What Price A Strong Brand?
As the world of brands becomes ever more cluttered and competitive, the marketer's task of building and maintaining strong brands becomes increasingly difficult. Senior management wants concrete evidence of return on marketing investment. Yet the challenge of demonstrating a brand's true value is complex. What proof do we have that strong brands really provide a financial benefit to brand owners and shareholders?
A trusted brand is a treasured asset, prized by its owners and envied by competitors. Companies are bought and sold for vast sums of money, above and beyond the value of factories, patents and processes, on the strength of their brands. But when one company pays a premium to acquire a stable of brands from another, what are they really paying for?
Brands are valuable to companies because they are valuable to consumers. People will pay more for a branded product than a generic one, and more for a favored brand than the alternatives. It seems obvious, then, that a brand that has forged a strong and enduring relationship with consumers should provide a financial advantage to a company. But can this financial advantage be quantified?
Demonstrating Brand Value
Demonstrating a causal relationship between consumer affection and sales results for a specific brand is not easy. Not everyone who buys a brand feels strong loyalty towards it; some people may purchase a brand because it's on sale or because it's the only one available. Further, many factors external to a brand will affect its sales performance, including business logistics and competitive activity, as well as wider social and economic trends. However, in spite of these complexities, we have been able to demonstrate that, all things being equal, stronger brands do outperform weaker brands.
Summarizing brand strength
As the starting point for our analysis, we summarized the strength of a brand's relationship with consumers using two key measures, Presence and Voltage.
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- Presence is a measure of how many people know about a brand and understand what it has to offer. A brand with a high level of Presence will enter a buyer's consideration set more easily than a brand with low Presence.
- Voltage is a relative measure of how efficiently a brand converts people from Presence to higher levels of attitudinal loyalty. Because higher levels of loyalty are associated with increased probability of purchase, a brand with a high Voltage score is positioned well to grow its share of sales in the category.