Ruchi Gunewardene of Brand Finance Lanka and Lulu Raghavan of Landor Mumbai explain how greater accountability can be built into brand investments.
Brands are usually associated with advertising, which is thought to require significant money to build. It is also seen to be the exclusive responsibility of the marketing department. It is viewed as a black box, with very little accountability for the returns of investment on the large advertising budgets that are spent annually. And, never in the context of creating business value. A system of accountability would seem to be an absolute necessity considering the hundreds of millions of rupees that are spent on advertising, promotions and sponsorships, amongst other media investments, which are many times more than capital investment budgets. In this context, if the Chief Marketing Officer of a company wants to gain a seat on the board, it would seem logical that he or she should be pushing the agenda for greater marketing and brand accountability.
What is a brand?
A brand is often thought of as a slogan or pay-off line, logo design, or advertisement. It is not any of these. A brand is what people individually and collectively believe about a product, service or company. We may think that we own the brands that we promote, but in fact, brand ownership lies within the customer’s minds. It is what they have formulated in their minds individually and collectively, based on their own experiences and observations. Michael Eisner, former Chairman and CEO of Disney, summed it up succinctly when he said: “The Disney brand is our most valuable asset. It is the sum total of our 75 years in business, of our reputation, of everything that we stand for.” This reputation is built on the perceptions that stakeholders have of the company, which in turn is based on the products and services it offers; the way it has behaved in all aspects of conducting business, the way it treats its employees, its financial performance, its dividend payments and a myriad other undertakings of the company — whether done consciously or subconsciously—that stakeholders have witnessed. The question, then is: if the brand is the sum total of the way the business and its products and/or services are perceived in the minds of customers and other stakeholders, is there any value in that? It so happens that perceptions do matter. And they have a huge impact on value creation across all aspects of the business. Perceptions across different stakeholders drives behaviour, which in turn impacts the way they behave and interact with a company, which, in turn, has a positive or negative impact on business value creation.
Perceptions drive value
Starting with customers, the higher their perception of the product or service that is sought by them, the higher the potential for revenue generation and lower the risk of losing them. A high brand perception builds greater customer loyalty, greater advocacy, and increases price elasticity, all of which directly improves revenue. On to suppliers, where the higher their perception of a company, the more likely they will want to have them as customers, and therefore the more likely they will provide better prices—both in terms of lower price points and/or better terms. This has a direct impact on the cost of business, which is lowered. There are many examples of this where reputed Sri Lankan companies were able to get discounted prices on machinery because a supplier wanted them on their customer list. As for employees, who have a cost impact on a company, the higher their perception of the company, the more likely it is that they will agree to join at a lower salary and lower benefits. They want to be associated with corporate brands they perceive favourably, in order to further their own career development by enhancing their CVs. And finally, the cost of capital is lower, as banks will lend at lower rates to those companies that have a higher reputation in the market.
Which leads to the question: How does one build and harness this value to the business and how can it be measured? We start with the understanding that business value is created by the behaviours of various stakeholders, as listed above, which in turn are influenced by their perceptions of the brand. If we know what drives that perception, and can build a relationship with the stakeholder—that which we call brand equity—then we are essentially in control, and can provide the right inputs. This is what we, as managers, are mandated to do. The pivotal point of the value creation process is building that brand equity, or relationship, with individual stakeholders through the insights that we gather from experience, intuition, and market research, or by looking at what has worked in other sectors. The brand is positioned, defined, built and articulated in a way that captures these key drivers of equity. This process requires strategic insight coupled with creative capability, which is fundamental to brand building.
We use a combination of logic and creativity in this transformation process. We closely study the customer, and their expectations and needs—both expressed and hidden—that influence the many and varied (major and minor) purchase considerations within the decisionmaking process. These can be quantified and measured, and the importance of the attributes established and weighted—from the most-important to the leastimportant purchase considerations. This identifies the levers that can be pulled to drive greater brand consideration and loyalty, and to minimise lapse. Once this framework is overlaid on market realities — having identified what competitors are doing, which spaces they have occupied — we begin to see how a brand can be differentiated and play a unique role in the market. One final area of exploration that must be considered is the credibility of the business itself to deliver what it promises, and to do so through a belief system that the employees can relate to and practice on a day-to-day basis. While this analysis leads us to make certain conclusions in identifying, narrowing down and bundling the most important attributes, the creative mind takes over, at this point, to explore and flesh out concepts upon which the brand can be articulated, bringing the brand to life.
With the brand clearly defined, it is now ready for its broader role, beyond being a customer- focused tool. It can be used by the human resource department, at employee deployment sessions, training modules and setting a reward system that can be woven around the brand; by operations, to provide the relevant customer service; and by finance, as a means of tracking performance. The performance tracking is possible because we have defined the core attributes of the brand. Therefore, using market research and brand valuation tools, we can begin to monitor the impacts of investment across the entire business—from the impact on customers to employees’ understanding of the brand and level of motivation. Brand valuation will measure the increase or decrease in value over time, and brand scorecards will establish how it is performing. In this broader context, the responsibility for the brand is not just with the CMO, who is responsible for ensuring customer returns on investments, but with the HR department as well, who needs to ensure that returns on training investments are also made by ensuring employees have a full understanding of the brand and act accordingly.
Adopting this strategic approach creates accountability, which links directly to creating business value: As the building blocks of the brand are derived from the core business drivers, it is very likely that the brand will work much harder to increase revenue. Management is actively looking at ways in which the brand can be differentiated from the competition, so it is likely that this will lead to a unique offering, which will improve engagement, involvement and empathy. The entire business will operate from a common platform, which everyone in the company understands fully, and there will be synergy and value created across the business. Marketing, HR, Finance—every department will know what the company stands for. There will be efficiency in investment, because there is clarity around the brand. And every undertaking — whether a philanthropic initiative or a new product extension—will be aligned with the brand, further maximising its impact. Finally, it will enable the institutionalising of accountability through a brand scorecard that will track and measure performance over time.
This piece was originally published as “Institutionalising Brand Accountability” by the Daily FT Sri Lanka (9 December 2016).
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