Many organizations are very good at developing brand and marketing strategies that have the potential to produce excellent business results. But often these strategies become diluted or even derailed due to misaligned execution. Other organizations are experts at flawless execution of strategies that may not align with actual customer behaviors and organizational goals. The reality is that it takes both to succeed. And that requires a holistic approach, connecting internal and external components to create a symbiotic brand.
When marketers fail, it is generally tied to their inability to connect strategy with in-market execution. My new book, “Getting There from Here: Bridging Strategy and Execution,” takes on the task of not only outlining how critical it is to bridge this gap but also identifying the rewards on the other side: operational excellence and in-market impact. It is an excellent reference for perspective and processes that help bridge expectations, experiences, and behaviors among all brand stakeholders at every touchpoint.
Visit http://amzn.to/1yK9DTG to download a copy. Whatever your goals, it will help you get there from here by giving you tools and processes to effectively bridge strategy and execution for better business results.
Getting There from Here: Bridging Strategy and Execution
Page 15: The power of the bridge between strategy and execution
Page 59: The RAPPORT Process; a master process and language that helps align every level of your organization
Page 125: How to conduct an effective Strategic Summit
Page 42: How to know a good vision statement when you see one
Page 116: How to build a metrics bridge dashboard
Page 17: The true relationship of brand and marketing
Page 21: Harnessing the relationship between business, brand, and innovation
Page 34: Finding strategic alignment control points
Page 53: How to be sure you’re selecting the right opportunities
Page 56: When estimating can be better than counting
B2B marketing folks are often deer in the headlights when their CFOs challenge them for proof that brand building funds return value on their investments.
Financial executives – especially in B2B organizations– often have a hard time justifying brand-building investments. That’s mostly because when marketing folks like us are asked to provide ROI calculations for the big bucks we request, we morph into deer in the headlights before their very eyes.
So what do we do? We cloak brand building in marketing execution expenses that the financial guys can wrap their heads around. Simply put, we expense it. Feeling wimpy yet? You’re not alone. But now it’s time to help your CFO understand the value of building brand equity and put it in the asset column where it belongs…because investment in assets and a solid valuation methods are things they can relate to.
Who Doesn’t Want Higher Business Valuation?
For many middle-market B2B companies, brand equity falls off the financial radar completely, mostly because there’s no official GAAP measurement formula for organic brand equity. In a survey of nearly 200 senior marketing managers, only 26 percent responded they found their “brand equity” metric very useful. That’s pretty sad, considering that some prominent marketing researchers believe brands are one of the most valuable assets a company owns. This is a measure brand and marketing managers should leverage in their stakeholder relationships.
Who doesn’t want 5% – 20% more company valuation?
Even in B2B, where “branding” is looked upon as something more suited for consumer products, brand equity can account for 5% – 20% or more of a company’s market value. And who wouldn’t want that (except maybe for that Cheerio-lobbing cherub who disses Jimmy Fallon on those Capital One commercials)?
In certain industries, increasing customer loyalty by 2% can impact the bottom-line in the same way as a 10% reduction in costs (The Market Research Executive Board, “Measuring Brand Equity”). The report continued to cite that a composite of companies with brands considered by business leaders as “superior” grew 402% in the 1990s while the Dow Jones Industrial Average rose only 308%. And if that tidbit doesn’t cause pause in your CFO, toss this one at her: research finds that companies with the largest gains in brand equity generated an average current-term stock return of 30%, while companies with decreases in brand equity lost 10%. This is the kind of cred bean counters need to begin viewing brand as an investment instead of an expense.
What is brand equity really?
Brand equity trends are a good barometer overall brand health. But much like measuring the happiness of hippos, no single, comprehensive, industry-wide definition for brand equity exists. If pressed for a broad definition, brand equity essentially addresses the financial value that a brand’s identity, persona, and emotional appeal add to a product or service. It’s less about function and more about the customer experience and relationship. It all comes down to RAPPORT.
“Emotional value” is a pretty squishy thing to measure in financial terms, but it is undeniable that even in B2B, emotional attachment is a powerful issue. Though it may be expressed on different levels than B2C, people are still involved in the decision-making, influencing, and purchasing processes. And where there are people, there are emotional attachments.
The bottom line is…well, the bottom line…meaning that even if a brand has an emotional connection with its stakeholders, differentiation in the marketplace, high awareness, and easy accessibility, but not sustainable sales and margins; what’s it worth? This could be one reason why many B2B financial folks hold limited regard (and approve fewer, smaller budgets) for supporting this “phantom asset” than in B2C.
The flaws in most approaches to B2B brand equity measurement are their overemphasis on marketing factors and diminished emphasis on business, financial, and operational efficiency factors. After all, equity is a financial concept, so brand equity measurements – especially in B2B companies – should be less about the marketing aspects and more about the business and financial impact, right? One hitch: Marketing folks are more comfortable identifying and measuring brand equity drivers (marketing factors) that are great for prescribing ways to improve the financial equity of a brand, but not so good for measuring the equity. See the difference?
A Scorecard Just for B2B Brand Equity
To provide measurement of brand equity specifically for middle-market B2B brands that balances the marketing (external) and financial (internal) dimensions of the brand, I’ve crafted a scorecard that balances the two. The scorecard framework is based on the perspective that brand and business objectives always work hand-in-hand, because neither would exist without the other (if you believe that brand is a relationship with stakeholders). Another point to keep in mind is that the scorecard metrics are not meant to be used as isolated snapshots, but rather assessed in trends, taking the measurements at different periods over time and watching the delta and direction. This trending approach averages temporary influences and favors long term outlooks for valuation and predictive modeling.
The Devil’s in the Details
Dimension: The aspect of the brand to be measured
Eight select business and marketing dimensions of the brand are identified from a balanced “branded-business” perspective
Internal/External: Categorizing each metric as internal or external
Internal factors are things that can be controlled internally, such as setting pricing, aligning people, or switching operational processes or investing in specific capital equipment. These are business metrics. External factors are controlled by forces outside the brand organization. They include factors such as media, marketing, events, economics, etc., and affect the dimensions of external culture, awareness, and preference.
Loyalty is a bridge between internal control factors and external control factors because the organization (internal) has control over loyalty programs, but customers (external) are ultimately the ones who control the loyalty score. These unique qualities make loyalty a very powerful indicator of brand health because they provide an ultimate measurement for the faithful delivery of the brand promise.
Metric: The specific measurement for each dimension
1. Financial: Price premium and positioning over median category pricing
This is a traditional brand equity measure. One caveat: Make sure the category is segmented very carefully (whether you are valuing a product or corporate brand). Price premiums can skew heavily either way if the category includes competitive alternatives or substitutes positioned off your target. If you’re valuing a corporate brand, you can quantify corporate perceived price positioning by using a “basket of brands” approach against the market median pricing of an equivalent basket for each competitor. This is an internal metric because the B2B brand has control over its pricing.
2. Operational: Operational alignment score
Operational alignment occurs when the operational aspects of an organization and its people are all in alignment with the brand strategy. This means that everyone in a line position knows what to do on a daily basis in their jobs to support the brand’s delivery to its customers. This often combines elements of the corporate and product brand strategies. Operational alignment is not given much credit in the brand equity spreadsheet, but it can dramatically reduce costs in many ways. This is an internal metric because the B2B brand has control over its operational investments, processes, and policies.
Brand delivery is a brand touch point metric that assesses the alignment of stakeholders’ beliefs of what the brand delivers to them, above and beyond the functional aspects of the product or service. When employees and customers share the same understanding of what the brand is delivering (attributes beyond the functional), a brand is well aligned. When operationalized in every employee and customer group, this metric can pinpoint areas of misalignment, leading to clues for significant improvements in customer satisfaction. This is an internal metric because the B2B brand has control over setting and meeting customer expectations.
4. Loyalty: Net Promoter Score
The Net Promoter Score (NPS) is a measure of customer advocacy and evangelism. Essentially, it measures the percentage of branded customers who actively refer a brand within their personal and professional networks. High NPS has been related to strong brands and sustainable financial success. This is a hybrid internal and external metric because the B2B brand and the customer each have some control over loyalty.
5. Awareness: Brand awareness score
Brand awareness alone is a measure of marketing success and not necessarily financial success. But combined with the other metrics in this scorecard, it can help drive financial success. This is an external metric because awareness is a customer perception factor.
6. Recognition: Logo/packaging
Brand recognition is an important dimension that helps quantify not only differentiation, but also the degree to which a brand cuts through the noise of the modern marketing landscape. It is an external metric because it is customer perceiption-based.
7. Preference: Market share trend
This metric is a traditional bell weather and helps round out the competitive success of the brand. This is an external metric because it deals with the external market competitive milieu.
8. Cultural: Buzz metrics (segment or industry) Social media has made “buzz” an undeniable part of our brandscape. Measuring resonance with brand positioning amidst current socio-economic trends is another facet of awareness, but includes richer customer positioning connotations. This is a purely external factor because it is in the control of customers.
All metrics should be expressed in percentages and averaged together for a composite score. Each or any of these factors can be weighted to accommodate specific industry peculiarities.
Once you begin treating your brand investments like investments instead of expenses, you’ll be surprised at how much more confident you’ll be in your brand budget discussions.
Contact GroPartners Consulting for guidance on how to measure your B2B brand equity, either corporate or product. 847-845-6970
A strong corporate brand strategy is one of the most powerful forces an organization can marshal. Properly operationalized, it can measurably improve top-line effectiveness for product brands and bottom line efficiencies throughout the organization from the stock room to the board room − and everywhere between. In the best brands, the strategy acts as a guide for every stakeholder decision, from the highest level to the most granular, which can result in reduced management costs and greater employee satisfaction.
But just as any other kind of strategy, the true power of brand strategy is activated only with aligned execution. A brand strategy road map helps brands stay on track with clear process, aligning business, vision, people, and process.
Brand strategy originates in your organization’s vision and values. Aligning business goals, customer wants and needs, and employee satisfaction with that vision is critical to sustainable growth.
Virgin operates 53 separate brands, as diverse as airlines, records, books, and health. All Virgin brands are based on the same vision and values:
“Virgin believes in making a difference. We stand for value for money, quality, innovation, fun and a sense of competitive challenge. We strive to achieve this by empowering our employees to continually deliver an unbeatable customer experience.”
Experience…Founder Richard Branson showcases the Virgin brand with his swashbuckling extreme sports, spaceships and experience-steeped TV commercial roles. By contrast, many organizations mistake the branding process for an identity exercise. And while that is an essential piece of brand, there are three major components to branding:
A brand strategy road map helps communicate the process to senior management and provides “gates” that must be sequentially satisfied to move through the process. (Click graphic to enlarge)
Your company’s best branding strategies will almost always come from aligning customer insights with organizational vision, values and business objectives. Those strategies are brought to life with brand development (logos, messaging, governance, programs, products, services) and should permeate your organization’s processes and culture/employees. Only on this strategic footing is the brand ready to push outward to customers through sales and marketing touch points. This process helps organizations “live the brand,” so customers’ and consumers’ brand experience is consistent with what the brand stands for. This consistency provides a host of business benefits from enhanced productivity, support for premium pricing, and deflection of competition, to higher revenues and margins.
Mergers & Acquisitions
When a merger or acquisition occurs, though there may be solid business due-diligence behind the transaction, brand misalignment is likely. Rarely are two brand cultures so similar that an alignment action isn’t needed to optimize business performance. Developing a brand strategy roadmap, along with some seasoned facilitation and guidance, helps resolve brand misalignment issues so people and processes support a common goal.
Get the (big) picture?
Alignment essentially assures that people, processes, and business goals all understand the vision and support each other. Alignment of talent, brand delivery, marketing, operations, and other functional areas and stakeholder groups make up the entire alignment picture. “People” include not only employees, but also distributors and customers.
Chicken and egg
There’s a debate among brand consultants about whether business strategy drives the vision or vice-versa…that business strategy may change the organizational vision. I’d like to hear your thoughts on this. Leave a comment (see top of post).
Delighted customers are worth more than their individual revenue streams.
In my August, 2010 frenchonbrand.com, “Is Customer Delight Overkill?” (http://wp.me/pU6PC-25), I downplayed the concept of customer delight as potentially over-performing on the premise that people don’t necessarily want to be delighted, merely satisfied. My logic was that over performing in this area causes excess cost. Since then, and as a result of one of my reader’s well-informed and thoughtful comments (thanks, John H. FMB!) — and more research on the subject — I’ve moderated my position on customer delight and pass along the following convincing metric: a way to measure the impact of customer delight on word-of-mouth promotion to optimize the investment.
I realized the impact of customer delight extends far beyond the customer, after a review of W. Edwards Deming’s Profound Knowledge and Fred Reichheld’s “The Ultimate Question” (Net Promoter Score a.k.a. NPS). In this holistic approach to business, operationalizing customer delight becomes essential to its importance. Instead of viewing “delight” as overkill, I can now reconcile it with other favorable business results, such as increasing the lifetime value of a customer (promoter) beyond the customer revenue stream, and into areas such as:
Low-cost customer acquisition via referrals (reduced marketing costs)
Viral customer acquisition (referrals of referrals)
More nimble market response due to vibrant customer connections (innovation)
Continuous improvement of operations through cultural alignment (operationalized brand)
And many more
The result is sustainable growth.
To measure customer delight word-of-mouth radiance, Reichheld offers the following formula (this can be modified per individual situation). A customer survey is needed to capture the information needed to perform the calculations below (contact GroPartners for specific survey content).
Pick a benchmark date in the past (for example, the past 12 months, or last fiscal year). Then use this measurement process.
1. How many delighted customers do you have?
Find out how many of your new desirable customers were referred by other delighted customers (NPS of 9 or 10, meaning “on a scale of 1-10, how likely would you be to refer a friend or colleague to your brand?)
2. What is your average new customer worth?
Calculate (or see industry analysts’ calculations) what your average new customer is worth in dollars and cents.
3. Calculate the total value of those new delighted customers
Multiply the data from #1 (above) by #2 (above)
4. Calculate the value of positive comments
In your NPS survey, also ask respondents for positive or negative comments that support their NPS rating. If x number of positive comments generated $y in revenue (from 3 above), divide y/x to calculate the value of each positive comment
6. Calculate the value of each promoter
In your survey, find out the number of people per year to which each promoter might have commented, and multiply the average number by the value in #4 (above) to get the value of word-of-mouth per promoter. This is the “magic number” that helps optimize customer delight.
Anything can be measured. Even the power of customer delight. Now I’m a believer. How about you?
frenchonbrand.com is content published by
GroPartners Consulting helps middle-market organizations bridge strategy and execution for better business results.
Brand is the network of relationships that surrounds a business or product, including all its touch points.
I once spent the better part of a year convincing the CEO of a marketing organization that brand was not a subset of marketing, but instead, the reverse. To my surprise, during that year, I noticed his perspective is fairly common, even among marketing folks.
To many people (especially direct marketers and finance folks), “brand” associates with really fluffy connotations. In reality, brand is much bigger than marketing. In fact, it’s bigger than the products brought to market and even bigger than the companies that make the products that go to market. Why? Because the brand includes not only the company and its products, but relationships among its people, all its functions, channels (distributors, etc.), customers and even – to a degree – its competitors. It encompasses values, purpose, beliefs, and ultimately, identity. Essentially, brand is about that precisely dicey issue of “what you stand for” and what that means to people in the context of their lives. Finance guys often get heartburn from brand discussions mostly because they can’t easily and accurately prove out ROI on brand investments. An operationalized approach to brand investments can quench the heartburn. This means placing strategic metrics among and between internal operations, customer touch point metrics, marketing results, and financial results.
The difference between Marketing and Brand
Click image for a larger view.
Marketing builds and measures transactions. Brand builds and measures relationships. Even though marketers refer to building relationships through marketing, the goal is transactions, so technically, there’s a little brand blended in with the marketing mentality. Brand relationships continue after marketing has delivered products to customers. The goal of branding is to build relationships as a pipeline for transactions.
Where marketing is about all the intelligence and activities it takes to drive transactions, brand focuses on the underlying relationships and expectations among stakeholders around the transactions. When positive relationships exist and expectations are met, the stage is set for a continuous stream of transactions (i.e. successful sales and marketing campaigns).
This sets into motion a chain of operational implications, both internal and external. Brand-aligned organizations use this as an opportunity to examine the dynamic and causal relationships among employees, customers, and operations. Identifying cause-and-effect among these forces builds business value – the goals at the core of business operations. To do this successfully, an operationalized brand metrics program should first be in place (for more on this, contact Gropartners).
The truth is, most people feel more comfortable gaining a level of trust before they take the leap into a transaction. Until they experience a level of satisfaction or value as “compensation” for the currency they trade, customers experience anxiety and feel vulnerable. But they may not even take the leap until they feel they can trust the seller (kind of “chicken-or-egg” first). So whether an ad campaign puts a friendly face on the brand, a sampling campaign lets you “try before you buy,” or a recommendation from a trusted friend disarms you, some level of pre-transaction relationship is usually required to help minimize the feeling of risk and start the flow of transactions. This, and it’s post-transaction counterparts (“customer care,” etc.), wrap the transactions up in “relationship wrappers.”
Brands are relationships between people and products, services, or ideas, which are made of three fundamental elements: focus, distinction, and trust. The word “brand” should be distinguished from ‘branding.” “Brand” focuses on the strategic dimensions of a relationship while “branding” refers to execution. “Branding” is a term that broadly defines the scope of activities that bring the brand to life for stakeholders –- creative application of brand values, identity and communications (logos, taglines, guidelines, messaging, etc.). These activities “voice” the brand to stakeholders. And while these are certainly essential elements of brand, they are usually products of creative execution under strategic direction.
So when you hear or use the phrase “brand marketing,” it generally relates to issues about customer relationships and delivering on the promise. In contrast,”product marketing,” issues are mainly about transactions and delivering the product. That’s how brand marketing and product marketing work hand-in-hand to build business value. And that’s why you find many high-profile CEOs personally driving brand conversations and initiatives. The big picture guys get it.