August 2008 Newsletter

Newsletters

We use our newsletters to share new research and new ideas with the research community. Issues include white papers on a variety of subjects, notes on recent TRC studies, highlights from our Insightology blog, and announcements about upcoming TRC conferences and services. Check out past issues, or sign up to receive new ones.

August 2008 Newsletter

August, 2008

Insightology
	Can owning an iPod make you more creative? How about just looking at one? New research points out how brands and the attributes associated with them can affect our behavior in not so obvious ways. Plus, "rock, paper, scissors" - it's not just for kids anymore. Want to know more? Check out the latest discussions and articles from Rajan's desk. Return to top
Practitioners' Place
	Measuring the value of a brand We know that strong brands help companies win in competitive marketplaces, yet it's difficult to pindown the extent to which brands influence consumer choice. How can we make tangible the intangible value of a brand? How can we optimize brand expenditures relative to other important product attributes? Discrete-choice can help. Read more about it in the latest TRC White Paper. Return to top
From our recent work
	Telematics has room to grow, particularly in households with young drivers. A recent TRC study explored the market for this family of technologies and discovered practical and emotional benefits of adoption. The findings have implications for device manufacturers, auto companies, and insurance carriers. Click on the above link to explore more details from this research. Return to top

News & Announcements

Be sure to register for TRC's latest conference, Making Research Relevant: Using Research To Drive The Business. The one-day session will be held September 24, 2008 at The Union League in Philadelphia and all conference attendance fees will be donated to Philabundance - an organization dedicated to hunger relief. Slated speakers are Vikas Mittal and Paul Dholakia of Rice University's Jones School of Business and TRC's own Chief Research Officer - Rajan Sambandam. Space is limited. To register or for more information, click here.

New multi-sponsor research evaluating Call Center Performance in the Utilities industry. If your efforts to improve call center performance have not yielded the results you expect, your customers may hold the answers. Our latest multi-sponsor effort is coming soon. Contact This e-mail address is being protected from spambots. You need JavaScript enabled to view it to learn more.

Ever taken office supplies?

Give a little, take a lot?
About half of companies (45%) provide free coffee - a step that should encourage good will, right? Maybe not. Thirty-eight percent of employees who enjoy free coffee also help themselves to office supplies from time to time, while among the "no free coffee" firms just 22% of workers admit to stealing supplies. Have questions? Answer Junkie can get the answers.
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To access the full library of TRC's White Papers click here.
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HOW TO MEASURE THE VALUE OF A BRAND

White Paper Series

What is the value of a brand? How can we measure the value of a brand? A simple way to look at this problem is to ask "if two brands had exactly the same features, would both be perceived equally by consumers?" If there are differences in the way they are perceived then what leads to that difference? Inevitably, the answer is the intangible value inherent in the brand name. It could manifest in the form of positive image, higher market share or even a price premium. But how can we measure the intangible value of a brand? Simple methods such as ratings of a brand’s attractiveness (either in the form of a single question or an index) will not distinguish the impact of tangible features and brand intangibles. What is required is an approach that can make this distinction and indicate the pure value of the brand in dollar terms. In this discussion we will take a look at how such brand value (often referred to as brand equity) can be reliably measured.

The basic problem in measuring the value of a brand is the degree to which one can control for the influence of various extraneous problems. The extent of these problems can vary by category. For example, if one were interested in understanding the brand value (or lack thereof) of private label brands (or store brands) compared to national brands in the breakfast cereal market, a simple experiment can be run. In this experiment one could switch the contents but not the packaging of the various cereal brands being tested, to measure the impact of the brand name. The problem becomes more difficult when we talk about complex services such as hotel chains or cell phone service. Simply switching packaging is no longer an option. So what can we do in these cases?

The answer lies with a technique called discrete choice conjoint analysis [for a more detailed explanation see the article Deriving Value from Research: The Use of Conjoint Analysis for Product Development]. It is a trade-off based method that requires consumers to make choices based on the product combinations provided. The pattern of choices made provides us with enough information to identify the relative importance of the various features being tested. Once we know this information it is relatively straightforward to hold the impact of the various features constant and identify the actual impact of the brand name on respondent choice. This approach can be used as long as the product or service in question can be described using tangible features.

Example
Two separate studies were conducted using a web panel to measure the value of a brand. The first example is from the hotel industry. Business travelers completed a discrete choice conjoint exercise where product bundles were described using hotel brand name, proximity to destination, restaurant location, presence or absence of gym, Internet access, rewards points and room rate. Importance scores were calculated for each of these features based on the choices made by the respondents and are given in Table 1. Note that brand is not the most important feature on which choice decisions are being made.

Table 1
Features	Importance
First	20
Second	19
Third	18
Brand	16
Fifth	12
Sixth	9
Seventh	7

Next, in order to calculate the value of the brand, a simulation was run where all five products are specified in exactly the same way except for the brand name. So effectively, it is like a market where there is no product differentiation whatsoever except for the brand name. This resulted in each brand having a different share of preference, but the differences in preference are now based solely on brand name. This is how we control for the effect of other features. Next we need to translate this difference in preference to difference in price premium. To do that, we change the prices for each brand in such a way that the shares are made equal. Once the shares of preference are equalized by varying the room rates, we are able to identify the different room rates that each brand could charge for exactly the same product. This information is given in Table 2 and shows the price premium enjoyed by the Brand B in this market place.

Table 2
Brand	Room Rates ($)
A	182
B	195
C	152
D	162
E	157

What this means is that for exactly the same features, Brand B would be able to charge a premium of $13 a night more than the next highest brand (A) and a premium of $43 a night more than the lowest value brand. Such an advantage can turn into substantial revenue differences over the course of a year between these brands. This is true even when brand is not the primary criterion in the choice.

The second example comes from the cell phone industry. Cell phone users were asked to make choices between various cell packages described by cell carrier brand name, price per month, length of contract, free minutes per month and cell manufacturer brand name. Based on the choices made importance scores were calculated for each of these features and are shown in Table 3.

Table 3
Features	Importance
First	35
Brand	20
Third	19
Fourth	16
Fifth	10

As in the previous example, price premiums were calculated (using price per month) and are shown in Table 4 and show the advantage enjoyed by Brand A.

Table 4
Brand	Price ($)
A	56
B	46
C	47
D	50

Here brand A enjoys a $6 per month advantage over the next best brand and a $10 per month advantage over the least valuable brand name.

As these examples illustrate, it is possible to measure the impact of brand only, when controlling for the impact of tangible features. The results can be put to good use by a company, either in the form of increasing market share or improving profit. Brands that don’t enjoy a price premium in the market (i.e. whose brand names are not valuable) will need to improve their performance on tangible features or communicate better to gain an advantage.

When embarking on research of this nature, it is important to understand that there are limitations. The shares of preference and the subsequent value of the brand are fully reliant on the features that have been used in the study to describe the product category. Exclusion of an important feature can easily distort the results. For example, in the hotel case study let us assume that Internet access was not included as a feature. Let us further assume that this was an important feature on which customers base their choice. Results from the work that would essentially apply to a world where Internet access does not matter and therefore would not be a true representation of the marketplace. Further if there is a brand that is especially good at providing this service and has built a reputation based on that, then its impact will be underestimated.

For brands in various categories there is a need to understand and measure the pure value offered by the brand name. The approach described in this discussion can be very helpful in achieving that goal. Of course, this method can also be used to understand the value of any feature, not just brand.

To access the full library of TRC's White Papers click here.

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CONSUMER REACTIONS TO TELEMATICS
TRC, in concert with a number of insurance carriers, surveyed consumers to explore their knowledge of and reactions to Telematics - defined in this research as a range of technological capabilities including GPS-enabled vehicle location, real-time driving directions, direct communications between drivers and service centers, the tracking of driving behavior and quality, and vehicle maintenance monitoring. The survey focused particularly on the potential of Telematics to improve driving quality. Results help illustrate the potential for growth in this marketplace and the opportunity for insurance companies to differentiate themselves moving forward with respect to Telematics products and services. Details on some of the study's key findings are provided below. The Telematics market is fast-growing and not yet saturated, with about half of owner/users acquiring the technology within the past 12 months (survey conducted in mid '07) (Chart 1). Two factors appeal to a majority of non-users: "real time driving directions" and "communication between vehicle occupants and customer service reps who can send help". The former represents a key practical benefit of Telematics; the latter an emotional benefit of having the technology (Chart 2).	Few agree that the use of Telematics could improve driving behaviors. Still, there is openness to the general concept of third-party monitoring, particularly among households with younger (15 to 24-year old) drivers or those with soon-to-be drivers. Most appealing are applications geared towards the monitoring of maintenance and safety, and towards saving money. The use of Telematics to enable "more accurate pricing" by insurance companies is not as well-received (Chart 3). Key takeaways: Opportunities exist within the Telematics space for Insurance carriers and other third-parties. The most attractive target for vehicle monitoring and insurance-related Telematics applications is households with young drivers. The strongest case for carrier use of Telematics would link monitoring of young drivers with the ability to connect with a service center in case of accident. Parents can feel safe and secure in their childrens' whereabouts. Two obstacles for carriers - suspicion as to their aims and only a weak sense among consumers that their auto insurance provider could offer this technology. Telematics - defined in this research as a range of technological capabilities including GPS-enabled vehicle location, real-time driving directions, direct communications between drivers and service centers, the tracking of driving behavior and quality, and vehicle maintenance monitoring. Results for many other Telematics-centric questions were obtained from this study. For more information, or to discuss Telematics or insurance research issues in greater detail contact This e-mail address is being protected from spambots. You need JavaScript enabled to view it , TRC's Director of Insurance Research, by email or at 215.641.2250.
About the study This study was conducted among 814 insured drivers aged 18 or older. One-hundred ninety (190) were current Telematics users; 624 were non-users and 267 were non-users with a young driver (aged 15-24) or a soon-to-be driver (within two years) in their household. Sample was drawn from TRC’s web panel, which is generally representative of U.S. households with web access.