BRAND BUILDING is a blog feature in which our experts present an in-depth POV on topics ranging from branding to design to experience, all through the lens of simplicity. Here Ben Osborne, head of insights for Siegel+Gale EMEA, discusses how, despite its impact on business success, brand owners are still facing challenges when demonstrating the importance of brand in the boardroom. He elaborates on the art of turning marketing-speak into a financial language that proves its value and resonates with the board.
David Ogilvy, considered by many to be the father of advertising, described a brand as the intangible sum of a product’s attributes. The important word here being intangible.
Likewise, Jeff Bezos defines a brand as what people say about you when you’ve left the room. A clear and succinct explanation but, once again, a intangible, boardroom-ready explanation escapes him.
Brand owners face a serious challenge. How do they lobby for and sustain investment in their brand? How do they put a value or price-tag on something you can neither see nor touch?
Brand is not the only ‘intangible asset’ being talked about in boardrooms. Other intangibles, like human capital, intellectual property and customer data, are also edging their way up the agenda. But how do we also isolate brand from these other intangible assets in order to show why it’s important to invest in brand over people, IP or customer data?
Brand valuation – an approach mixing both art and science – has been a method used to calculate the total financial value of a specific brand since the late 1970s.
However the varying approaches mean that the different players rarely agree on the valuation of brands. For example, Interbrand’s methodology values Google’s brand at just over 130 billion dollars, compared to 110 billion dollars by Brand Finance and 85 billion dollars by Forbes.
These dramatic differences, exaggerated by the size of the numbers calculated, gives brand valuation a reputation for being fluffy and inaccurate, which risks derailing the original intention of the exercise. Furthermore, traditional approaches can encourage us to forget that brand valuation is a means to an end, not an end in itself; measurement may try to help us to speak the language of the boardroom and make the intangible, tangible, but it doesn’t tell you how to reinforce or create incremental brand value or optimise allocation of resources – and this is what matters in the real world.
For this reason, the best way of bringing brand into the boardroom is to focus on the one truly meaningful metric: brand contribution.
Calculating brand contribution to revenue; quantifying the strength of a brand in consumers’ minds and the contribution of predisposition to buy–these are all evidential measures that clearly communicate the value of brand to the bottom line and the role it plays in generating future cash flow. These are the measures that will win you board support for brand-building investments.
What’s more, brand contribution has a number of benefits over a full valuation exercise:
- Efficient: takes less time and is more cost efficient to run
- Easier to run regularly: with less reliance on annual or quarterly financial reporting, it’s easier to keep updated
- Comparability: easier to accurately compare to competitors, since you don’t rely on sensitive information
- Strategic: data can be cut by specific audiences or business units
Ultimately, calculating brand contribution focuses on underlying drivers of brand preference, offering up a rich understanding of the building blocks of the brand. This provides additional robustness but also the tools needed to re-build the brand, optimise brand value and make informed decisions about utilisation of investment.
This helps to build meaningful strategies and project the future impact of investments in order to quantify a tangible return on brand investment. And when we talk about speaking the language of the boardroom, this may be the Holy Grail.
Whilst traditional brand valuation fulfils a need to make the intangible tangible, there is a risk it is too complex and an end in itself rather than a means to an end.
The art of turning the language of branding into language of the boardroom is to keep it