Month: June 2005

Brand valuation – 7 applications

Since seven seems to be the magic number which relates with brand value and brand valuation let’s check seven applications of brand valuation:

External investor relations
Mergers and acquisitions were the original driving force for brand valuation. Now many successful companies use brand valuation as an ongoing business performance indicator: to help ensure that brand strength is reflected in share value.

Internal marketing management
Brand valuation is increasingly being used as a management tool in leading organizations. For example: brand valuation figures can be used to evaluate new product and market development opportunities, to set business objectives or allocate budgets.

Internal royalty rates
Across a large organization there may be many affiliates, subsidiaries or divisions that make use of any particular brand. As the profit potential of brands becomes more clearly understood more companies are charging royalties, across their business operations, for the use of these brand assets.

Licensing and franchising
Where companies allow outside organizations to use their brand, on a licensing or franchising basis, a brand valuation can lay the foundation for appropriate charges.

Tax planning
As the management of brands as financial assets becomes more sophisticated, so tax authorities around the world have started to take an interest in how these assets are managed. The result is that more and more international organizations are planning the most cost-effective domicile for their brand portfolios and are organizing their tax affairs with their brands in mind.

Securitized borrowing
Even in the conservative world of banking, the asset value of brands has been recognized. As a result brands have been used to secure loans, especially in the US, where companies such as Disney have borrowed significant amounts of money against their brand name.

Litigation support
Brand valuations have been used to support litigation against the illegal use of a brand name (as a basis for calculating damages, for example) and also in cases of receivership, to prevent the assets of the business being undervalued.

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Brand-Customer Relationship

Brand is often limited in its definition to awareness of a product or service. A company markets its brand – creates the name, broadcasts it to target customer segments, and applies it to its corporate identity or a set of products and services. The brand makes the company, product, or service recognizable.

This limited view of brand is destined to fail in today’s business environment. Marketing, which orchestrates only a small part of the brand-customer relationship, puts the face on the brand, making a set of promises.

Creating a coherent brand experience requires aligning every touchpoint of your organization with your brand. The more perfect that alignment, the more perfect the customer brand experience. You can’t escape your brand. Either you make the customer experience, or it gets made without you. Brands are essentially the collective perceptions of an organization’s key constituents (customers, suppliers, investors, employees, etc.) and are defined more by deeds than by words. Brand is how your customer experiences what you do.

Visionary companies recognize that responsibility for brand management belongs with the organization as a whole.

It’s your choice: deliver an effective brand experience or don’t. If you’re active in shaping the customer experience you can develop a rich and long-lasting relationship, firmly based in your brand. Where you fail to create a strong relationship with customers, a competitor will. Here are five places to start:

1. Clearly articulate your brand identity. If you can’t clearly articulate your brand identity, you’ll be unable to control how customers interpret it. A clear brand identity sets expectations across your organization for your products and services.

2. Establish a customer value proposition and use it to guide each department. The various departments responsible for delivering against your customer value proposition need to understand what the customer value proposition means to them.

3. Define the optimal customer experience. Identify the contact points where customers interact with your company.To create a holistic brand experience, you need to create a consistent and compelling experience at each of these touchpoints.Take an outside-in perspective when aligning each department with your customer value proposition and brand identity.

4. Cultivate relationships with customers. Treat these relationships carefully. Listen attentively to what you’re being told, learn from it, and respond.

5. Strengthen your brand over time. Based on what you learn from your customers, recalibrate your brand. Always be aware of how your brand can strengthen your brand-customer relationship.

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Corporate Branding

One of the questions that many companies grapple with is which level of branding they should use. The main choices are:

Corporate branding

Corporate branding is where the corporate name is the brand, and here the products tend to be described more in alpha numeric or letter terms, and not have distinctive brand names. Such is the case with BMW. Corporate branding gives each product the strength of the corporate brand values and positioning, and saves a great deal on advertising and promotional spend. It builds up the strength of the corporate brand and its financial value. Corporate branding is very appropriate to those companies engaged in service industries, as their products are more intangible in nature. When consumers cannot see the product, the company brand name helps give them an assurance of quality, heritage, and authenticity.

Product branding

Product branding is where each individual product has its own brand name and resources. With this strategy, the company name is either totally or virtually absent. It gives each brand the opportunity to have unique values, personality, identity and positioning. As a consequence, this approach implies that every new product the company brings on to the market is a new brand, and can be positioned precisely for a specific market segment. Product branding makes it easier for the company to evaluate brand performance and worth, and makes for better resource allocation decisions. Moreover, if the product is a flop, or is involved in a marketing disaster, the bad news does not attach itself to the company name. Product branding is costly though, as advertising and promotion costs cannot be shared, and its success depends on the product itself having a sustainable competitive advantage and clear positioning in the marketplace.

House branding

House or endorsement branding uses both ideas, and the corporate name is placed alongside the product brand name. This allows the product brand to assume its own identity and positioning, but draw strength from the values of the corporate brand, and give consumers the assurance, in many cases related to quality, of the corporate brand. There are a variety of ways in which this can be achieved, with the corporate brand in lesser or greater prominence. House branding helps with the introduction of new products, where it can be very difficult to break into mature markets without the endorsement of a strong and credible corporate parental brand name. One possible disadvantage is where the product is not favourably received and causes damage to the parental brand name.

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Small brands

Should a small company use branding as a part of its competitive strategy? There are some factors that imply that brands with a small geographic market have a good chance to steal market shares from the gigantic, global brands.

The most important thing from a small brands perspective is to be strong in its own defined market. A smaller brand has an opportunity to serve its customers in a more flexible and in a more creative way than its greater counterparts. Most of all that goes for small brands that live and breath closer to its customers than big, global brands. Many of these small brands have a chance to get stronger if they stop having inferiority complex against the bigger brands and start to make their brands more clear and focused, and build their brand in a new and exiting way.

Small companies with local and regional markets seem to have accepted the global brand´s dominance over their customers and live by the convention that branding costs too much money and they are left to compete with product offerings and price. Even though they have realized their opportunity to offer personal service, it is seldom you come across companies that manage to do so in a unique or exiting way. Therefore they do not manage to overcross the hindrance which the credibility of the big brands put up.

You do not build a strong brand only through advertising and media, it is the collected, over all experience that makes a strong brand. This experience is infl uenced by all encounters you have with a brand, how the salesperson act, how other personnel interact with you, service, packaging, public relations, etc. The bottom line is to which degree you manage to satisfy those needs that you have promised to satisfy.

Small companies have flat organisations, the decision making process should be a lot easier and they are physically close to the market they wish to attract. Yes, small companies may have less money to spend on large media, but due to their small sizes a possibility to create a near, unique and possibly also an exciting experience for their customers. In a small organisation it should be much easier to manage and perform a consistent branding strategy. The possibility lays not in thinking big, but to think further.

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Co-branding approaches

We discussed earlier that co-branding is not a new concept, and that it remains crucial to consider the strategic objectives of the project and to address all the possible risks before it is launched.

Co-branding can be an asset in nearly all aspects of marketing, from creating initial awareness to building loyalty. There are four main approaches to co-branding that companies should consider.

Promotional/sponsorship co-branding.
Co-branding began with endorsements. This approach can be a good beginning point for organizations; the relationship is simple, but it can result in significant brand enhancement and sometimes even an unplanned opportunity.

Ingredient co-branding.
Partners in ingredient co-branding are usually the company’s current suppliers or largest buyers. Easy access to offerings and a well-established relationship translates into a lower level of investment required than in other forms of co-branding. An ingredient brand’s success relies on being distinct, either through patent protection or by being a dominant brand.

Value chain co-branding.
Other players in the value chain can create new experiences for the consumer, which, in turn, can create a level of customer value and differentiation not possible with promotional or ingredient co-branding. There are three types of value-chain co-branding:

  • Product-service co-branding. This approach allows partners to share industry-specific competencies while at the same time opening previously unavailable customer bases.
  • Supplier-retailer co-branding. These relationships can range from the natural to the less obvious—even to traditional rivals, which can help both partners become better positioned against well-entrenched competitors.
  • Alliance co-branding. Globalization and better, broader offerings through cooperation aside, forming alliances with similar companies may be crucial for rapidly consolidating industries.

Innovation-based co-branding.
In this approach, partners create entirely new offerings to provide substantial increases in customer and corporate value. It offers the potential to grow existing markets and create entirely new ones. Because both partners are seeking a high level of value creation, the rewards and risks are often an order of magnitude larger than those created by other co-branding approaches.

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Internal Branding: Get Your Employees Behind Your Brand

Your advertising. Your packaging. Your corporate business cards. Even your product itself. They all reflect your brand, and your brand is your company’s single most valuable asset. And although it is nurtured and managed by your marketing department, your brand is represented by your entire organization. From the receptionist at the front desk to the customer service rep staffing the phones. That’s why a strong brand requires that everyone in your organization has a complete understanding of, and ability to express, your brand positioning and attributes.

When your employees are aligned behind your brand identity, you maximize the strength of your brand. An effective brand communications program consists of six steps:

1. Awareness
Most likely, your marketing department has a thorough understanding of the brand, but others in the organization need a general awareness of the corporate brand and what it stands for.
For this you can use existing communications vehicles and tools like new-hire orientations, all-company meetings, corporate e-mails, training videos, corporate newsletters, the company Intranet, newsgroups and other internal communications vehicles to generate greater employee awareness, and constantly ask yourself : Are our internal communications on-brand?

2. Education
Once everyone in your organization is aware of the brand, they need to understand the values and visual components that comprise the brand, how it is communicated, and what constitutes on-brand and off-brand qualities.

3. Buy-In
Establishing a brand-related goal in each employee’s personal goals and objectives for the year will make sure they think about their roles in building the corporate brand. Ensure that managers understand how to develop brand objectives for their staff. It is essential that all managers have a complete understanding of the brand, and that they express the brand clearly, consistently, and constantly.

4. Actions
By participating in brand contests and other ways to express the corporate brand, your employees take more and more responsibility for the brand — they become invested in the brand. They’re proactive in nurturing the brand. They support the brand in all their day-to-day activities. They remain on-brand in everything they do, they find creative ways to promote the brand.

5. Results
Communicate with them about the state of the brand. Share brand research results, showing how each organization within the company is doing with overall brand objectives. Spread the word about recognition and awards from outside organizations. And even more: Strong Brand = More Money. That’s an equation everybody can understand!

6. Recognition
One of the best ways to reinforce positive brand actions is to reward them. Give special recognition to employees who live the brand.

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7 Important Factors in Building Brand Value

Professor David Jobber identifies seven main factors in building successful brands:

Quality

Quality is a vital ingredient of a good brand. The core benefits must be delivered well, consistently. Research confirms that, statistically, higher quality brands achieve a higher market share and higher profitability that their inferior competitors.

Positioning

Positioning is about the position a brand occupies in a market in the minds of consumers. Strong brands have a clear, often unique position in the target market. It can be achieved through the combination of brand name, image, service standards, product guarantees, packaging and the way in which it is delivered.

Repositioning

Repositioning occurs when a brand tries to change its market position to reflect a change in consumer’s tastes. This is often required when a brand has become tired.

Communications

All elements of the promotional mix need to be used to develop and sustain customer perceptions. Initially, the challenge is to build awareness, then to develop the brand personality and reinforce the perception.

First-mover advantage

In terms of brand development, first-mover means that it is possible for the first successful brand in a market to create a clear positioning in the minds of target customers before the competition enters the market.

Long-term perspective

This leads to the need to invest in the brand over the long-term. Building customer awareness, communicating the brand’s message and creating customer loyalty takes time. This means that management must invest in a brand, perhaps at the expense of short-term profitability.

Internal marketing

Management should ensure that the brand is marketed internally as well as externally. By this we mean that the whole business should understand the brand values and positioning. This is particularly important in service businesses where a critical part of the brand value is the type and quality of service that a customer receives.

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Make Your Small Business A Big Name

Brand building is simply a new label for a collection of functions that have always been necessary to make a business successful, requiring ongoing effort in several areas to increase the public’s awareness of your business name and logo as well as to build a strong company “essence” that inspires loyalty and trust in your current customers and provides a level of familiarity and comfort to draw in potential customers.

A carefully built brand is worth more in actual dollars than all the tangible assets put together and is what will reap monetary rewards when you’re ready to sell your company. The first thing you have to do is decide how you want people to perceive your business, and then figure out what you have to do to get there.

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Positioning – what’s new?

Since we discussed earlier that positioning is one key element in creating a winning brand, there’s a another wave of opinnions which consider that rise of sophisticated and knowledgeable consumers, is the main reason for the fall of positioning. Instead, companies are adopting a new strategy that recognizes the impact of the Internet and globalization on purchasing and business behavior. Consumers now buy based on research and personal value, not how on companies seek to position their products.

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