More Web Proxy on the site http://driver.im/

article

Measuring and Understanding Brand Value in a Dynamic Model of Brand Management

Authors:

Ron N. Borkovsky,

Avery M. Haviv,

Sridhar MoorthyAuthors Info & Claims

Marketing Science, Volume 36, Issue 4

Pages 471 - 499

https://doi.org/10.1287/mksc.2016.1020

Published: 01 July 2017 Publication History

Abstract

We develop a structural model of brand management to estimate the value of a brand to a firm. In our framework, a brand's value is the expected net present value of future cash flows accruing to a firm due to its brand. Our brand value measure recognizes that a firm can change its brand equity by investing in advertising. We estimate quarterly brand values in the stacked chips category for the period 2001-2006 and explore how those values change over time. Comparing our brand value measure to its static counterpart, we find that a static measure, which ignores advertising and its ability to affect brand equity dynamics, yields brand values that are artificially high and that fluctuate too much over time. We also explore how changing the ability to build and sustain brand equity affects brand value. At our estimated parameterization, if brand equity were to depreciate more slowly, or if advertising were more effective at building brand equity, then brand value would increase. However, counterintuitively, we find that when the effectiveness of advertising is sufficiently high, increasing the rate at which brand equity depreciates can increase the value of a firm's brand, even as it reduces the value of the firm overall.

Data and the online appendix are available at <ext-link ext-link-type="uri" href="https://doi.org/10.1287/mksc.2016.1020">https://doi.org/10.1287/mksc.2016.1020</ext-link>.

References

[1]

Aaker DA, Biel AL (1993) Brand Equity and Advertising (Lawrence Erlbaum, Hillsdale, NJ).

[2]

Ailawadi K, Lehmann D, Neslin S (2003) Revenue premium as an outcome measure of brand equity. J. Marketing 67(4):1-17.

[3]

Ataman B, Mela C, van Heerde H (2008) Building brands. Marketing Sci. 27(6):1036-1054.

[4]

Bagwell K (2007) The economic analysis of advertising. Armstrong M, Porter R, eds. Handbook of Industrial Organization, Vol. 3 (North-Holland, Amsterdam), 1701-1844.

[5]

Barwise P, Higson C, Likierman A (1989) Accounting for Brands (London Business School, London).

[6]

Borkovsky R (2017) The timing of version releases: A dynamic duopoly model. Quant. Marketing Econom. Forthcoming.

[7]

Borkovsky R, Doraszelski U, Kryukov S (2010) A user's guide to solving dynamic stochastic games using the homotopy method. Oper. Res. 58(4):1116-1132.

Digital Library

[8]

Borkovsky R, Doraszelski U, Kryukov S (2012) A dynamic quality ladder duopoly with entry and exit: Exploring the equilibrium correspondence using the homotopy method. Quant. Marketing Econom. 10(2):197-229.

[9]

Bronnenberg B, Dhar S, Dubé J (2007) Consumer packaged goods in the United States: National brands, local branding. J. Marketing Res. 44:4-13.

[10]

Bronnenberg B, Kruger M, Mela C (2008) The IRI academic data set. Marketing Sci. 27(4):745-748.

Digital Library

[11]

Caplan J (2008) The man buried in a Pringles can. TIME (June 4). http://content.time.com/time/business/article/0,8599,1811730,00.html.

[12]

Caplin A, Nalebuff B (1991) Aggregation and imperfect competition: On the existence of equilibrium. Econometrica 59(1):26-59.

[13]

Chintagunta P, Vilcassim N (1992) An empirical investigation of advertising strategies in a dynamic duopoly. Management Sci. 38(9):1230-1244.

Digital Library

[14]

Clark R, Doraszelski U, Draganska M (2009) The effect of advertising on brand awareness and perceived quality: An empirical investigation using panel data. Quant. Marketing Econom. 7:207-236.

[15]

de la Merced M (2012) Kellogg to buy Procter & Gamble's Pringles group. New York Times (February 15). https://dealbook.nytimes.com/2012/02/15/kellogg-to-buy-procter-gambles-pringles-group/?_r=0.

[16]

Dixit A, Pindyck R (1994) Investment Under Uncertainty (Princeton University Press, Princeton, NJ).

[17]

Doganoglu T, Klapper D (2006) Goodwill and dynamic advertising strategies. Quant. Marketing Econom. 4(1):5-29.

[18]

Doraszelski U, Markovich S (2007) Advertising dynamics and competitive advantage. RAND J. Econom. 38(3):1-36.

[19]

Doraszelski U, Satterthwaite M (2010) Computable Markov-perfect industry dynamics. RAND J. Econom. 41(2):215-243.

[20]

Dubé J, Manchanda P (2005) Differences in dynamic brand competition across markets: An empirical analysis. Marketing Sci. 24(1):81-95.

Digital Library

[21]

Dubé J, Hitsch G, Manchanda P (2005) An empirical model of advertising dynamics. Quant. Marketing Econom. 3:107-144.

[22]

Erdem T, Keane M, Sun B (2008) A dynamic model of brand choice when price and advertising signal product quality. Marketing Sci. 27(6):1111-1125.

Digital Library

[23]

Ericson R, Pakes A (1995) Markov-perfect industry dynamics: A framework for empirical work. Rev. Econom. Stud. 62:53-82.

[24]

Ferjani M, Jedidi K, Jagpal S (2009) A conjoint approach for consumer- and firm-level brand valuation. J. Marketing Res. 46:846-862.

[25]

Fischer M (2007) Valuing brand assets: A cost-effective and easy-to-implement measurement approach. MSI Reports 7(2):25-50.

[26]

Goettler R, Gordon B (2011) Does AMD spur Intel to innovate more? J. Political Econom. 119(6):1141-1200.

[27]

Goettler R, Gordon B (2014) Competition and product innovation in dynamic oligopoly. Quant. Marketing Econom. 12(1):1-42.

[28]

Goldfarb A, Lu Q, Moorthy S (2009) Measuring brand value in an equilibrium framework. Marketing Sci. 28(1):69-86.

Digital Library

[29]

Gowrisankaran G, Town R (1997) Dynamic equilibrium in the hospital industry. J. Econom. Management Strategy 6(1):45-74.

[30]

Hall G, Rust J (2003) Simulated minimum distance estimation of a model of optimal commodity price speculation with endogenously sampled prices. Working paper, Yale University, New Haven, CT.

[31]

Holbrook M (1992) Product quality, attributes and brand name as determinants of price: The case of consumer electronics. Marketing Lett. 3:71-83.

[32]

Horsky D (1977) An empirical analysis of the optimal advertising policy. Marketing Sci. 23(10):1037-1049.

Digital Library

[33]

Igami M (2017) Estimating the innovator's dilemma: Structural analysis of creative destruction in the hard disk drive industry, 1981- 1998. J. Political Econom. 125(3):798-847.

[34]

Kamakura W, Russell G (1993) Measuring brand value with scanner data. Internat. J. Res. Marketing 10:9-22.

[35]

Keller K (2008) Strategic Brand Management, 3rd ed. (Prentice Hall, Upper Saddle River, NJ).

[36]

Laincz C (2005) Market structure and endogenous productivity growth: How do R&D subsidies affect market structure? J. Econom. Dynam. Control 29:187-223.

[37]

Narajabad B, Watson R (2011) The dynamics of innovation and horizontal differentiation. J. Econom. Dynam. Control 35(6):825-842.

[38]

Nerlove M, Arrow K (1962) Optimal advertising policy under dynamic considerations. Economica 29(114):129-142.

[39]

Nevo A (2001) Measuring market power in the ready-to-eat cereal industry. Econometrica 2:307-342.

[40]

Pakes A, McGuire P (1994) Computing Markov-perfect Nash equilibria: Numerical implications of a dynamic differentiated product model. RAND J. Econom. 25(4):555-589.

[41]

Rosen S (1974) Hedonic prices and implicit markets: Product differentiation in pure competition. J. Political Econom. 82:34-55.

[42]

Salinas G (2009) The International Brand Valuation Manual (John Wiley & Sons, Ltd, Chichester, UK).

[43]

Schmidt-Dengler P (2006) The timing of new technology adoption: The case of MRI. Working paper, University of Vienna, Vienna.

[44]

Simon C, Sullivan M (1993) The measurement and determinants of brand equity: A financial approach. Marketing Sci. 12(1): 28-52.

Digital Library

[45]

Srinivasan V, Park C (1997) Surprising robustness of the self-explicated approach to customer preference structure measurement. J. Marketing Res. 34(2):286-291.

[46]

Srinivasan V, Park C, Chang D (2005) An approach to the measurement, analysis, and prediction of brand equity and its sources. Management Sci. 51(10):1433-1448.

Digital Library

[47]

Sriram S, Kalwani M (2007) Optimal advertising and promotion budgets in dynamic markets with brand equity as a mediating variable. Management Sci. 53(1):46-60.

Digital Library

[48]

Su C, Judd K (2012) Constrained optimization approaches to estimation of structural models. Econometrica 80(5):2213-2230.

[49]

Sudhir K (2001) Structural analysis of manufacturer pricing in the presence of a strategic retailer. Marketing Sci. 20(3):244-264.

Digital Library

[50]

Swait J, Erdem T, Louviere J, Dubelaar C (1993) The equalization price: A measure of consumer-perceived brand equity. Internat. J. Res. Marketing 10(1):23-45.

[51]

Takahashi Y (2015) Estimating a war of attrition: The case of the U.S. movie theater industry. Amer. Econom. Rev. 105(7):2204-2241.

[52]

Tellis GJ (1988) Advertising exposure, loyalty, and brand purchase: A two-stage model of choice. J. Marketing Res. 25(2):134-144.

Cited By

Bar RHaviv A(2023)Brand Building to Deter Entry and Its Impact on Brand ValueManagement Science10.1287/mnsc.2022.460869:9(5418-5438)Online publication date: 1-Sep-2023
https://dl.acm.org/doi/10.1287/mnsc.2022.4608
Ke TShin JYu J(2022)A Model of Product Portfolio DesignMarketing Science10.1287/mksc.2022.142442:6(1101-1124)Online publication date: 30-Dec-2022
https://dl.acm.org/doi/10.1287/mksc.2022.1424
Tian H(2022)Brand Marketing Leveraging the Advantage of Emoji Pack Relying on Association Rule Algorithm in Data Mining TechnologyComputational Intelligence and Neuroscience10.1155/2022/35112112022Online publication date: 1-Jan-2022
https://dl.acm.org/doi/10.1155/2022/3511211
Show More Cited By

Measuring and Understanding Brand Value in a Dynamic Model of Brand Management
1. Applied computing
  1. Law, social and behavioral sciences

Recommendations

Building Brand Equity through Perfect Customer Relationship Management
ICIII '10: Proceedings of the 2010 3rd International Conference on Information Management, Innovation Management and Industrial Engineering - Volume 01

Brands are important tools attracting customers to purchase. The purpose of this article is to address how to build brand equity through CRM and customer service. CRM creates value for customers and firms. CRM increases customers’ brand awareness, brand ...
Optimal Advertising and Promotion Budgets in Dynamic Markets with Brand Equity as a Mediating Variable

We study the optimal levels of advertising and promotion budgets in dynamic markets with brand equity as a mediating variable. To this end, we develop and estimate a state-space model based on the Kalman filter that captures the dynamics of brand equity ...
The Measurement and Determinants of Brand Equity: A Financial Approach

This paper presents a technique for estimating a firm's brand equity that is based on the financial market value of the firm. Brand equity is defined as the incremental cash flows which accrue to branded products over unbranded products. The estimation ...

Comments

Please enable JavaScript to view thecomments powered by Disqus.

Information & Contributors

Information

Published In

cover image Marketing Science

Marketing Science Volume 36, Issue 4

July 2017

173 pages

ISSN:1526-548X

Issue’s Table of Contents

Publisher

INFORMS

Linthicum, MD, United States

Publication History

Published: 01 July 2017

Accepted: 07 June 2016

Received: 29 July 2014

Author Tags

Qualifiers

Article

Contributors

Other Metrics

View Article Metrics

Bibliometrics & Citations

Bibliometrics

Article Metrics

5
Total Citations
View Citations
0
Total Downloads

Downloads (Last 12 months)0
Downloads (Last 6 weeks)0

Reflects downloads up to 13 Dec 2024

Other Metrics

View Author Metrics

Citations

Cited By

Bar RHaviv A(2023)Brand Building to Deter Entry and Its Impact on Brand ValueManagement Science10.1287/mnsc.2022.460869:9(5418-5438)Online publication date: 1-Sep-2023
https://dl.acm.org/doi/10.1287/mnsc.2022.4608
Ke TShin JYu J(2022)A Model of Product Portfolio DesignMarketing Science10.1287/mksc.2022.142442:6(1101-1124)Online publication date: 30-Dec-2022
https://dl.acm.org/doi/10.1287/mksc.2022.1424
Tian H(2022)Brand Marketing Leveraging the Advantage of Emoji Pack Relying on Association Rule Algorithm in Data Mining TechnologyComputational Intelligence and Neuroscience10.1155/2022/35112112022Online publication date: 1-Jan-2022
https://dl.acm.org/doi/10.1155/2022/3511211
Rao A(2020)Strategic Research and Development Investment Decisions in the Pharmaceutical IndustryMarketing Science10.1287/mksc.2020.122439:3(564-586)Online publication date: 1-May-2020
https://dl.acm.org/doi/10.1287/mksc.2020.1224
Xu LSilva-Risso JWilbur K(2018)Dynamic Quality Ladder Model Predictions in Nonrandom Holdout SamplesManagement Science10.5555/3272525.327253764:7(3187-3207)Online publication date: 1-Jul-2018
https://dl.acm.org/doi/10.5555/3272525.3272537

View Options

View options

Media

Figures

Other

Tables

View Issue’s Table of Contents