Brand Potential Index - Explained
What is Brand Potential Index?
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Table of ContentsWhat is Brand Potential Index?How does a Brand Potential Index (BPI) Work?Calculating the Brand Potential Index An Example of the Brand Potential Index (BPI):Metrics for Measuring Brand Potential IndexThe popularity of the brandBrand performanceThe Intensity of the brand (brand ownership)Brand AssociationBrand coverageUses of the Brand Potential IndexLimitations of the Brand Potential IndexAcademic Research on Brand Potential Index
What is Brand Potential Index?
The brand potential index (BPI) refers to the relationship between a brands development index, and it's market development index for a particular market. Users of BPI use it to forecast the future sales and to also organize for future advertising budget allocation. Most companies both big and small use the BPI as their brand management and development plans.
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How does a Brand Potential Index (BPI) Work?
The brand potential index helps in identifying the determinants of brand strength. It makes a comparison between the exact and prospective number of customers in a specific market region, to the percentage of all customers in the whole country. With this, business personnel is able to identify where many of their brands customers reside. They can then tailor their marketing, advertising, and sales efforts towards that direction so as to increase their sales, and maximize their profits. Note that users of the BPI focus on a limited geographic area. This is because it enables them to get a better concept of how certain regions will feature into their future sales, advertising, and marketing plans.
Calculating the Brand Potential Index
To be able to find out the BPI, you must use a brands market development and its brand development index. A market development index is a tool used in business development to determine where exactly will the market penetration happens. This is usually expressed as a ratio between the exact numbers of customers versus potential customers in a particular market zone.
An Example of the Brand Potential Index (BPI):
Assume that a certain brand gets 10% of its sales in a region that is home to 20% of the countrys population. In this case, that regions brand development index becomes the product of 10x100/20 or 50%. Also, if that particular region their total number of customers is 20,000, whereas the number of potential customers is 200,000, then the market development index results will be as follows; 20,000/200,000 or 0.1. The relationship between the two factors is what makes up the brand potential index.
Metrics for Measuring Brand Potential Index
It is worth noting that the residual equity determines the brands value. You will be able to determine the bonds value by relating it to what it is associated with. This may include things such as depth and competitiveness of the association, performance, and whether they are worth. There are different metrics used to give an overview of the current brand worth. They are measures used to assess the future brands performance, and whether there is an opportunity for further investment. They are as follows:
The popularity of the brand
Through popularity, you are able to know the performance of your brand strength and its future market position. It is, therefore, important to assess how much your brand is talked about by the consumers. How passionate the consumers are about your brand. You will also have to assess the popularity of your future brand plans. Find out if and why the customers will be excited about what you are planning to bring to the market. Why they will be glad to share information about the brand with other potential consumers. All these will enable you to determine the brands strength, and also decide whether to invest in it or not.
Brand performance is represented by what a number of people talk about regarding your brand. The talk can be about the market stocks, top-line sales, or profits generated from the capital. Therefore, to be able to assess the BPI of your brand, you need to know what has driven your brands performance up to date, and conclusions you can draw regarding its performance in the future. Note that a strong brand must go beyond what the market delivers. You should, therefore, work to ensure that your brand performance surpasses the average market growth. Also, the brand should also be able to resist the market dynamics such as technology changes, customers reactions, and new ideas. If it can perform well through such changes, then, it is an indication that your brand is doing much better in the market. Another indicator that your brands performance is good, is when you are able to successfully maintain its price beyond the market average. Steady prices when other competitors are losing margin, it is a sign that your brand is above market strength, and can clearly tell you about its future performance.
The Intensity of the brand (brand ownership)
Another way to measure the BPI of your brand is to assess the loyalty of consumers towards it. Find out to what extreme do they love and buy your brand. Do an evaluation of your brands ability to grab a good share of consumers life, and if you can be able to maintain this better than your competitors. If more people love and are willing to buy, and use your brand, it means there is good potential for your brands future growth. Using this performance metric, you will be able to channel your budgets strictly at brands with good chances of market performance.
A brand is able to generate value if people associate with it. You need to, therefore, find out what is it that makes people like being associated with your brand. What is the feeling like whenever they use your brand and where exactly do these people live? These aspects of the brand association will enable you to focus your marketing efforts to powerful sports where you can establish and grow your brand fast.
Brand coverage is another way you can measure the strength of your brand. Where you want your brand to reach, the number of people willing to buy and use your brand is a strong determinant of your brands strength. For this reason, you need to look for distribution plans where consumers have similar ambitions and the same speed of change as yours. For instance, you can target a population where you want your brand to cover, but first, you must ensure that your target population has a desire to be associated with your brand. This way, you will be able to successfully expand your brand coverage and at the same time, ensure its market strength.
Uses of the Brand Potential Index
- The brand potential index can be used to predict future sales of a particular product. It helps in determining its market strength in the future. This way, you can able to know whether or not to invest in the product.
- BPI is can be used to determine how you budget and allocate funds for advertisement.
- It can be used to identify the main drivers with the greatest influence on brand strength. This will help you to direct investment in this direction so that you can maximize your capital.
Limitations of the Brand Potential Index
The process of brand identity structuring is difficult. It requires extensive market research, marketing audit, and usability among others. This may be complex where a firm has a range of products and services that may need such research. The BPI is also expensive to design. It is time consuming where you have to create and design. In this case, you may be forced to contract a consultant to do the designing for you of which you will pay a considerably good amount of money. Due to market dynamics such as firm expansion, change in consumer preference, product or services, the BPI may be difficult to maintain.
Academic Research on Brand Potential Index
- Searching for competitive advantage with the aid of the brand potential index, Vukasovi, T. (2009). Journal of Product & Brand Management, 18(3), 165-176.
- Brand name as a heuristic cue: The effects of task importance and expectancy confirmation on consumer judgments, Maheswaran, D., Mackie, D. M., & Chaiken, S. (1992). Journal of consumer psychology, 1(4), 317-336.
- Using consumer attitudes to value brands: Evaluation of the financial value of brands, Hupp, O., & Powaga, K. (2004). Journal of Advertising Research, 44(3), 225-231.
- Brand value as an element of sustainable competitive advantage, Vukasovi, T. (2012). International journal of sustainable economy, 4(4), 390-409.
- How risky are brand licensing strategies in view of customer perceptions and reactions?, Wiedmann, K. P., & Ludewig, D. (2008). Journal of General Management, 33(3), 31-52.
- A new generation of brand controlling: evaluating the effectiveness and efficiency of the complete marketing mix, Hgl, S., & Hupp, O. (2007). Market Research Best Practice, 367.
- Purchasing power at the bottom of the pyramid: differences across geographic regions and income tiers, Guesalaga, R., & Marshall, P. (2008). Journal of Consumer Marketing, 25(7), 413-418.
- Enriching the ECSI model using brand strength in the retail setting, Sarantidou, P. (2017). European Journal of Management and Business Economics, 26(3), 294-312.
- Anew GENERATION OF BRAND CONTROLLING, Hgl, S., & Hupp, O.
- Create a Competitive Advantage with the Brand Value Concept, Vukasovi, T., Gole, P. A., & Maek, A.
- Channel efficiency: Franchise versus non-franchise systems, Yoo, B., Donthu, N., & Pilling, B. K. (1998). Journal of Marketing Channels, 6(3-4), 1-15.