Driven by the brand
There is widespread acceptance that brands play an important role in generating and sustaining the business and financial performance of branded businesses. Strong brands help companies to communicate why their products and services are uniquely able...
There is widespread acceptance that brands play an important role in generating and sustaining the business and financial performance of branded businesses. Strong brands help companies to communicate why their products and services are uniquely able to satisfy customer needs. But how is this value generated and realised? To understand this, the multi-dimensional qualities of a brand and its contribution to business strategy and performance need to be clarified.
Firstly, we must understand what we mean by "business strategy". Disney's global domination of the family entertainment sector is their business strategy. IBM's business strategy is to dominate the e-business category to achieve market leadership. In both cases, globalisation is key. But why should these two companies attempt such a goal? Competitive forces for one thing, costs for another. Brands drive down costs through economies of scale to the point where mass production becomes attractive.
Another manifestation of business strategy can be seen at the point of sale. For one brand of gin to be priced at a premium of as much as €5 over another is the brand owner's prerogative. That price point reflects the perception of quality by the consumer that has earned his or her loyalty.
From a brand's perspective, there are five reasons why brands and branding are important to business strategy. The first is that a brand bridges the gap between producer and consumer to form an ongoing emotional relationship that is based on feelings, attitudes and associations with the brand. This is the fundamental reason for generating liquid cash flows from successful brands. That relationship is worth money in the bank.
Secondly, by reward for the budget and brand-building programmes that have been invested in it over time, the brand owns a place in the perceptions of its target market with the consequence that it builds customer preference and loyalty through re-purchase and the purchase of more cross-sold products.
Thirdly, a brand is a form of data compression. It is short-hand for communicating quickly in a very noisy and very cluttered market.
Fourthly, this income stream becomes a long-term financial benefit that can be measured, managed and increased over time to generate lower betas, lower costs and higher prices for the brand owner in the market.
Fifthly, a brand can become a company's best asset with equity that goes beyond the product dimension to create high value-added with analysts and shareholders who apply their own methods of assessing the value of a company.
There are five key drivers that support a brand's capability to deliver on the brand owner's business strategy. These are:
1. the focus on organisational marketing;
2. the brand name as leverage of business;
3. the brand's business performance;
4. the brand's intangibles;
5. the brand's value and measurement.
Understanding the value of the drivers of a brand and what contribution they make is crucial to adding value to the balance sheet and to the brand's equity in a brand-based business, going forward. Now that analysts and private equity firms have embraced the financial value of a brand, it is up to senior management of businesses large and small to invest and profit from it.
Tangible business results are a result of a considered business strategy no matter where the company is based or which market the brand serves.
• Mr Ward from Peak Ogilvy will deliver the module on brands and business strategy as part of the IoD Four Seasons series, being held at the Hilton Malta on Saturday.
Firstly, we must understand what we mean by "business strategy". Disney's global domination of the family entertainment sector is their business strategy. IBM's business strategy is to dominate the e-business category to achieve market leadership. In both cases, globalisation is key. But why should these two companies attempt such a goal? Competitive forces for one thing, costs for another. Brands drive down costs through economies of scale to the point where mass production becomes attractive.
Another manifestation of business strategy can be seen at the point of sale. For one brand of gin to be priced at a premium of as much as €5 over another is the brand owner's prerogative. That price point reflects the perception of quality by the consumer that has earned his or her loyalty.
From a brand's perspective, there are five reasons why brands and branding are important to business strategy. The first is that a brand bridges the gap between producer and consumer to form an ongoing emotional relationship that is based on feelings, attitudes and associations with the brand. This is the fundamental reason for generating liquid cash flows from successful brands. That relationship is worth money in the bank.
Secondly, by reward for the budget and brand-building programmes that have been invested in it over time, the brand owns a place in the perceptions of its target market with the consequence that it builds customer preference and loyalty through re-purchase and the purchase of more cross-sold products.
Thirdly, a brand is a form of data compression. It is short-hand for communicating quickly in a very noisy and very cluttered market.
Fourthly, this income stream becomes a long-term financial benefit that can be measured, managed and increased over time to generate lower betas, lower costs and higher prices for the brand owner in the market.
Fifthly, a brand can become a company's best asset with equity that goes beyond the product dimension to create high value-added with analysts and shareholders who apply their own methods of assessing the value of a company.
There are five key drivers that support a brand's capability to deliver on the brand owner's business strategy. These are:
1. the focus on organisational marketing;
2. the brand name as leverage of business;
3. the brand's business performance;
4. the brand's intangibles;
5. the brand's value and measurement.
Understanding the value of the drivers of a brand and what contribution they make is crucial to adding value to the balance sheet and to the brand's equity in a brand-based business, going forward. Now that analysts and private equity firms have embraced the financial value of a brand, it is up to senior management of businesses large and small to invest and profit from it.
Tangible business results are a result of a considered business strategy no matter where the company is based or which market the brand serves.
• Mr Ward from Peak Ogilvy will deliver the module on brands and business strategy as part of the IoD Four Seasons series, being held at the Hilton Malta on Saturday.