An Approach to the Measurement, Analysis, and Prediction of Brand Equity and its Sources

The authors propose a new approach for measuring, analyzing, and predicting a brands equity in a product market. Brand equity is defined as the incremental contribution ($) per year obtained by the brand in comparison to the underlying product (or service) with no brand-building efforts. The incremental contribution is driven by the individual customers incremental choice probability for the brand in comparison to his or her choice probability for the underlying product with no brand-building efforts. The approach takes into account three sources of brand equity - brand awareness, attribute perception biases, and non-attribute preference - and reveals how much each of the three sources contributes to brand equity. This is done by taking into account not only the direct effects of these three sources on choice probabilities, but also the indirect effects through enhancing the brands availability. The method provides what-if analysis capabilities to predict the likely impacts of alternative strategies to enhance a brands equity. The survey-based results from applying the method to the digital cellular phone market in Korea show that the proposed approach has good face validity and convergent validity, with brand awareness playing the largest role, followed by non-attribute preference.