A Conjoint Approach for Consumer- and Firm-Level Brand Valuation

Abstract

This article develops and tests a reduced-form, conjoint methodology for measuring brand equity. The proposed approach (1) provides objective dollar-metric values for brand equity without the need to collect perceptual or brand association data, (2) captures the effects of awareness and availability in the marketplace as sources of brand equity, (3) accounts for competitive reaction, (4) allows the mix of branded and unbranded firms to affect industry size, and (5) uses consideration set theory to project market share estimates from the conjoint experiment to the marketplace. Managers can use the approach to develop customized strategies for targeting customers, monitoring brand “health,” allocating resources, and determining the values of brands in a merger or acquisition. The empirical results suggest that the proposed metric for measuring consumer-level brand equity has convergent validity; in addition, the magnitudes and strengths of brand equity vary considerably across consumers and brands. At the firm level, the results show that previous methods are likely to overstate brand equity, especially for products with low market shares. Finally, the results show that the external validity for the proposed brand equity measures is high.