Marketing and Research Consulting for a Brave New World
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In a digital age we have such precise ad serving and performance measures that marketers yin yangare increasingly managing by short term effects.  One marketer told me her big challenge for a campaign tracking system was, “How do I quell the panic?!” Performance marketing is winning ad dollars and the upcoming annual ARF conference even has a focus area around the question “Does brand equity matter in a digital age?”

Marketers are getting confused by marketing in a digital age.

To understand the benefit of brand equity in a digital age, we need to clarify what it means in terms of the way that people decide.

Let’s start with Prof. Kevin Lane Keller succinct definition of brand equity, “the differential advantage from knowing the brand.”  If you think brand equity means you are the only brand someone would buy, you are looking for the wrong thing. Brand equity is an edge (small or large) based on brand familiarity associated with a relevant context. But in an era of self-directed consumer purchase journeys, an edge is actually a lot. You’d go to Vegas with odds tilted in your favor like that.

Consumers live in a world of a long-tail of choices…hundreds of channels where we used to have half a dozen, unlimited items in stock online rather than only what fit on the shelf, hundreds of sources of information not just those stores we can visit or friends we can talk to. So what do consumers do in the face of unlimited choices?

Just like the behavioral economists tell us, the first thing consumers do is choice reduction in everything they do. The familiar and trusted brand might not be the only option but it is one of only a few choices that are SEEN in any context at any stage in the journey…in search pages, on Amazon product pages, on store shelves. That’s big.

So net/net…a brand is a simplifying heuristic…the grand-daddy of all at simplifying choices. Brand equity can even be thought of as the percent of purchase journeys for whom YOUR brand plays a simplifying role.

And when your display ad pops up on a web page, it is more likely to be seen there too.  And that brings us to why even the media data scientists should care…they are trying to maximize response to ads but …most just don’t realize that brand equity is one of their biggest weapons because they do not have a consumer dynamics background nor reflect it in their modeling.

In that quest, here is important news; consumers who have a level of preference for a brand not only convert at higher rates, they are more responsive to advertising…in measurement terms, they have the highest ROAS (return on ad spend, defined as the INCREMENTAL lift in sales divided by INCREMENTAL media cost.)

Now extend that finding even further…bigger brands have more people who feel that way about the brand. That’s because the most fundamental law in marketing is that brands must have more loyals and more switchers whose group sizes are commensurate with brand size. If you are a big enough brand to have a large enough segment to target programmatically, you can really drive ROAS through the roof (ping me for white paper).

So, for the benefit of media pros focused on maximizing short term effects, let me paraphrase our brand equity definition…brand equity is the differential response to advertising from knowing the brand.  In fact, brand equity might be your best media weapon if you leverage it right with precision targeting.

Now where does brand equity come from?  That is where brand marketing comes in to tell your brand story, carefully crafted to be meaningful to a consumer in a given need context.  Your next step in managing the ad budget is to figure out how to BALANCE short term performance marketing with brand marketing…a problem I am currently working on with industry leaders to inform.

Does brand equity still matter is a digital age? Hell yeah…here are 5 ways brand equity matters to both brand marketers and media optimizers:

  1. Brands are the simplifying heuristic by which people navigate their time-starved world overloaded with choices
  2. It drives up short term response to advertising, making your spending more efficient
  3. It leads to loyalty-based segments that can be targeted and drive your ROAS through the roof
  4. Brand equity activates in context…How I feel about a Coke changes substantially at noontime on and is retrieved at consumption moments. while this is how brand equity works, it is not how it is  typically measured
  5. It creates a data exhaust of first party data (sign-ups, app downloads, etc.) that becomes a runway for highly successful marketing tactics.

I will be at the ARF event on March 27th and look forward to discussing this in person with you. Please ping me to meet up

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4 Responses to “Why brand equity matters even to performance marketing”

  1. Art

    Right on! The most misunderstood and under estimated driver of response –

    • joel rubinson

      thanks Art. this principle of ad responsiveness as a function of brand size is unknown to most…as is the relationship of brand loyalty and price elasticity. We know the principle from our Hendry days but it is nice to know that evidence from modeling in a digital age proves the truth of these principles and makes it more actionable by showing how the principle operates at a targetable segment level.

  2. Erich Joachimsthaler

    All correct, except that brand equity is NOT the differential response to ADVERTISING. You did not paraphrase Keller, you inserted “advertising”. Think Uber, Tesla, Airbnb, Google or Amazon or Netflix. Have these brands been built on advertising?

    • Joel Rubinson

      Erich, I took KLK’s definition as a polemic and proved a principle that is actionable and unknown to most(possibly including KLK but I have not asked him)…big brands will have higher ROAS IF they target loyals and switchers programmatically. This brings the worlds of performance marketing and brand marketing together for media scientists in a way they are not aware of. Whether or not a brand chooses to exploit this with advertising, is up to them. Irrespective of how they were built, I would note that today, Google, Amazon and Netflix actually have billion dollar marketing budgets. Uber also advertises (especially in a city that restricts Ubers to preserve the value of cab medallions.)