INTA: Getting to the heart of brand value
Brands are sometimes labelled “intangible” assets, but over the past few years much research has been undertaken to evaluate, identify, and quantify the tangible value of brands. This so-called brand equity has been analysed to determine how it has been influenced by companies, consumers, and third parties, how it can be enhanced, and—equally important—how it might be lost.
This understanding is critical not just to marketers and accountants, but also to IP professionals, largely because the ways IP rights are protected, used, and enforced have a direct impact on brand equity. INTA’s 2018–2021 Strategic Plan recognises this. The Strategic Plan encompasses three major strategic directions, including “reinforcing consumer trust”.
This objective addresses brand equity. According to the Strategic Plan: “Companies or individuals own their trademarks and related IP. Consumers influence, in more ways than ever before, how a brand and its equity evolve. INTA will build bridges with consumer associations, professional organisations, and academia to be part of the brand equity conversation.”
Latest thinking on brand equity
The value that brands add to products and services can be measured from a psychological and an economic perspective. The former (consumer-based brand equity, or CBBE) focuses on the image that consumers have of brands and how that image affects their behaviour, while the latter (sales-based brand equity, or SBBE) looks at sales information for branded and non-branded goods and services.
A 2017 paper in the Journal of Marketing examined how CBBE and SBBE align, based on a decade of data for 290 brands spanning 25 packaged goods categories in the US. The paper concluded that investments in CBBE pay off “if they build consumers’ awareness and understanding of what the brand stands for (knowledge), make the brand appropriate to the consumer (relevance), and enhance consumer regard for the brand (esteem)”.
A fourth dimension—differentiation—revealed other results: as the paper concludes, “a strongly differentiated brand does not necessarily appeal to the masses”.
Studies such as this help to show companies how best to target their investment. For example, brands in sectors such as beer, cigarettes, frozen pizza, or disposable diapers might want to focus on awareness, relevance, and esteem rather than highlighting differences. By contrast, coffee or ketchup brands should consider developing “energised differentiation”.
Research also illustrates the growing importance of markets such as China and India. The most recent edition of the “Brand Finance China 100” report, issued in March 2017, found that the value of China’s 100 most valuable brands had more than tripled from $266 billion in 2012 to $823 billion in 2017, driven partly by the growing value of brands in the banking and finance industries. According to the report, “Chinese consumers have a relationship with their brands (including their bank brands) that Western brands can only dream of.”
A study of brand equity among fast-moving consumer goods (FMCG) companies in India published in the IIMB Management Review in 2015 noted: “It is important for managers to measure the brand association, brand loyalty, and perceived quality of FMCG brands, and further build them with the development of appropriate marketing strategies, if brand equity is to be built.”
Meet the belief-driven buyer
The most important trend that researchers have identified in recent years is perhaps the rise of “belief-driven buyers” who will actively support, avoid, or even boycott a brand based on its stance on particular issues. The 2017 “Edelman Earned Brand” study tracked this trend among 14,000 consumers in 14 countries. Some of the findings in the Edelman study were that:
l 57% of respondents are buying or boycotting brands based on the brand’s position on a social or political issue—up 30% from three years ago.
l Belief-driven buyers are younger, have higher incomes, and are most prominent in markets such as China, India, the United Arab Emirates, Mexico, and Brazil.
l 65% of belief-driven buyers will not buy a brand because it stayed silent on an issue that the buyer believed it had an obligation to address.
The study concluded that consumers consider, among other factors, the treatment of a brand’s customers and employees and the way products are made and used; consumers also care about a brand’s core values and heritage and the kind of communities in which the brand operates.
In other words, consumers are making value judgements and buying decisions based on questions such as: does a brand have a good environmental record? Is it socially inclusive? Is it ethically responsible? With which sports, events, and celebrities is it associated?
Threats to brand equity
The rise of belief-driven buyers provides opportunities for brand owners to create powerful connections with consumers, many of whom will actively promote their favourite brands on blogs and social media. However, brands are increasingly vulnerable to external factors that threaten that relationship of trust.
Some of these factors are geopolitical. For example, “a substantial drop in global perception” of the US was identified as the reason why the US fell from 1st to 6th in the 2017 “Nation Brands Index” compiled by market research institute GfK. This decline could have an impact on the reputation of brands that are strongly associated with American culture and values.
Growing anti-IP sentiment is another threat, arising from a misunderstanding of the role of IP rights among the public and growing calls from lawmakers to restrict the ways brands can be used. These restrictions can take the form of plain packaging, standardised packaging, or the elimination or reduction of the use of characters, logos, designs, or devices on packaging, all of which potentially violate article 20 of the TRIPS Agreement.
