Recognising and evaluating brand equity in South African business to gain financial and operational benefits

Sinclair, Roger
Journal Title
Journal ISSN
Volume Title
This thesis presents a new approach to the measurement of consumer brand equity outcomes. The approach links financial performance with consumer behaviour to acknowledge the true source of a brand's strength. The methodology developed can be used to value brands for a variety of purposes ranging from corporate accounting, to taxation, to trademark protection and to capital market analysis. Its most significant application might well become the re-positioning of marketing as the leader of a company-wide activity that contributes to and protects shareholder wealth. The study concludes that the function of marketing has become too introspective and is in danger of allowing its essential role of building and maintaining brands to be taken over by the company as a whole. Brands today are becoming the responsibility of the board and marketing is increasingly seen as a function that deals with certain extemal agencies and buys their services. The author has studied the extant valuation methodologies and has found that they avoid incorporating consumer perceptions of brands: the main reason why brands exist and thrive. The explanation for this is to avoid what the financial community call the "soft issues". And yet it is these so called "soft issues" that determine the value of the brand. Brand equity is defined as the value a brand adds to a non-branded, or commodity, version. This value is invested in the brand by its users and to ignore this in a valuation methodology is to omit a key variable. The methodology presented in this thesis deals with this fundamental requirement and departs from the conventional approaches in four substantive ways: • It uses the Capital Asset Pricing Model to estimate the cost of capital which acts as a proxy for the commodity or non-branded version. • An adapted Delphi approach iteration survey isolates the super profits attributable to the brand from the other profit generating resources. • By analysing the category in which the brand sells according to four defining variables - longevity, leadership, barriers to entry, and vulnerability - time markers are set for notional category dominant and marginal brands. • Survey based consumer data provides quantitative statistics that are reduced to Brand Knowledge Structure (BKS) scores. These are substituted for the dominant and marginal brand markers to establish the Brand Expected Life. The brand value, captured by this approach, is the capitalised present value of the future cash flows. In developing a valuation approach that incorporates consumer behaviour a metric has been developed that links marketing activities directly with shareholder value; which raises the status of the marketing function and which provides the company with a tool to measure return on marketing investment and monitor the value of what in many cases is the firm's most important asset.
Thesis (Ph.D.)--University of the Witwatersrand, Faculty of Commerce, 2002.