principles of brand asset management

7/28/2019 Principles of Brand Asset Management

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Principles of Brand Asset Management

By Scott Davis

Would your business recruit top MBAs and then leave them in their offices to learn by

osmosis? Would it invest millions of dollars in equipment, but fail to maintain it overtime? Would it park its Treasury funds in a 1.9% savings account?

Of course not.

People, capital and machinery are crucial business assets. As such, they must be

given the proper nurturing in terms of investment, management and maintenancefor their value to prove out over time.

If an asset is defined as a property with an assumed value that should be

consistently maximized by an organization, then shouldnt businesses also bemanaging their brands as the assets they are?

Its a notion that an increasing number of organizations are beginning to understandand apply as integral to their long-term, underlying business strategies the

strategy is called brand asset management.

Adopting it enables companies to maximize the long-term value of their brands from

two perspectives. First, demanding consumers are forcing companies to spend moredollars to earn greater returns. Second, companies generally admit that they dont

have the strategies in place to make the most of their opportunities for getting thosedollars from consumers.

Implementing a brand asset management strategy involves more than just putting a

process in place although going through the process is essential. It requires acommitment to brand asset management from the very highest levels of the

organization, so that the end goal of supporting and nurturing your brand as anasset is imbued throughout the corporate culture.

Brand Management Leads to Return on Investment

An astounding 71 percent of companies admit that they under-leverage their brands,

according to a study I conducted several years ago. Perhaps if they betterunderstood the correlation between brand strength and Return on Investment (ROI),that statistic would change. In Brand Leadership (Free Press), authors David Aaker

and Erich Joachimsthaler point to a causal link between brand equity and stockreturn, based on the EquiTrend database from Total Research.

EquiTrends annual brand power rating for 133 U.S. brands in 39 categories uses

perceived quality as the key brand equity measure. The average quality ratingamong those with opinions on brands has been found to be highly associated with


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brand liking, trust, pride and willingness to recommend.

Consistent with a wide body of empirical research in finance, a strong relationshipbetween ROI and stock return was found, Aaker and Joachimsthaler say in their

book. Remarkably, the relationship between brand equity and stock return wasnearly as strong.

Firms experiencing the largest gains in brand equity saw their stock return average30 percent; conversely, those firms with the largest losses in brand equity saw stock

return average a negative 10 percent. And brand equity impact was distinct from

that of ROI the correlation between the two was small. In contrast, there was noimpact of advertising on stock return, except that it was captured by brand equity.

The authors suggest that the brand equity/stock return relationship might stem from

brand equitys tendency to support a price premium, which contributes toprofitability. This relationship is undoubtedly based upon a two-way causal flow a

strong brand commands a price premium, and a price premium is an importantquality cue, they write. When a high level of perceived quality has been (or can be)

created, raising the price not only provides margin dollars but also aids perceptions.

Clearly, improving the return on all investments in the brand is a key benefit ofadopting a Brand asset management approach. But the benefits go further: It

maximizes the growth potential of the brand while also protecting it againstcustomer "disloyalty triggers." And finally, the approach provides a discipline for

senior management and others throughout the organization in terms of prioritizingresources and making decisions all aimed at the same outcome: maximizing the

long-term value of the brand.

Phase One: Develop a Brand Vision

Companies with the foresight to develop a brand vision simultaneous to their

creation of corporate mission, values and vision statements are more likely to avoidwhat happens at many organizations that fail to manage their brand as an asset:

Treated as a marcom initiative, the brand budget is one of the first to be cut duringlean times.

Why develop a brand vision? From a strategic perspective, it accomplishes three keyobjectives. It forces a consensus by management to long-term growth objectives and

identifies where the growth will come from. It guides research. And it sends a strongsignal to all stakeholders on the future direction of the company and the brands role

in getting there.

Components of a brand vision statement include:

A statement of the overall goal for the brand

Target market(s) identified for brand development

How the brand will be differentiated from others

Financial goals linked specifically to the brand


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Development of a brand vision is the first phase in an 11-step process leading to the

ultimate implementation of a brand asset management approach to businessmanagement. A crucial step under this phase is in defining what strategic and

financial goals the brand should help achieve.

This part of the process starts with one-on-one, information gathering sessions withmembers of the senior management team, including the CEO, CFO, all senior vicepresidents and other key influencers. They should be asked a series of probing

questions, such as:

What markets, business lines and distribution channels do we want tocompete in?

What are our strategic and financial objectives and what role does brand play

in them?

What does our brand stand for currently and in the future?

What resources are we willing and able to commit?

Can we achieve our goals with our existing brands, or must we undertake ashift?

From here, the organizations strategists must analyze the financial growth gap by

estimating the financial impact if nothing were invested in growing revenues over thenext five years compared with the company's revenue goals. Alternatives in filling

that gap via price increases, new products or acquisitions and the like include theoption of more successfully leveraging the brand. Left out of the equation, viable

options to fuel revenue growth might not be pursued.

Phase II: Determine Your Brand Picture

This phase encompasses three steps of the brand building process:

1. Determining your brands image2. Creating its contract

3. Creating a brand-based customer model

Your brands image is the associations your customers link to it. Ralph Lauren

clothing, for example, tends to strike an emotional chord with customers by makingthem feel good about themselves. While other apparel lines could copy the clothes,

they cant replicate the feeling associated with the Ralph Lauren brand. Thatemotional value helps the brand stand above others.

Building brand associations requires research into your own brand as well as

competitors. The research should include current and prospective customers, evenformer customers, along with industry experts and players in the distribution

channels. The key is discovering the associations they have with your brand.


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Those associations are best visualized as part of a pyramid. At the tip of the pyramidis brand strengths associated with beliefs and values the most powerful and most

difficult to imitate, but the hardest to deliver. At the center are the functional oremotional benefits the brand provides customers. At the bottom are features or

processes that must be demonstrated to customers the easiest to deliver, buthaving the least meaning and very easily duplicated.

Brands at the pinnacle of the pyramid include Nordstroms, Disney and FederalExpress. They enjoy enviable customer loyalty, the ability to charge premium prices,

and considerable brand endorsement power to support new product and service

launches.

If your brand has made it to the top of the pyramid, the challenge is in maintainingthat position. If its at the bottom, the challenge is moving up.

Your brand association is half of your brand image. Brand persona is the other half.

Separately, they have little value. Together, they deepen your understanding of thebrands image, strengths and weaknesses, and differentiating points.

Brand persona is the human characteristics such as personality, gender and size thatconsumers associate with your brand. When attractive, the personas can betranslated into selling propositions. When not, its time to fix the brand.

The old Target persona, for example, was a somewhat shabby retail chain with poor

service and low- to middle-class customers. The revitalized Target has successfullydeveloped a meaningful and relevant customer proposition. Its new persona is

demonstrated not just through merchandising -- well-designed and clean storescarrying great brands and giving great values, and higher levels of customer service

but through effective communications that cement the changed image.

A critical aspect is the creation of the brand contract a list of all the promises your

brand makes to customers. Executed internally, its defined and validated by themarketplace, and can change over time. It helps define marketplace perceptions and

expectations. Developing a brand contract involves several steps:

Ask customers how they see your brands image. Find out what promises thebrand has made, how well the promises were delivered and what other

promises the customers would like to see made.

Translate the brand contract into actionable standards.

Fulfill the good promises of the brand, or risk damaging it.

Make sure youre aware of the bad promises (negative associations) of thebrand and fix them.

Finally, develop a brand-based customer model, which represents a comprehensiveunderstanding of customer beliefs, behaviors, product or service, category and

competitors. It helps the company do a better job of positioning and extending its

brand and have a greater influence on the purchase decision. It is created byexploring the answers to three key questions:


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1. How do customers choose one brand over another?2. How does your brand stack up?

3. What opportunities are there for brand growth and expansion?

Phase III: Develop Your Brand Asset Management Strategy

This phase encompasses five steps:

1. Positioning your brand for success.

Put simply, your brands positioning is the benefit you want the customer to

associate with your brand. It begins by defining your target market, thebusiness youre in, and key differences and benefits of your brand.

For example, Tides might be: To homemakers, Tide is the detergent thatgets clothes the whitest and brightest. Update the statement in line with the

companys updates in overall growth strategies.

Remember that your positioning is strongest when its supported by senior

management, brought to life by employees, and, ultimately, customer-driven.

2. Extending your brand.

Successful brand extension is tied to keeping current customers happy,

creating new ones and keeping your brand fresh. However, extensions mustsupport, rather than weaken the brand. Extensions can be accomplished by

extending the definition of your business, its points of differentiation, or itsentire position in the marketplace.

Use what youve learned about customer needs in earlier phases of theprocess. Evaluate challenges and opportunities and develop three to fivespecific, brand-based opportunities in response.

An example of this process is Burger Kings Big Kids Meal. The Big Kids Meal

started when the corporation studied the market gap between McDonaldsHappy Meals (for young children) and the adult and teen market. The in-

between group of junior high-aged children (aged 11 to 14) was nevertargeted.

Burger King took the simplest but most effective route to extend its products

to this segment: It repackaged current offerings (such as the Whopper, 16-

ounce drink and large fries) and massively advertised directly at the target

audience.

During the exploration phase, the company most likely asked these

questions: Does any other fast food company provide a meal specifically

focused on this age group? Will anyone else do so soon? Has McDonalds? Theanswers were no, no, and no. And, yes, Burger Kings Big Kids Meal has been

a resounding success.


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3. Communicating your brands positioning.

In order to bring your brands positioning to life, its essential to develop andimplement long-term communication strategies demonstrating your brands

value to your target market.

The message must be consistent with the brand value, persona and vision. It

must be integrated into advertising and public relations efforts, eventmarketing and corporate sponsorships, trade, sales and consumerpromotions, direct marketing and internal employee communications.

Dont make the all-too-common mistake of relegating your branding efforts to

your advertising agency. This and your advertising program in support ofthe brand must be controlled by insiders. The advertising agency is

responsible for executing your brand vision, not creating it.

4. Leveraging your brand to enhance your channel influence.

Distribution channels are undergoing massive change. Manufacturers are

increasingly following mass retailers rules. The Internet is maturing. Catalog

sales are at all-time highs.

To gain control of these channels, the goal is to have customers asking for

your brand by name. The more direct your selling efforts, the more controlyou'll have over the outcome.

Mega-brands such as Pepsi hold power because their brand portfolios have

strength and diversity. Its the brand power that gives Pepsi the clout to tellretailers to stock Mountain Dew or do without Pepsi.

Your brand may not have the clout of a Pepsi, but its still possible to

influence the channels to carry your brand by providing quality products,funding to promote it, and a realistic pricing strategy.

5. Pricing your brand at a premium.

By nurturing your brand as an asset, you gain the option to charge premiumprices and earn higher margins.

This creates a host of other benefits. New products can be launched more

cheaply than the competition. Development and launch costs can berecovered earlier. New customer acquisition costs are lowered. You create

more control over distribution channels. The brand can be leveraged across

other target markets without dilution.

Phase III: Supporting a Brand Asset Management

Culture

As the saying goes, what is not measured is not managed. The final steps involved ininitiating your Brand asset management strategy are to ensure you have the

processes in place to measure the return.


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A variety of techniques can measure your return on brand investment. Weve createdor worked with 19 different metrics over the years, but most consistently focus on

eight key metrics. These range from brand awareness and positioning understandingto brand-driven customer retention and loyalty measures. Which metrics you use

may vary as different companies have different needs.

Essentially, good metrics will help you strategically grow your brand by:

Showing how your brand performs over time both internally and externally;

Providing information about ROI, and allowing for a return on overall

marketing and branding strategies;

Helping to sustain focus and consistent communications

Enabling more effective allocation of resources

Providing data for compensation

Establishing a brand-based culture across your organization is essential. Without it,

the painstakingly designed brand asset management strategy will just sit on theshelf.

Organizing around the brand is not without its challenges, however.

For example, because few companies have established brand-based career tracks,managers think in terms of short-term brand decisions that get short-term results.

Often those short-term results come at the expense of long-term success and brandvalue.

Another obstacle lies in the fact that finance or operations people with little or no

marketing or branding experience lead many organizations. This means the value ofthe brand, as an intangible asset, is under appreciated.

Establishing a brand asset management strategy requires a new style of organization

that demands that brand issues reach top management. The hierarchy should

include a Chief Branding Officer and a brand asset management steering committee.

This approach requires a resolution of the question of whether brand should be

contained within the functional silo of marketing or grown as a cross-functionalactivity. Under this new construct, performance of the brand plays a role in bonuses

and stock options.

Conclusion

Many companies address pieces of the brand puzzle. But the changing face of the

customer, delivery channels, competition and the general business environmentrequires management to realize that the future success of the brand and their

company will only be achievable with a new approach.

Leveraging a brand asset management approach will help companies realize top


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objectives for their brands: maximizing its long-term value while profiting fromshort-term results.

principles of brand asset management

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