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The corporate brand is probably the least understood asset in most companies, yet it can be one of the greatest tools for the CEO to build enterprise value.
Since brands are an intangible asset. they don't show up on the balance sheet and therefore they are often thought of as having no financial value. Yet, over the past 40 years intangible assets have grown from about 20% of the value of a company to 80%. A good portion of this value is derived from the brands of the company.
Here are 10 good reasons that CEOs should pay close attention to corporate brand valuation and to the nurturing and growth of these assets with a long-term view:
1. Brand valuation legitimizes investment. By understanding and defining the value that the brand creates, questions about brand-building investment change from whether to invest to how much to invest. Companies that understand this value manage their brand investment to maintain and maximize the value. These companies are characterized as communicating aggressively to shape the landscape of their markets, thus managing their markets to their strengths and reaping the associated benefits.
2.Brand value provides an objective measure of effort. By measuring the impact of brand building, leadership can evaluate the quality of branding efforts without resorting to subjective opinions or personal perspective. Measurement and metrics add science to the art of creative brand building.
3. Brand valuation creates accountability. By utilizing a tangible measure of impact, leadership and marketing teams can be evaluated by their stewardship and management of a tangible asset over the long term.
4. Brand valuation aligns leadership. Creating a common vocabulary for a brand gives marketing an appropriate seat at the management table. Because the return for branding can be identified and tracked over time, the effort and return for any department is visible. This permits all senior managers to work together for the optimum total return on investment. When finance and marketing cooperate, working toward defined goals, everyone wins.
5. Brand valuation identifies growth opportunities. Understanding brand value illustrates the opportunity to advance a business not only through geographical growth but also through product/service adjacencies.
6. Brand valuation predicts market shifts. By understanding the relationship between brand value and other performance drivers, leadership can identify changing market conditions. Intelligence is about understanding where the market is going before your competitors know. This is usually best done by knowing the right questions to ask, by researching continuously and by creating custom models that zealously seek the answers.
7. Brand valuation identifies competitive opportunity and advantage. Understanding brand value relative to competitors can drive changes in market-growth strategies. By understanding the value of your brand vs. competitors and the dimensions that drive that value, you gain valuable intelligence for creating and maintaining a competitive market advantage in the areas that define business success. Understanding the market and opportunity available can point a company in the right direction.
8. Brand valuation informs M&A or strategic alliances. Understanding the value of all business assets will inform negotiations in mergers, acquisitions and partnerships. M&A can be tricky, and emotional attachment to pre-existing entities can be strong. But by understanding the value and dimension of all brands involved, leadership can strategically deploy those brands for maximum impact.
9. Brand valuation creates licensing opportunities. Understanding the brand's value permits predictable revenue growth through licensing efforts. A brand on the move creates momentum that can be leveraged. Licensing is a great way to make significant income from the brand itself.
10. Brand valuation helps to define the value of other intangibles. Is it good business to be a good corporate citizen? Sustainable business practices, Corporate Social Responsibility (CSR), philanthropy, and other “goodwill” efforts can be understood and valued. Knowing the amount of impact can help make CSR a good business decision rather than one that is based purely on the goodness of the management of the company.
Brand valuation begins with consistently benchmark tracking the brands that are vital to your growth. There are many valuation experts including your accounting firm who can help you set a value for your brand. Your brand is what sets you apart from your competition. As a CEO always remember that measuring, valuing, and managing the corporate brand and your product brands is a key component of managing the financial health of your corporation.
James R. Gregory is founder and CEO of CoreBrand, a global brand strategy, communications and design firm headquartered in New York, with offices in Los Angeles and Tampa. He helps clients develop strategies to improve their corporate brands and profitability. Gregory has written four books on creating value with brands: “Marketing Corporate Image,” “Leveraging the Corporate Brand,” “Branding Across Borders” and “The Best of Branding.” Contact him at [email protected].
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