Assessing the Total Financial Performance Impact of Brand Equity with Limited Time-Series Data

Abstract

One of the key challenges in empirically modeling the total impact of marketing assets on financial performance is the limited availability of marketing metrics data over time. The author presents an approach for estimating the total financial impact of marketing assets with limited time-series data and demonstrates the approach with an application to brand equity research. Consistent with prior research, the aggregate analyses indicate that brand equity, as measured by customer mindset metrics, positively affects current financial performance. In addition, the author documents brand equity's significant and much greater impact on the firm's future financial performance: at the aggregate, only a small portion of the total financial impact of brand equity is reflected in current-year profits, whereas the bulk of the profitability impact is realized in the future. Most importantly, however, the analyses document significant heterogeneity of these effects: in some industries, the entire direct impact is contemporaneous, whereas in others, no contemporaneous effects are observed and all of the profitability impact occurs in the future.