Quantifying the Value of a Brand

Sales-driven businesses often struggle to see the value of branding and its
impact on the bottom line. For many companies, branding is considered the “soft
stuff” of marketing gurus or ad agency types—lots of fun like the guys on Mad
Men seem to have—but a little hard to quantify.

Well, as it ends up, from a financial perspective, a company’s brand falls into a
category used by accountants called “intangible assets.” This category includes
such things as patents, licensing rights and intellectual property. Intangible
doesn’t necessarily mean non-quantifiable. In fact, these non-physical assets can
often be the most valuable things a company owns.

Branding is becoming an increasingly serious concern of CEOs and CFOs as

they see the profound effect it has on such strategic issues as business
development, structuring new partnerships, customer loyalty, recruiting,
employee retention and company valuation.

After a decade and a half of launching and re-launching numerous brands, I’ve
observed seven quantifiable, revenue-enhancing benefits that emerge when
a company’s branding is done with intentionality and creativity.

1. A competitive edge when pitching new business

When your sales team members visit prospective clients for the first time, there is
a greater likelihood of winning new business if a strong, well-regarded brand has
gone before them. When a potential customer has already formed a positive
opinion about your company based on your branding efforts, your sales team
enters that dialog with greater confidence. Maybe even a bit of swagger.

The simple formula I use with clients for such brand-building is:

Uniqueness + Frequency + Consistency = Brand Identity

When prospective customers see your company’s brand frequently and it is

presented with great consistency in a variety of media, revealing your
organization as uniquely differentiated from competitors, your success rate in
new business development is far greater than with a forgettable, undifferentiated
brand.

2. Confirming customer loyalty

It is axiomatic in business that the cost of acquiring a new customer far exceeds
that of retaining an existing one. Yet many companies—and especially their sales
personnel—are so deeply engaged with landing new business that existing
customers are taken for granted. A systematic focus on reinforcing your brand at
every customer interaction is a tremendous safeguard against this kind of
customer service entropy. It is useful to occasionally perform a “brand audit”
examining the dozens of touch-points where your customers interact with your
organization. Every interaction either reinforces the brand or undermines it.

Similarly, one of the least appreciated, yet most valuable, aspects of consistent
branding in advertising and public relations is the impact it has on current
customers. When they see your company frequently visible in the media, they
feel confirmed in their good judgment for hiring your firm.

3. Reducing pressure on pricing

Price becomes less of an issue when a brand is well regarded and professionally
deployed, functioning as an insurance policy for the buyer. In other words, a
brand that stands for something other than low cost can direct people to make
decisions based on things other than price.

A brand’s value could thus be calculated as the difference in price that customers
are willing to pay vs. the commodity pricing for similar products or services
delivered by your competitors. Unless you are prepared to be the Wal-Mart of
your industry, you’ll need to build a brand that suggests paying a premium is well
worth the value and privilege of working with your firm.

4. Empowering employees with a belief system for making decisions

We often hear organizations extol the virtues of “empowered employees.” But I’ll
bet that most interactions you’ve had with customer service departments recently
would suggest they never got the empowerment memo. These front-line
employees may be well acquainted with bureaucratic policies and procedures,
but they lack any real autonomy or personal judgment.

But that all changes with a strong brand. When a company has a clearly defined
brand, it begins to define company culture and employee attitudes. Effective
leaders can articulate what their brand means to employees and customers, and
then free to them to interpret and apply the brand in their everyday interactions
with customers. That’s true employee empowerment—with big results for
customer retention.

5. Faster launch of new products and services

A well-branded company enjoys far better odds of successfully launching a new

product or service than one that lacks a compelling brand. Brands are belief
systems (not logos or taglines). Because they’re belief systems, the credibility
accruing to a brand’s past success in one product or service category can be
leveraged to launch a new product or service. This transfer of brand equity is not
unlike a company funding a new division with capital from an already established
enterprise.

6. Enabling satisfied customers to become brand advocates

Anyone who has been in business very long will confirm that a referral is the
most powerful force in business development. Just as people feel good about
and speak enthusiastically about their favorite brand of hotel, car or smart phone,
so also you can observe people being eager to mention their association with the
best brands in your industry…hopefully yours.

There is a certain amount of psychological identification taking place when

people align themselves as customers of a company renowned for
professionalism and quality. This transfer of brand identity naturally leads to
referrals. Companies with strong brands rarely need to ask their clients for
recommendations, viz. Apple and its fanatic, brand-evangelist customer base.

7. A more profitable succession strategy

This is the most important outcome of effective branding, because at some point
in every company’s history, it will either be:

a.
 Passed on to one’s children

b.
 Acquired by partners in the firm
c.
 Sold to investors
d.
 Purchased by another company
e.
 Go public
f.
 Pass into oblivion

In all but the last and regrettable outcome, a strong brand delivers more value at
the time of succession. This can translate into hundreds of thousands or even
millions of dollars in an acquisition. Smart investors pay good money for well-
regarded brands. That’s because brands guarantee the loyalty and attraction
described above, securing future income for the potential buyers of a company. If
you’re passing a company on to children or partners, then you certainly want to
pass on the most valuable, respected asset possible. A compelling brand makes
that possible.

These seven benefits of effective branding can be worth millions of dollars over a
company’s lifespan. The investment in time, money and talent to build a
memorable brand should be viewed as seed capital with a quantifiable return on
investment. For businesses willing to make that investment, the results include
sustainability, even in hard economic times, and a more profitable outcome when
it is time to sell the company or pass it on to others.

© 2011 David Heitman

David Heitman is president and brand strategist at The Creative Alliance, a marketing
and public relations firm in Lafayette, Colorado. He can be reached at
david@thecreativealliance.com