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Posts Tagged ‘Metrics’

Many companies are well-known to consumers by their corporate names, including manufacturers, chain retailers and service providers. The corporate name may serve as the leading brand identifier (like an ‘umbrella’ name) for the company’s products or services. But furthermore the corporate-level brand name is the gate to access the organisation’s image as held in the public opinion of consumers. In the last decade companies are increasingly judged by their values, culture, and market and public conduct. Consumers are more strongly influenced in their choice of products or services of a company by what they think of and how they feel towards its corporate brand.

A Tel-Aviv-based strategic management consulting firm, TACK, constructed a two-dimension metric for assessing the image strength (or sturdiness) of companies in Israel. The metric comprises a rational-oriented ‘pillar’ named Logic and an affective-driven ‘pillar’ called Magic. Each dimension of the image strength metric is measured by two (rating-scale) items.

Logic represents how much a company is appreciated by consumers, and to what extent the company makes it worthwhile for consumers to be its customers.

Magic expresses how much a company is loved by consumers, and to what extent consumers believe that the company cares about its customers.

Magic pertains to the emotional ties between the company and its customers and is therefore particularly important to the relationships built by a company with the customers. We cannot underestimate the importance of the logical or cognitive-based evaluation of the company, by weighing its advantages and disadvantages, as the basis for the interest and preference consumers show in using the company’s products and services. However, reasoned appreciation of the company and its offerings will likely not hold-up a relationship without developing an attachment to the corporate-name brand.

TACK applied its Logic & Magic metric for the third continuous year in 2019 to 71 Israeli companies (e.g., food producers, retail chains, telecom service providers, banks). Measures were collected in a survey of 503 adult Israeli consumers (Hebrew-speaking). The companies are not necessarily managed purely as a ‘branded house’; however, this study is not concerned with additional brands owned by the company (e.g., brands that may be endorsed by the corporate brand name or products positioned as sub-brands). The demonstrated mappings of corporate brands (in Hebrew), along the dimensions of Logic and Magic, bring forward some sobering realizations shared below:

Firstly, it is noticeable that, from a consumer perspective, companies that are doing better on the logical-functional front are also more successful on the emotional front, and thus are doing better overall in connecting with consumers. We cannot conclude from this a cause-and-effect relation. But the findings do suggest that a wise strategy that is sensitive to consumers (i.e., it sees things through the eyes of consumers) can win on both fronts. In other words, a company as such that succeeds, through its strategy, in gaining the appreciation of consumers for its performance and advantages of its products and services, is also likely to win the affection, trust and approach of the consumers.

There are hardly any corporate brands that seem to get a high score on Logic but relatively lack in their score on Magic, and vice versa. This implies that a company cannot sustain a ‘cold-minded’ appraisal of its performance and offerings while failing to win the hearts of its customers; and just as well, a company cannot sustain an affectionate connection with its customers without establishing the foundation of approval of its functional benefits to customers (e.g., being relevant and attractive). Nevertheless. it should be noted that the spread among corporate brands with relatively higher Logic and Magic scores is greater than among brands with relatively lower scores on both dimensions (there are more of them and they are more condensed). There is still much variability among the best performing companies — they are not consistently doing better in the same way.

Secondly, the quality of products and services is just one of the factors consumers likely consider in their logical-functional evaluations, and is possibly not the more prominent one. There seem to be large differences in perceived quality of the products of at least some of the companies or in the weight assigned to quality. Moreover, companies whose products appeal in their high quality or expertise to only a relatively small segment of consumers (a niche) seem to fall behind and do not come out favourably in this type of all-market brand rankings. It is not so surprising to realise that the stronger and leading corporate brands are those of companies that aim to fulfill the needs and preferences of the wider common base of the mass market.

Let us look at a few examples:

  1. In the category of retail food chains, a heavy discount retailer, Rami Levy, is positioned close to the top-right corner of the map (both in its category and overall) with high Logic and Magic scores, while a delicacy retailer Tiv Ta’am is at the bottom-left corner of the map. The two major food retail chains are in-between, one in the top-right quadrant (Shufersal) and the other in the bottom-left quadrant (Bittan [Mega]). Tiv Ta’am may bring better-quality products (e.g., fresh produce, imports of delicacies) than other food retailers, but its stores are considered too expensive, lucrative, and they are not liked. Rami Levy and Shufersal are listed among the Superbrands of Israel for 2018 in the retail category.
  2. In the category of coffee houses, we find in relatively high positions the low-cost, basic-service chain of Cofix, and the espresso-bar, self-service chain Aroma. In the worst position we find Arcaffe, an Italian-style chain of coffee bars serving fine coffee, sandwiches and other products, but it fails to receive the appreciation of the greater public for their offerings and service. Aroma is much more popular although their products and its serving standard are moderate. Yet Arcaffe is considered more ‘top-notch’, made for European-connoisseurs, and is relatively more expensive. Eventually, Aroma and Coffix are also much more emotionally appealing to Israeli consumers than Arcaffe. Roladin, a bakery and coffee-house chain, can be argued to be much closer in quality and service standard to Arcaffe than to Aroma; yet, Roladin is appreciated and considered worthwhile (Logic) similar to Aroma and is even a little more loved and cherished (Magic) than Aroma —  the advantage of Roladin over Arcaffe seems to be that they understand better what the greater part of Israelis like to eat and expect to find in a coffee-house for a light meal. Aroma and Roladin are listed among Israel’s Superbrands of 2018 (dining out) whereas Arcaffe is absent.
  3. In the media category, among the news press publishers, HaAretz holds a much lower position on both Logic and Magic than Israel HaYom; Yediot Aharonot is located closer to HaAretz. Two marked differences between them: (a) HaAretz is left-leaning (affiliated with the Guardian and New-York Times) and Yediot is oriented to the centre-left, whereas Israel HaYom is right-wing; (b) HaAretz is superior, especially in some areas, in quality of commentary and analysis to the two other newspapers (tabloid-fashioned). But the political left, and the HaAretz newspaper associated with it, are out of favour in recent years, and perhaps as a result the tolerance to its reporting by large circles of society is low, no matter its apparent news quality. [It is noted that all three also have a news website, though in the case of Yediot the online channel is branded separately as ‘ynet’ — it is positioned close and just a bit better than the press edition]. Yediot (+ynet) and Israel HaYom are listed in the media category of Israel’s Superbrands for 2018 but HaAretz is absent (its economics and business branch TheMarker is included).
  4. Interestingly, the researchers of TACK report that preference for Arcaffe and for Tiv Ta’am, each in its category, is stronger among consumers who describe themselves as leaning to the political left. The relevance of political attitudes to dining-out and food shopping is a little obscure, but it gives an indication of the portrayal of their more likely customers. More importantly, this research evidence amplifies the argument that corporate brands more entrenched in niches — like HaAretz, Arcaffe and Tiv Ta’am — are much less likely to be considered strong leading brands.

Thirdly, response to price and value perceptions are not free of an emotional loading. An economic approach views the calculation of value as a rational procedure of weighing the benefits and cost of a product or service offer. However, when an offer is judged as unfair to the disadvantage of the buyer, this may stir anger and resentment of the consumer in response to the price offer. The resentment is more often directed to the retailer, but it may be pointed towards the manufacturer of a national brand as well, depending on whom the consumer believes to be more responsible for a price differential or increase.

The judgement of unfair price differentials is contingent on the reference price used (e.g., a price paid by a friend for the same product at another store this week). In the case of a price increase, the reaction is subject to whether consumers can see justification to a price increase by attributing the increase in retail price to a rise in cost that retailers or manufacturers could not control (e.g., price of raw materials). In the past decade much resentment developed because consumers failed to find such justifications. Instead, the perception more accepted was that retailers and manufacturers were rolling their cost rises mostly to consumers, and they raised prices merely to improve their profits. In Israel this problem was evident especially in the food category where consumers were witnesses to continued feuds between the food chain retailers and manufacturers. More broadly, many Israeli consumers appear to these days to have little tolerance to retailers, service providers or manufacturers that seem to raise prices unfairly or try to position themselves to be more up-scale and luxurious — disappointment and anger at them motivates consumers to punish them in some way. This kind of resentment and urge to act in revenge is apparent also in the results of the study by TACK.

Price is given priority by more Israeli consumers, and it seems to overweight possible advantages in quality of products, services or the environment of shopping. In some cases consumers may fail to appreciate any such advantages while in others they simply consider the price premium as unjustified or unaffordable (which may add frustration to their evoked emotions). This can be another aspect that explains the differences between companies described above: (a) for instance, the gaps on Logic and Magic between coffee-house chains like Cofix and Aroma compared with Arcaffe,  and vis-à-vis Roladin, or (b) Rami Levi which is probably perceived as making greater effort to charge affordable prices (although it declined a little from last year), far better than a delicacy chain such as Tiv Ta’am. In other categories, it is more difficult to make clear inferences. In telecom services (mobile, TV, Internet), for example, all major companies receive relatively low appreciation and are less loved. A specialised dairy producer (Tara) is positioned less favourably than the two major and larger dairies (Tnuva and Strauss) which happened to be more shaken by consumer protests of several years ago (Tara is more preferred though among ages 55+ according to TACK). Among fashion retailers, a low-cost retailer of casual wear (Fox) is positioned just slightly higher on Logic but lower on Magic than some major main-stream retailers (H&M, Castro, Zara); yet another retailer (Renuar) that is probably somewhat more exclusive appears to be considered less worthwhile and having moderately less of magic (as reference, Polgat [for men], which has visibly better quality clothing, is not included).

The study of image strength by TACK sheds light on the relative positions in which consumers hold corporate brands both in their minds (Logic) and in their hearts (Magic).  It is somewhat surprising to find such a strong association between the logical-functional dimension and the affective dimension — it suggests that a company cannot sustain a positive stance on one dimension without the other for a long time. There is some discomfort also in realising that price could be more dominant than quality, but it is important to acknowledge how perceptions of value, and especially unfairness, can influence the emotional reaction of consumers to the corporate-level brands. Effectively, being attentive and sensitive to what the wider circles of consumers in the country need and expect to have is a key to be regarded overall as a favourable, strong leading brand.

Ron Ventura, Ph.D. (Marketing)


Comment on Methodology:

The brand scores are given in percentages. More detailed values reported for 2017 help to understand the metric’s structure. The score on each dimension (Logic or Magic) seems to be calculated as the sum of the ‘top-box’ proportions for the two items it is composed of (e.g., % who give a rating of 6 or 7 on a 7-point Likert-type scale in agreement with each statement of Logic, where 25% on ‘appreciate’ + 20% on ‘worthwhile’ = 45% on Logic). However, summing up those percentages is not a proper procedure — this sum does not have a meaningful interpretation because the proportions cannot be accumulated. It would be correct to take their mean rather than the sum. Another valid option is to add-up the rating values of the pair of items for each respondent and then calculate the percentage who have given a total score on that dimension of above a threshold (e.g., a score on the index of Logic of above 12) in order to produce a score that may be more easily related to.

Reference on price fairness:

The Price is Unfair! A Conceptual Framework of Price Fairness Perceptions; Lan Xia, Kent B. Monroe, & Jennifer L. Cox (2004); Journal of Marketing, 68 (October), pp. 1-15.

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The attitudinal approach to measuring brand equity is highly common in marketing research. It essentially aims to reflect the subjective disposition of consumers towards a brand as a concept which goes beyond the physical product or functional services offered under its name and symbols — how much power a brand has in attracting a consumer before he or she considers the features of any particular product item from that brand? In an attitudinal approach we broadly include constructs such as beliefs, evaluations, attitudes, intentions or inclinations to behave in a given way that favours the brand (though not evidence of actions themselves as measured and analysed in a behavioural approach). Our goal is to understand and assess how consumers hold brands in their minds. Most appropriately, the brand equity of a focal brand should be assessed relative to its competing brands in the same product or service category.

However, when companies track measures of brand equity to monitor and evaluate how brands they own evolve and strengthen over time, managers often find out that brand equity, from the customer perspective, rises in a rather slow pace or not at all. And even when some measures of brand equity show a sharp increase (e.g., following a TV advertising campaign), the improvement upwards often dissipates after a short while, partially or completely. Therefore, a trend of growth can be difficult to detect in a short time span, and for some brands it is not possible. This may be quite disappointing or frustrating for managers, particularly if they do not understand the measures and don’t know how to work with them.

Attitudinal models of brand equity normally are composed of multiple measures that correspond to aspects or layers like brand image, emotional attachment to the brand, and committment. These are frequently regarded as contributors to greater customer-based brand equity. In a hierarchical model, one may concentrate on ‘commitment’ as the highest and ultimate level of brand equity where a customer can reach his or her strongest bonding with a brand. But this solution may not be appropriate for all brands. A brand owner should choose the appropriate metrics considering the product/service type, its own business strategy and objectives, and the company’s resources.

For the following discussion suppose our focus is on brand attachment, reflecting how closely a consumer feels connected with a brand, a linkage that is mostly affect-laden. The metric may be a summate scale (an average score) based on statement items such as:

  • “I truly like [brand X]”
  • “I feel that [brand X] is the right brand for people like me”
  • “[Brand X] best fits my lifestyle and personality”
  • “I identify with values and ideas that [brand X] supports and promotes”
  • “[Brand X] is my favourite brand of [product/service A]”

(Assume responses on a 1 to 7 scale where 1 means “strongly disagree” and 7 means “strongly agree”)

The chart below suggests three scenarios as to how this metric of brand equity may evolve over a period of five years (monthly). The curve lines presented here are hypothetical (i.e. simulated) but are based on experiences of real-world phenomena.

Attitudinal Brand Equity Over Time

Scenario 1 suggests a stairway-like path of the attachment metric. In this scenario a favourable shift in attitude towards the brand relies on discrete events, particularly image-building advertising campaigns.  It is likely to rise in a lag or delay after a campaign commences while its effect usually weakens several weeks after the campaign ends. The metric either flattens or descends back to a level between prior to the campaign and the recent peak in the brand equity metric. If a company aims to boost its brand like that, it  has to launch an advertising campaign once every few months to refresh and enforce the brand’s image in consumers’ minds. Trying to achieve a more continuous climb in brand attachment would require more frequent ad campaigns which can be too expensive and exhaustive for many companies. With time the impact of such campaigns is also likely to dampen. Actually the stronger brands do not need to advertise too often to retain their top stature.

Yet consumers in recent decades obtain information about brands from more sources (e.g., Internet content of various types, friends, media reports), they are increasingly alert to stimuli they are exposed to in retail outlets, and are more sensitive to their direct service experiences when interacting with companies. In other words, events are happening all the time and customer relationships with brands and companies are continuous. That implies that growing the brand’s equity more continuously and smoothly over time, as depicted by Scenario 2, demands brand managers to be attentive all the time to events, especially episodes involving customers, and to be proactive. Management has to respond promptly with corrective measures to negative events that become public, and on the other hand initiate events and activities that remind customers of the positive things the company can do and thus solidify the relationships with them.

A brand may reach a certain high level on a metric of brand equity where it has little room to grow much further. This is the case of Scenario 3. First, objectively it becomes more difficult to improve further when a brand is already at the top in its field. Second, however, it may also be an outcome of a property of the measure, and that is typical in consumer survey-based measures: the measure as described here is bounded between the lower end of the scale (1) and its upper end (7). In particular, as the metric value gets closer to the upper end of the scale, increments and decrements get smaller, and the slope of the curve is more subtle, as the metric converges towards or near the maximum value. For a brand that has reached this position, this does not mean in any way that its management can rest and become complacent. The mission at this stage turns from forming and changing attitudes to sustaining those positive attitudes it has achieved. Much of the demands described regarding growth in Scenario 2 are still valid. Although those activities may be pursued less intensively and frequently, they are still required, and the brand equity metric should still be monitored to ensure that it continues to travel in a top band on the chart (because remember it is bounded from above but it does have a lot of room to fall down…)

The three scenarios discussed illustrate the different turns that attitudinal measures of brand equity can take, up and down. Furthermore, it should clarify how such scenarios can be associated with different strategies and quality of management, as well as lessons that can be learned from each scenario in order to enhance the brand’s equity. Tracking metrics of brand equity is an essential managerial tool, but the metrics used should be well understood to employ them effectively. Measures should be taken at a reasonable and practical frequency (e.g., quarterly, bi-monthly, monthly). In addition, brand equity metrics should be evaluated for different segments and compared between them, particularly distinguishing between more regular (‘loyal’)  brand users and other consumers, or between recognized customers and non-customers of service providers like banks and telecom companies.

Ron Ventura, Ph.D. (Marketing)

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