Assessing the Financial Impact of Brand Equity with Short Time-Series Data

In this chapter, we describe an approach to estimating the total long-term impact of brand perceptions on financial performance. The approach relies on modeling the stock market reactions to changes in brand perceptions and allows estimating their total impact even with limited time-series data. We present an application of the method to the Y&R Brand Asset Valuator (BAV) data. The analyses show that, on average, the bulk of brand impact on financial performance is realized in the future and the contemporaneous effects reflect only a small portion of the total impact. The analyses, however, also show considerable heterogeneity across industries: while in some industries the whole impact of brand asset occurs in current period only (restaurants), in other industries it occurs in future periods only (high-tech). Further, some components of consumer perceptions have differential effects in different industries. Returns to brand building, and to marketing efforts in general, should not be evaluated based on contemporaneous outcomes, but should rather be evaluated over a long-time horizon.