The trouble with Brand Value

Brands create value.

Let me re-phrase : Strong brands create value.

Brands create value not only for consumers, but also companies. I see this as a cyclical process - brands first and foremost, create value for consumers, and this then translates into value for companies. You just can't be profitable without delivering genuine consumer value.

Great companies know this. They find ways to re-invent their brands to ensure that consumers love and resonate with them. They do this through imagery (Mercedes Benz), building relationships (Nike) or even by creating experiential value (Apple). The marketing discipline has come a long way. Very few today would argue that brands are the pillars of strong consumer relationships and loyalty.

But the trouble with brand value is that it starts getting blurrier as we move through the funnel.

Kevin Lane Keller, one of the great brand thinkers of our generation has summarised this funnel pretty succinctly.

This is all well and good. But the model fails to acknowledge the difficulty in justifying linkage.

Consider this:

The impact of brands on consumer value metrics (awareness, salience, attachment, loyalty) can be measured fairly easily through primary research. In fact, advances in marketing mix modeling have made the second level of linkage (sales, profitability, ROI) possible too. But how can the perennial 'shareholder value' be justified by marketers ? Today's economic climate makes it necessary for marketers to justify linkage not only with sales but also with long-term shareholder value.

If a marketer invests $100,000 in brand building, what is the long-term impact on shareholder value?

The difficulty arises due to the long lag effect of most marketing outcomes (sometimes even years), making accurate linkage extremely difficult. There is no doubt that brands do create shareholder value (look at the long-term stock market stability of some of the great brand-companies, for eg. Procter & Gamble, and this will be clearly evident). But the trouble is in linkage. 

This is unarguably the biggest challenge facing marketers today. Many probably don't even realise it.

The four habits of highly 'effective' marketing companies

Ad Age's CMO Strategy column is one of my personal favourites. The content really resonates with the idea of this blog and what I am trying to capture with my writings. I read a recent article on Why Measurement Alone Will Not Lead To Better Marketing and I couldn't agree with it more.

However, the article stirred up a whole new set of thoughts in my mind i.e. what makes companies highly effective marketers?  Well, let's start by thinking about it this way : "You can't manage what you can't measure", and hence, the first step to effective marketing is measurement.

But how do we measure the impact of marketing? And, can we measure marketing? Marketing is not something that can be measured, there are too many variables involved, it is highly intangible, right?

Wrong.

I am a firm believer that good marketing practice starts from the belief that marketing IS tangible and marketing CAN be measured. It is a similar concept to winning the Olympics - it seems really difficult and sometimes highly impossible, but people win gold medals at the Olympics, don't they?

So how can we as marketers win gold medals i.e. clearly articulate the impact and value that marketing creates for the organization?

I am not going to propose a secret formula for success or a magic metric to follow, simply because there isn't any. But what we can follow is a set of guiding principles and then apply them to our business context to achieve maximum impact.

Principle 1 - Define:  Understand what marketing means to your company and what it is accountable for, both in the short and long-term. Is it short-term incremental sales, brand equity, bottom-line growth or even long-term shareholder value creation. This first step is crucial in laying the foundations of effective measurement.

Principle 2- Design: Select the right metrics that align with and allow the measurement of these objectives. Is it ROI, cash flow, NPV, share price or even simple metrics such as NPS (net promoter score), brand awareness, intention to purchase or sales? Once there is clarity on what is being measured, the battle is half won.

Principle 3 - Decipher: This is the tricky part. But how do we measure ROI or NPV? How can we be certain that X% to our revenue or profit can be attributed to Y marketing activity. We can't be certain. But what we can do is build hypothesis through an expert understanding of our business and make reasonable assumptions based on our historical experience and current context. So principle 3 is acknowledging that measuring marketing is all about smart hypothesis building & testing! No marketing mix model will yield results with 100% accuracy.

Principle 4- Deliver: The last but most important of them all. Measuring marketing is all about courage and perseverance. It needs senior-level support, buy-in and initiative. It needs alignment with all other functions in the company. It needs to be a shared responsibility of all. It needs continuous learning. And finally, it needs artistic flair (hypothesis, creativity in selecting approaches & processes) as well as scientific rigour ( decision tools, statistical & modeling expertise). One cannot be substituted for the other.

Let's embrace one, and the others will follow.

Is the CMO role necessary?

I recently read a post on the Branding Strategy Insider blog about the Chief Marketing Officer role and whether it is justified. More and more companies are moving towards creating this role within the C-suite. While the article makes many valid points about the importance of the CMO in aligning the organisation with marketing and creating a more customer centric organisation, I do believe that creating a "position" that looks after "marketing" restricts it's role and influence to a certain extent. It is a paradox, isn't it?

Consider this:

1. If marketing's true role goes beyond sales & advertising, pervading through all functions of the company, what is the value in creating a single role that looks after marketing? Should this be a part of everyone's role in the company?

2. If marketing's true role is long-term profit and value creation, then don't business unit leaders or Chief Executive Officers play the role of a CMO anyway?

I feel that the creation of the CMO role is mainly driven by the insecurity of marketing to occupy a seat at the table. It is unfortunate that today, companies need CMOs to be proponents of the marketing philosophy - why can't this be embraced by everyone?