Measuring Brand Equity: Review and Alternate approach

Abstract: Purpose- Aim of this article is to reviewthe existing models on brand equity valuations and propose a comprehensive model that uses only publicly available financial data for its measurement. Design/Methodology/approach-All the existing models are summarized and reviewed with their advantages, disadvantages and limitations in terms of their methodology and data set. Then alternate model is proposed with simple structural equations to arrive at value of brand equity by addressing limitations of existing models. Findings- There is lot of subjectivity in models proposed till now both in terms of methodology and data. There were very few objective models and few models which use publicly available data. It was also observed that there are three dimensions of Brand equity, one is behavioral, another one is financial and final one is perceptual dimension. Most of the models measure brand equity from one of these dimensions. There is lot of scope for research on comprehensive model of Brand Equity Valuation which measures brand equity from all dimensions. Originality/value:This paper includes contributions of existing models in brand equity valuation. It also includes review of each model in terms of its scope, applications and also highlights limitations of each model. It also reasons out need for comprehensive model for Brand Equity valuation and also importance of objective model. The proposed model addresses limitations of existing models. Key words: Brand equity, Valuation, comprehensive framework, Critical Review, objective method, financial data. Paper type: Research paper

Introduction: Brand is very well known concept right from the ancient days, they may not know it but they mean it. Around 500 B.C. brick makers in Egypt used to put symbols on their products for identity, but brand name concept first appeared in early sixteenth century for whiskey distillers to prevent mixing with cheap products. Brand Concept emerged in eighteenth century where symbols of animals were replaced with producers name to strength association of brand with product (Farquhar, 1990).These associations created loyalty of consumers to particular brand for which they pay premium. This resulted in creating brand equity for a company. Brand equity came into light when Interbrand Company valued Rank Hovis McDougall (RHM) Company in the year 1989, by which it convinced investors for hostile takeover of company (Seetharaman et al., 2001). From that time on words companies treated it as an asset and valued in balance sheet. Brand equity not only used for valuation of a company but also it helps brand managers to substantiate their investment strategies for a brand. Definition of Brand equity: There are so many definitions of Brand equity given by various research scholars in the field of brand. Some of them had seen brand equity as a value to the product, added value with which a given brand endows a product (Farquhar, 1989)andwhile others see it as a value to the company.Brand equity is financial value which attaches to a brand name (Dyson et al., 1996). Brand equity also defined from the perspective of customers associations the set of associations and behavior on the part of a brand's customers, channel members and Parent Corporation that permits the brand to earn greater volume or greater margins than it could without the brand name (Leuthesser, 1988), value added to a product by consumers' associations and perceptions of a particular brand name (Winters, 1991). Another view of brand equity was presented by Carol J. Simon and Mary W. Sullivan (1993)as a long term strategy adopted by company by which it can earn in the future through the incremental cash flows which accrue to branded products over and above the cash flows which would result from the sale of unbranded products. Brand Equity specifies importance of branding which yields margin over unbranded products incremental contribution ($) per year obtained by the brand in comparison to the underlying product (or service) with no brand-building efforts(Park and Srinivasan, 2005). Importance of Brand Equity: There are mainly two motivations of Brand Equity, one is from financial perspective and other one is from marketing perspective. Financial perspective is a long term investment in brand building process so that company can have price margin over unbranded products. It also includes valuing brand equity as an asset in company balance sheet which is mainly useful during mergers and acquisitions. Marketing perspective helps brand managers to justify their branding efforts and to substantiate the investments on them. It also paves way for taking future decisions, which will help in enhancing brand equity for a company.

Conceptual Frameworks of Brand Equity: There are many frameworks in the literature of brand equity which tells about brand equity with its dimensions, how to measure it and its importance for a company. There are two important conceptual frameworks of brand equity valuation based on literature study. One is David A Aaker (1992) framework on brand equity and other one is Kevin Lane Keller (1993) framework on brand equity. David A. Aaker (1992) framework containsten components which have been classified in five categories. They are loyalty measures,perceived quality& leadership measures, associations & differentiations measures, awareness measures, market behavior measures. Aakers framework focuses both on company and customer while measuring Brand Equity. First four categories are customer focused and can be measured using survey and fifth category is company focused and can be measured using publicly available data on financial performances of a company. Kevin Lane Keller (1993) proposed a framework that looks at brand equity from perspective of individual customer. He proposed a new definition for customer based brand equity differential effect of brand knowledge on consumer response to marketing of a brand. Brand knowledge is measured in terms of Brand Awareness and image. It can be measured in two ways which are not substitutes but are complementary, one is direct method and anther one is indirect method. Direct method involves the measurement of the effect of brand knowledge on consumer response to elements of marketing mix. It involves conducting experiments in which one group of consumers respond to a particular marketing mix of branded product and other group with same marketing mix elements but with un-named version of same product or service. And in indirect method it measures brand knowledge to assess the potential sources of brand equity. Present status of the brand equity measurement models: The conceptual frameworks on brand equity given above tell us about components of brand equity, brand equity measurement and its impact on value creation for a company. These frameworks lack in assigning a value to brand equity of a company or product. New models on valuing brand equity were developed using above basic frameworks of brand equity. These models help to assign a particular value to brand equity of a company. In this paper we have reviewed the significant existing models on brand equity.

Financial Perspective models on Brand equity Valuation: State-of-the-work J. Simon and Mary W. Sullivan (1993): In this method,authors present a new technique for estimating a Firms brand equity based on financial market value of firm. They consider brand equity as an asset and extract value of the brand equity from value of firms other assets. In its first phase of measuring brand equity, it calculates value of intangible assets of a company; it is simply the difference between market value of a company and tangible assets that exist on company balance sheet. They suggest that this value is represented by ( ) ( )

where CR4 is the four-firm concentration ratio, reg is a dummy variable indicating presence or absence of regulation, adv equals advertising expenditures, both current and past, age is the age of the firm,Snb is the market share attributable to non-brand factors and Sb2 is the market share attributable to brand equity. The beta values can be calculated using regression analysis. And the Value of Brand equity is ( )

It gives competitive insights by comparison of structural coefficients for firm-specific model with industry-level model. It also allows firm to monitor the market response to its marketing decisions. The change in brand equity provides immediate feedback. However, this method can only measure brand equity at firm level but not at individual brand level. Only major events can change brand equity since stock market wont reflect each and every marketing decision. It took age of brand as one of the important component in calculating brand equity but very few brands are there in the top position as it was in last 6o years. Authors used linear model. As indicated by Calderon et. al.(1997). This method is only applicable to those firms which have publicly traded securities so that we can compute the total financial market value of the firm Damodaran valuation of brand name (1996): Damodaran proposed various methods to value a brand name. There are three methods, one is Historical cost approach, and another is discounted cash flow approach and finally Relative valuation method. In historical cost approach, value of brand name is measured by amortizing historical brand name expenditure for last twenty years. The main criticism of this method is capital investment in a brand may not represent returns from the brand and it wont represent brand value. The second approach is Discounted cash flow approach, in which value of brand name is simply difference between expected DCF value of a firm and capital investment in firm, which means all profits to a company are due to brand name itself but it is not the case since profits also contains other intangible assets like good will, and other IPRs. The final method is

relative valuation method. In this method brand name is measured by comparing with a generic company. *( ) ( ) + If generic company not available then (EV/Sales) Generic Company can be measured by regression analysis, The main criticism of this valuation is finding a generic company; some companies may have higher volume but lower growth rate than brand and vice-versa. Expected growth rate may be subjective. Dr. Yoshikuni Hiroses methodology (2002): This model was developed by a Committee on Brand valuation Under Japanese Ministry of Economy. Unlike other methods, this methodology is an objective brand valuation model using publicly available financial data. The brand value (V) is calculated from the formula

Where, PD is Prestige Driver (Price advantage of the brand),LD is Loyalty Driver (Stability of the brand), ED is Expansion Driver.(Brand expansion capability) and r is risk-free interest rate. PD is represented by cash flows attributable to the price advantage of the brand and is given by formula,

*(

Where, Si is Sales, Ciis Cost of sales, Si* is Sales of a Benchmark Company, Ci* is Cost of sales of a Benchmark Company, A is Advertising and promotion cost and OE is Operating cost. LD is a factor that focuses on the capability of the brand to maintain stable sales for a long period based on the stable customers or repeaters with high loyalty. LD is represented by the stability of the cost of sales.

Where, c is five-term average of cost of sales and c is five-term standard deviation of cost of sales. ED is explained by an average of the growth rate of overseas sales and growth rate of sales from non-main businesses,

[ (

)]

Where, SO is overseas sales and SX is Sales from non-main businesses In this method authors used risk free rate of return but brand cash flows are risky. And it needs more factors or drivers to arrive at value of brand equity. Consumer perspective models on Brand Equity Valuation: State-of-the-work Wagner A. Kamakura and Gary J. Russel (1992): In this method,authors measured value assigned to a brand by consumer; it is based on actual purchase behavior observed under regular market conditions. Data had been collected from super market check-out scanners. First they measured brand value using utility model. In this they divided total utility or consumer choice of a brand into two components, one utility is intrinsic to a brand, another one is due to situational factors like Price and advertising expenditure.

Ukj= ij+ Pkj + sakj + ek

Where Ukjis total utility of a product (Purchase share),ijcomponent of utility intrinsic to brand j and segments, Pkj, is net price of brand j available to consumer K,akjisadvertising expenditure for past four months., is the price sensitivity parameter of segment s, sis advertising sensitivity parameter of segment s, ekis random disturbance with mean zero. And brand value is measured by formula,

BV = sfs s
Where fsis size of segment Here total Brand Value can be sub divided into Brand Tangible value (Physical features) and brand intangible value (Perception distortions)

BVj=BIVj+BTVj

They calculated brand tangible value based on performance of a brand on particular attributes. They used Consumer Survey report rating to measure it. By subtracting this value from Brand value, we get brand intangible value. This method does not permit the separation of overall equity into its two components i.e. Attribute based and non-attribute based. Purchase behavior of consumers at particular store may not represent overall behavior of consumers. Chan Su Park and V. Srinivasan (1994): In this method, the authors developed survey based method of measuring brand equity in product category and also evaluated equity of brands extension into different but related product category. Here brand equity is divided into two categories, one is attribute based and another is non-attribute based. Attribute based brand equity captures impact of brand building activities on the consumers attribute perceptions and Non-attribute based brand equity captures brand association un-related to product attributes. They measured brand equity using Utility framework. Brand equity eij is difference between total utility and objectively measured utility.

eij= uij-u(o) ij uij can be calculated using the formula, Uij= { }

Where Pi is price premium, Rij is overall rating by consumer and mi is second lowest rating of a brand. These can be measured using survey method. Substantial measurement errors can arise because it is based on a consumer survey. It is relative method rather than absolute method. Lassar, Walfried; Mittal, Banwari; Sharma, Arun (1995): In this method, authors refined the work of Martin & Brown (1990), who presented a model of measuring brand equity from perceptual dimensions. They considered performance, social image, value, trust worthiness and attachment as elements for measuring brand equity. They conducted a survey in two phases, first, to refine the variables and questions and second, to measure brand equity. Through this method we get Brand equity as a rating not as an absolute value. Another issue with this method is that Brands should be of same product category while comparing. But main advantage is that it is quick and handy method to measure brand equity.

Comprehensive models on Brand Equity: State-of-the-work Interbrand Model (1989): Interbrand, a London based brand consulting firm uses a three year weighted average of Profit After tax and then uses a brand-earnings multiplier. This technique is described by Wentz and Martin (1989). This multiplier depends on seven factors which are given individual weightages on the basis of both historical data such as brand share and advertising expenditures and individual judgments of other factors like stability of product category: S. No 1 2 3 4 5 6 7 Factor Leadership Stability Market Support Protection International presence Trend Weightage 25 15 10 10 5 25 10

Interbrand has developed a chart known as the S curve which relates brand strength and brand multiple. Historical data are used to calculate the weighs which may not translate into accurate future earnings. The underlying assumption is that what has happened in the past will happen in the future. Also the reliance on individual judgments makes it difficult to apply the technique in different time periods or across different companies. Another criticism of this model is value of the multiple which is highly subjective.

Reza Motameni and Manuchehr Shahrokhi (1998): In this method, the author combines both marketing and financial perspectives of valuation and presents a new model in global perspective. It is very similar to Interbrand method but the main difference here is that the brand multiple is calculated from survey method rather than individual intuition based approach. They emphasize equity varies from one market to another. Neglecting market differences will result in significant over or under-pricing of a brand. So any new model should incorporate market differences in the calculation of Brand equity. They propose the development of a S-curve that relates the brand strength to the brand multiple. S-curve is

different for each product category. Three potencies are looked upon: customer based, competitive and global. Then all these are assigned with weights.They defined Global Brand Equity which is equal to

[(

)] +-

Where GBE is Global brand equity, CBPF is customer based potency factor j in the country i, CPF is value of Competitor potency factor, GPF is global potency factor and BNE is brand net earnings.It is the product of brands net earnings and the brand multiple which will be determined based on brand strength. Calculation of brand strength in turn needs a detailed review of each brand in terms of its positioning;its past performance, operating market and competition. In this method, they assumed generic company will generate five percent as a return on capital employed, which is subjective. Weightages measured by surveys so there will be measurement errors. Brand Finance Model: (2000) Approach used by brand finance uses discounted cash flow method. They classify the process into four steps. First, they use the financial forecasts for the company using appropriate segmentation. These forecasts are used to determine the Economic Value Added for the firm. They include a proportion of the total economic value added to be included in the valuation which is the BVA (BrandValue Added) index. They arrive at the key drivers of the demand by reference to qualitative research and management discussions, which can be verified by consumer surveys. The contribution of each factor can be calculated using trade-off analysis. This gives the contribution of each factor to EVA (Economic Value Added). The final step is to determine the appropriate discount rate or the risk associated. It is done with the help of brandbeta analysis. ( ( ( A BrandBeta scoring template measures ratings on a 1-10 scale for the following parameters Table 1 Variables considered by Brand finance during Brandbeta analysis Time in the market Price premium ) ) )

Distribution Market share Market position Sales growth rate

Price elasticity Marketing spend Advertising awareness Brand awareness

Source:DavidHaigh Best practice in measuring the impact of marketing on brand equity and corporate profitabilityJournal of Targeting, Measurement and Analysis for Marketing, Vol 9, No 1, 1 August 2000, pp. 9-19(11) A score of 100 on the scale implies that it is a theoretically risk free brand and discount rate is the risk free rate. A score of 0 implies that equity risk premium is doubled. And 50 means its an average brand and discount rate used is the composite rate for sector. Equity risk premium and sector beta, which is implied discount rate for all brands in the sector, can be found out by investment data providers and risk evaluation services. Although the model can be used for comparing brands, segments, product classes and different times, the data required for the forecasts is confidential to the company, so the model works only for internal evaluation. The approach is subjective since empirical methods are used for determining the key demand drivers. It gives a better relative evaluation of the brand within the industry rather than the actual evaluation.

Findings From above literature review, we find that three lines of thought have come up for Brand equity from three different dimensions, one is from behavioral point of view (Keller, 1993;Park & Srinivasan, 1994), another one is from perceptual point of view (Lassar et al.1995) and finally from financial point of view (Simon et al., 1993; Hirose, 2002). Each point of view has its own advantages and disadvantages. Financial point of view gives firm brand equity value and gives no insights for marketing managers for their future strategic planning of marketing. In the same way behavioral point of view has its own limitations of measurement errors since they are survey based methods which includes subjectivity and also issues with translating ratings of customers into brand equity value.Almost all models concentrate on measuring brand equity from one of the dimension of brand equity.Review also suggested that many models which combine all the dimensions are proprietary and their validity is subjective both in terms of data and method. We find that there is much research gap in the field of valuation of brand equity for a comprehensive framework which looks upon it from all the dimensions. The other important issue in brand equity valuation is subjectivity. Either models are subjective or the data that they use is subjective. This leads to over or undervaluation of Brand. With subjectivity in model and data there is a possibility of unethical way of valuing Brand equity.This review will pave a path for

further research in the valuation of brand equity in a more comprehensive way and objectivity in the models. Background for alternate approach Above review will help extensively in proposing alternate comprehensive framework to measure brand equity.Comprehensive framework should include variables which are important and should be supplement to each other so that they represent brand equity from all dimensions. Extreme caution should be taken to avoid overlap of each variable significance, which otherwise will result in over valuation of brand equity. The proposed framework should be objective in nature and should not have any assumptions, and also it should use publicly available data to remove measurement errors in data collection. Table 2 Summary of existing models on brand equity Model Interbrand Year Perspective 1989 Both Consumer and Financial Summary It uses weighted three year profit after tax multiplied by a brand multiple which is related to brand strength calculated on the basis of seven key factors. They measure brand value from super market checkout points. It is more reliable than survey method. It uses utility framework to measure brand equity. Intangible assets of a company found by the difference between market value of a company and tangible assets. Use regression analysis to find the significance of various factors that make up that value They measured customer based brand equity by using consumer surveys. They used utility framework t measure brand equity. They measured brand equity rating of a brand particular category. They viewed brand equity from perceptual dimension. Damodaran measures brand name value by comparing with generic company. Include the variation of brand equity across markets. Look upon three potencies: Customer, Global, Competitive Uses a proportion of EVA calculated by financial forecasts of the company to determine the cash flows. Risk is determined by using brandbeta analysis which includes the sector attributes as well

Kamakura and. 1992 Consumer Russel

Simon & Sullivan

1993 Financial

Park and Srinivasan Lassar et al

1994 Consumer

1995 Consumer

Damodaran Motameni and Shahrokhi Brand Finance

1996 Financial 1998 Both Consumer and financial 2000 Both consumer and financial

Hirose Methodology

2002 Financial

This method measures brand equity from publicly available data. It is an objective method. It used risk free rate of return but brand investments are risky.

Alternate Model for Brand Equity Valuation: Important drivers considered while valuing Brand equation: From above literature reviewwe found out the key insights for an alternative approach. We classified various factors which are very important in valuation of a brand as drivers.We identified these drivers as Premium driver, Leadership driver, Loyalty driver, Expansion driver, Perception driver and Market driver.These drivers will cover brand equity from all three dimensions.We elaborated how we identified these drivers in details in coming paragraphs. Premium Driver: It is the premium charge that the consumers are willing to pay for the product because of its brand. Aaker (1992) called it as over price which comes under loyalty measurement category. Park & Srinivasan (1994) used it in valuing total utility of the product.Interbrand (1989), Motameni and Shahrokhi (1998) mentioned it as brand net earnings which are difference of earnings of branded product with generic product. Brand finance (2000) also use price premium for Brandbeta analysis. Hirose methodology (2002) mentioned it as prestige driver while valuing brand equity.Ailawadi et al. (2003) mentioned revenue premium while valuing brand equity. To measure it we need to first calculate premium consumer pay for one product which we call as premium ratio.

Premium ratio=
Where, Si is Sales revenue, Ciis Cost of Sales Si* is Sales revenue of a Standard Company, Ci* is Total expenditure of a standard Company, There is no particular definition for standard company. To arrive at this we took industry average ratio of above which is total sales revenue of the industry upon total expenditure.But sometimes this ratio may be more than ratio of the company we are calculating. Then premium becomes negative, we should avoid this case. This happens only when market share of the company is very less.Another possibility is this ratio is almost same as the company we are calculating. To avoid both above cases we should multiply industry average ratio with (1- market share of the company we are calculating).

So Standard company ratio is

Where, SIis the Industry Average Sales Revenue CIis total industry Average Cost of sales And premium driver is

[(

)]

Leadership Driver: It is another important variable and should be included for brand equity valuation. Aaker (1992) mentioned it in his model as position or popularity of the brand. Interbrand (1989) also considered it as an important variable and gives highest weightage. It defines leadership as ability to stand as a market leader. Brand Finance (2000) mentioned it as market share in that particular product category. To measure leadership driver we considered total sales revenue upon total industry sales revenue, which gives market share of the company in that particular industry.

Loyalty Driver: It is the loyalty of the consumers towards a brand. It can be estimated bymeasuring the stability of the brand for its quality and sales. Interbrand (1989) measures it as ability to retain loyalty over a long period. Aaker (1992) mentions loyalty in his framework.Hirose methodology (2002) considered it as the loyalty driver. Yoo & Donthu (2000) mentioned brand loyalty as one of the important components of brand equity. Erdem & Swait (1998) considered consistency as one of brand signal in the creation of brand equity.Motameni and Shahrokhi (1998) considered brand loyalty while measuring customer based potency in global brand equity valuation. To measure loyalty driver we considered equation proposed by Dr.Hirose method (2002). In this driver we focused on measuring loyalty of the consumers, which can be represented by stability of the sales revenue unlike cost of sales in Hirose method.

{
Where, s is five-term average of sales revenue s is five-term standard deviation of sales revenue

Expansion Driver: Expansion driver of a brand depends on its global footprint.International presence increases value for brands, Interbrand (1989). It also shows expansion capability of the brand, Hirose methodology (2002).Motameni and Shahrokhi (1998) also mention it as global potency while measuring brand equity.So while measuring expansion driver we focus on its international growth rate and also its non-main business. We considered equation from Dr. Hirose method (2002) and it is

[ (

)]

Where, SO is overseas sales revenue and non-main business sales revenue Market Driver: Market driver depends on type of market which gives insights about in which market the product is operating; it may be monopoly, oligopoly, monopolistic or a perfectly competitive market. Four firm concentration ratios is widely accepted measure to judge the type of market. Interbrand (1989) uses it while measuring brand multiplier, which in turn is used for measuring brand equity.Motameni & Shahrokhi (1998) also mention it in under the competitive potency construct for measuring brand multiple. To measure market driver, we used formula in economics four firm concentration ratio which is to know type of the market firm is operating in.

Perception Driver: Perceived quality is overall quality perception of a product which is attributable to its branding. It is one of the most important element in valuation of brand equity as mentioned in Aaker (1992), Motameni and Shahrokhi (1998) while measuring consumer potency of brand equity. Simon & Sullivan said that perceived quality depends on advertising expenditure; Yoo & Donthu (2000) mentioned perceived quality as aconstruct while valuing brand equity. Story & Loroz (2005) mentioned role of technology in consumer perception. To measure perception driver we considered percent of investments in technology and Advertising expenditure upon total expenditure.

{
Where, AE is advertising and promotion cost TE is total expenditure. R&D is investments in Research and Development. Table 6 Drivers of Brand Equity: Driver Premium Driver

Leadership Driver Loyalty Driver

Position in Literature Hirose(2002) Prestige driver Aaker(1992) Overprice Interbrand(1989) and Motameni and Shahrokhi(1998) Brand Net Earnings Brand Finance(2000) Price premium Ailawadi et al. Revenue premium Aaker(1992) Popularity/Position Brand Finance (2000) Market Share Interbrand (1989) Leadership for the calculation of brand multiplier Hirose(2002) Loyalty Driver Aaker(1992), Motameni & Shahrokhi (1998) and Yoo & Donthu (2000) Brand Loyalty Interbrand(1989) Loyalty Erden & Swait(1998) Consistency Hirose methodology (2002) Expansion Driver. Interbrand(1998) International presence Motameni and Shahrokhi(1998) Global potency Motameni and Shahrokhi(1998) Competitive potency Interbrand(1989) Market Strength Aaker(1992), Simon & Sullivan(1993) and Yoo & Donthu (2000) Perceived Quality Story & Loroz (2005) Technology Motameni and Shahrokhi (1998) Consumer potency

Expansion Driver Market driver Perception driver

To remove fluctuations in ratios we took past five years data i.e. from 2005-2009, which also helps in removing element of over or under valuation of perception driver. In the face of all the literature review done and the insights gained we are proposing a new framework for valuation of brand equity by taking above drivers into consideration.We have tried to measure each driver from publicly available data so that it removes element of subjectivity. The following is the proposed conceptual model

Figure3. Proposed Model on Brand Equity:

Premium Driver

Market share

Leadership Driver Brand Equity Loyalty Driver

Stability of the Brand

Advertising Expenditure

Perception Driver

Technology

Expansion Driver

International Presence

Market Driver

Structural Equation for valuation of Brand Equity: In the above proposed model, given drivers will direct impact brand equity of a company. We can observe that except premium driver all other drivers are in percentage formand all drivers need to increase value of brand equity to a company. So we shouldmultiply all the drivers, but if we multiply then value of brand equity is decreasing instead of increasing.So weadded one, now value of brand equity increases by multiplying. So equation for brand equity becomes, *( * ) ( ) ( ) ( ) ( ) +

Application of model to companies: We applied above proposed model with its structural equation to three Indian companies using publicly available financial data. The following table shows measurements for drivers of brand equity.

Table 7 Calculations of Driver of Brand Equity: BPCL Premium Driver ( Mn.$) Leadership Driver Loyalty Driver PerceptionDriver
3530.874

Airtel
2485.993

State Bank of India

4062.38

0.16
0.907348

0.30
0.924017

0.23367

0.937285

0.0214

0.1104

0.003001

Expansion Driver

0.210252

0.58

0.225

Market Driver

0.86

0.77

0.421552

The following table shows the brand equity value from proposed model and brand finance value of four Indian companies of various industries. Table 8 Calculations and Comparison of Brand Equity of Indian Companies: Company Industry Proposed Method Brand Finance Brand Equity Brand Equity Value Value ( Million $) (Million $)
3,217.511 3,159

Bharti Airtel

Telecommunications

BPCL

Oil and Gas

3,004.089

2,945

State India

Bank

of

Banking and Financial Sector

2826

4,551

Discussion: There are important points to discuss from the above results. Bharat Petroleum Corporation limited (BPCL) has three times higher sales revenue than Bharti Airtel sales revenue but its brand equity value is less than that of Bharti Airtel. This is due to factors likeleadership and expansion drivers affected much in Bharti Airtel than BPCL. Bharti Airtel is expanding at higher growth rate, more than double, thanBPCL globally. Even though percent of revenue from overseas sales are higher for both Wipro and Infosys but their expansion driver is lesser than that of Bharti Airtel.This is because of growth rate of Wipro and Infosys are lower than Bharti Airtel in terms of their global expansion.The perception driver for BPCL is less, when compared with others this is because the percent of advertising expenditure and investment R&D with respect to operational expenditure is very less compared with Bharti Airtel. While coming to comparisons with Brand Finance values, both BPCL and Bharti Airtel are in line with them but coming to state bank of India, it is overvalued. SBI as a brand in comparison with other brands in that particular industry, consumers are not willing to pay more premiums for it while comparison with others in banking industry. So its brand equity is less in our methodology compared to that of Brand finance. Conclusion: From above we can conclude that our methodis addressing all the limitations of previous models on brand equity and improving method of valuation of brand equity. They are, considering store data (Russell& Kamakura, 1992) while valuing brand equity, and Survey of consumers (Park & Srinivasan, 1994), which didnt represent whole consumer but in this model we considering sales revenue data which represent whole consumers opinion. The other one is Interbrand (1989), Young & Rubicam BAV (2000), Motameni and Shahrokhi (1998), Brand Finance (2000) are black box models, which are subjective and values changewith evaluator. These are subjective not only in terms of models but also on data collected. In this model, we remove this element of subjectivity by measuring from publicly available data. And its quiet simple model and needs no expertise and its value wont change with evaluators. The other important limitations in the above models are considering generic company, it is difficult to identify generic or private label product for brand equity valuation and also it is subjective. This limitation we can observe inInterbrand (1989), Damodaran (1996) and Motameni and Shahrokhi (1998). In this model we eliminated this limitation by considering industry average.The other important limitation addressed in this model is of Simon & Sullivan (1993), which requires company,should be listed on stock exchange. But this model can be equally applied to both listed and non-listed

companies. This model also values brand equity from three dimensions .i.e. it is a comprehensive model which covers every aspect of brand equity. Limitations: In this proposed model, we considered all drivers are of equal importance but it can improve by taking weighted average of these drivers while measuring value of brand equity. This model considers only past five years data, to improve calculation we can increase time period of consideration to ten to fifteen years. The other important limitation of this model is we considered only two factors for perception driver; it can be improved by taking more factors like corporate social responsibility etc. References: 1. Kevin L. Keller. (1993),Conceptualizing, Measuring, and Managing Customer Based Brand Equity, Journal of Marketing, Vol.57,1-22,Jan93 2. Aaker, David A. (1996),Measuring brand equity across products and marketsCalifornia Management Review; Spring 1996; 38, 3 3. Wagner A. Kamakura and Gary J. Russel (1992)Measuring Brand value with scanner data,International Journal of Research in Marketing, Vol 10 Mar, pp-9-22 4. Chan Su Park and V. Srinivasan. (1994), ASurvey-Based Method for Measuring and Understanding Brand Equity and Its Extendibility ,Journal of Marketing Research, Vol. 31, No. 2, Special Issue on Brand Management (May, 1994), pp. 271-288 5. Dr. Yoshikuni Hirose (2002),The Hirose methodology for Brand Valuation-the Japanese Model, [cited from Risk analysis in Brand Valuation, SSRN-Id931023] 6. Swagner A. Kamakura, and Gary J. Russel (1993), Measuring Brand value with Scanner Data, International Journal of Research in Marketing 10(1993) 9-22 7. Carol J. Simon and Mary W. Sullivan. (1993),The Measurement and Determinants of Brand Equity: A Financial Approach, Marketing Science, Vol. 12, No. 1 (Winter, 1993), pp. 28-52 8. Aswath Damodaran bookDamodaran on Valuation, Second edition,Wiley India Publications, Pg 407-457 9. Lassar, Walfried; Mittal, Banwari; Sharma, Arun. (1995), Measuring customer-based brand equity The Journal of Consumer Marketing;12, 4; 10. Peter H. Farquhar. (1990),Managing Brand Equity,Journal Research. New York: Aug/Sep 1990. Vol. 30, Iss. 4; of Advertising

11. Paul Dyson, Andy Farr and Nigel S. Hollis. (1996), Understanding measuring, and using brand equity Journal of Advertising Research, Vol. 36, No. 6. 12. Reza Motameni, Manuchehr Shahrokhi. (1998), Brand equity valuation: a globalperspectiveJournal of Product & Brand Management, Vol. 7 No. 4 1998, Pp. 275290
13. David Haigh Brand Valuation: Measuring andLeveraging your Brand,A report

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Executive summary and implications for managers and executives: Brand equity is intangible asset in companys balance sheet and its value is created over the period of time. Valuing this is important issue now a day. There is lot of research work already

done on valuing brand equity and so many models were proposed till now. And also there are consultancy companies which had their own proprietary methods of valuation of brand equity. But still there is lot of research gap in this area. Each model values a companys brand equity in a different method and their results were not matching. So there is lot of confusion for executives and managers of company to choose between them. Some models value their brand as of higher value and others value them lower. So there is a possibility of managers and executives choosing the model which values their company's brand equity value higher. The reason behind this difference of valuing brand equity differently by different models is due to either their method or data. Coming to method, most of the methods are in black box i.e. their methodologies are not publicly available. So there is a possibility of unethical way of valuing brand equity i.e. under or over valuation of brand equity. The model should give same results whosever measures brand equity value. Due to subjective element in these models, brand equity values may come differently for different evaluators using same model. Another reason is data, most of the models use surveys, and there is an element of subjectivity in these surveys. There will be measurement errors in surveys and also survey method considers a sample of consumer but not whole population. To avoid above limitations a model should be simple, use publicly available data and should not be in black box. The reason for simplicity is method should understand by each and every one and should need no expertise in relevant fields. There should not be any assumptions in the model proposed. Another important one is, model should use publicly available data i.e. data should be same whosever looks at it, unlike in survey method which may be depend on evaluator. This removes element of over and undervaluation of brand equity. Another important one is method should not be in black box which enhances subjective element. This may lead to unethical way of valuing a brand. So methodology should be available for public and whosever measures it should get same value for a company. Finally method should be equally applicable to each and every company in any sector of operation and should applicable equally to both listed and non-listed companies in stock exchange. In this proposed model, we addressed above concerns of managers and executives very cautiously. This proposed model is simple in calculation, requires no expertise and involves zero cost. This model uses only publicly available financial data. So this model is much more reliable compared with others since it gives consistency results whosever measures. This method has no assumptions so there is no room for under and over valuation a brand. This method is also equally applicable to each and every company whether they are listed or not in stock exchanges. This method helps managers and executive to remove confusions about valuation of brand equity and enhance transparency in valuation of brand equity.