The Brand Scorecard: Linking Your Brand to the Bottom Line

By far the most common marketing measurement challenge today is linking investments in branding with bottom-line value creation. Without the certainty of near-term payback offered by direct-response and promotional options, brand building has to fight much harder for its share of the budget and meets with more skepticism along the way.

Unfortunately, in this regard marketers are often their own worst enemy. Rationalizations for branding investments are couched in terms like "increasing awareness" or "building brand preference" — intermediary outcomes that mean little to today's more activist CFO. When you talk about brand building, they hear Charlie Brown's teacher — "wha wah whaa, wah wah whaa." As Don Schultz of Northwestern termed it, "brand babble."

Successfully creating and selling your business case for brand building requires a better understanding of how brands build the bottom line in both the long and short term. That's where a good brand scorecard can really help.

Not to be confused with popular rankings of major brands (like BusinessWeek's Global Brand Scorecard or Forrester's Tech Brand Scorecard) or brand valuation (more on that later), a brand scorecard is a management tool that allows you to keep an eye on how your brand is playing in the marketplace — but in terms that actually impact the results that are important to you, such as trial purchase, sales, and other desirable outcomes. As you pull various marketing levers — advertising campaigns, pricing decisions, distribution strategies — the brand scorecard allows you to watch their impact over time on the brand and the business. The scorecard thus serves as a key component of the marketing dashboard. [See our special issue on marketing dashboards, vol. 1, issue 6, page 8.]

Whereas the marketing dashboard tends to look at things more from the company's point of view — "What investments are made in programs and initiatives and what should I expect to get out in terms of customer behavior?" — the brand scorecard asks, "What do our major constituencies of interest think and feel about our brand and how well is our brand supporting our desired value propositions?"

The role of the brand scorecard within the marketing dashboard is to reflect the evolution of brand assets and continually gauge the potential value of the demand they represent. For this unique reason, we recommend setting up the brand scorecard as a separate-but-linked portion of the overall marketing dashboard. Doing so helps to highlight both the input/output importance of the dashboard and the asset-nurturing insights of the brand scorecard.

The Problem with Brand Scorecards Today
If you ask 100 companies to show you their brand scorecards (and we have), 20 will look at you quizzically, another 20 will show you elaborate consumer surveys of brand attribute ratings, and the remaining 60 will pull out a research summary of the latest scores on the classic "hierarchy of effects" waterfall:

— 74% of consumers are aware of the brand on an unaided basis
• 61% indicate an overall favorable impression of the brand
→ 47% indicate a willingness to try the product
... and so on.

The problem with this typical example is that it never actually connects awareness or preference to value creation, and as such is seen by the CFO and the rest of the finance department as "marketing mumbo jumbo" used to justify spending money.

Awareness without salience is a useless achievement. Each of us is personally aware of a great many companies that we know nothing about. We don't know what they make or do and, even if we do, we have no clue as to why we might want to buy their product or service. We have awareness of these companies, but no salience to that awareness that places it into a proper context for us.

Salience itself may have multiple levels. I may know IBM makes computers, but I may not know they make the kind of Web servers I need for my company. Or maybe I know they make Web servers, but I think they offer solutions only in the high-performance/high-price end of the market.

"Preference" also has many potential dimensions and degrees. I may "prefer" to drive a Jaguar, but have no realistic hope of ever being able to afford one. I might thereby "prefer" the Hyundai to the Kia, but do I really "prefer" the Hyundai? Brand preference is of little value absent the proper context. My preference for a given brand should be measured within the context of those that are physically available to me and within my affordability zone. Preference should also be measured in a temporal context — relative to the point in time when I am most likely to translate my attitudes into behavior and buy.

When it comes to willingness to try the brand, the wheels really come off. Just because I'm willing to try it doesn't mean I ever actually will. Maybe if I get a coupon for 50% off I'll consider it, but if it's not available where I normally buy, my willingness is strictly theoretical.

Purchase intentions are only valid when the prospective customer has the appropriate salient awareness, knows where to buy the product, understands what the tradeoffs are within the competitive set, and has the money and desire to act.

There's little doubt that salient awareness, contextual preference, and qualified purchase intentions can be valuable indicators of the potential economic value of the brand. But until they are unlocked and flowing freely from the minds and hearts of the customers to their wallets and into our company treasury, we must find a way to measure them for what they are: Accumulated goodwill toward the brand that has not yet translated into a financial outcome. This is where the brand scorecard comes in, actually allowing you to measure the subtle nature of customer perception.

What's in a Brand Scorecard?
Every company and possibly every brand will have its own view of the most crucial components of the customer's brand decision process. Regardless of the approach you are using (or if you're just starting out), the key consideration is to find the elements that are most predictive of the future behavior of prospects and customers.

In general, there are four dimensions of brand measurement that tend to bind the customer to the brand:

the functional performance of the underlying product or service;
the convenience and ease of accessing the product or service;
the personality of the brand (a.k.a. "the one for me"); and
the pricing and value component.

The combination of functionality, accessibility, personality, and value attributes of the brand often provide a well-rounded picture of how well the brand asset is growing and how much untapped cash flow is waiting to be unlocked.

Functionality
Is the product of sufficient quality? Does it work as promised? Is it more durable, more flexible, more efficient, more yellow, more professional, or more appropriate to the intended task than perceived substitutes? Each brand is intended to deliver a combination of functional benefits to the user, be it toothpaste, financial services, or silicone polymers. The brand scorecard should reflect how well these functional elements are perceived by the experience of regular customers versus the newly acquired customers and how they compare to the perceptions of the imminent prospects versus those in the target audience at large.

Convenience/Ease
Can I get it at my local mass merchant? Do I buy it on the Web? Will an agent come to my home? The degree to which prospects are aware of how they would acquire or access the brand and their perceptions of the acceptability of that avenue are all important components of the brand asset value. Likewise, the perspectives of the current customers on the ease of access through the present distribution channels provide an important opportunity to validate or question the current business process.

Personality
As marketers, we all understand how one soft drink might have a different "personality" than another. For many years now, marketing researchers have used personification exercises to get consumers to describe a product as male/female, young/old, progressive/conservative, outgoing/shy. Corporate brands also tend to have key personality traits like "reliable," "trustworthy," or "innovative." If you can establish that certain personality profiles, when attached to your brand, actually increase the flow of prospects becoming customers and customers buying more, then those critical elements should be on your brand scorecard.

Price/Value
Last, and certainly not least, brands often exist for one primary purpose — to differentiate competitive offerings and prevent commoditization of the market. Brands are used to imbue certain companies or products with a premium value perception that commands a premium price. In other categories, brands are used to capture the consumer gratitude for being the lowest-priced provider. In either extreme, or at any point in the middle of that spectrum, every brand has a price/value component to it that is either the bedrock of its success or is a requirement to compete effectively. This "absolute price" perception is often worthy of tracking on the brand scorecard. The second dimension of pricing is the "relative price" — a measure of the extent to which prospects and customers perceive that your brand offers good "value for the money." Continuously gauging the relative price perceptions is an effective way to quickly identify opportunities for market or margin share increases.

What is often thought to cause people to purchase — Brand A seems to do the job better than Brand B — quickly goes out the window when the consumer's local store only stocks Brand B. If this is common in your category, availability of the product can be a more important scorecard metric than one that measures the degree to which the customers believe your brand has a special functional characteristic or has a personality "like me."

Sometimes it's sufficient to have your brand just penetrate the competitive set and then out-execute the competition on distribution or packaging. Knowing what really drives your brand category is critical to selecting the scorecard metrics that will be both most diagnostic and most predictive of future success.

Timing Your Measurements
Brand perceptions aren't static — consumer loyalties can last over a lifetime or end in a few short days. And that often runs counter to a company's own brand perception, which can remain pointlessly unchanged. Most companies, even many with huge research budgets, don't carefully monitor the clarity, or lack of clarity, their brand has with customers and prospects at any given point in time. A brand value proposition that made a lot of sense under one set of industry circumstances may degrade to irrelevance and become a commodity position if it stays too long in one place.

Most often, brand attributes are monitored in large-scale tracking studies conducted in waves three, six, or 12 months apart. If your category evolves faster than the frequency of your tracking studies, these periodic reads may provide irrelevant historical information and present a picture that bears little resemblance to today's reality — especially when you consider that it often takes four to six weeks from the end of survey fielding until the report gets on your desk.

Many organizations are today migrating towards "continuous" brand tracking, with smaller samples fielded each week or month that are then read in the aggregate over a rolling six, eight, or 12 weeks. While a bit more expensive, this approach can repeatedly check the temperature of customers and prospects to ensure you are maintaining a healthy relationship, in addition to potentially measuring the impacts of marketing stimulus programs on brand attributes with greater reliability.

The bottom line is you need to clearly know what your brand is and what it means to the target customer. If you don't, you are prone to serious over- or underestimations of your brand strength. Without an effective brand scorecard, you might not have an accurate picture of where your brand stands or where it's headed. With one, you have no excuses not to.

Brand Value vs. Brand Valuation
To be a useful tool for organizational planning and resource allocation, the brand scorecard needs to go beyond attribute ratings and incorporate a second key measurement — an understanding of brand value.

As we mentioned earlier, there's a difference between "brand value" and "brand valuation." Brand value is the strategic and financial value of the brand to your company today. Brand valuation is a financial exercise intended to put a price on the brand over and above the discounted future cash flows. The difference can be subtle. Tim Ambler of the London Business School uses this metaphor to describe the two: "Since I live in my house and plan to do so for some time, its value to me is the shelter and comfort I derive from it. When I'm prepared to consider selling it, I'll be interested in the valuation." Brands work much the same way.

Brands create value for companies in several ways:

They create customer loyalty, resulting in a lower cost of customer reacquisition and greater likelihood of future sales from existing customers.
They lower the perception of risk the company presents to the financial marketplace, resulting in lower borrowing or financing costs.
They establish negotiating leverage with suppliers and vendors who seek to be associated with them.
They establish the perception of continuity of cash flows into the future amongst investors, thereby increasing the multiple over the company book value that investors are willing to pay for stock.

If these dimensions of brand value are relevant ways for you to gauge the potential return you will create by investing in brand development activities, then they should be reflected on your brand scorecard. You may choose to reflect it in competitive comparisons of expected customer lifetime value, perceptions of company "quality" amongst investors and analysts, an index of company borrowing costs that isolates brand contributions from other marketplace and company variables, or a survey of brand influence within the vendor community.

Brand valuation, on the other hand, may be relevant to you if your portfolio of brands includes some acquired from other companies, or if you anticipate selling one or more brands at some point in the not-too-distant future.

Accounting regulations in the United States and many other countries require companies to keep close tabs on the "goodwill" assets they carry on their balance sheets from past acquisitions. As a result, companies with acquired brands often need to continually monitor the value of those brands on their brand scorecard to prevent any sudden surprises in earnings.

Similarly, if your company anticipates selling itself in the whole or just selling one or more brands in its portfolio, a brand scorecard can help you begin tracking brand valuation over the period leading up to the sale to understand which potential investments help increase the valuation and which might actually detract from it.

If you're not marketing acquired brands or planning on selling your own, the remaining reasons to do brand valuation are mostly tax or technical/financial and likely not important for a brand scorecard.

Identifying Your Key Audiences
The first step in developing a successful brand scorecard is identifying your key constituencies. They might include, at a minimum:

customers,
employees,
society, and
investors.

1. Customers. No matter what your business or industry, customers are your most influential audience. If your brand is not strong and positive in the eyes of current or prospective consumers, they will not be purchasing your products or services. That seems obvious.

2. Employees. Employee perspectives on the brand are particularly important in service and retail industries as associates are increasingly asked to play ambassadorial roles. Many companies consider the entire associate population to be "brand managers" as they define the ultimate customer brand experience in their attitudes and actions. Elements like brand understanding, pride of association, and referral willingness or behavior are terrific indicators of the quality of brand equity amongst the employee population.

3. Society. Society is the place where the brand and corporate reputation intersect. Is the brand considered to be a good corporate citizen? Is it known as an active, contributing member of the community? These measures are often seen to be like placing water into buckets in advance of a fire breaking out. When something adverse happens in the marketplace, the media will relentlessly whip consumers into a frenzied call for heads to roll. If you haven't stored up goodwill within the community, one minor event can spiral out of control and cost billions in lost sales and market value. Companies who depend upon a broadly known corporate brand, like Wal-Mart or Citigroup, must constantly measure within societal and regulatory areas. A brand like Tootsie Roll, on the other hand, has far less to worry about how society views it.

4. Investors. Not only is it related to the short-term cost of borrowing as we discussed above, but somewhere built into the investor's perspective is the quality of management. This is where lists like Fortune's "Most Admired Companies" come in. While this is often a lagging indicator (behind customers and employees), it is nevertheless highly correlated with premium company valuation.

Depending on the nature of the brand in question, these four constituencies may be more or less relevant, and you may have other audiences (like regulators, channel partners, or suppliers) not listed here that are particularly vital to your business. If your CEO has emphasized the importance of any or all of these constituencies in your company's success plan, make sure to reflect the important diagnostic and predictive elements of it on your brand scorecard.

Finding the Drivers of Success
Now that you have the framework for the many dimensions of brand equity that might be important in creating asset value, how do you tell which ones are the most predictive of financial outcomes?

The most common approach is attribute correlation and covariance.

To begin, let's say you have a tracking study out in the market in which you've identified 15 key brand attributes and have a sampling of customers and prospects rating your brand versus competitors on each attribute. You survey a hundred people each month and read the results on a rolling three-month basis.

Your tracking study should include gathering self-reported information on the volume (and/or type) of purchase activity each respondent has had in the category for the past month, quarter, year — whatever timeframe is relevant to purchase cycles in your category. You are interested in understanding the purchase patterns across you and your competitors.

Now, using statistical regression techniques, you can correlate brand attribute ratings to purchase activity or purchase intentions to identify the attributes that are most strongly associated with increased category or brand purchase behavior.

Simple, right? Hardly. There are a great many places where this approach can get derailed or become seriously misleading.

First off, self-reported purchase behavior can be significantly different from actual purchase behavior. Sometimes people forget how much they bought and which brands. Other times they tell little white lies to protect themselves from the judgment of others (even the interviewer). If you can connect a specific individual's survey responses back to that person's actual purchase behavior as reflected in your transactional files, you can close the gap somewhat. If not, you might consider conducting a separate study specifically amongst a group of category consumers and check to see how self-reported behavior varies from actual purchases, then use that as an error factor to adjust what you get from your tracking studies.

Second, attributes are commonly lumped together by consumers into positive and negative buckets, making it difficult to see any one attribute as a real driver to a greater degree than others. This is the covariance effect — a statistical term indicating the extent to which two or more elements move in the same direction. Sometimes it's helpful to group attributes with high covariance into "factors," or higher level descriptions. For example, the attributes "offers good value for the money" and "is priced competitively" might be grouped into a factor called "price appeal." As long as you aren't grouping too many attributes together into a few still undistinguishable factors, you can still get a strong feeling for which elements of the brand scorecard might be most important.

Time and again interviews with researchers suggest that the best approaches start with exhaustive qualitative research amongst customers and prospects to identify the possible list of driver attributes and articulate them in ways that are clear and distinct to survey respondents.

Done correctly, this effort can help focus the brand scorecard on the specific aspects of brand equity that have the greatest potential to drive incrementally profitable customer relationships.

Permission: The Brand Frontier
To create a really well-rounded brand scorecard, you may also want to think about measuring brand permission: the degree to which the target customers would be receptive to seeing the brand associated with new or related products or services. Before you extend a powerful brand into new areas, you need to clearly know what your brand is and what it means to the target customer.

One example of a failure to secure consumer permission was Reebok's decision to market their own brand of bottled water. Reebok thought that Reebok stood for health; in reality, it stood for running shoes. Why would anyone want to drink water out of a shoe?

Similarly, Virgin had a history of success going into industries where they could play Robin Hood against the fat cats, which worked well in airlines and financial services, where consumers perceived they were being ripped off. So when Virgin took a look at the cola industry and saw a tyrannical oligopoly, they figured the time was right to come in and give the consumer more choice. But while the cola industry is in fact oligopolistic, consumers weren't feeling ripped off. Virgin had no "permission" from the consumer to be in that industry, and Virgin Cola failed.

The Big Payoff
A well-designed and highly functioning brand scorecard can make the CMO's life much easier. You will have a constant finger on the pulse of your brand's value in the mind of your customers — and a direct connection to the business results the brand is driving. As the critical brand attributes show continuous improvement, you can increasingly predict future economic success with confidence.

The brand scorecard is how marketing builds bridges to finance and the rest of the executive committee. Integrated into a more comprehensive marketing dashboard, it will not only help promote better understanding of marketing ROI, but build the accountability and credibility necessary to run today's complex marketing organizations.