Connecting brand strategy to business results
Competitors are gaining ground. The look and feel of products within your company’s portfolio needs a refresh. Employees are uninspired and disengaged. Your brand has outgrown (or underutilized) its current identity or positioning. Whether the realization came about as a result of formal analysis or your personal observations, you know your brand isn’t working hard enough for your business—and something’s got to change.
However, to make the kinds of changes that will drive your business forward, you also know that investment and support from the top of your organization will be required. As you prepare to make the business case for brand change, you will probably have questions to answer:
- How should the brand be positioned?
- What is the optimal brand architecture?
- What kind of investment will be needed?
- What value will this create for customers?
- What impact will this have on customer behaviors and revenues?
- What ROI can we expect?
Answering these questions requires a very diverse set of skills, from developing strategy to consumer research, analytics and financial modeling, determining the investment required and, crucially, the articulation of a compelling case. It requires a holistic view of a brand that can connect the dots between the way your brand functions, how its expression influences customer perceptions and behaviors and, ultimately, how the strength of your brand impacts financial performance.
By bringing together market, brand, competitor, and financial data, the brand valuation model provides a framework within which strategic options can be assessed and business case modeling conducted.
In addition to brand value, business case modeling will include estimates of top and bottom line improvements, as well as expected changes in business value.
To fully harness the power of your brand to drive choice, win loyalty and command a premium, specialist skills must be brought together and combined with a strategic overview. The goal, of course, is to secure future earnings and increase market share, but to arrive there, your brand must stay relevant. What will the future look like? Is the total experience of your brand one that is likely to create identification, differentiation and value next quarter, next year, or five years from now? Knowing how your brand impacts financial results is critical to maximizing brand and business value and staying competitive—and profitable— in the long-term.
Interbrand’s approach to business case development
Many firms claim to be able to evaluate strategic branding options. However, very few have the range of skills needed to tie the impact of branding to financial results (and therefore brand and business value). In order to do this, you must first establish the key value drivers for the business. In the telecom sector, for example, the biggest driver is typically subscriber turnover or churn, but ARPU (average revenue per user) and subscriber acquisition rates are also important. In financial services, the drivers include customer numbers, average products per customer, or balance on account. In the automotive sector, the drivers are typically unit sales volumes, average selling price and dealer incentives.
To fully appreciate how value is generated, it is critical to understand the relationship between brand perceptions and the value driving customer behaviors we want to model. Using retail as an example, if we are able to create a more engaging in-store experience, we can expect that customers will spend more time shopping and enjoying The atmosphere. When encouraged to experience a retail environment at their leisure, customers tend to purchase more, and potentially higher-value, items. However, in order to gain any real advantage regarding revenue generation, it’s not enough to know that this sort of change is generally beneficial—you need to know how to make it happen and exactly where you might need to invest.
Before committing resources to brand changes, businesses want to know if the changes will be worth making and what the nature of those changes might be. To that end, a range of research and analytical techniques are available to help organizations better understand the connections between customer perceptions and value driving behaviors. At Interbrand, we deepen our understanding of these relationships by connecting existing data from across the business (such as data from market research, CRM, and financial systems) and also commissioning new research (which may involve testing new concepts or brand propositions).
Once research and testing have helped identify what kinds of changes might be necessary and how the brand might benefit from implementing them, a commitment to invest is the next step. In most cases, upfront investment is usually needed to get improvements underway. This may also be followed by ongoing operational costs to, for example, deliver certain hallmark experiences to support a revitalized brand proposition. To help inform decision-making and make the case to upper management and the board for investment, we examine the variables in a financial model of the business, compare the potential upside with the cost to deliver, present strategic options for brand change, and show how each approach is expected to impact brand and business value.