The use of experimental design in monitoring brand equity

Date of publication: June 15, 1992

Author: Joel N. Axelrod

Abstract:

Traditionally, attitude research has been done by surveys rather than experiments. In part, this is a function of management regarding experiments as risky; they want certainty. This is unfortunate because experiments permit direct observation of cause and effect relationships, while surveys only permit correlations. Our definition of brand equity is the incremental price that a customer will pay for a brand versus a comparable product without the brand name on it. The mechanics of measurement involve randomly dividing customers into different cells and then exposing them to the test brand in the context of one or more competitors. The price of the test brand is manipulated from cell to cell in such a way that the consumer has no knowledge what the test brand is nor that price is a variable. While the basic design is elegantly simple, well thought through decisions are required regarding customers, competition, price levels, frequency of measurement, sample size, and units of measurement. In selecting customers it is critical to select those who are responsible for generating the greatest profits for the brand. In selecting competitors, one has to consider not just those within the category, but, often, those outside the category. In selecting price levels, the further apart the price points, the easier it is to discriminate. However, too large an increase may shift the brand into a different category. In determining the frequency of measurement, it is necessary to consider the dynamics of the category and how long it takes for management to respond to a problem, i.e., the deterioration of brand equity. Similarly, sample size should be partially determined by how quickly a response can be developed if a problem is identified. While typically the units of measurement will be dollars, for some categories time and distance may be appropriate surrogates. The output of brand equity research based on experimental design can help in making pricing decisions, assessing the effectiveness of a promotional campaign and of an advertising campaign, and in determining if a brand is strong enough to support line extensions.

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