The Brand Value Chain

The Brand Value Chain The Brand Value Chain The brand value chain is a structured approach to assessing the sources and...

The Brand Value Chain

The Brand Value Chain

The brand value chain is a structured approach to assessing the sources and outcomes of brand equity and the way marketing activities create brand value . It is based on several premises.

First, brand value creation begins when the firm targets actual or potential customers by investing in a marketing program to develop the brand, including product research, development, and design; trade or

intermediary support; and marketing communications.

Next, we assume customers’ mind-sets, buying behavior, and response to price will change as a result of the marketing program; the question is how.

Finally, the investment community will consider market performance, replacement cost, and purchase price in acquisitions (among other factors) to assess shareholder value in general and the value of a brand in particular.

The model also assumes that three multipliers moderate the transfer between the marketing program and the subsequent three value stages.

• The program multiplier determines the marketing program’s ability to affect the customer mind-set and is a function of the quality of the program investment.

• The customer multiplier determines the extent to which value created in the minds of customers affects market performance. This result depends on competitive superiority (how effective the quantity and quality of the marketing investment of other competing brands are), channel and other intermediary support (how much brand reinforcement and selling effort various marketing partners are putting forth), and customer size and profile (how many and what types of customers, profitable or not, are attracted to the brand).

• The market multiplier determines the extent to which the value shown by the market performance of a brand is manifested in shareholder value. It depends, in part, on the actions of financial

analysts and investors.

Sources: Kevin Lane Keller and Don Lehmann, “How Do Brands Create Value,” Marketing Management (May–June 2003), pp. 27–31. See also Marc J. Epstein and Robert A. Westbrook, “Linking Actions to Profits in Strategic Decision Making,” MIT Sloan Management Review (Spring 2001), pp. 39–49; Rajendra K. Srivastava, Tasadduq A. Shervani, and Liam Fahey, “Market-Based Assets and Shareholder Value,” Journal of Marketing 62, no. 1 (January 1998), pp. 2–18; Shuba Srinivasan, Marc Vanheule, and Koen Pauwels, “Mindset Metrics in Market Response Models: An Integrative Approach,” Journal of Marketing
Research, forthcoming.