Why brand? Because it's good business.
In a recent post I talked about how its too easy for marketing to be viewed as an expense rather than a value generator.
This bias becomes even more pronounced when you mention branding.
Branding = voodoo?
Branding gets a bad rap. Not that it isn't deserved. I've met plenty of loonies in the branding business who want you to believe they wield some sort of branding magic. Asking for quantification gets you a patronizing smile as if to say, "I would expect such from someone who doesn't understand what it is like to be touched by the hand of the branding gods."
Come on. Really? Understanding why branding appeals to us can do nothing but add value to the work of all us honest and forthright branding practitioners. And adding some measure of quantification helps smart business people validate the decision to invest in smart branding.
The logic of the illogical
To understand the value of branding, we need to first look at the decision making mechanism.
For us humans, branding connects with the illogically-prone emotional part of our brains (the limbic region for all you amateur neuroscientists out there). The thing is, this is also the part of our brains responsible for decision making.
So it logically stands to reason that if you want a direct line to the decision making mechanism of every human being, connect with their emotions. It's so illogically logical.
Quantifying the brand
Connecting with the decision making part of the brain is good theory. But let’s get to the numbers that prove that branding is good for business.
Leading organizations recognize the ability of the brand to contribute to the value of the company. For example, one report put the estimated value of the Coca-Cola brand alone at $68.7 million.
How do brands affect the value? According to the Journal of Applied Corporate Finance, “Brands contribute to the market value of companies by increasing not only current earnings, but also the price-to-earnings (P/E) multiples that investors assign to current earnings. Such increases in P/E multiples in turn reflect investors’ expectations for lower risk, higher growth, or both."
What kind of impact does that have? “Accenture estimated that intangibles accounted for almost 70% of the value of the S&P 500 in 2007, up from 20% in 1980.”
A sweet brand value story
It’s one thing to talk about what a brand is estimated to be worth. It’s another to actually see companies assign a value to a brand that they are buying. That’s what happened with Hostess Brands. You know, Wonder Bread, Twinkies, and such.
Hostess Brands fell on hard times, entered bankruptcy, and its businesses were auctioned off. The buyers weren’t buying the inefficient and outdated operations that had caused problems for the company. They were attracted to the value of those Hostess brands - many dating back to the pre-WWII era. According to the ABF Journal, “(The buyer) ascribed $193 million — or 55% of its purchase price for Hostess bread brands — to identifiable intangible assets, mainly trademarks."
That’s some sweet brand value.
What’s it all add up to?
The brand holds the potential to add real value to the organization. Not just some squishy, feel-good value. Cold, hard cash value. When you consider it through this lens, it’s easy to understand why you should invest in and protect the brand like any other key asset of the company.