Understanding the Value of a Strong Brand

What’s the value of knowing who you are? 

Think about it. Knowing what you’re best at, and what you should leave to others. Having a clear sense of what matters to you and behaving accordingly. Being consistent and reliable in how you show up in life. Invaluable, right? Those things are more than correlated with success. They are, in many cases, causal. 

So, what is the value of clearly defining your brand?

I’d argue that too is invaluable. And, if you're a CMO, I bet you agree with me. 

You already know,  a well-defined brand makes your life as a marketer immeasurably easier, giving you the clarity of focus and ease of decision-making that a clear brand strategy dictates. It says what’s in and what’s out, leaving little room for debate or missteps. Like “the freedom of a tight brief”, a well-defined brand can define the playing field for your organization in a way that frees them up to think broadly and innovate, all the while knowing they are within bounds. And, of course, a clear brand results in consistency, and consistency is inextricably linked to brand value, in what is really a beautiful little cycle.

Yet, for too long, arguing the business value of branding has been a tough argument to make, and it's one that too often lands on deaf ears. Despite the advances in measuring the impact of marketing initiatives, it is still hard to attach a number to brand value, and even harder to communicate that number in a way that makes CEOs and investors confident enough to use it as a guide to decision-making..But, there's work being done by people like those at the Marketing Accountability Standards Board (MASB) and the Marketing Science Institute (MSI) who are putting a finer point on the value a strong brand contributes.

  • According to brand valuation standards validated by the MASB, brand value alone contributes 19.5% of enterprise value on average. Across categories. For consumer brands, that number can easily exceed 50%.

  • Academic research shows that brand directly affects share price: a 10% increase in brand value (per the MASB value model) correlates with a 3.3% increase in stock price.

  • The MSI, in an analysis of 220 consumer products, concluded that marketing-driven brand preference drove price premiums of 26% on average, even when brand quality was the same. 

  • Brand tracking studies conducted by MASB and the MSI across more than 100 brands have demonstrated that brand preference predicts both cash flow and market share.

  • Millward Brown in its "BrandZ Top 100 Most Valuable Brands" study quantified that strong brands not only capture more sales but sell more often at a premium. They also perform better and recover more quickly in a crisis, with the value of the Kantar BrandZ™ Strong Brands Portfolio increasing 363% between April 2006 and April 2021, outperforming both the S&P 500 and the MSCI World Index.

Brands represent opportunity, not risk. As marketers, the more we can do to substantiate this and relate brand value to enterprise value, the more successful we will be. 

There is some momentum toward an accepted standard for valuing brands. About two years ago, the International Standard Organization (ISO) unanimously passed a brand evaluation standard that has yet to gain wide adoption but establishes common practices for more accurately assessing brand value. Such standards could ultimately make the “what's it worth” conversation much easier. But, for now, marketers still have to rely on arguments like the ones I’ve made here.

If better defining or articulating your brand strategy is an investment you are preparing to argue for as the calendar turns to a new year, we’d be happy to help think about the most compelling argument to be made for your business. And, when it comes time to do the heavy lifting, bring in an outside perspective. I won’t even advocate for Firehouse here. There are any number of great partners and processes that could help, and what’s important is finding the one that best fits you and your organization. But, bring in an outside perspective, and keep your team from breathing too much of its own exhaust.

The data substantiates something you already know, the investment of dollars and time in branding can be well worth it. But I’ll leave you with a final thought: the trick is making the work actionable and allowing it to infuse your organization, because a binder on a shelf does little to create value.