Michael Sussman, PhD: EVP, Dir Of Analytic Planning, Y

1

Quantifying The Power Of Brand

• Michael Sussman, PhD EVP, Dir Of Analytic
  Planning, YR North America

BrandAsset Valuator
2
Key Facts About BrandAsset Valuator

• Worlds Largest Brand Database
• Over 500,000 consumers
• 35,000 brands
• 215 studies
• 44 countries
• 14 years worth of data
• 72 different brand metrics including
• Brand Health
• Brand Imagery/Personality
• Usage
• Consideration
• Loyalty

Canada
Russia
Europe
United States
China
Japan
Mexico
Taiwan
India
Venezuela
Philippines
Malaysia
Columbia
Indonesia
Brazil
Chile
South Africa
Australia
Argentina
3
4 Key Brand Pillars
DIFFERENTIATION The brands point of difference
RELEVANCE How appropriate the brand is to you
ESTEEM How well regarded the brand is
KNOWLEDGE An intimate understanding of the brand
Percentile Rank
A brands pillars are measured relative to all
other brands in the US brandscape
4
Pillar Patterns Tell a Story
Brand has captured attention and now has power to
build Relevance momentum or niche
Uniqueness has faded, price or convenience
dominant reason to buy commodity
R D
D R
Examples Mini Cooper iPod Smirnoff
Ice Gucci Odwalla
Examples Tylenol Blockbuster Xerox Lowes Van
Heusen
100
100
80
80
60
60
40
40
20
20
0
0
DIF
REL
DIF
REL
5
Relevance Is Cost Of Entry To Usage And
Consideration
1.0
Strong Relationship
0.8
0.6
Correlation With Relevance
0.4
0.2
0.0
Exclusive Usage
Overall Usage
Exclusive Consideration
Overall Consideration
Base BAV USA 2004
6
Differentiation Gets You Pricing Power, Word Of
Mouth And Emotional Loyalty
70
Recommend to a Friend
60
Worth a Premium Price
50
Brand Loyalty
40
Percent of Users That Agree
30
20
10
0
Level 0
Level 1
Level 2
Level 3
Differentiation
Base USA Adults 2004, brand users
7
Pillar Patterns Tell A Story
Brand is better liked than knowndesire to find
out more
Brand Is Better Known Than LikedLooking For
Better Options
K E
E K
Examples Pella Windows Trader Joes Lindt Coach
Leatherware
Examples Fear Factor Budget Rent-a-Car Spam Slim
Fast
100
100
80
80
60
60
40
40
20
20
0
0
EST
KNO
EST
KNO
8
in todays fast moving world, have the
requirements of brands evolved?
9
A significant proportion of current economic
growth is driven by intangibles - intangible
assets are now increasing 4 times faster than
hard assets
Market to Book Ratio for the SP 500 - 1983 to
2004 (Annual Average)
8
7
6.8
6.6
6
5.5
5.3
5
Market to Book Ratio
4.7
4.6
4.3
4.1
4
3.8
3.3
3.0
3.0
3
2.7
2.4
2.3
2.2
2.2
1.9
1.9
2
1.5
1.4
1.3
1
0
2004
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
10

Brands are the source of a large proportion of
these intangiblesBrands have a multiplier
effect impacting financial performance.

• Strong brands support potential for premium
  pricing
• Strong brands have more loyalty or resonance with
  their customers
• Strong brands create purchase consideration with
  new prospects and provide a pathway for rejecters
  to return
• Strong brands have option value.the permission
  to play in new categories and new geographies
• Strong brands are given forgiveness or the
  benefit of the doubt. Their value will not be
  significantly impacted when things go bad
• Strong brands generate higher returns from
  marketing expenditures

MarketValueof the company
Intangible Assets
Brands
InvestedCapital
11
Working with our academic partners, a significant
amount of work has been conducted over the past
18 months, dissecting how the various components
of brand operate

• Working with professors Natalie Mizik from the
  Columbia Business School and Robert Jacobson from
  the University of Washington School of Business,
  we modeled over 10 years worth of data from our
  BrandAsset Valuator Study in conjunction with
  SP 500 stock price trends.

BAV
CRSP
COMPUSTAT
f
New Learning



Brand Tracking
SP Accounting Performance
Security Prices Stock Returns
12
(No Transcript)
13
energy the consumer perception of brand motion
and direction
14
brands not moving are at risk of becoming
invisible
15
We found that the equity behind leadership brands
has evolved over the past decade
The Change In Leadership Today Vs A Decade Ago
140
120
Performance
Trustworthy
Traditional
High quality
Good value
Best brand
intelligent
Down to
Reliable
Earth
High
Average Percent Response Rate 2006 Indexed Vs 1997
100
Kind
Daring
Unique
Dynamic
Original
Charming
Carefree
Energetic
Different
Fun
80
60
Base BAV USA 1997 2006 Leadership Brands
16
A new Energy pillar added to our model Brand
metrics capture current and future performance
BrandAsset Valuator
LEADING
CURRENT
E
K
R
D
E
ENERGIZED BRAND STRENGTH
BRAND STATURE
Differentiation
Energy
Esteem
Relevance
Knowledge
17
Energized Brand Strength is key to Creating
Future Value
Stock Market Valuation
Economy-wide and firm-specific risk factors


Future Earnings

67
33
Current Earnings
BrandAssets
Energized Brand Strength
Brand Stature
DIFFERENTIATION
ENERGY
RELEVANCE
ESTEEM
KNOWLEDGE
18
The leverage of Energized Strength in creating
value
Energy strength adds incremental explanatory
power to traditional financial metrics
standardizedeffect onmarket valueof a firm
Source Collaborative study between Young
Rubicam Brands,R. Jacobson (University of
Washington Business School) and N. Mizik
(Columbia Graduate School of Business)
19
Energized Strength FundEBS fund nets 15,574.70
(55.75) vs. SP500 12,353.67 (23.54) on
10,000 initial investment made 5 years ago
16,000
15,000
14,000
13,000
12,000
SP 500
11,000
EBS Top
10,000
50 Index
9,000
8,000
7,000
6,000
Apr-02
Apr-03
Apr-04
Apr-05
Apr-06
Dec-01
Aug-02
Dec-02
Aug-03
Dec-03
Aug-04
Dec-04
Aug-05
Dec-05
Aug-06
Dec-06
20
Energy Is A Kicker
Energy
Increases consideration
For Brands that have
Increases Loyalty
High Differentiation Low Relevance
100
80
60
20.9
20.7
40
20
0
DIF
REL
Low Differentiation High Relevance
100
80
60
26.2
54.0
40
20
0
DIF
REL
High Differentiation Low Relevance
100
80
60
30.4
37.0
40
20
0
DIF
REL
21
While Differentiation And Relevance Are
Independent, Energy Can Drive Both
France
Peru
Russia
0.8
1.0
0.9
Consumer Electronics
Auto Care Related Products
Delivery Companies
Financial Services
Retail
Travel
0.8
0.7
Wireless
Motorized Vehicles
Beverages
Consumer Electronics
Internet
0.9
Non-Gov Organizations
Cigarettes
Household Products
0.7
0.6
Magazines Newspapers
Electronics
Computers
Apparel Accessories
Household Goods
Retailers
Non-Alcoholic Beverages
Countries
Financial Services
0.8
0.6
Appliances
Apparel Accessories
Sports Equipment
Appliances
Packaged Foods
0.5
Cigarettes
Miscellaneous
Alcoholic Beverages
Personal Care Products
Television
Alcoholic Beverages
Countries
Retail Stores
ENERGY ON DIFFERENTAITION
ENERGY ON DIFFERENTAITION
0.5
ENERGY ON DIFFERENTAITION
Cameras
Household Products
Communications
Automotive
Auto Care Products
Corporations
0.4
0.7
Schools
Food
Wireless Communications
Fashion Accessories
Motorized Vehicles
0.4
Airlines
Corporations
Personal Care
0.3
0.6
Computers
0.3
Periodicals
Restaurants
Countries
0.2
Personal Care Products
Movies
Corporations
0.2
Radio
Apparel
Celebrities
0.5
Airlines
Games Lotteries
0.1
Hotels Travel
0.1
0.0
0.4
0.0
0.0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1.0
0.0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1.0
Correlation of Energy with Differentiation and
Relevance by category
22
Energy is highly predictive of usage and
preference
high equity to energy ratios drive incremental
behavior and attitudes
2003 2004 change top usage 10 top
preference 4
energy
2003 2004 change top usage 3 top preference
1
momentum
awareness regard equity measures
Source BAV USA 2003-2004 Full Year All Adults
23
Energy captures momentum across countries and
categories
Brazil Beauty products
Italy - Fashion
China - Internet
14.0
17.5
12.0
12.0
15.0
10.0
10.0
12.5
8.0
8.0
Gaining in Popularity
6.0
10.0
6.0
4.0
4.0
7.5
2.0
R Sq Linear 0.43
R Sq Linear 0.51
R Sq Linear 0.44
0.0
5.0
2.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
0.2
0.4
0.6
0.8
1.0
0.6
0.7
0.8
0.9
1.0
1.1
1.2
Energy
Energy
Energy
24
In commodity markets, Energy can be the new
differentiator
RELEVANCE
Source BAV USA All Adults 2006FH
25
In commodity markets, Energy can be the new
differentiator
Cingular
100

• Resulting in
• Greater usage
• 1.63 times the average category usage
• Stronger consumer preference loyalty
• 19 greater emotional commitment
• 18 greater behavioral commitment

90
80
70
60
Percent Rank Score
50
40
30
20
10
0
DIF
ENE
Source BAV USA All Adults 2006FH
26
Energy attracts consumers, driving preference
France - Travel
UK - Computers
Germany - Supermarkets
30.0
40
60.0
25.0
50.0
30
20.0
40.0
Top Preference
20
30.0
15.0
10.0
20.0
10
10.0
5.0
R Sq Linear 0.39
R Sq Linear 0.44
R Sq Linear 0.58
0.0
0
0.0
0.0
0.5
1.0
1.5
0.3
0.4
0.5
0.6
0.7
0.8
0.9
0.2
0.4
0.6
0.8
1.0
1.2
1.4
Energy
Energy
Energy
27
Energy drives pricing power
Russia - Autos
Peru Non-Alcoholic Beverages
Germany - Computers
30.0
8.0
30.0
25.0
25.0
6.0
20.0
20.0
Pricing Power
4.0
15.0
15.0
10.0
2.0
10.0
5.0
R Sq Linear 0.592
R Sq Linear 0.367
R Sq Linear 0.538
5.0
0.0
0.0
0.4
0.6
0.8
1.0
0.4
0.6
0.8
1.0
1.2
1.4
1.6
0.2
0.4
0.6
0.8
1.0
1.2
1.4
Energy
Energy
Energy
28
But, price can be the barrier in converting
preference to usage
Relationship Between Brand Preference and Usage
100
99.0
97.7
80
72.5
68.7
60
Conversion of Preference To Usage
52.1
40
40.8
20
0
Soup
Toothpaste
Electronics
Hotels
Fashion
Autos
Increasing Category Price Variance
High
Low
Source BAV US, 2005
29
Energy can disrupt the price barrier, driving
purchase
Auto category
For a 10 improvement in Energy to Price Ratio,
Usage Increases by 9.3
Energy
Own/Lease
Price
30
Energy a more loyal consumer
China - Apparel
Russia Consumer Electronics
Peru Wireless Communications
0.7
1.5
0.8
0.6
1.25
0.5
1.0
0.6
Emotional Commitment
0.4
0.75
0.4
0.3
0.5
0.2
0.2
0.25
R Sq Linear 0.454
R Sq Linear 0.571
R Sq Linear 0.856
0.1
0.0
0.0
0.4
0.6
0.8
1.0
1.2
0.2
0.4
0.6
0.8
1.0
0.6
0.8
1.0
1.2
1.4
1.6
1.8
Energized Strength
Energized Strength
Energized Strength
31
Energy Drives Brand Loyalty
Even in a commodity category, brands with strong
Energy have twice the loyalty of the competition
Based on BAV Brand Loyalty Model Brand
Resonance
32
Brands with Energy dont have to be condemned to
category mediocrity

100
Trader Joe's
Starbucks
Target
Home Depot
JetBlue
80
Whole Foods
Average Specialty Retail
Average Big Box/Department Store
60
ENERGIZED BRAND STRENGTH
Geico
Bank Of America
40
Average Coffee
Average Supermarket
Average Bank
Average Insurance Company
20
Average Airline
0
0
20
40
60
80
100
BRAND STATURE
Base BAV 2006FH USA All Adults
33
Those brands with greater Energized Strength reap
benefit

• Geico achieved 2.8x the category momentum
• Home Depot achieved 3.1x the category preference
• Jet Blue achieved 2x the category loyalty
• Starbucks achieved 2x the category pricing power
• Target achieved 2.3x the category emotional
  commitment
• Trader Joes achieved 1.6x the category
  preference
• Whole Foods achieved 2x the pricing power
• Bank of America achieved 2.3x the usage

Base BAV 2006FH USA All Adults
34
Igniting Energy
35
vision

• brands with Energy have a clearly defined point
  of view

36
invention

• brands with Energy are full of new products and
  services

37
dynamism

• a brand will never generate Energy if it just
  repeats itself over and over

38
Igniting Energy
VISION What you aspire to be and stand for. BE
DYNAMISM How do you express yourself to the
target that constantly prompts them to consider
and reconsider you. SAY
INVENTION What you are offering that excites,
reward or challenges the status quo of the
market. DO
The Energy-Driving Idea is the strategic
imperative for how an enterprise can activate its
vision everywhere along the value chain. It
opens up the use of creativity to solve business
problems in whatever form or action is necessary.
39
vision
Think Different
invention
dynamism
36 more energy87 more loyalty 63 more original
than competitors
45 more unique 41 more independent32 more
daring
40
vision
to revolutionize the way people shop and trade

invention
dynamism
105 more energy449 more usage 141 more fun
than competitors
76 more trustworthy 53 more social 62 more
friendly
41
vision
democratize design
invention
dynamism
44 more energy69 more preference 36 more
innovative
than competitors
32 more trendy 22 more stylish 20 more good
value
42
Through execution a strong Vision, Target turned
around a commodity brand
Target
100
80
60
40
20
0
93
99
02
06FH
Base BAV 1993 - 2006FH All Adults
43
Vision Driven Brands
Base BAV USA 2006FY All Adults
44
Invention Driven Brands
Base BAV USA 2006FY All Adults
45
Dynamism Driven Brands
Base BAV USA 2006FY All Adults
46
Discussion
47
Appendix
48
Brands Are Plotted On Two Dimensions On The Power
Grid Leadership Brands Are Strong On Both
Energized Brand Strength And Brand Stature
Leadership High Earnings, High Potential
Unrealized Potential or Niche Low
Earnings, High Potential
Declining High Earnings, Low Potential
Energized Brand Strength (Differentiation,
Relevance Energy)
New
Eroded Seriously Challenged, Chapter 11?
Unfocused or Unknown
Brand Stature (Esteem Knowledge)
49
Some Examples
Starbucks, 97 - 05
America Online, 97 - 05
100
100
2001
2005
1997
1999
2003
1999
80
80
2001
ENERGIZED BRAND STRENGTH
ENERGIZED BRAND STRENGTH
60
60
1997
2002
2004
2005
2003
40
40
20
20
0
0
0
20
40
60
80
100
0
20
40
60
80
100
BRAND STATURE
BRAND STATURE
Base USA Adults 1997, 1999, 2001, 2003, 2005