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The Measurement and Determinants of Brand Equity: A Financial Approach

Author

Listed:
  • Carol J. Simon

    (University of Chicago)

  • Mary W. Sullivan

    (University of Chicago)

Abstract

This paper presents a technique for estimating a firm's brand equity that is based on the financial market value of the firm. Brand equity is defined as the incremental cash flows which accrue to branded products over unbranded products. The estimation technique extracts the value of brand equity from the value of the firm's other assets. This technique is useful for two purposes. First, the assigns an objective value to a company's brands and relates this value to the determinants of brand equity. Second, the isolates changes in brand equity at the individual brand level by measuring the response of brand equity to major marketing decisions. Empirically, we estimate brand equity using the macro approach for a sample of industries and companies. Then we use the micro approach to trace the brand equity of Coca-Cola and Pepsi over three major events in the soft drink industry from 1982 to 1986.

Suggested Citation

  • Carol J. Simon & Mary W. Sullivan, 1993. "The Measurement and Determinants of Brand Equity: A Financial Approach," Marketing Science, INFORMS, vol. 12(1), pages 28-52.
  • Handle: RePEc:inm:ormksc:v:12:y:1993:i:1:p:28-52
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    File URL: http://dx.doi.org/10.1287/mksc.12.1.28
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    References listed on IDEAS

    as
    1. Hauser, John R. & Urban, Glen L., 1975. "A normative methodology for modeling consumer response to innovation," Working papers 785-75., Massachusetts Institute of Technology (MIT), Sloan School of Management.
    2. Griffin, Abbie. & Hauser, John R., 1991. "The marketing and R & D interface," Working papers #48-91. Working paper (Sl, Massachusetts Institute of Technology (MIT), Sloan School of Management.
    3. Green, Paul E & Srinivasan, V, 1978. " Conjoint Analysis in Consumer Research: Issues and Outlook," Journal of Consumer Research, Oxford University Press, vol. 5(2), pages 103-123, Se.
    4. George P. Huber, 1974. "Multi-Attribute Utility Models: A Review of Field and Field-Like Studies," Management Science, INFORMS, vol. 20(10), pages 1393-1402, June.
    5. John R. Hauser, 1977. "Testing the Accuracy," Discussion Papers 286, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
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