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30th May 2012
This article has been written due to comments from third level students who major in finance and their approach to branding. I talk quite a lot about the importance of branding and how it affects your bottom line but it wasn’t until the above parties questioned the connection of these two major business functions that it encouraged me to write this article. We need to quantifiably show the power of brand development and why we call it an investment and not a cost.
Have you ever thought about what your brand is worth??? Or imagine that you will build a brand that is worth more than what appears in your accounts. Let’s look at some examples…
You may know the famous quotation from John Stuart (Quaker Oats), “If this business were to spilt up, I would give you the land and bricks and mortar, and I would take the brands and trademarks, and I would fare better than you”. So what does this mean? It means that John Stuart knew the value that his brand had, without taking into consideration the company’s’ buildings and equipment. He knew people recognised it, trusted it and bought into it. The point is – customers purchased the brand, repurchased it, and repurchased it again! Therefore, having loyal customer’s leads to increased revenue and it is not based on bricks and mortar. His point is - he would be able to keep up his brand success regardless of people taking the tangibles away.
Another example is the company Kraft; Kraft was purchased for more than $13 billion, more than 600% over its book value and far beyond the worth of any balance sheet item representing bricks and mortar. Why is this? The answer, because the brand is known, liked and has loyal customers. The monetary value of the brand was not captured in the balance sheets.
This is why companies such as ‘Interbrand’, who have changed the world’s view of branding and brand management by creating and managing brands as valuable business assets, and showing us that brands are worth more than what appears on paper and in the accounts.
There is also the argument that people pay more for products and services produced by well developed and strong brands. Why pay more for a t-shirt that is 100% cotton that has no logo over a t-shirt that is 100% cotton but has a Nike logo on it? Again, the answer lies in - such t-shirts have added value in the eyes of the customer. This added value is often called Brand Equity. Brand Equity is the potential for the brand to impact your business.
My question to you - What can your brand do for you in terms of revenue and profit??? To revisit my original question - Have you thought about what your brand is worth? Or what it could be worth if you invest your time resources into building a strong brand? Now, I realise I have given non-SME examples, however this does not take away from the importance and relevance of branding to small companies. Where did Quarter Oats, Kraft or Nike start? They started small. They started at the start. SMEs need to think strategically, we need to embrace our potential to resonate with our customers. We need to embrace our belief in what we are producing and selling and it’s not always about the tangibles.