Brand Matters
Thursday, August 7th, 2008 “Companies that place high importance on managing the economic value of their intangible assets and primarily their brands, consistently outperform basic economic measures.”
[Interbrand Top Performing European Retail Brands, 2008]
I was reading an article in Ad Age about how, increasingly, the people who handle the brand inside organization are being considered for top jobs.
Brand matters. It contributes significantly to the company’s value. Lived and owned rather than an afterthought - a deliberate, two-way conversation between a company and the marketplace - a brand is a powerful asset.
Especially in an increasingly crowded competitive environment. A brand that does well by its customers earns a positive reputation. It in turn translates into positive cash flow. There is a correlation.
How do we measure it? Is there a way to make it truly apparent? Start with what happens when the brand is not a valued asset inside the organization.
- the vision, mission and value statements read like those of just about any other company and nobody can possibly see how they come alive, how people live them;
- every business is a silo. It develops products or services in a vacuum, and articulates what the company does differently. There is no central core to vet new products and services against;
- the marketplace is quite confused about what it is that you deliver. There is no brand promise to fulfill, to rally around, to make decisions by;
- there is no compelling reason why or unifying idea behind why a business is in business;
- a line item that contains activities around branding is the first to be cut into oblivion, and with it potentially the company. Did I mention that there are so many choices today?
You know that these symptoms tend to seep outside the confines of the organization. We’re in a connected marketplace. When we buy anything at all, we sign up to join a story. The story could be that of using the cheapest toothpaste or most convenient store, but make no mistake - we make decisions and trade offs based on brand stories and experiences all the time.
I like the idea of exercising, but I do not like gyms - they are noisy, crowded, sometimes hardly clean and expensive. My return on effort is not there. And I do not like paying annual fees on top of monthly fees with no guarantee that I will be able to use the equipment I want, when I want it. Recently I started taking Pilates classes.
The place where I go offers the right kind of environment for me. The largest crowd you’d ever have is 5 people so the instructors have plenty of opportunity to help everyone. You book a machine online ahead of time, the hours are flexible, and the fee is flat per month - you go as many times as you can/want. The brand experience is: personable, flexible, convenient, and fun. Oh, and the reason why you’d go? It promises to make you fit, I am already seeing the results.
Do you have a brand matters story? Today at Fast Company I discuss how cost cutting choices are cutting brands short.
Now you know what to look out for and have your example in mind. How do you calculate brand value?
According to Interbrand, it is at the intersection of brand strength analysis and the role of brand analysis. You take the benchmark of your brand’s ability to secure ongoing customer demand (loyalty, repurchase/reconsideration, retention) and reference that to the measure of how the brand influences customer demand.
To calculate the value, Interbrand uses financial forecasting - branded revenues minus operating costs, taxes and capital to get to intangible earnings. To separate the role of branding from things such as R&D and management expertise, they use an analytical framework. In B2B, the brand is usually one purchase driver among many. This is expressed as a percentage.
The assessment of brand strength determines the specific risk of the brand. The net present value of the forecast brand earnings discounted by the time value of money and the risk that the forecast earnings will materialize. Interbrand refers to a wide array of primary and secondary sources that are applicable to each brand. These include amongst others; Datamonitor, ACNielsen, Gartner, Hall & Partners, etc. in addition to a network of brand valuation experts. More in the report.
If this sounds fairly complicated, go back to how hard it is to explain to the organization that people do not want to buy your products or services because your brand experience and reputation are poor.
“When the value of a brand is recognized by its owner, the brand strategy becomes a self-fulfilling prophecy.”
Source: Conversation Agent.com
