How does brand equity affect the bottom line?

The reason we measure brand regard, relevance, differentiation, and preference is these measures predict stock market price, market share, net income ¹, price elasticities,² price premiums and purchase frequency.³

The data shows that:

1. Higher brand relevance translates into acquiring more customers.
2. Increasing brand regard leads to customer retention (reduced churn).
3. Consumers will pay more for brands with high differentiation, increasing profit margin.
4. Consumers prefer and buy high-equity brands, with price premiums of +26%.
5. Brand equity, as we measure it, accounts for 19.5% of firm value.⁴

Preference-Usage

We measure brand usage based on the category. Fans indicate usage if they:

• Have or own (automobiles)
• Are a current customer, account/policy holder or member (insurance, wireless, banking, credit unions)
• Use(d) services (health care, utilities, etc.)
• Fly, visit, buy, use or consume regularly/often (airlines, c-stores, QSR, beverages, retailing)
• Rank the brand as industry leader (B2B)

Based on over 2.4 million fan observations, we grouped the 2000+ partner brands into 10 groups (deciles) to compare brand usage. Brand equity is the summed average of brand regard, relevance, differentiation and preference (0-100). As shown, low brand equity attracts few customers. As brand equity scores rise from around 50, customer acquisition increases at an increasing rate.

When fans recognize a brand as a partner of their team, brand equity increases by 54.5%. The brand that begins below the midpoint with no recall (database average = 35) ends up much higher (brand equity = 55) and brand usage jumps 11% (8% to 19%) among fans reached. Brand equity jumps 74% among fans reached by 4 or more partner assets.

Implications

Take a brand that begins with brand equity at the midpoint (50) that reaches one in five (20%) fans with a relatively small investment of $250,000 in an NFL team with a fanbase of 10 million.

What would happen if the brand spent twice as much to reach 40% of fans (4 million)? On average that means 2 million more fans have 54.5% higher brand equity scores for the partner (~77/100). Looking at the chart above, that means a boost from 19% usage to around 31% usage among the now total of 4 million fans reached.

Partners can estimate return on investment using marginal analysis using data like these drawn from individual reports. Please contact us for more information, including our ROI spreadsheet calculator.