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MASB’s Game Changing Brand Investment and Valuation Project – Part I

July 20th, 2015 Comments off

How much is my brand worth in financial terms?  How much will my marketing grow its value?

Despite their seeming simplicity, these two questions have frustrated brand practitioners for decades.  It is well accepted that there is a link between brand building activities and corporate profits.  After all, the entire field of marketing is based upon this proposition.  Yet it is equally well accepted that there is no standardized approach that companies can rely on to quantify brand value in the dollar-and-cents terms applied to other assets.  This puts marketing at a severe disadvantage within boardroom discussions of resource allocations, as its expenditures are all too often seen as pure costs rather than investments in the business.  And this is despite a growing realization that intangibles account for up to eighty percent of overall corporate value with brands being at the top of the list.

But one industry group is actively working to change this.  The Marketing Accountability Standards Board (MASB) created the Brand Investment and Valuation (BIV) project to establish the quantitative linkages between marketing and financial metrics.   The solution they have proposed is as simple as the questions themselves:  Identify a “brand strength” metric which captures the impact of all branding activities, understand how this metric translates into financial returns (ultimately cash flow), and then use this to calculate a brand value and to project the return from future marketing investments.

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Of course this begs the question, does such a “brand strength” metric exist?  And if so, is it practical enough to be used?  After an exhaustive search of research literature, MASB identified brand preference as the most likely candidate for the brand strength metric.  Brand preference (also known as brand choice) is defined within the common language in marketing dictionary as:

One of the indicators of the strength of a brand in the hearts and minds of customers, brand preference represents which brands are preferred under assumptions of equality in price and availability.

The ability of brand preference to isolate brand strength from other market factors (e.g., price and distribution) separates it from other marketing measures.  Furthermore, previous studies demonstrated that the behavioral brand preference approach pioneered by MSW•ARS met MASB’s predetermined ten criteria of an ideal metric:

  1. Relevant:  It has been proven to capture the impact of all types of marketing and PR activities.  Over the last 45 years it has been used to measure the effectiveness of all forms of media (e.g. television, print, radio, out-of-home, digital), events (e.g. celebrity and event sponsorships), and brand news (e.g. product recalls, green initiatives).  It has also been shown to capture both conscious and unconscious customer motivations and so applies equally to rational, emotional, and mixed branding strategies.
  2. Predictive:  Its ability to accurately forecast financial outcomes has been demonstrated in a number of studies.  This includes studies comparing preference to sales results calculated from store audits, in-store scanners, pharmaceutical prescription fulfillments and new car registrations.  When applied to advertising, changes in brand preference have been proven to predict changes in the above sales sources from control market tests, split media tests, pre-to-post share analysis and market mix modeling.  In fact, Quirk’s Magazine noted over a decade ago that “this measurement has been validated to actual business results more than any other advertising measurement in the business”.
  3. Objective:  It is purely an empirical measure by nature.  No subjective interpretation is needed.
  4. Calibrated:  It has been applied to the broad spectrum of brands and categories and its correlation to sales has proven consistent across geographies.  Furthermore, it self-adjusts to the marketplace where it is collected so it has the same interpretation without any need for historic benchmarks.

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  1. Reliable:  It has been shown to be as reliable as the laws of random sampling allow.  This is true both for brand preference gathered at a point in time and for changes over time caused by marketing activities.  The table below summarizes this consistency in measuring changes.  Changes in brand preference caused by 49 campaigns were each measured twice among independent groups of costumers.  Observed variation between the pairs was compared to what would be expected from random sampling.  The ‘not significant’ conclusion confirms that the measure is as reliable as the laws of random sampling allow.

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  1. Sensitive:  It is able to detect the impact of media even from one brand building exposure (e.g., a single television ad shown once).
  2. Simple:  It is easily applied and understood.  It can be incorporated within any type of customer research including tracking, pre-testing, post-testing, segmentation, strategy, product concept.
  3. Causal:  While it captures the effect of product experience, it is not driven by just product experience.  In fact, it has been proven predictive of trial for new products for which consumers have no experience.
  4. Transparent:  It doesn’t rely on ‘block box’ models or norms.
  5. Quality Assured:  Its reliability and predictability are subject to continuous review.

To verify its suitability as the brand strength metric, MASB included an aggressive trial of brand preference as part of its BIV project.  A cornerstone of this endeavor was a longitudinal tracking study sponsored by six blue chip corporations and conducted by MSW•ARS Research.  The two year study covers one hundred twenty brands across twelve categories with a variety of market conditions.  In part II of this article we will review several of the key findings from this project, which are already changing industry perceptions on measuring brand value and making brand building investments.

The MSW•ARS Brand Preference measure can be incorporated into a wide variety of research and can even become a standard key performance indicator in your reporting, particularly in your tracking data.  In future blog posts we will discuss this and how you can easily apply it.

If you don’t want to wait then please contact your MSW•ARS representative to learn more about our brand preference approach.

Is Brand Preference Marketing’s Higgs Boson?

November 20th, 2014 Comments off

Higgs Boson-02Chances are you have heard of the Higgs Boson, an elusive elementary particle that physicists have spent the last fifty years and billions of dollars to find.  Reports of its potential discovery have captured headlines around the globe.  If verified, not only will it help cement our mathematical understanding of how the universe works, but will set the trajectory for future technological advances.

What has this got to do with the marketing discipline?  For the last fifty years we have been dealing with our own elusive particle, an accurate metric that quantifies the financial value a brand provides.  Without this the mathematics is incomplete for financial forecasting, planning, justifying marketing investment or improving marketing return.

But 2015 may be the year that this changes due to the work of the Marketing Accountability Standards Board (MASB).  This group of marketing and financial practitioners and academics has been pursuing aggressive “game changing” projects to not only create general principles and methodological standards for brand valuation, but to prove them out in brand “trials” that serve as practical examples of their application.  Based on prior research, MASB chose the MSW•ARS brand preference measurement approach as the cornerstone of its two-year long brand investment and valuation trials.  The first installment of this research was presented at the group’s summer summit in August and the initial results have been making waves in industry news.

Mathematics of Brand Preference

Just like physics equations hinted at the existence of the Higgs Boson, so did the equations of marketing hint at brand preference.  For years marketers have dissected sales data and realized that maintaining market share and price point were critical to maintaining revenue streams.

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But this just pushes the question a level deeper to: What drives a brand’s unit market share?  Economic theory provides two of the key elements, price relative to competing products and distribution.  Simply put, on average the less costly in terms of time and money a product is to obtain, the higher the demand for it will be.  But people are not economic robots.  They will oftentimes choose a more costly option if they feel that it will provide them a decisive benefit, even if it is a purely emotional one.  Thus it is the breadth and strength of consumers’ preference which set the base level for a brand’s unit market share with distribution and relative price acting as modifiers to it.

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So how effective is brand preference in explaining a brand’s unit market share?  In the initial MASB trial analysis, six months of brand preference, unit share, price premiums, and distribution were analyzed across twelve participant categories containing one hundred nineteen brands.  The categories examined included a diverse mix of product types; prices from thirty cents to thirty thousand dollars, impulse buys to deliberate purchases, consumables to durables.  Across these categories brand preference accounted for seventy-one percent of the differences between brands while effective distribution and price premium added another fourteen percent.

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With this milestone achieved the next step is already underway, incorporating brand preference in financial and marketing forecast and planning applications.  More details on these endeavors will be forthcoming in future installments.

Please contact your MSW●ARS representative to learn more about how brand preference is embedded throughout all of our research solutions.

2014: A year for radical change in advertising formats?

January 6th, 2014 Comments off

1941 was a turning point in the history of marketing.  On July 1 of that year, the world’s first paid television commercial aired.  Costing the Bulova Watch Company $9 it was a pre-roll to a baseball game between the Brooklyn Dodgers and the Philadelphia Phillies.  Simple in nature, just a graphic and a voice-over, the ad extended Bulova’s reach from radio, print, and in-stadium presence to the emerging audience of television.

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Despite its simplicity, it served as the launching point for the highly visual branding vehicle that has come to dominate the advertising landscape.  Fast forward nearly 75 years to today where marketers eager to tell their brand stories compete for Super Bowl placements costing $4 Million!

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What made this breakthrough and subsequent evolution of the television ad format possible?  It was a confluence of factors.  Technology adoption among consumers provided another means of reaching them… while simultaneously fragmenting the existing radio, print and sponsorship media landscape.  FCC changes in legal frameworks in April 1941 provided security to companies willing to experiment in the new space.  But the final ingredient was marketers willing to change the way they developed their campaigns to simultaneously take advantage of the richness of the format while maintaining the practical underpinnings learned from the other media channels.  It was a time when “mad men” and “marketing scientists” were drawn upon in equal measures to create something new, great, and systemic.

We at MSW-ARS Research see this same convergence happening in 2014.  Digital platforms have finally reached the point where their reach and capabilities move beyond being just an inexpensive frequency vehicle fueled by banner ads and pre-rolls.  And the legal framework of what is and isn’t permissible has solidified. Finally marketers are experimenting with a number of new ad formats which have the potential to extend the art beyond the traditional TV spot.

Over the coming months we will be highlighting in this blog the most effective techniques we are seeing adopted, including:

  • Illuminated User Generated Video – consumer created content is being enhanced with professional editing techniques to create the ultimate testimonial and product focus ads
  • Long Form Video – the 30 second limit is being breached and the resulting ads are structurally very different from their shorter counterparts; especially in terms of emotional content
  • Micro Ads – mastery of mobile requires a shift in thinking the other way, how to best engage with consumers in short, effective bursts
  • Music – well recognized as an effective means for setting the tone, new research has tied it more directly to sales effectiveness, thus elevating its role
  • Privacy – while consumers desire privacy they also desire relevance in their advertising and convenience in interacting with their brands
  • MediaMesh – congruence in messaging and execution across media vehicles is as important as ever and even out-of-home advertising is leveraging the new technology and learning
  • Creative Is Still King – even with the cost savings of digital reach, the largest return will come from the power of the creative itself