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 brand’s 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 customer’s 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 brand’s availability. The method provides what-if analysis capabilities to predict the likely impacts of alternative strategies to enhance a brand’s 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. (Brand; Brand Equity; Brand Choice; Cellular Telephones) *Graduate School of Business, Stanford University, Stanford, California 94305, [email protected] ** Korea University Business School, Seoul, 136-701, Korea, [email protected] *** Yonsei Business School, Seoul, 120-749, Korea, [email protected] ****The authors thank Mr. Ja Ik Koo at Samsung Electronics Co., Ltd. for his assistance, Professors Oded Netzer, John Roberts, and Allan Shocker, the participants in the marketing seminars at Duke, Stanford and Yale Universities, the Department Editor, Associate Editor, and two reviewers for their comments on earlier versions of this paper. This research was supported in part by the Korea Research Foundation Grant (KRF-2000-CA0069) and the Korea University Institute of Business Research and Education Grant awarded to the second author.