which individual criteria within the components are
ascertained and how these values are combined. Finally, the brands analy-
zed using the Brand Asset Valuator are graphed as points within a four-field
matrix known as the "Power Grid" based on their brand strength and brand
stature.45
However, this model also fails to convert the resulting brand
values into concrete monetary terms.
7.2.6. The Emnid/Horizont Brand Barometer
Brand valuation using the Emnid/Horizont Brand Barometer is yet another
psychographic system. This approach assesses brands using a preference
barometer on a scale ranging from below average to above average. The
following criteria are used to determine brand preference: unaided brand
recall (doubly unaided survey), aided brand recognition (by name only),
aided advertising recognition (advertising recently seen), relevant set (aided
question about brands in question), trial purchase (trial purchase already
made), principal brand (brand currently purchased) and appeal (unaided
appeal set). However, it is not known how these criteria are weighted in
brand valuation. As with the other behavior-based models, the Brand Baro-
meter does not yield monetary brand values that are anchored, absolutely
or otherwise. The preference barometer allows the value of a brand to be
determined only relative to the other brands studied.
51
44 Aaker (1996), p. 304.
45 Cf. Drees (1999), p. 21.
46 Cf. Riesenbeck (2000), pp. 10-11.
52
7.2.7. The McKinsey brand valuation system
McKinsey's method for determining brand value operates on the as-
sumption that brand strength is definitively quantifiable. However, the
system does not determine aggregate brand value, but rather quantifies
as target values four individual benefit components of brands from a brand
management perspective and can be viewed as a model based on behavioral
science only in terms of the drivers (the three P's of the brand). The bene-
fits of a strong brand are expressed, for instance, in larger market share
in the long term (e.g. Persil, Lufthansa), a higher attainable price premium
(e.g. Porsche), lower marketing costs per sale as the result of brand loyalty
(e.g. Mercedes) and higher leverage potential via transfer, extensions and
licensing (e.g. Nivea, Disney). These individual dimensions are used to ana-
lyze and measure brand strength, eliciting a profile of strengths and weak-
nesses and indicating the brand's potential for developing into a power
brand.46
McKinsey defines the three P's of the brand ­ performance, personality and
presence ­ as the key determinants of such a power brand. Performance,
i.e. the product's ability to deliver, is an indispensable prerequisite for a
strong brand. A clearly differentiated benefit pledge and its consistent
implementation above all in advertising (e.g. Porsche, Nivea, Magnum ice
cream) help make brand performance visible to consumers. The second
characteristic of a power brand is brand personality. A brand must be
expressive and "stand for something," as Marlboro stands for freedom and
adventure. This is possible only by way of a consistent benefit pledge and
advertising pursued consistently over many years, with only cautious fine
tuning of the way in which the brand is depicted. Ongoing relaunches and
agency or management changes are extremely damaging to the develop-
ment of brand personality (e.g. Apollinaris, König-Pilsener). The third attri-
bute of a strong brand is presence. A power brand is characterized by an
ongoing, towering presence, ubiquity, innovation in advertising materials,
and an up-to-the-minute, contemporary image (e.g. Nokia, Langnese).
McKinsey supposes that the quantitative brand strength values are a func-
tion of the three P's:
· Sustainably higher market share
· Higher enforceable price premium
· Lower marketing costs per sale, e.g. through
brand loyalty
· Higher leverage potential through transfers,
extensions, licensing
· Performance
· Personality
· Presence
Quantitative brand strength elements = f (the 3 P's of a brand)
53
It must be noted that, while McKinsey's system for brand appraisal postu-
lates individual brand strength values and designates them as quantifiable,
it does not offer any information on the functional context or global brand
value. Moreover, it is not clear whether the three P's truly encompass all
relevant drivers of brand strength or whether there are others. It is, for
instance, conceivable that pithiness could be considered a "fourth P" indi-
cating the extent to which brand image is differentiated and delineated.
7.2.8. Psychometric brand positioning models
(Emnid/Horizont)
We will turn briefly to the last type of model driven purely by the principles
of behavioral science: psychometric brand positioning models, illustrated
here by the example of the Emnid/Horizont sociometric model. The
psychometric and/or sociometric approach gauges fundamental sociocul-
tural and psychological positions via spatial reconstructions of conceptual
environments. The varying value contexts of individual target groups are
expressed in specific fundamental attitudes that can be tied to concepts.
This allows the fundamental attitudes of target groups to be gauged by how
they judge certain words. The results of each sociometric survey are
depicted via the mapping process, known in marketing theory as spatial or
positioning models. The basis for this is a sociometric positioning method
such as factor analysis or multidimensional scaling. In terms of brand
valuation, this means that brands are allocated to a sociometric realm
according to dimensions such as sociality/individuality and obligation/
joie de vivre. The psychological spatial model is reconstructed based on
consumer responses.
Sociality
Duty Joie de vivre
Individuality
Wrangler
HIS Jeans
Mustang
Levi's
Lee
Diesel
47 Cf. also Sander (1994), pp. 69-70.;
Herreiner (1994), pp. 24-25.
54
The fundamental sociocultural attitudes and values predominant in the
target group surveyed (e.g. a more individualistic culture with a strong
sense of duty or a social culture characterized by marked joie de vivre)
provide the basis for the brand preference dimensions. A brand's position-
ing is determined by the way it combines fundamental attitudes and mind-
sets ­ in the case of Levi's, for instance, this would be a combination of
individuality and freedom.
The behavioral models presented here ­ with psychographic values such
as awareness, purchasing intention, relevant set, top of mind, image/
personality associations, appeal, product performance, consumer relevance,
uniqueness, expressiveness of the brand symbol and recall value ­ must
be integrated with the purely business-financial approaches. The following
composite models are dedicated to this consideration.
7.3. Composite business financial/behavioral models
A third group of marketing-oriented brand value measurement indicators
has established itself parallel to the focus on psychographic values. These
indicators depict the status of a brand on the market as the result of con-
sumer buying patterns. This further supports the focus of brand valuation
on financial and/or management-related factors and essentially creates
a third level within a phased concept of brand creation. These values for
consumer-based market penetration include such dimensions as market
share (quantity, value), trial-buyer share (per period, cumulative trial-buyer
rate), brand loyalty (repeat purchase rate, brand loyalty rate), buyer share for
the brand, purchasing volume per buyer index (usage intensity) and the price
index as check and balance for quantity values. The composite models
include variables for the earning-power status (3rd level), market status
(2nd level) and psychographic status (1st level) of a brand.
7.3.1. The Interbrand brand value approach
One of the best known composite or indicator models is the Interbrand
consulting firm's brand value system, which must be considered an
earnings-based approach using a scoring system (point-based valuation
model). The scoring system is founded on seven factors that are operatio-
nalized and gauged on the basis of a total of 80­100 criteria. These seven
determinants of brand value are: (1) brand leadership, (2) brand stability,
(3) market, (4) international presence of the brand, (5) brand trend, (6)
marketing support and (7) legal protection enjoyed by the brand. The table
shows the criteria/indicators associated with each determinant and the
respective determinant weightings.47
For each indicator, the brand can
achieve a fixed maximum point value. The point score achieved per deter-
minant is derived from the sum of points earned for their operationalization
criteria. Together with the weighting of determinants, this count determines
brand value potential in points.48
Monetary brand value is determined in a four-step process. In the first step,
the brand value driver criteria for each of the seven influencing factors are
ascertained and assigned a point score. In the second step, the seven
scores are combined and weighted according to their significance as regards
brand value to arrive at overall brand strength. In the third step, this point
score ­ a standardized index value ranging from 0­100 ­ is converted into
a multiplier using a transformation function. The transformation is expressed
as a special, S-shaped brand index curve that depicts the relationship
between brand strength and the brand multiplier. Interbrand relies on long-
standing market experience and empirical ex post studies showing corre-
lations between the prices found to have been realized during company
mergers or acquisitions and reconstructions of brand strength. This allows
the brand index curve to be ascertained inductively, yielding a multiplier
value ranging from 0­20.49
55
48 Cf. Schlaberg (1997), p. 191.
49 Cf. Berndt and Sander (1994), pp. 1364-65.
Drivers Weighting of drivers Operationalizing criteria (a selection)
Brand leadership 25% Market share (MS), market position,
relative MS, market segment, structure,
future aspects, etc.
Brand stability 15% History, current position, future development
Market 10% Overview, (structure of competition, value,
volume, etc.), trend (market dynamism, etc.),
prospects
International reach of brand 25% Past (export history, etc.), present (presence
on foreign markets), future
Brand trend 10% Development (sales volume, MS), status
(competitive trend), planning (development plans)
Marketing support 10% Qualitiy and continuity (advertising activities,
sales promotions, etc.), future strategy
Legal protection of brand 5% Rights to name, registration, etc.
Multiplier value
Brand strength
Large
Small
0 50 100
20
In the fourth step, the resulting multiplier value is multiplied by average
earnings after taxes50
for the last three years to determine monetary
brand value.
The four process steps illustrate that the Interbrand approach is an easy-
to-use system, a fact also made clear by the large number of appraisals
carried out using the approach. The Interbrand model represents an attempt
to assess brand value as a whole. A broad-based catalogue of criteria is
used in an attempt to chronicle the complexity of a brand in its key evalua-
tion dimensions. The model can also be used for tracking purposes as it
is possible to compare the brand's current values and target values (fixed
or implicit in the scale's upper range) for the individual criteria. In addition,
management is effectively sensitized as regards brand decisions as the con-
sequences of these decisions can be seen in the criteria values.51
The concept does, however, have some drawbacks. A decisive weakness
is the strong influence of subjective components. This criticism applies
above all to the selection and weighting of factors and/or their criteria for
determining brand strength, the arbitrary scale system for the multiplier,
delineation of the relevant market and the estimates necessary to determine
brand earnings. In addition, earnings after taxes are used for determining
monetary brand value, which means that brand value is partially dependent
on the tax system in use. What's more, the results are distorted by a lack
of independence, an insufficient functional hierarchy of criteria and the
correlations between indicators. Thus, determinant factors are counted
several times over (parallel and successively), resulting in a tendency to
inflate the overall rating. The use of some input factors such as marketing
support must also be viewed critically as it appears questionable to assume
a direct correlation between purely quantitative values such as advertising
spending and brand value. It is also unclear whether the customer-related
factors relevant to brand valuation are sufficiently operationalized and
integrated. Overall, it can be said the data used by the Interbrand model
are for the most part estimated values, so that the resulting monetary brand
value must also be viewed as an estimated or trend value.52
50 The earnings value is determined by the values from the three most recent periods to prevent distortions caused
by disproportionately high or low values during the most recent period.
51 Cf. Sander (1994), pp. 79-80.
52 Cf. also Bekmeier-Feuerhahn (1998), pp. 80-81.
56
BV =Brand profit x Brand multiplier
Three-year average, The brand-strength-score value BS
qualified using 15-step process from over 80 valuation dimensions is
in terms of inflation factor, creation converted into brand multiplier BM
of third-party brands, weighting via regression analysis (basis: proceeds
of past history, expected rate of from brand sales, taxes, etc.,
interest, then applied to a single year reconstructed brand strength values)
57
7.3.2. The A. C. Nielsen brand balance sheet
Like the Interbrand model, the A.C. Nielsen brand balance sheet, deve-
loped by Schulz and Brandmeyer, is built around a scoring model. The brand
balance sheet relies on six criteria groups containing a total of 19 individual
criteria (see illustration) that are deemed good indicators of brand value.53
All market-related values are viewed in value terms rather than quantity
terms, with the goal of preserving brand value over time and staving off
a short-term "sell off" of the brand based on price/quantity strategies.
The relative degree of each of the 19 criteria is converted to a standardi-
zed scale value to facilitate comparison and operationalization. The scaled
criteria are then added together, reaching a maximum point score of 500,
with the individual criteria weighted differently. The total score determines
a brand value factor that serves as a reference value for the brand's future
potential.54
The exact procedure for scaling and weighting data is not, how-
ever, explained by Nielsen for reasons of competition.
53 Cf. Schulz and Brandmeyer (1989), p. 366.
54 Cf. Sander (1994), p. 81.
I. How does the market look?
1. Market value (market-development potential)
2. Market development
3. Value creation in market
II. How big is the brand's share in its market?
4. Market share in value terms
5. Relative market share
6. Development of market share
7. Share of profits earned in market
III. How do wholesalers and retailers assess the brand?
8. Weighted distribution
9. Commercial appeal of brand
IV. What does the company do for the brand?
10. Product quality
11. Brand's price behavior
12. Share of voice
V. How strong is consumer loyalty to the brand?
13. Brand loyalty
14. Confidence capital of brand
15. Share of mind (unaided brand awareness)
16. Advertising recall
17. Identification with brand
VI. How big is the scope of influence?
18. International reach of brand
19. International brand protection
55 Cf. Berndt and Sander (1994), p. 1363.
56 Cf. Sander (1994), p. 87.
58
In a further step, the monetary value of the brand is calculated using the
income approach. This entails calculating brand revenues from total sales
in the industry, estimated market share and the sectoral returns of the
brand, finally applying a discount factor (long-term capital market yield,
plus risk premium as a function of brand strength). The discount factor
and/or the size of the risk premium it entails are derived from the point
count obtained in the scoring model. High scores result in an overall lower
discount factor and thus to a higher earning-capacity value for the brand
(and vice versa).The earning-capacity value is seen as an expression of
brand value.55
The brand balance sheet is fraught with the problems typical of scoring
systems (cf. the Interbrand approach): subjective determination and
weighting of criteria, interdependence and insufficient functional hierarchy
among them, compensation premises implicit in the criteria, delineation
of the relevant market and the need for the brand to have at least a mini-
mum level of tradability to permit valid measurement of the criteria. In ad-
dition, it is not clear how brand strengths and weaknesses based on the
criteria can provide a good estimate of market share or any changes in it.
Estimates must also be relied on for the levels of some specific criteria
such as value creation or normal returns in the brand's overall market.
A questionable aspect is the validity of the correlation between the point
score and the risk premium. A final point to be viewed with a critical eye
is the largely arbitrary valuation timeframe built into the model.56
59
7.3.3. The A.C. Nielsen Brand Performancer
Nielsen itself has also acknowledged that the brand balance sheet is in need
of improvement and has developed a more advanced model based on it,
the so-called Brand Performancer. The Brand Performancer is intended to
provide relevant data tailored to the specific information needs of marke-
ting decision-makers while preserving the fundamental idea of the brand
balance sheet, i.e. to create a correlation between complex market environ-
ments, the significance of long-term brand cultivation and successful brand
management. The modular structure of the Nielsen Brand Performancer
makes it possible to supplement gauges of brand value with analyses for
the purpose of brand steering, financial brand valuation and tracking of
brand leadership. The four modules are depicted below.
The central element is the Brand Monitor, a scoring model and the basis
of the analyses that follow. The criteria used rely on fewer indicators than
included in the brand balance sheet. These are market volume, market
share, growth of market share, market growth, relative market share, brands
in the relevant set, weighted distribution, brand loyalty and brand aware-
ness.57
The criteria are weighted based on causal analyses, with objective
selection and weighting of criteria.58
The weighted values are added together and scaled, with a brand reaching
a maximum of 1.000 points in the best-case scenario. Next, absolute
brand strength is determined as a percentage value of the point score
achieved by the brand (max. 1.000 points). Once absolute brand strength
is known, relative brand strength is determined by juxtaposing absolute
brand strength for the brand in question against the absolute brand strength
of competitor brands already analyzed.
57 Cf. Bekmeier-Feuerhahn (1998), p. 84.
58 Cf. Franzen, Trommsdorff and Riedel (1994), p. 1394.
Brand
Steering
System
Brand
Monitor
Brand
Control
System
Brand
Value
System
59 Cf. Franzen, Trommsdorff and Riedel (1994), p. 1394;
Drees (1999), pp. 19-20.
60
To determine monetary brand value (Brand Value System), estimated market
volume is then multiplied by the annual net operating margin to calculate
the earnings potential of the market as a whole. The brand value share of
the brand for the current business year is determined by multiplying this
sales potential and relative brand strength. Next, brand value is determined
by assuming an annuity in perpetuity, discounting future brand earnings
using a capital market interest factor. The Brand Monitor is supplemented
by the Brand Steering System, intended to support brand steering in a
targeted manner. The system studies marketing activities as compared with
those of competitors using a strength/weakness analysis. In addition, the
current position of the brand is compared with strategic objectives. The
Brand Control System allows goal-oriented tracking of marketing by correla-
ting marketing spending and their success with the resulting brand strength,
thus tracking the efficiency of brand management.
As can be seen, this procedure is based on three assumptions: the same
net operating margin for all brands, a perpetual life cycle for all brands
and an attraction theorem of brand preference familiar from market res-
ponse theory. From a theoretical perspective, the latter aspect is very
positive.59
The Brand Performancer attempts to deliver an integrative consumer and
company-oriented brand valuation system. In addition, it avoids certain
measurement-related weaknesses of the brand balance sheet, on the one
hand by limiting the number of criteria on the scorecard and on the other
by validating the system of criteria by causal analysis. The diminished size
1. Relative brand strength (RBSb) of brand b is determined as the sum of corresponding brand balance
sheets for j = 1...N brands:
2. Estimates are made of market value and net operating margin p.a., to compute market
earnings potential (E)
3. Brand value share (BVSb) of brand b during a reference year is measured by:
BVSb = RBSb · E
4. The formula for brand value BVb is:
Annual sales Net operating Relative Perpetual annuity
BVb = of respective x margin x brand x NPV discount factor
brands strength
RBSb =
BSb
 BSj
N
J
BVb =
BVSb
; i = interest factor
i
61
of the data pool makes the methods more transparent. The formation of
brand value is easier to follow and reproduce. In addition, competing brands
can be evaluated with little effort as the necessary data for the attraction
model are not a problem to obtain. However, there are still subjective factors
in the procedures for determining revenue potential, estimating net opera-
ting margin and calculating the risk premium integrated into the earning
capacity-value formula. Another shortcoming is that adjustment components
for future development are not incorporated into the model. The approach
also dispenses with all types of knowledge structures, which means that
the determinant of customer acceptance is standardized only for certain
phases of information processing and thus may not be adequately opera-
tionalized. In addition, cost factors as regards brand-building are not taken
into account, which will presumably fail to satisfy marketing controlling.
Finally, the assumptions of constant net operating margins and the perpe-
tual life cycle of brands must be seen critically, though both areas could be
modified relatively easily.60
7.3.4. The Brand Rating valuation approach
The Brand Rating valuation system is a consumer-oriented, monetary
model for determining brand value. This is a three-component model based
on the assumption that brand value must be "measured above all in the
heads of consumers." The first component of the concept is the icon iceberg
model, which expresses brand value from a consumer perspective as
qualitative brand strength. The iceberg index measures and encapsulates
visual brand image (e.g. attractiveness, communication) and hidden brand
assets (e.g. appeal, loyalty). See section 7.2.4. for an in-depth description of
this model.
The second component is discounted price differential and/or the mone-
tary value creation tied to the brand, which is also the basis for comparison
of competing brands as well as industry specifics and risks introduced
into the model. The price differential, or price premium, p is determined
in relation to an unbranded product from the same category. Here, the
average value over the last three years is used to avoid distortion. Value
creation is discounted using an interest rate that takes into account the
specific future risk of the respective industry (risk premium). Overall, the
second component represents the earning-capacity value of the brand.
The third component is designated the "brand future score" and reflects
future value and quantity curves. This index describes the brand's potential
using, for instance, strategic brand development potential (brand leadership
in the broader sense) and existing brand protection (in a legal sense, too).
To calculate monetary brand value, these three components are linked algo-
rithmically. Brand Rating does not divulge the details of these algorithms.
60 Cf. also Bekmeier-Feuerhahn (1998), pp. 84-85;
Kriegbaum (1998), p. 17.
61 Cf. Maretzki and Wildner (1994), p. 102 (our translation).
62
The advantage of this model lies in the link between based-based and
financially-oriented perspectives. While this is also provided by most of
the other composite models, they often deal only fleetingly with behavio-
ral components. The Brand Rating concept also scores well by virtue of its
simple data collection process, regardless of the competitive situation.
Another advantage is the fact that strategic brand potential is taken into
account. In addition, the price premium is determined based on a three-year
average, avoiding upward or downward distortions. The problem of the price
premium as a concept has already been discussed. Finally, an industry-
specific risk premium is also taken into consideration.
The approach is not, however, without its weak points. As with the Brand
Trek method, it is also affected by interdependence problems between brand
image and brand assets. No information is given as to whether certain
feature levels of brand image and brand assets can be offset. In addition,
the general criticisms leveled at the premium-price approach also apply
here (definition of the zero mark, assumed direct correlation between price
and brand, etc.). Finally, how the three components are linked is also
problematic: If this is an algorithmic linkage as postulated, the question
is how it comes about.
7.3.5. The GfK brand power model
The GfK brand power model describes the value of a brand as brand
power, defining this as the "attractiveness of a brand to consumers, an
attribute that can't be explained by the short-term marketing mix."61
Brand power is cultivated in the long term, through such channels as com-
plex brand image creation or also through consumer habit. Thus it cannot
be observed directly, but is expressed in buying patterns. Brand power is
determined and made measurable by consumer purchasing patterns. The
icon iceberg index
1. Brand strength
criteria:
Brand image
Brand assets
2. Weighting
based on brand age
3. Indexed using
average sectoral
reference values
Discounted price
differential
 p · q
i
(Using annuity in
perpetuity)
Brand future score
· Development
potential
· Brand protectionBV =
yardstick of brand power is the price that consumers are prepared to pay
for the brand as compared with competitor products.62
Purchasing patterns
are gauged by means of consumer panel data and are reflected, among
other things, by the market share achieved by a brand in the respective
product category. Impacted by brand power, purchasing behavior is also
influenced by short-term marketing-mix strategies for the brand itself and
for competing brands. The marketing mix, in turn, has a varying positive
or negative impact on brand power. Promotions, for example, can positively
influence purchasing patterns in the short run, yet affect brand value
adversely in the long run. This is why determining brand power entails first
identifying the impact of short-term marketing-mix measures. After deducting
this, we are left with pure brand power ("magnetism") generated out of
long-term, sustainable brand strength as the difference in the equation:
The suitability of the GfK model for appraising brands, especially for the
purpose of brand steering, is restrained because of its limited explanatory
power. The brand-power value elicited by the model does not give any
indication of why the value is high or low, what influences brand power and
which measures need to be taken to increase brand power. As a result, it is
necessary to resort to behavioral data to enhance brand value. Consumers
and their view of the brand must be considered, and not simply on the
basis of the number of purchasing acts. In addition, the model is geared
toward the determination of value differentials. An absolute value for brand
power ­ or absolute brand value ­ can be obtained only if the brand's
value differential is determined as compared with a notional branded and/or
unbranded product.63
7.3.6. The Semion brand value approach
The brand valuation system used by Semion Brand Broker GmbH is
yet another approach relying strongly on behavioral and image data in
addition to financial values. Semion defines four brand value drivers whose
levels, in turn, are determined by indicators. The influencing factors are the
financial value of the company, brand strength, brand protection and brand
image. The chart shows the subcriteria into which these factors break down.
The Semion approach comprises four steps. The first step consists of as-
certaining a factor value for each of these four drivers on the basis of the
criteria for the four factors. The indicators for each factor are aggregated
63
62 Cf. also Heider and Strehlau (2000), p. 517.
63 Cf. Esch and Andresen (1997), pp. 15-16.
Market share =
Brand power
due to the brand strength
of long-term assets
Impact of
short-term marketing
mix
on branded products
Core portion of market
share attributable to
lasting brand strength
magnetism
=
to give a single factor value. In the second step, the values thus obtained
are added together to form an overall factor value, or weighting factor.
Finally, average earnings before taxes in the past three years are determined
(step three) and then multiplied by the weighting factor (step four). The
product of this formula is the monetary value of the brand being valued.64
financial brand protection brand brand
BV = financial value x value + and conflict + strength + image
factor factor factor factor
With this procedure, too, it is clear that subjective influences cannot be
ruled out. Both the selection of determinants and the individual weighting
factors for establishing the factor values are arbitrary and unverifiable,
as Semion does not make these values public. Another shortcoming lies
in the potential correlations between the criteria used. In addition, the model
neglects forward-looking values, indications of development potential and
brand sustainability. Finally, generating the base data, particularly for the
factor of brand image, is an arduous task.
7.3.7. The Sattler brand value approach
The Sattler approach to appraising brands is an indicator model allowing
long-term brand valuation. In the Sattler system, long-term brand value is
determined using a five-step empirical analysis. The first step entails iden-
tifying potential brand value indicators by means of an explorative survey
of experts. The experts are presented with abstract brands in a market-
place they are familiar with. These brands are described by them in terms
of familiar criteria as well as indicators they consider important to long-term
brand value.65
This process yields the criteria highly relevant to an assess-
ment of long-term brand value: market position during the past five years,
64 Cf. also o.V. [Semion?] (1998), p. 20.
65 Cf. Sattler (1997), p. 47.
64
Financial value
of company
Earnings before taxes
Earnings trend
Brand protection
Product classification
Brand environment
Intern. protection
Brand image
Consumer associations
Image position on market, among
consumers and vis--vis product
Brand strength
Market share
Market influence
Marketing activities
Distribution rate
Degree of familiarity
Identity and potential
Semion
Brand Value
market share in value terms, weighted distribution rate, level of aided aware-
ness, image advantages over competitors according to brand surveys, and
repeat purchase rate.
In the second step, the experts estimate the long-term value of selected
brands in an experiment for the purpose of data collection. The brands
are described in terms of identified brand strength coefficients and ranked
by the experts as regards their long-term value. Next, based on the expert
data, the relative importance in forecasting long-term brand value is deter-
mined using conjoint analysis and regression. Once these coefficients have
been identified, they can be used to determine the long-term benefits of
any brand (fourth step).
The final step involves translating the long-term brand benefit into long-
term monetary brand value. A linear function is assumed for this purpose.
At least two data points are needed to determine the conversion func-
tion, i.e. the long-term brand benefits of at least two brands must be
translated into brand value.66
Finally, long-term monetary brand value is
determined as a function of long-term brand benefit, the brand's contri-
bution to earnings during the past year and the NPV discount factor for
an annuity in perpetuity.
The Sattler analysis assumes a market volume that remains virtually con-
stant in the long term as well as similar objective product quality from
brand to brand. However, these conditions are not always satisfied by pro-
duct groups other than those studied by Sattler. In general, it can be stated
that the monetary conversion of the calculated benefit values is accompa-
nied by a significant level of uncertainty; the estimated parameters permit
only an inexact forecast of real brand value and the generalization of results
makes sense only for product groups with the same structure as those
analyzed.
65
66 Cf. Sattler for details of this computation (1999), pp. 644-45.
1. Brand strength coefficients
Brand preference ranking Market status, market share,
made by experts =  distribution rate, degree of
("Long-term Brand Benefits", LTBB) familiarity, image edge, repeat
purchase rate
2. BV =  (LTBB coefficients, annuity-in-perpetuity discount factor, annual earnings contribution)
67 Cf. Bekmeier-Feuerhahn (1998), pp. 111 et seq.
66
7.3.8. Bekmeier-Feuerhahn's market-oriented brand valuation
The Bekmeier-Feuerhahn approach67
is a market-oriented system of
valuation that combines a consumer-based perspective with a company-
based one. As this system involves an extremely comprehensive model,
it can be outlined here only briefly. Bekmeier-Feuerhahn operates on the
assumption that brand value is derived from brand strength and brand
earnings, both assessed on the basis of market prices.
The approach comprises two steps. In the first step of the brand-specific
brand value analysis, the determinants of brand value are identified.
These include brand strength and brand earnings. Brand strength describes
a driving force that is generated by consumers' subjective perception of a
brand's value and helps it to achieve a better competitive position. The fac-
tors influencing brand strength are on the one hand brand consciousness
(perceived risk, involvement), product perception (brand knowledge, product
assessment) and prestige value, and on the other the accessibility, quality,
intensity and uniqueness of inner brand image. Brand strength must be
determined on the basis of primary consumer surveys. To operationalize
the brand strength construct, Bekmeier-Feuerhahn explains the willing-
ness to act generated by brand strength in terms of the marketing-related
realms of influence for brand strength. Six indicators are used to gauge this
factor: willingness to pay a premium for the brand, acceptance of brand
extensions, brand loyalty, response to marketing, generation of pull effects
and the brand's future prospects.
Brand earnings, the second driver of brand value, is based on company
and industry-related metrics and is calculated by subtracting normal
Pull effects
Brand loyalty
Future prospects
for brand
Response to marke-
ting
Acceptance of brand
extensions
Acceptance of
premium pricing
Accessibility
Accessibility
Uniqueness
Intensity
Intensity
Quality
Quality
Brand strength
Pictorial brand
knowledge
Verbal brand
knowledge
67
industry costs from product revenues weighted using a normal market
rate of return.
The brand value indicators of brand strength and brand earnings constitute
the starting point for the second step ­ namely, a market-related analysis
of brand value or company-oriented brand valuation ­ in which a market
price is identified for brand strength and brand earnings. Aside from any
specific brand, an expert survey is conducted to place a monetary value on
brand strength and brand earnings. Here, the type of survey carried out
must depend on the purpose of the valuation. If, for example, a valuation
problem associated with a brand acquisition is being addressed, the utility
should be determined with the goal of brand acquisition in mind. The experts
surveyed must outline the benefits they envision as regards brand strength
and brand earnings when the brand is being acquired. The holistic value
of a certain brand is ultimately determined by multiplying the market prices
for brand strength and brand earnings by the brand strength and brand
earnings metrics and aggregating these results. The aggregated earnings
from these two sources provide the objectivized, market-oriented value of
a brand.
A positive feature of the Bekmeier-Feuerhahn model is that it is a compre-
hensive, integrative approach to brand valuation that takes into account
the special requirements of brand appraisal and yields a tangible monetary
value. The approach is forward-looking since brand strength involving know-
ledge structures anchored in the long-term memories of consumers is sig-
nificant not only for current behavior but also, due to its stability, for future
patterns. In addition, the experts draw upon both present and past data in
determining market prices, allowing them to forecast future developments.
1. Brand strengths = 1 a (Brand consciousness, product perception,
prestige value)
+
- Acceptance of premium pricing
- Acceptance of brand extensions b (Accessibility, intensity, quality, uniqueness
- Brand loyalty of pictorial and verbal brand knowledge)
- Trademark recognition
- Brand pull effect
- Future forecast
a = factors added together
b = factors multiplied together
2. Brand earnings = 2 (Size of market, market growth, market quality, competition,
market position)
3. Brand value =  [1, 2 ]
68 Cf. also Bekmeier-Feuerhahn (1998), pp. 269-70.
69 Cf. Preißner (1990), pp. 83 et seq.
68
Another advantage of the model is that it identifies purely brand-triggered,
intangible brand value (brand strength) on the basis of special branding
associations that are juxtaposed with general product-related associations.
For calculating brand earnings too, general product-related influences on
revenues are eliminated. A product-independent brand assessment is
achieved because the expert valuation does not apply to a real brand, but
to specific brand performance factors of brand strength and brand earnings,
which exist independently of product-related attributes.68
There are, however, also cases in which application of the approach becomes
problematic. If, for instance, the product market to be analyzed does not
provide any category perceptions, the category associations necessary for
identifying brand strength cannot be defined. In this case, notional category
products or weak branded products have to be used, with the danger that
the strength of the brand studied will be slightly underestimated. However,
the less marked the brand strength of the reference brand, the less likely
this is. There is also great difficulty when the brand to be analyzed is a
product innovation as no category products or other comparative products
exist to help determine brand strength at the launch of a so-called pioneer
brand. But imitation and/or competing products are generally quick to
follow in highly competitive markets, so consumers also develop particular
category perceptions relatively quickly, thus solving the problem of insuffi-
cient comparability.
7.4. Input/output and portfolio models
Against a backdrop of increasingly dynamic development and competition,
product and market analyses are becoming more and more important in
determining brand potential. These analyses are, however, frequently com-
plex, difficult to understand and extremely labor-intensive on the data-
collection end. Alternatively, they may be quick and easy to carry out, but
not very enlightening. Preißner69
has developed a method for determining
brand potential which is easy to apply and yields informative results. Four
values are needed for each product: (1) market share, (2) weighted dis-
tribution, (3) average retail price and (4) product performance assess-
ment. The first three values can be ascertained in panel evaluations. Product
performance can be assessed, for instance, via scorecards.
The method proceeds in a number of stages. In the first step, the market
to be analyzed has to be demarcated, and all products perceived by con-
sumers as alternatives must be included. A distinction by trade channel may
also be necessary: Certain variables, such as the price, may have varying
significance in different channels.
69
As a second step, the quotient of market share and weighted distri-
bution is calculated for each product (MS/WD). This value eliminates the
influence of distribution on the success of a product and so mirrors its
success with consumers. This division allows all products to be handled
as if they were distributed in the same way. Next, the MS/WD values are
translated into index values (dividing by the average value).
The third step entails evaluating the products, with all factors impacting
the purchasing decision taken into account. Here, the results of product
tests scoring purchase-relevant factors can be taken into account. Once
all products are evaluated, the values obtained are also indexed.
In the fourth step, average prices are gleaned from the panel evaluations
and converted into indices. Finally, the quotient is determined for each
product in the form of a product performance and price index (perfor-
mance/price index).
In other words, two values are calculated per product, the MS/WD index
and the P/P index. These form the coordinates of a matrix chart. The values
show how successful a product is compared with the average and/or how
good or bad its relative price/performance ratio is.
The chart shows that brands A and B are undervalued (weak brands).
Brand B does, however, have the best price/performance ratio and hence
the potential to be a market leader. Brands C and D are currently being
"oversold" (strong brands). Their market position can be expected to worsen
in the long run. Brand E, on the other hand, is positioned exactly on the
diagonal. It can be assumed that this brand will maintain its relative position
in the near future.
MS/WD
0 1 P/P
1
C
A
D
E
B
70
These input/output models in general constitute consumer status and
market status models. Brand value (the brand value index) is deter-
mined here in the form of an output/input quotient.
In line with the concept of production functions, the input and output
should not be added to or multiplied by one another, but may only come
together in a ratio for the purpose of measuring efficiency. This is due to
the fact that addition or multiplication would increase brand value by
double-counting some factors since an output in time period t is generally
reinvested as an input in t+1, or an input in t becomes effective as an out-
put in t+1. There is, however, an exception to this rule: when the addend
or multiplier is an input that has not yet become an effective output.
Determining brand value and/or brand potential using the output/input
approach makes it possible to depict the direction in which a product's
market share (given constant distribution) will potentially move in relation
to the competition. In addition, the approach draws attention to products
that, for instance, have moved a long way from the diagonal and necessitate
a more exact analysis. Products can be studied in terms of efficient adver-
tising and PR, attractive price spreads, distribution, product performance,
price-setting, etc. The advantages of this method include the ability to fore-
cast future developments and the inclusion of competitors. However, the
approach can be used to generate a relative brand value index only; it does
not allow an absolute monetary value to be determined. In addition, there
is also the problem that the identified brand value does not refer exclu-
sively to the value generated by branding, but rather the potential realized
via the entire marketing mix.
Brand value index =
MS index
Weighted distribution rate index
Product perfomance score index
Price index
71
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73
The Editorial Team
Dr. Rainer Zimmermann
Chief Executive Officer BBDO Group Germany
Born in 1956, Rainer Zimmermann studied German, Media Studies and
Sociology, and initially worked as a freelance sub-editor and journalist.
Dr. Zimmermann joined ABC/Eurocom as a consultant in 1988, becoming
a member of their executive management in 1991. He was appointed
Managing Director of Kohtes Klewes in 1992, Managing Partner in 1993,
and CEO in 1996. When Kohtes Klewes Kommunikation GmbH (Holding)
was renamed European Communications Consultants GmbH (ECC)
in September 1999, he became Managing Partner and CEO of ECC.
Dr. Zimmermann has been Managing Partner and CEO of BBDO Group
Germany since January 2000. He writes regularly on communications
topics, and is co-editor of Manual of Corporate Communications (first
published in 1998) with Professor Klaus Merten. He is a member of the Super-
visory Board of start AG, Munich, of the Executive Board of GWA (German
Association of Communications Agencies), of Deutsche Werbemuseum e.V.
and of Düsseldorfer Kunstverein. He is married with two children, and lives
in Düsseldorf.
Udo Klein-Bölting
Managing Partner BBDO Consulting
Born in 1962, Udo Klein-Bölting was a business trainee and went on to
study Business Economics at the University of Münster. He joined BBDO
as a management trainee in 1990, later becoming Management Supervisor
and Member of the Executive Management. He left after six years to become
Chief Executive and Managing Director of J. Walter Thompson in Frankfurt.
Since 1999, Mr. Klein-Bölting has been Managing Partner of BBDO Consult-
ing GmbH, and Holding Partner of BBDO Group Germany. He has authored
publications in the field of brand management and brand equity. He is
married with two children, and lives in Düsseldorf.
Björn Sander
Born in 1966, Björn Sander studied Business Economics at the University
of Saarbrücken, with particular emphasis on Marketing and International
Management. He began his career in 1995 with Procter & Gamble GmbH
(Schwalbach, near Frankfurt), where he was a national and international
brand manager for five years, responsible for names such as Ariel, Tempo,
Bounty and Demak'up. Björn Sander moved to BBDO Consulting in Düssel-
dorf in May 2000, where he covers strategic brand management for the
financial services, media and automotive sector. He also prepares internal
reports as Head of the Brand Equity Project Team.
Dr. Rainer
Zimmermann
Udo Klein-Bölting
Björn Sander
74
Tharek Murad-Aga
Born in 1972, Tharek Murad-Aga studied Business Economics at the Uni-
versity of Bielefeld and at Copenhagen Business School in Denmark. His
chosen focus for his course was Marketing and International Management.
He began his business career in the field of data-based marketing at Capital
Call Centres, Edinburgh, Scotland. He moved to BBDO Consulting in Düssel-
dorf in August 2000, where he works in strategic brand management in a
number of industries as well as in CRM. Tharek Murad-Aga also prepares
internal reports as a member of the Brand Equity Project Team.
Scientific advisor
Prof. Dr. Hans H. Bauer
Studied Business Economics at the University of Erlangen-Nuremberg, and
began his career as an academic assistant to Professor Erwin Dichtl at
Erlangen-Nuremberg and subsequently at the University of Mannheim. After
gaining his doctorate, Hans H. Bauer was a lecturer at the University of
Mannheim and also did external lecturing at the universities of Karlsruhe
and Kaiserslautern. In 1986, he was awarded the Venia Legendi in Business
Economics by the University of Mannheim and went on to take the Chair
in General Business Economics at the WHU Otto Beisheim Graduate School
of Management, Koblenz, where he was also appointed Vice President.
Professor Bauer has held the Chair at the University of Mannheim's Depart-
ment II of Business Economics and Marketing since 1993, and he is Director
of the affiliated Institute of Market-Oriented Corporate Management (for-
merly known as the Institute of Marketing). In addition to his academic and
administrative work, he delivers lectures and provides consultancy for
companies and public-sector bodies. He has authored or edited many
publications, particularly in his specialty fields of electronic commerce,
automobile marketing and pharmaceuticals marketing.
Prof. Dr. Hans H.
Bauer
Tharek Murad-Aga