Establish KPIs that grow brand equity

This article was first published in Admap magazine April 2017 ©Warc

Brand KPIs are only valuable when and where they are genuinely actionable and if they measure the right things – the variables most important to building a brand's financial value over the short and long term. To this end, KPIs must be justified with solid evidence and this article advises marketers on what to measure and when.

The marketing industry has for decades relied largely on instinct to determine the attitudinal KPIs to measure the success of brand-building campaigns. In recent years, though, there has been a concerted push for KPIs that have a proven relationship to financial outcomes. This shift is a great thing for the industry. It makes marketers far more credible in the boardroom, and crucially improves the probability of generating positive financial returns on marketing investment.

"It's critical that brand measures which relate to long-term sales success remain as KPIs. But it's also critical that we respond to the demand for evidence, by proving how attitudinal measures relate to sales success"

However, the drive for evidence-based KPIs risks pushing marketers towards activity with ROI that is easiest to demonstrate, as opposed to activity with the greatest ROI. This in turn pushes marketers more and more towards evaluating success on the basis of short-term sales or click-through, and away from attitudinal brand measures that can indicate long-term success. As Binet and Field showed in their IPA paper The Long and the Short of It, these short-term KPIs won't optimise long-term success.

It's critical that brand measures which relate to long-term sales success remain as KPIs. But it's also critical that we respond to the demand for evidence, by proving how attitudinal measures relate to sales success. We must also respond to the need for speed. Where the full sales return from brand-building activity may take time to realise, we need quicker (but validated) indicators of whether a brand is on track for long-term sales.

The good news is that many of the metrics that have for years been the foundation of brand tracking and equity research do have very well-proven relationships to long-term sales. Furthermore, recent industry thinking, notably from the Ehrenberg-Bass Institute, has enhanced our understanding of some of these key measures and offered new complementary metrics. Finally, new data sources such as search and social data are providing faster-moving brand health indicators.

One critical set of KPIs for long-term brand health are survey measures of overall brand equity. This term can mean different things to different people, but here it is used to refer to measures of overall consumer attitude, such as brand affinity, how well brands meet consumer needs, and brand difference.

Unfortunately, it's become increasingly unfashionable to include brand equity measures such as these as key performance indicators. The prevailing view in the industry is that these metrics are slow moving, and are a result of past behaviour, rather than a driver of future behaviour. While it's true that these are slow-moving measures, and as such should be used as long-term KPIs, there is in fact strong evidence that the right equity measures do pre-empt future sales growth.

The latest evidence for the importance of brand equity measures is the strongest yet. Kantar has combined the BrandZ database, the largest brand equity database in the world, with the largest shopper panel database from Kantar Worldpanel to explore the relationship between equity measures and sales growth.

Chart1Low attitudinal equityMedium attitudinal equityHigh attitudinal equity% change in sales volumeBrandsthat lostsalienceBrandsthat grewsalienceBrandsthat lostsalienceBrandsthat grewsalience6.02.20.0FIGURE 1: RELATIONSHIP BETWEEN ANNUAL SALES GROWTH AND ANNUAL CHANGE IN BRAND SALIENCE

Source: Kantar Millward Brown – 978 brands: equity from BrandZ 2013 and 2014. Volume sales change from percentage change in total household unit sales recorded by Kantar Worldpanel from year 1 (as per BrandZ, 2013/14) to year 2 (2014/15).

Figure 1 shows the average annual sales change for over 1,000 brands, split into brands with high first-year scores for attitudinal equity (above the level expected given their size) vs. those with medium or low equity scores. The brands with higher attitudinal equity in the first year tend to grow sales in the following year, while those with an average equity stay static and those starting with low equity tend to shrink.

There is an equally strong and proven connection between these same measures of attitudinal equity (affinity, meets needs, and brand difference) and the price a brand can justify charging. The stronger the brand performance on these metrics, the higher the price it can command in the marketplace. So, profitable long-term growth will be underpinned by a strong performance on these measures of attitudinal equity. These measures, though, are slow moving and their effect is felt over the long term, so should be monitored no more frequently than on a three- to six-monthly basis.

Measures of brand salience, on the other hand, can move faster, and our data shows that salience acts as a lever to unleash the growth potential that strong brand equity provides. Figure 1 shows the relationship between annual sales growth and the annual change in brand salience. We see that among the high-equity brands, annual sales growth is boosted by increased salience and, in fact, salience declines lead to sales declines for those brands. In contrast, brands with lower equity have no relationship between sales and unaided awareness. This means that high-equity brands have a great opportunity and even need to boost sales through increased salience, while low-equity brands won't get much of a sales return from driving salience.

Given the slow-moving nature and long-term importance of brand equity measures, a sensible approach to monitoring brand equity is to collect these metrics as part of an annual deep-dive study which provides an update of performance against KPI targets and feeds brand planning. Ideally, these deep-dive studies should be run by interviewing shopper panellists, providing a single-source data set of both attitudinal data and sales that can quantify the contribution of equity to sales for a given brand and its competitors.

Furthermore, adding brand image questions to the study can help diagnose the drivers of equity and thus long-term sales. This helps marketers determine which brand benefits they should try to emphasise in their communications over the coming year. In turn, brand image attributes and advertising communication questions measuring those chosen brand benefits should become KPIs for the brand and advertising tracking in the coming year.

Holistic one-off annual deep dives such as this, in combination with added quarterly or six-monthly KPI dips to keep track of progress, are a far better use of research budget than continuously tracking these high-level equity measures and all possible drivers.

"Given the slow-moving nature and long-term importance of brand equity measures, a sensible approach to monitoring brand equity is to collect these metrics as part of an annual deep-dive study which provides an update of performance against KPI targets and feeds brand planning"

Brands with low equity either need to fix their equity problem or find a different route to growth (e.g. physical availability). However, for brands with strong equity, to exploit their growth opportunity they need to increase or at least maintain their salience during the course of the year.

As such, marketers need a suite of measures to monitor and diagnose salience. Thankfully, recent years have seen the emergence of more sophisticated conceptualisation and measurement of salience, led by the Ehrenberg-Bass Institute. Its work has spawned a useful definition of brand salience as 'coming quickly and easily to mind in buying situations'. This means that for brands to become more salient in a way that drives sales, they need to become generally more prominent in consumers' minds or to strengthen their associations with category needs and occasions to make them more prominent in buying situations.

So, marketers need KPIs to cover both concepts: is the brand becoming generally more prominent? Is it building association with category needs and occasions?

There are tried-and-tested survey measures of the general prominence of brands in the minds of consumers. These include basic measures of both prompted and unprompted brand awareness, which indicate the medium-term shifts in general brand prominence, as well as more sensitive measures of communications awareness which indicate the cumulative effect of recent marketing activity on brand prominence.

Similarly, there is strong recent sales validation for emerging survey-based approaches for tracking the associations of brands with category needs and occasions. The ideal approach is to use a combination of faster-moving advertising messaging measures, to indicate the effect of recent marketing activity, with longer-term measures of overall brand association with category needs and occasions. These brand association measures should be prompted to give greatest sensitivity to medium-term changes, with spontaneous brand association questions giving a longer-term measure of overall salience.

While survey measures are very well-equipped to provide the medium-term indicators, they tend to be a little insensitive when it comes to providing the truly fast-moving indicators which allow marketers to optimise campaign activity on the fly. Luckily, just as the online world is largely what's driving the need for faster marketing decision-making, so it is the online world that is providing the solution.

The volume of social conversation around brands indicates the general prominence of the brands in consumers' minds. The search interest in brands, meanwhile, indicates whether they are seen as offering an answer to a relevant need, implying increased association with category needs and occasions. So by harvesting and treating measures of search and social volumes for brands, we are able to get extremely sensitive measures of salience. As Sarah Walker covered in detail in her article 'Focusing on meaningful inputs and drivers of digital brand performance' (Admap, April 2016), by treating search and social signals to separate out noise and seasonality, we can create reliable measures of campaign impact and long-term base trends.


Metric Indicates Sensitivity
Non-survey campaign indicators:
Increase in social volume attributed to campaign spend Contribution of latest campaign spend to brand prominence One- to two-weekly
Increase in search volume attributed to campaign spend Contribution of very latest campaign spend to association of brand with relevant needs One- to two-weekly
Advertising cut-through Is recent advertising contributing to brand prominence? Two- to four-weekly
Advertising impressions Whether associations with category needs and occasions are cutting through from advertising Two- to four-weekly
Prompted association with categories needs and occasions Overall progress in associations with category needs and occasions Monthly
Spontaneous brand awareness or association with needs and occasions Overall trend in salience vs. competitors One- to three-monthly
Brand equity and image:
Prompted association with key brand benefits Overall progress in associations with key brand benefits that drive equity Monthly
Overall brand attitudes (e.g. affinity, meets needs, difference) Overall trend in attitudinal equity vs. competitors Three- to twelve-monthly

Source: Kantar – 424 brands: subset of data from main chart, for brands that are included in BrandZ for at least two years from 2013 to 2015 to provide salience measurement.

Specifically, then, marketers should consider a toolkit of attitudinal brand KPIs that combines survey measures with more sensitive measures from online search and social data. This should include the key components as shown in Figure 2.

Marketers and market researchers can no longer afford to run cumbersome, overblown tracking studies, with endless image, equity, usage and awareness measures chosen on the basis of intuition. Brand KPIs must now be justified with solid evidence and measured only when and where they are genuinely actionable.

The evidence suggests the best tracking programme consists of a set of annual or six-monthly equity KPIs, complemented by a more frequent read on the key brand benefit image statements that are identified as equity drivers. That more frequent measurement of key image items should be accompanied by a toolkit of salience measures that helps the marketer unleash the growth potential that improved brand equity provides.

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