Advertisers, media, advertising agencies, creatives, and academia. The Borderless Marketing Community (BMC) aims to create interaction and discussion among professionals with different specialties, and to realize undivided, holistically optimized marketing. A free event exclusively for members was held at the Tokyo venue on Friday, April 2024, 4.

The event was divided into two parts: a "seminar" where experts from various fields spoke, and a "lab" where practical knowledge was generated through two-way communication between the speakers and participants. This article reports on some of the content of the seminar.

【Speakers】

Mr. Takahiro Hoshino
Professor, Faculty of Economics, Keio University Director, Institute of Economic Research, Keio University　

Mr. Motonobu Takaki
XICA Business Headquarters/Analysis Department Deputy General Manager Business Headquarters/Analysis Department/Research Section Manager

Mr. Tetsuya Hada
XICA Development Headquarters Research Department

[Moderator]

Mr. Yoshiaki Hirao
President and CEO of XICA Corporation

The cutting edge of brand equity research: Unraveling the successful branding process with data science

As an increasing number of companies quantitatively grasp brand equity (the asset value that a brand possesses), many people are probably struggling to understand the causal relationship between branding and business results, or the conditions for increasing the effectiveness of branding.

For this event, Professor Hoshino from the Faculty of Economics at Keio University was invited as a guest and, exchanging opinions from both an academic and business perspective, introduced the "successful branding process" that can be put to practical use.

Increasing brand value leads to improved ROA

The seminar began with a talk by Hoshino on "The Cutting Edge of Brand Equity Research." Hoshino is an expert in statistics, behavioral economics, and marketing, and is also known as one of Japan's top data scientists. In addition to conducting research into brand equity that can be applied to business, he also serves as a corporate advisor to many major Japanese companies and conducts joint research.

First of all, how can brand equity be measured? While Hoshino mentioned that there are various methods, he focused on the mainstream measurement method of "customer (consumer) base," that is, measurement based on consumer surveys. Advantages of this method include "the ability to break it down into elements such as 'brand awareness' and 'brand association'," and "the ability to understand the relationship between individual elements and marketing activities." It can also be said to be suitable as a marketing measurement method.

Next, he explained whether brand equity is linked to business results. The conclusion is that investing in brands is very important in a financial sense. To support this, he cited the results of a recent study conducted by Hasan et al. (2022) that showed that brands can prevent a sudden drop in stock prices. The research showed that companies with high brand reputations can prevent a sudden drop in stock prices even if a problem occurs that could affect the stock price.

In addition, models by Mizik and Jacobson (2008) and Mizik (2014) can be used to explain the effect of brand value, including long-term effects, on ROA (return on assets).The results of this research show that long-term effects (future realization) have a greater impact than short-term effects (current period).

This type of research has also been conducted in Japan, and it has been found that brand value affects ROA and SGR (sustainable growth rate), but the inverse relationship does not hold (it is weak). In other words, it shows that rather than "financial performance increases brand value," it is "increasing brand value leads to financial performance."

From "Empirical Analysis of the Relationship between Corporate Brand Image, Advertising Costs, and Financial Indicators (Nikkei Advertising Research Institute Report)" by Kato and Hoshino (2017, to be released in 2024 with new data).

Some people may consider brand strategy to be a part of marketing. Hoshino re-explained his understanding of brand strategy. He said that today, "corporate brands are important as an 'adjusting variable' for marketing measures." What exactly does "adjusting variable" mean? One example is the research result that shows that even if prices are increased, sales volume is unlikely to decrease if the brand is strong.

It was concluded that investing in brands is quite promising when considering the "long-term effects."

How can you increase brand equity?

Next, Mr. Takagi from XICA took to the stage. XICA is trying to use data science to understand how branding contributes to business results. He introduced the "successful branding process" that he discovered from his analysis results so far.

First, Takagi reaffirmed the definition of a brand, explaining that a brand is "a unique value that is associated in the mind of consumers as a result of contact with a product, service, advertisement, store, reputation, etc." and that this knowledge is accumulated, leading to subsequent purchasing behavior.

Brand equity, as conceived on this basis, is something that visualizes the "brand (the value associated in one's mind)" that is essentially invisible to the naked eye as a corporate asset. Looking more closely, there are two ways of thinking about brand equity: "something added to the product" and "the overall value of the product." This time, the former was the premise of the discussion.

When using MMM (Marketing Mix Modeling) to measure the contribution of each measure to results, a baseline (unknown portion) that cannot be explained by the measures or external factors always remains. XICA believes that this baseline includes "purchase influence influenced by the brand." To uncover this, it is necessary to measure "the extent to which advertising from several years ago has influenced current results," and he thought that by doing so, it would be possible to visualize the brand equity effect.

The following has become apparent from the analysis conducted so far:

First, there are differences in brand equity depending on the product. In particular, it was found that for products with high brand equity, the long-term effect of television commercials is about twice as large as the short-term effect. It was also found that brand equity and advertising volume are not linked, meaning that spending more ads does not necessarily increase brand equity.

The key to the difference in brand equity is the product, not the industry. Even within the same industry, brand equity seems to vary depending on the product. This is due in large part to differences in promotion methods, as well as the characteristics of the product.

The report also showed that products that meet two of the following "characteristics that lead to a high brand accumulation effect" - "there is consistency in the creative tone and worldview" and "there is continuous advertising (not in terms of the amount of advertising, but in terms of continuous advertising)" - tend to have high brand equity.

Hoshino agreed that continuous advertising makes sense when you consider the mechanisms of human memory. For example, it is known that advertising effectiveness increases with repeated exposure (Zajonc 1968) and that the speed at which people forget slows down depending on the amount of information they remember (Ebbinghaus's experiment).

Hoshino also explained that an effective method of storing memories is related to the brain's mechanisms. Between the hippocampus, which is responsible for short-term memory, and the cerebral cortex, which is responsible for long-term memory, is the amygdala, which processes emotions and feelings. In addition to the fact that memories are consolidated by repeating information (transferring information from the hippocampus to the cerebral cortex), by using this brain mechanism to memorize information in conjunction with emotions (stimulating the amygdala), memories are more likely to be consolidated.

Optimize both "quality" and "quantity" and continue the PDCA cycle

To refine brand strategies, XICA recommends considering "visualizing quality" through approaches such as MMM, which we introduced here, in addition to "visualizing quantity," as well as approaches that capture consumer awareness. We believe that by visualizing and optimizing both quality and quantity and going through a refining cycle, we can increase the success rate of business.

As a closing remark, XICA Hirao reiterated the key points of this seminar. Based on the findings that "brand value influences corporate profits" and "branding can be done scientifically (there is no right answer, so it is necessary to keep turning the PDCA cycle)," he spoke to the participants about the importance of strategic branding for companies.

Speaker introduction

【Speakers】

Mr. Takahiro Hoshino
Professor, Faculty of Economics, Keio University Director, Institute of Economic Research, Keio University　

In March 2004, he completed his doctoral studies at the University of Tokyo Graduate School of Arts and Sciences. He holds a PhD in Economics. He has served as a visiting researcher at the University of Chicago and the Kellogg School of Management at Northwestern University. He is a visiting professor at the London School of Economics. He is the 3th president and current standing director of the Association for Behavioral Economics and Management, and a director of the Marketing Science Society. He also serves as team leader of a team that applies AI to economics and management research at the RIKEN AIP Center, a central research institute for AI research in Japan. He has conducted basic research in statistics, econometrics, and psychology, as well as applied research in a variety of fields, including marketing, neuroscience, and public health. Recently, he has been challenging himself with a new approach that combines behavioral economics and AI to promote behavioral change.

Motonobu Takaki
XICA Business Headquarters/Analysis Department Deputy General Manager Business Headquarters/Analysis Department/Research Section Manager

Graduated from the Department of Physics at the Graduate School of Science, University of Tokyo. After that, he worked as a researcher in the field of fundamental physics experiments. He learned data analysis and statistics through the analysis of experimental data. He became interested in data analysis in the marketing field and joined XICA.

Tetsuya Haneda
XICA Development Headquarters Research Department

Graduated from the Graduate School of Systems Creation at Osaka University. Joined Recruit as a new graduate and worked as a data scientist analyzing customer behavior across the entire group. Joined XICA in 2022 as a lead data scientist, where he is engaged in research and development of advertising effectiveness estimation methods and data analysis in various domains.

[Moderator]

Yoshiaki Hirao
President and CEO of XICA Corporation

A graduate of Keio University, Faculty of Policy Management. Yoshiaki witnessed the banruptcy of his father's company, and this drove him to discover the potential of management support through statistical analysis in university. He founded XICA Co., Ltd. in February 2012. Based on his background in statistics and economics, he has provided extensive marketing consulting services to a number of major clients, and he has served as a product owner in the development of various products at XICA.