Know-How Exchange : Advertising/PR

Ron,

Calculating the value to a company of brand awareness is a several part exercise. First, one must understand the brand awareness number. The most common way to do this is to survey potential users for your product and ask them if they are aware of your brand. OK, I know, pretty obvious when you state it that way, huh? Well, you simply can't ask them, "Do you know of the brand, XYZ?" You have to have them name brands they are aware of in your product category and ask them to rank them based on what they know about them and also whether they use them or intend to use them. It gets complicated. Next, you have to determine the linkage to brand awareness and the purchasing decision. Usually, people purchase based on the best perceived value. So, you need to ask them to rank based on perceived value and then ask if they purchase based on that or some other factor. If you find out most people purchase based on some other factor, then have them rank the brands based on that factor. This gives you a measure of brand awareness. Then, you need to understand the "lag" between a change in brand awareness and sales changes. This could be right away to months different. You do this by looking at your brand awareness information and correlating that to sales. With this, you denote activities you do for your marketing efforts. Once you have a good correlation between awareness and sales, you can look at profit from sales. If you build a regression analysis of profit from sales versus awareness, you can determine the value of brand awareness. It's not an exact measure - like the book value of capital equipment, but it does give you an idea of what the return on investment for building brand awareness is and helps you make marketing investment decisions.

I hope this helps (and thanks for the opportunity to contribute, Ron!)

Wayde

Wayde, as usual, has nailed it. But don't let the complexity scare you. We've done some modeling about the value of an increase in brand awareness, simply based on information we had and some reasonable assumptions.

We then did a sensitivity analysis on the key assumptions and were very surprised to find that the assumptions were really not as important as the core information we had actually measured with quantitative research. Sure, it changed the value by as much as +/- 20%, but that's not so bad for most decision-making purposes. What's the precision of most ROMI calculations?

If answering the key question of awareness valuation is really important to you, you can also conduct a Brand Audit ... in which you ask your target audience to first rate the importance of several attributes, and then do a multiple regression analysis of those results with market share. Then you can see how your brand stacks up on perceptions against the attribute rankings and calculate the value of your "awareness." (I know that's kind of convoluted, but you get the idea.)