The brand value chain is a structured approach to assessing the sources and outcomes of brand equity and the manner in which marketing activities create brand value. The brand value chain is based on several basic premises.
The brand value creation process begins when the firm invests in a marketing program targeting actual or potential customers. Any marketing program that can be attributed to brand value development, either intentional or not, falls into this category — product research development, and design; trade or intermediary support; and marketing communications.
The marketing activity associated with the program affects the customer â€œmind-setâ€? with respect to the brand. The issue is, in what ways have customers been changed as a result of the marketing program? This mind-set, across a broad group of customers, then results in certain outcomes for the brand in terms of how it performs in the marketplace. This is the collective impact of individual customer actions regarding how much and when they purchase, the price that they pay, and so on.
Finally, the investment community considers market performance and other factors such as replacement cost and purchase price in acquisitions to arrive at an assessment of shareholder value in general and the value of a brand in particular.
The model also assumes that a number of linking factors intervene between these stages and determine the extent to which value created at one stage transfers to the next stage. Three sets of multipliers moderate the transfers between the marketing program and the subsequent three value stages — the program multiplier, the customer multiplier, and the market multiplier.
The program multiplier determines the ability of the marketing program to affect the customer mind-set and is a function of the quality of the program investment. The customer multiplier determines the extent to which value created in the minds of customers affects market performance. This result depends on contextual factors external factors external to the customer.
Three such factors are competitive superiority (how effective is the quantity and quality of the marketing investment of other competing brands), channel and other intermediary support (how much brand reinforced and selling effort is being put forth by various marketing partners), and customer size and profile (how many and what types of customers, profitable or not, are attracted to the brand).
The market multiplier determines the extent to which the value shown by the market performances of a brand is manifested in shareholder value. It depends, in part, on the actions of financial analysts and investors.