Corporate Brands Analysis

Earlier I stated that in our highly imperfect world ‘image is everything’. Hence, more and more revenues, profits, free cash flows and stakeholders’ value in a business entity are generated by corporate brands. In some cases, more than 90% of financial value of a company is represented by aggregate financial value of its brand portfolio.

Which makes a powerful corporate brand your extremely valuable – and often decisive – competitive advantage. It also means that efficient management of your corporate brands portfolio is vitally important for achieving your strategic corporate objectives.

How does your brand generate this financial value for you? By (1) making the consumer buy a branded – rather than non-branded (generic) product with identical functional value; (2) making him/her pay a higher (often – much higher) price for a branded product that has identical functional value with non-branded and (3) creating brand loyalty – a strong and stable habit of buying products and services under a specific brand. Your brand.

What is the driving force behind these consumer decisions? Emotional value created by your corporate brand. Value that is large enough to warrant paying extra (often – much more) for the pleasure of owning and using the product under a specific prestigious brand. Or maybe not necessarily prestigious – just safe and secure.

To maximize emotional value of your corporate brand, you must make sure that your brand satisfies emotional needs of your corporate stakeholders to the fullest possible extent – and definitely much better than your competition. Which, naturally, requires knowledge of these emotional needs and of the degree of satisfaction of these needs by your brand and those of your competitors.

Ultimately, you would want the level of emotional attachment to your brand to be so strong that it can be rightfully labeled ‘brand religion’ or ‘corporate religion’. Examples of ‘corporate religion’ are abound: Apple, Harley-Davidson, Rolex, Armani… The stronger is the level of this emotional attachment, the more powerful is the brand and the higher is the additional financial value that it generates for your business.

How can you achieve this objective? For starters, you will need a highly competent manager for each of your corporate brands. Ultimately – the whole brand management team. The team that will utilize the optimal and highly efficient brand management methodology and corporate process. For each individual brand and for your whole brand portfolio (a mature business entity rarely has just one brand). Obviously, you need to make sure that the synergy between brands in your portfolio is maximized at all times.

As the primary objective of your corporate brands is to generate additional financial value, your brand management system must be built around the system of financial valuation models – for each corporate brand and for the whole brand portfolio.

It is well-known that brand management is very information-intensive. Therefore, you will need to develop – and keep relevant and up-to-date at all times – a comprehensive knowledge base on your corporate brands.

To a significant extent, each brand is sort of a ‘business within a business’ and therefore must be treated as such. As any business, it has four fundamental financial performance indicators: financial value of the brand in question, economic profit (which determines if the brand in question has economic sense), ROIC (return on invested capital) and WACC (weighted-average cost of capital).

The latter reflects corporate risks associated with a specific corporate brand. Typically, due to diversification effect, an individual brand is riskier than your business as a whole; therefore, its WACC is higher than the corporate one. Additional financial KPI for a brand is the price premium that consumers are willing to pay for the pleasure and privilege of owning this particular brand.

As for non-financial KPI, a brand has four – market share (in monetary and unit terms), Aggregate Competitiveness Index (aggregate and relative to each competing brand), distribution of its consumers by the level of emotional attachment – from ‘pure product’ (no brand awareness) to corporate religion and the degree of brand loyalty – number of consumers staying loyal to your brand over time.

Actual values of these KPI must be compared with each other (those of the other brands and with the average values for brand portfolio), benchmark values (general or specific) and those of your competition (when you can legally obtain data for comparison).

Obviously, your core competencies must match your KEF, your corporate vision statement, your corporate strategies, strategic objectives, strategic plans, your UVP system, your target markets, your core competencies and competitive advantages,  needs and desires of your corresponding stakeholders and – very important – your corporate culture as well.

And again, your brand management system by itself is useless. To be useful and valuable to your company they must be tightly integrated into your strategic and operational management process. In other words, you need to develop and deploy a highly efficient corporate process of using your corporate brands in your strategic and operational management.