1. Brand Equity in the Casual Dining Market October 12, 2006 “Improving Brand Worth Through Research”

2. 2 Commonly Asked Questions 1. Can I get copies of the slides after this presentation? 2.Is this web seminar being recorded for later viewing?

3. 3 Commonly Asked Questions Yes 1. Can I get copies of the slides after this presentation? 2.Is this web seminar being recorded for later viewing? Yes

4. Brand Equity in the Casual Dining Market October 12, 2006 “Improving Brand Worth Through Research”

5. 5 Brand Equity “... the power of a brand lies in the minds of consumers or customers and what they have experienced and learned about the brand over time” -Keller, Strategic Brand Management

6. 6 Why Care About Brand Equity?  Brand equity plays a specific role in restaurant choice and in the price premium your brand can command  Knowing about these things is important  Managing them is the difference between success and failure

7. 7 Outline  What is Brand Equity?  Financial models  Marketing models  Premium models  Economic models  Conceptual Model  Brand Equity in the Casual Dining Industry  Research design  Brand worth  Drivers of brand worth  Summary  Recommendations

8. 8 Financial Models  Difference between stock value of the company with the brand and what it would be without the brand  Helpful to financial analysts, maybe, but not very helpful from a research standpoint

9. 9 Marketing Model  Aaker: Brand Equity is...  Brand awareness  Perceived quality  Brand loyalty  Brand associations  Other proprietary brand assets  Keller’s consumer-based equity  Customer is familiar with the brand  Customer’s brand associations are  favorable  strong  unique

10. 10 Premium-Based Equity Metrics  The difference in cash flow attributable to the brand  The value of the brand apart from its price/attributes  Revenue premium

11. 11 Premium-Based Equity Metrics  The difference in cash flow attributable to the brand  Restaurant Brand A has weekly sales of $30,000  If not for the brand name, the restaurant would only have weekly sales of $25,000  The $5,000 difference is the brand premium  The value of the brand apart from its price/attributes  Revenue premium

12. 12 Premium-Based Equity Metrics  The difference in cash flow attributable to the brand  The value of the brand apart from its price/attributes  Salt is salt is salt, but the Morton brand commands a premium  Revenue premium

13. 13 Premium-Based Equity Metrics  The difference in cash flow attributable to the brand  The value of the brand apart from its price/attributes  Revenue premium  Restaurant A sells 1,000 meals $12 average ticket, for revenue of $12,000  Restaurant B sells 1,200 meals at $15 for revenue of $18,000  Restaurant B has a revenue premium of $6,000 over Restaurant A

14. 14 Economic Theories of Brand Equity  Signaling theory  About some attributes, the manufacturer knows more than consumers  Therefore the customer has to trust the brand to deliver on its quality promise  Five factors affect this trust, and need to be measured:  Perceived quality  Clarity of the brand promise  Consistency of the brand promise  Credibility of the brand promise  Perceived investment in the brand

15. 15 Economic Theories of Brand Equity  Utility Theory  Consumer’s probability of choosing a brand is related to the total utility (value) of that brand and the utilities of its competitors  Utility of a branded product is a sum of  Utility of its features (taste of the food, server attentiveness, etc.)  Utility of its price  Utility of its brand name = “Brand Worth”

16. 16 Brand Equity Conceptual Model Perceived Quality Investment Consistency Credibility Clarity Product Features Brand Worth Price Brand Choice

17. 17 Brand Worth Portion Perceived Quality Investment Consistency Credibility Clarity Product Features Brand Worth Price Brand Choice

18. 18 Casual Dining Brand Equity  10 minute web-based survey  Fielded July 2006  800 respondents (18+ years of age)  Past 30 day casual dining customers  35% male  Median age 41  37% college graduates  Median household income of $53,360

19. 19 Casual Dining Brand Equity  Questionnaire - Brand Worth  Identify casual dining restaurants the respondent has visited  Among those visited, “At which one of the following brands of casual dining restaurant would a meal be worth the least to you?”  For each other brand visited: Now, imagine a meal that costs $10 at, the brand you reported is worth the least to you. How much would that meal be worth to you if you could get it at each of the following casual dining restaurants?

20. 20 Casual Dining Brand Wroth  Questionnaire – Each respondent gave detailed ratings on up to 4 brands  Focus on these brands  Applebee’s  Cheesecake Factory  Chili’s  Denny’s  IHOP  Olive Garden  Outback Steakhouse  Red Lobster  Ratings on  Perceived quality  Credibility  Consistency  Clarity  Perceived investment

21. 21 Brand Worths Lunch and Dinner Restaurants * Dinner Only

22. 22 Brand Worths Three-Meal Restaurants

23. 23 Drivers of Brand Worth – Denny’s 74% 9% 11% 5% 1% Perceived Quality Credibility Clarity Consistency Perceived Investment

24. 24 Drivers of Brand Worth – Denny’s 74% 9% 11% 5% 1% Perceived Quality Credibility Clarity Consistency Perceived Investment 50% 13% 37% Food quality Service quality Environment

25. 25 Drivers of Brand Worth – Applebee’s 55% 21% 9% 5% 10% Perceived Quality Credibility Clarity Consistency Perceived Investment 39% 28% 33% Food quality Service quality Environment

26. 26 Drivers of Brand Worth – Outback 55% 26% 13% 5% 1% Perceived Quality Credibility Clarity Consistency Perceived Investment 44% 21% 35% Food quality Service quality Environment

27. 27 Brand Worth Portion Perceived Quality Investment Consistency Credibility Clarity Product Features Brand Worth Price Brand Choice

28. 28 Summary  Brand equity plays a specific role in the frequency with which people choose your restaurant and the amount of premium they are willing to pay  Brand worth is measurable and should be tracked  As part of an existing brand tracking study  By itself if need be  It is explainable, and should be understood

29. 29 Strategy Implications  Measure brand worth to understand how to increase it  Cost benefit analysis of increasing brand worth  Strategy tradeoffs  Increase price?  Increase traffic?  A blend

30. 30 Strategy Tradeoffs  One extreme would be keeping price steady as brand worth increases – this improvement in total brand utility will increase market share and thus unit volume and total revenues and profits  Another extreme would be raising prices as much as brand worth increases – this tactic maintains unit volume but improves total revenue  Caution: if target customers have a price threshold above which they cannot pay (e.g., if a target segment has a fixed income) raising prices could result in lower unit volume, even if brand worth also increased  Any point in-between blends increased unit volume and increased revenue per unit

31. 31 Q & A Session

32. 32 Thanks for your time and participation today! To replay this webcast (available Oct. 13): www.maritzresearch.com/research-webcasts.html For copies of today’s presentation: Please visit: http://www.maritzresearch.com/brandequity To contact today’s speakers: Keith Chrzan: keith.chrzan@maritz.com Mike Fisher michael.fisher@maritz.com