Measuring the long-term health of selected brands in South Africa using the Brand Health Index.

Abstract

Measuring marketing performance is a long-standing issue for managers. Robust objective measures, which are market-based and incorporate the effects of brand performance output, are needed to provide reliable insights into the evaluation and assessment of brands. Behavioural measures fit this criteria and prove to be relevant to senior managers because they can be easily linked to revenue and returns, which is the common language of chief executive officers (CEOs) and chief financial officers (CFOs). Although brands are built over the long-term, majority of brand evaluation measures are focused on the short-term and thus managers are assessed on a short-term basis even though it is more beneficial to adopt a long-term approach to evaluating brands, because this approach will encompass the lagged impact of marketing actions and is not influenced by seasonal and temporal fluctuation. This study applies the Brand Health Index (BHI) developed by Mirzaei et al. (2015) to evaluate the brand health of selected companies on the Johannesburg Stock Exchange (JSE) over the period December 2001 to December 2017. The BHI is designed to evaluate the health of a brand over time and is theoretically based on two key elements of the long-term brand value model, namely persistence and growth. A brand is healthy if it can deliver sustained growth in sales over the long-term. Using a two-way cluster-robust error regression, the study finds a significant relationship between BHI and earnings per share (EPS), and also a significant relationship between BHI and return on asset (ROA). The study contributes to the branding literature by showing that there is a positive and significant relationship between BHI and EPS as well as ROA on listed companies on the JSE and secondly shows that a longer-term BHI measure – 10-year BHI – has a better explanatory power than shorter-term BHI measures namely, 5-year, 6-year, 7- year, 8-year and 9-year BHI.