Continuing on in our brand measurement blog series, this week we explore how brand value is indeed company value, and how every company should concern itself to some degree with increasing the value that can be derived from its brand.
And the beginning of realizing this brand value is to measure it.
A company’s brand finds itself quantified in dollars and cents in the stock price of a public company, though more rarely if it is privately held. In all cases, however, the value of a company’s brand exerts itself in the financial performance of a company. Among the many ways it can be shown, are:
Sales and Marketing
Sales and marketing are profoundly affected by brand perceptions and the work the brand does in the sales process. Brand offers everything from insight into the typical quality of the company’s offering, to the values for which it is primarily known, and even the life or lifestyle the brand defines in some cases. Through customer recognition, perception, name connection, and perceived performance relative to competitive brands, product sales are affected, which adds to a company’s bottom line. Likewise, marketing is an expense that is (or should be) directly related to sales, and busies itself with both communications about company offerings and company identity, or brand.
Both of these are in a company’s profit and loss (P&L) statement, and their values are therefore impacted by brand value.
Employee Retention and Recruitment
This one you don’t hear about as often. Employees remain at their respective companies when they feel their value is being acknowledged by their employer, when they have ample opportunity to grow in their careers based on their skills and interests, and when they feel their employer shares their values. Internally, the company brand is experienced in its most raw state. If the brand being projected by the company in its marketing and internal communications are not consistent with the company’s culture, the company will lose value in customer retention, employee retention, or both.
Employee retention is found on the company profit and loss not only through hard costs like recruitment and training, but also in several areas where tenure and experience are a lever against productivity and quality innovation.
Mergers and Acquisitions
While brand value is an important component of company value, it is seldom more clearly quantified in dollars and cents than in the case of mergers and acquisitions. When companies merge, each of the businesses are carefully valued (or one is valued if another is acquired) so as to ensure proper allocation of value is attributed to each business (or the business being acquired).
In some of the largest acquisitions in history, brand accounted for significant balance sheet value, though difficult to quantify as we spoke of earlier in terms of sales and marketing and employee retention. This value is frequently classified as “goodwill”, an accounting category which allows intangible value beyond what is accounted for in other tangible and intangible asset categories.
In the case of AOL and Time Warner, the value of goodwill was placed in the hundreds of billions of dollars. And caused a write down of $97 Billion in value in 2003.
While it is likely your company will not experience a multi-billion dollar increase in value due to brand value, you can most certainly increase its value significantly through measuring and understanding the value of your brand.
Whether you are seeking to market products consistent with your company’s brand value, ensure messaging and positioning are consistent with brand messages, increase your company’s employee retention rates or ensure your company’s culture and performance are consistent with your brand promises, Actionable Research is here to help with a custom brand research study.