S. Sriram, Subramanian Balachander, & Manohar U. Kalwani
Executive Summary
Brand equity has emerged as a key strategic asset that needs to be monitored and nurtured for maximum long-term performance. Today, many firms use consumer or expert surveys to measure and monitor brand equity. For consumer packaged goods, the ready availability of supermarket scanner data offers an alternative way to measure and track brand equity that is free of potential self-reporting errors. This article shows that store sales-based estimates of brand equity, together with an analysis of its drivers, can help managers monitor brand equity and formulate marketing programs designed to maintain or build a brand’s equity.
The authors use a two-stage analysis of store sales data to implement a brand equity–monitoring framework. In Stage 1, the authors use weekly sales data from a U.S. retail chain to obtain quarterly estimates of brand equity in a product category over a period of up to 30 quarters. In Stage 2, they relate the estimated quarterly brand equities to data on quarterly advertising, sales promotions, and product innovations undertaken by the brands.
The empirical results from analysis of two consumer packaged goods categories, toothpaste and dish detergents, reveal that brand equity estimates from store sales data are reliable and correlate well with other measures of brand equity. Furthermore, the estimated brand equity values effectively capture the high equity of strongly positioned popular brands and brands that command a significant price premium in niche markets.
With respect to the drivers of brand equity, advertising is found to have a positive impact on brand equity in both product categories, whereas the effect of sales promotions is not significant in either category. Product innovations have a positive impact on brand equity in the toothpaste category, which was characterized by several product innovations during the data observation window. Overall, the brand equity values reveal a high level of inertia, which suggests that a branded product has a longer window to respond to a competitive product or marketing program innovation. In the absence of a suitable response to the competitive innovation, however, it can experience cumulative erosion in brand equity that may become difficult to recover. Therefore, it is prudent to monitor a brand’s equity in addition to its sales, market share, and distribution coverage.
Finally, the article illustrates how a brand manager can use the study results to construct a confidence band for observed brand equity values. Brand equity values outside the band are not explained by marketing actions and may need further investigation. Apart from monitoring brand equity in this way, a brand manager can use the model results to estimate the relative profitability of alternative marketing actions to boost brand equity. Indeed, for a toothpaste brand, product innovations can efficiently substitute for significant spending on image-oriented advertising. Product innovations may be particularly useful for attaining significant improvements in brand equity over a shorter period of time. Thus, in addition to advertising, brand managers should consider product innovations an integral part of their strategy kit to manage brand equity.
Biography
S. Sriram is Assistant Professor of Marketing in the School of Business at the University of Connecticut. He holds a BTech from the Indian Institute of Technology and a PhD in Marketing from Purdue University. His research focuses on using econometric models to understand various marketing phenomena. Substantively, his primary interests are in the areas of brand equity, long-term implications of marketing actions, optimal allocation of marketing budgets, consumer adoption of technology products, and competitive interactions between firms. His research has been published in Marketing Science, Management Science, and Journal of Service Research.
Subramanian Balachander is Assistant Professor of Marketing in the Krannert Graduate School of Management at Purdue University. He has a PhD in Marketing from Carnegie Mellon University, an MBA from the Indian Institute of Management, Calcutta, and a BTech from Indian Institute of Technology, Madras. His research interests are in competitive marketing strategy, pricing, market signaling, advertising, and branding. In his research, Professor Balachander has applied game-theoretic models to the study of strategic marketing issues, such as entry deterrence, price and warranty signaling, limited-edition products, bundling, and everyday low pricing. In his other stream of work, he has analyzed issues related to pricing, advertising, and cross-category promotion effects using empirical data. His research has been published in Journal of Marketing, Management Science, Marketing Science, and Marketing Letters. Before Purdue University, Professor Balachander taught at the University of Maryland, the University of Toronto, Clark University, and Carnegie Mellon University.
Manohar U. Kalwani is OneAmerica Professor of Management in the Krannert Graduate School of Management at Purdue University. Before joining the Purdue faculty, Professor Kalwani served on the faculty of the Sloan School of Management at the Massachusetts Institute of Technology. He received his bachelor’s degree in Mechanical Engineering from the Indian Institute of Technology (Bombay) and his PhD in Business from Columbia University. Professor Kalwani’s selected current research projects include the measurement and management of brand equity, the impact of order of entry on firm survival, and modeling physician drug prescription behavior. His articles have appeared in leading professional management journals, including Journal of Marketing, Journal of Marketing Research, Management Science, and Marketing Science.
Journal of Marketing, Vol. 71, No. 2, April 2007
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