Product Analysis

Product Analysis

Imagine buying Coca-Cola from a vending machine and getting an unmarked can of pop with no familiar logo, no red-and-white markings, nothing to identify it as a soft drink, let alone as the Real Thing. Would that product still be Coke as we know it? And would consumers purchase this product without its world-famous packaging?

The truth is, the only physical product that the Coca-Cola Company sells is soft drink syrup to bottlers – not the bottles and cans of Coke that consumers buy. The company's greatest success comes from selling its brand, says William Dillon, associate dean for academic affairs and Herman W. Lay Professor of Marketing and Statistics in SMU's Cox School of Business. Dillon's research helps to differentiate among the threads of association and bias that affect consumer product choices and enables companies to make sense of where and why their products achieve their market positions.

To find these results, Dillon says, it's important to distinguish among the factors involved in consumer decisions and how they affect aspects of a brand's identity. He first makes the distinction between brand equity and brand valuation. Brand equity, like equity in a home, "is meant to reflect appreciation – the good things and positive associations that accrue because the brand has delivered on its stated promises," Dillon says. "Equity is the brand's asset." Brand valuation, as determined through such exercises as Interbrand's annual top 100 brands list published in Business Week, attempts to attach a measurable value to that asset.

"Strong brands build emotional attachments. They attempt to develop a relationship," says William Dillon of Cox School of Business.

"Typically, one looks at the market share of the brand and the price premium that the brand commands," Dillon says. "The notion is that brands that have created equity command a price premium in the marketplace." Hence consumers may pay $1.89 for a cup of Starbucks coffee when they could purchase the same volume for about 69 cents at another coffee shop. Most equity research tries to assess the strength of a brand through price premium or market share, he says.

One simple way of assessing this is to "equalize the products, label them, and then see how much someone is willing to pay," Dillon says. For example, a coffee company may put the same brew in two containers – one labeled "Starbucks" and the other, perhaps, "Bill's Fresh Coffee." If consumers prefer the Starbucks coffee and will pay more for it simply because of the label, their choices appear to be determined by their positive associations with the Starbucks' name.