The Relationship Between Brand Equity And Sales

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The Relationship Between Brand Equity And Sales

Straford Rodrigues, partner in brand and marketing ROI analytics practice at Kantar, discusses why sales might decrease but brand equity does not, and what brands can do about it.

Let us look at a scenario where sales are decreasing, and brand equity is increasing or flat. There are two possible reasons for this (outside of a seasonal decline in brand and category sales).

A price increase

Higher prices might lead to a reduction in sales volume, but they can also build perceptions that increase brand equity. Price increases may be part of a strategic plan to become a ‘premium’ or ‘higher-quality’ brand or it may just be the business passing on higher costs to its customers. As a marketer, one needs to assess the potential implication a price increase could have on sales volume.

The question is: would you like to attract a succession of price-sensitive, one-time consumers, or would you prefer ones who stick with your brand and continue to be ‘repeat purchasers’? An increased price could lead to a loss in consumers and therefore sales, but the brand still has strong equity, which in turn could lead to higher profits.

A reduction in the media pressure

Low quality/weak creative, reduced media weight (reducing share of voice), or changes in media flighting/phasing could result in a decline in sales, but brand equity may stay the same (at least in the short-term.) To better diagnose why this might be the case, it is important to look at sales as ‘base vs. incremental’ when comparing to brand metrics.

As we know, incremental brand sales reflect the short-term response of the brand, whereas base brand sales reflect the long-term equity of the brand. Stronger brands are usually able to sustain base sales despite a change in strategy. Signals of short-term and long-term sales impact (effectiveness drivers) typically reside in different brand KPIs, varying by category involvement, brand status and competitive activity. This gives us a view on which brand perceptions drive short-term volume and which drive long-term brand predisposition or both.

At Kantar, our experience has led us to a set of short and long-term metrics that are indicative of ‘base vs incremental’ movements in sales.

Short-term metrics: drivers of mental availability or salience e.g. communications awareness, top of mind, unaided awareness and rational brand associations.

Long-term metrics: brand affinity, emotional brand associations, purchase intent/consideration.

Short-term vs. long-term metrics often turn out to be complementary, not contradictory.

A decline in sales is always a cause for concern

Sales could be dropping due to a decline in short-term brand metrics (while long-term metrics are holding up), as changes in the strategy may not have translated to equity changes. The good news is this can quickly be reversed by identifying the cause and addressing the problem.

For example. if it is a creative issue, it would be essential to change elements within the creative, the message or the execution itself. It could be due to a decline in long-term brand metrics (while short-term metrics are holding up or even increasing). This is a bigger cause for concern, as it might reflect changing attitudes to the brand (despite the growing awareness), which will in time translate into (more) declining sales.

KANTAR 
kantar.com