Brand Equity as a Revenue Multiplier

This paper develops and illustrates a revenue multiplier methodology to estimate brand equity that addresses two major drawbacks in extant brand equity measurement methods: (i) Our methodology requires data only from easily available secondary sources; and (ii) Marketing mix impacts are explicitly modeled so as to allow a more accurate estimate of brand equity. For each specific brand, brand equity is measured as a multiplier that quantifies the difference in market response between that of the branded product and that estimated for an equivalent unbranded product with exactly the same market mix actions. This meshes extremely well with the notion that brand equity is the incremental effect of brand name on product value. In particular, we utilize frontier estimation tools to estimate the revenue of each brand’s “unbranded equivalent”, with each brand’s brand equity revenue multiplier reflecting the degree to which the brand’s observed revenues exceed this amount. The methodology is illustrated using data for the top 25 US beer brands and the results agree with intuition, theory and financial data-based brand equity valuations.