Case Study:
Consumer Electronics Brand Equity Valuation
Challenge
A leading global consumer electronics brand wanted to evolve the valuation of its brand equity from a nebulous concept based on perceptual metrics to actual purchase behavior based on the intrinsic premium that the brand commanded in the marketplace.
Our Custom Approach
We designed a discrete choice (conjoint) study to mimic typical consumer buying behavior in the given product category. It measured the importance of key attributes in driving product choice (brand, form, key category benefits and price). By simulating the underlying choice data, we estimated preference shares for the leading competitive brands as well as a store brand, which was used as a proxy for an unbranded product.
We then simulated the price point at which the client’s brand achieved an equal preference share as the store brand with the same exact form and category benefits. This represented the price premium that the client brand commanded vs. the store brand (unbranded) product. We quantified it as its price premium as a percentage of its overall sales.
We estimated the financial value of the client brand’s price premium using its five-year sales projection and calculated its Net Present Value, using the company weighted average cost of capital. This was, in essence, the financial value of the brand’s equity, manifested as the price premium that consumers were willing to pay for the brand vs. a comparable store brand.
Business Implications
By quantifying the financial value of the brand’s equity, the client was able to represent the brand equity as an asset using the same currency as its other assets.It reinforced the value of brand equity and why it should be protected and sustained by investing in brand building efforts.