How Brands Create Value

 Brand value is a cumulative result of sales volume, equity, audience size, and the brandʼs market potential.

But unlike other assets like stocks, bonds, commodities and real estate, there is no active market in brands that would provide comparable values. The main issue with brand valuations is their arbitrary measurement and few agreed-upon systems and processes for evaluating brand assets.

Brands are a company’s most valued asset, yet there is not universally accepted method of measuring that value. The only time you can be sure of the value of your brand is just after you have sold it.

At the same time, well-managed brands have extraordinary economic value. “Founders die. Factories burn down. Technology becomes obsolete. The brand is the only sound foundation on which business leaders can build enduring, profitable growth.

Brands create value on macro and micro levels. On a macro level, brands create value by participating in the economy. On the micro level, brands create value by linking culture with business.

Macro level

Strong brands outperform the market. Businesses that invested in their brands marked 67 percent above-average organic revenue growth and 70 percent above average total return to shareholders.

Here are the five macro-ways in which brands create value. Brands:

Expand the Size of Addressable Market. Brands build awareness for a business beyond its target audience, hopefully propelling it in the domain of culture and increasing its chances to be part of the consumers’ initial consideration set. Through its brand promise and brand values, a business can reach customers who ordinarily wouldn’t consider its products.

Provide long-term differentiation. Brands increase product value by adding emotional resonance and symbolic dimension to it. Consumers are not buying products, they are buying stories. Once they buy into a point of view, a set of values, and a lifestyle, consumers are less likely to treat a product as an interchangeable commodity, and more likely to be loyal to the brand.

Ensure Strategic Growth. Brands clarify decision-making criteria. They guide new growth opportunities, product development, operations, and communication. Brands that evaluate whether a specific business action or investment move them closer to their vision move faster and more confidently than its peers.

Protect price and market share. Companies that have a clear brand purpose achieve double brand-value growth than companies that are focused purely on profit generation. Brands protects product price, as customers are not waiting for discounts and sales in order to buy a product. They also protect market share by creating a clear differentiation versus the competition.

De-Risk the Business. Brands de-risk the business in two ways. They build customer proximity through qualitative and quantitative data and insights and keep the company laser-focused on its audience. This laser-focus on the customer increases the chances that brand actions, new products, and services will be a success. Second, having a shared purpose and values creates alignment between a company’s internal culture and its brand. Without this alignment, a company doesn’t have a brand. It has a custom font. Further, having an internal culture that prioritizes diversity, equality, creativity, and innovation is at least risk to spectacularly implode and become a PR disaster than the one that prioritizes relentless and fast-paced growth.

Micro level

In the past decade, there has been an economic reorientation towards social, cultural, and environmental value of goods.

There are the 4Cs of the modern brand: community, content, curation, and collaborations. The 4Cs shape how a brand creates social, cultural, environmental and economic value.

Community. A brand community went from a “nice to have” to a “must have.” It doesn’t matter what category a brand is in, it mandate is to find a way to put forward its social mission and values, which are the gel for a community. For brands that already maintain communities, the next step is to activate it more, and more often. The key here is for brands to stop thinking about their community just as top-of-the-funnel tactic, and consider it as a long-term, bottom-of-the-funnel strategy (purchase, bonding, advocacy, loyalty). Next step is to define and focus on the most valuable customer communities and connect with them on a personal level.

Content. Across categories, brands are pivoting to lifestyle, often livestreamed, content en masse. While it may feel overwhelming at times, this lifestyle content pivot is a good thing: it moves the brands away from product marketing and forces them to explore, define, and capitalize on their cultural and social role. There’s also a welcome content shift away from polished campaign imagery. More brands will hopefully embrace this lo-fi approach, and put forward scrappy, live, and real content focused on communal watching and socializing. Community-oriented content increasingly tends to do better vs the polished influencer one, as the currently predominant memes and aesthetic language demonstrate.

Curation.  Making something part of a curated selection lets brands increase the price and the profit. A product’s value is attached to the story. 

Collaborations. Collaborations work for brands because they transform non-culture into culture. It’s a great business model: collaborations don’t need financial capital, only a strong brand capital. Supreme can put its logo on a brick and collaborate with Colgate as long as its brand equity is attractive. Collaborations work well in mature markets, where consumers are bored and products are commodified.