Understanding Brand Value Creation

There are millions of brands in the United States. Most of these brands are sparks that are unable to ignite and create value for their owners. A few brands are shooting stars. They rise and reach market stardom, but swiftly lose focus and wither into oblivion. Only a selected number of brands become superstars; that is, they are able to build and retain value over time.

So what separates the sparks from the superstars? The answer is neither simple, nor straightforward. A winning formula for building a superstar brand can be elusive and differs from one industry to the next. Nevertheless, failure to understand brand value creation can prevent new brands from getting off the ground, and quickly chisel away at the value created by established brands.

Creating and sustaining brand value can be a complex and often daunting task. Gone are the days when marketing was synonymous with advertising, and a single ad placement on the Ed Sullivan Show or ABC’s World News allowed marketers to reach millions of consumers looking to spend their steadily growing, disposable income. Companies must now deal with a fragmented media landscape, as well as savvy consumers with short attention spans and high expectations. Furthermore, companies now face increasing pressure from an array of global competitors offering products and services of equal or higher quality, at lower prices.

Today, brand value creation requires marketers to skillfully manage a set of intricately related elements. These elements can be grouped into two categories: value drivers and value enablers.

Value Drivers

Value drivers are the set of building blocks that, when properly combined, allow a company to generate value. They are investment, innovation, brand platform, value proposition, and people.

1. Investment: Value creation cannot take place without investment—primarily financial investment. A common mistake made by marketers is to set unrealistic goals relative to available budgets. Business expectations should be aligned with the timing and amount of funds invested in creating and strengthening value drivers and enablers.

2. Innovation: Companies compete in an evolving market place. Businesses that thrive on change ultimately succeed, and those that fail to adapt inevitably fade away. Marketers need to continuously innovate their products, marketing approach, and business model in order to keep up with customers and stay ahead of the competition.

3. Brand Platform: A brand is much more than a logo or a name. Well-architected and clearly communicated platforms are key to building successful brands that drive revenue and outlive both business models and products.

4. Value Proposition: A compelling value proposition should be the foundation for all branding and marketing initiatives. Value propositions that clearly differentiate brands and evolve to meet customer needs are key to acquiring and retaining customers—and building financial value over time.

5. People: Innovative products and companies will certainly fail if the human capital necessary to support marketing and sales activities is not in place. Delayed product launches, unanswered calls, or long lines at the checkout counter are certain to anger customers and build negative brand equity that is expensive, and sometimes impossible, to reverse.

Value Enablers

Value enablers are the assets that allow value drivers to create and sustain brand value over time. They are measurement, knowledge, systems, alignment, and engagement.

1. Knowledge: Brand knowledge is an asset often ignored by most organizations. Mechanical tasks tend to be the spotlight of most employee training programs—how to fill out forms, handle inventory, etc. Companies should put equal focus on training programs that help employees engage customers, convey the right value proposition, and live the brand in their everyday work.

2. Measurement: Measuring and tracking the efficiency and effectiveness of marketing programs helps companies make the investments that drive the most value. From an efficiency perspective, marketers should focus on metrics that lower the cost of customer acquisition. Effectiveness benchmarks should focus on revenue generation, customer value, and brand equity.

3. Systems: A business system is much more than a computer network. It is the backbone of every organization. A business system can be a set of tools and networks that deliver the right information to decision makers. It can also be a human-driven process used to make products, marketing, or sales decisions. Business systems are key to
value creation.

4. Alignment: Organizational silo mentality can be a serious impediment to effective value creation. Marketing, finance, human resources, and IT should be aligned behind a common strategy, and work in unison to ensure that business goals are met. Within marketing, branding initiatives and marketing programs should be aligned with an overall business strategy.

5. Engagement: Historically, marketers have viewed their role as that of communicators. Their task was message development. Their tools were radio, print, and television. Their key metric was message recall. Today, marketers must be relationship managers. Their task is to engage consumers and turn them into loyal customers. Their tools must be media-agnostic, ubiquitous, and interactive. Their key metric should be customer lifetime value.

Properly blending and investing in the right value drivers and value enablers will ensure a healthy and lasting brand that drives revenue and builds shareholder value.

Copyright © 2009 Pedro Laboy