Principles of Brand Asset Management

By Scott Davis

Would your business recruit top MBAs and then leave them in their offices to learn by osmosis? Would it invest millions of dollars in equipment, but fail to maintain it over time? Would it park its Treasury funds in a 1.9% savings account? Of course not. People, capital and machinery are crucial business assets. As such, they must be given the proper nurturing in terms of investment, management and maintenance for their value to prove out over time. If an asset is defined as a property with an assumed value that should be consistently maximized by an organization, then shouldnt businesses also be managing their brands as the assets they are? Its a notion that an increasing number of organizations are beginning to understand and apply as integral to their long-term, underlying business strategies the strategy is called brand asset management. Adopting it enables companies to maximize the long-term value of their brands from two perspectives. First, demanding consumers are forcing companies to spend more dollars to earn greater returns. Second, companies generally admit that they dont have the strategies in place to make the most of their opportunities for getting those dollars from consumers. Implementing a brand asset management strategy involves more than just putting a process in place although going through the process is essential. It requires a commitment to brand asset management from the very highest levels of the organization, so that the end goal of supporting and nurturing your brand as an asset is imbued throughout the corporate culture.

Brand Management Leads to Return on Investment

An astounding 71 percent of companies admit that they under-leverage their brands, according to a study I conducted several years ago. Perhaps if they better understood the correlation between brand strength and Return on Investment (ROI), that statistic would change. In Brand Leadership (Free Press), authors David Aaker and Erich Joachimsthaler point to a causal link between brand equity and stock return, based on the EquiTrend database from Total Research. EquiTrends annual brand power rating for 133 U.S. brands in 39 categories uses perceived quality as the key brand equity measure. The average quality rating among those with opinions on brands has been found to be highly associated with

brand liking, trust, pride and willingness to recommend. Consistent with a wide body of empirical research in finance, a strong relationship between ROI and stock return was found, Aaker and Joachimsthaler say in their book. Remarkably, the relationship between brand equity and stock return was nearly as strong. Firms experiencing the largest gains in brand equity saw their stock return average 30 percent; conversely, those firms with the largest losses in brand equity saw stock return average a negative 10 percent. And brand equity impact was distinct from that of ROI the correlation between the two was small. In contrast, there was no impact of advertising on stock return, except that it was captured by brand equity. The authors suggest that the brand equity/stock return relationship might stem from brand equitys tendency to support a price premium, which contributes to profitability. This relationship is undoubtedly based upon a two-way causal flow a strong brand commands a price premium, and a price premium is an important quality cue, they write. When a high level of perceived quality has been (or can be) created, raising the price not only provides margin dollars but also aids perceptions. Clearly, improving the return on all investments in the brand is a key benefit of adopting a Brand asset management approach. But the benefits go further: It maximizes the growth potential of the brand while also protecting it against customer "disloyalty triggers." And finally, the approach provides a discipline for senior management and others throughout the organization in terms of prioritizing resources and making decisions all aimed at the same outcome: maximizing the long-term value of the brand.

Phase One: Develop a Brand Vision

Companies with the foresight to develop a brand vision simultaneous to their creation of corporate mission, values and vision statements are more likely to avoid what happens at many organizations that fail to manage their brand as an asset: Treated as a marcom initiative, the brand budget is one of the first to be cut during lean times. Why develop a brand vision? From a strategic perspective, it accomplishes three key objectives. It forces a consensus by management to long-term growth objectives and identifies where the growth will come from. It guides research. And it sends a strong signal to all stakeholders on the future direction of the company and the brands role in getting there. Components of a brand vision statement include:

A statement of the overall goal for the brand Target market(s) identified for brand development How the brand will be differentiated from others Financial goals linked specifically to the brand

Development of a brand vision is the first phase in an 11-step process leading to the ultimate implementation of a brand asset management approach to business management. A crucial step under this phase is in defining what strategic and financial goals the brand should help achieve. This part of the process starts with one-on-one, information gathering sessions with members of the senior management team, including the CEO, CFO, all senior vice presidents and other key influencers. They should be asked a series of probing questions, such as:

What markets, business lines and distribution channels do we want to compete in? What are our strategic and financial objectives and what role does brand play in them? What does our brand stand for currently and in the future? What resources are we willing and able to commit? Can we achieve our goals with our existing brands, or must we undertake a shift?

From here, the organizations strategists must analyze the financial growth gap by estimating the financial impact if nothing were invested in growing revenues over the next five years compared with the company's revenue goals. Alternatives in filling that gap via price increases, new products or acquisitions and the like include the option of more successfully leveraging the brand. Left out of the equation, viable options to fuel revenue growth might not be pursued.

Phase II: Determine Your Brand Picture

This phase encompasses three steps of the brand building process:

1. Determining your brands image 2. Creating its contract 3. Creating a brand-based customer model

Your brands image is the associations your customers link to it. Ralph Lauren clothing, for example, tends to strike an emotional chord with customers by making them feel good about themselves. While other apparel lines could copy the clothes, they cant replicate the feeling associated with the Ralph Lauren brand. That emotional value helps the brand stand above others. Building brand associations requires research into your own brand as well as competitors. The research should include current and prospective customers, even former customers, along with industry experts and players in the distribution channels. The key is discovering the associations they have with your brand.

Those associations are best visualized as part of a pyramid. At the tip of the pyramid is brand strengths associated with beliefs and values the most powerful and most difficult to imitate, but the hardest to deliver. At the center are the functional or emotional benefits the brand provides customers. At the bottom are features or processes that must be demonstrated to customers the easiest to deliver, but having the least meaning and very easily duplicated. Brands at the pinnacle of the pyramid include Nordstroms, Disney and Federal Express. They enjoy enviable customer loyalty, the ability to charge premium prices, and considerable brand endorsement power to support new product and service launches. If your brand has made it to the top of the pyramid, the challenge is in maintaining that position. If its at the bottom, the challenge is moving up. Your brand association is half of your brand image. Brand persona is the other half. Separately, they have little value. Together, they deepen your understanding of the brands image, strengths and weaknesses, and differentiating points. Brand persona is the human characteristics such as personality, gender and size that consumers associate with your brand. When attractive, the personas can be translated into selling propositions. When not, its time to fix the brand. The old Target persona, for example, was a somewhat shabby retail chain with poor service and low- to middle-class customers. The revitalized Target has successfully developed a meaningful and relevant customer proposition. Its new persona is demonstrated not just through merchandising -- well-designed and clean stores carrying great brands and giving great values, and higher levels of customer service but through effective communications that cement the changed image. A critical aspect is the creation of the brand contract a list of all the promises your brand makes to customers. Executed internally, its defined and validated by the marketplace, and can change over time. It helps define marketplace perceptions and expectations. Developing a brand contract involves several steps:

Ask customers how they see your brands image. Find out what promises the brand has made, how well the promises were delivered and what other promises the customers would like to see made. Translate the brand contract into actionable standards. Fulfill the good promises of the brand, or risk damaging it. Make sure youre aware of the bad promises (negative associations) of the brand and fix them.

Finally, develop a brand-based customer model, which represents a comprehensive understanding of customer beliefs, behaviors, product or service, category and competitors. It helps the company do a better job of positioning and extending its brand and have a greater influence on the purchase decision. It is created by exploring the answers to three key questions:

1. How do customers choose one brand over another? 2. How does your brand stack up? 3. What opportunities are there for brand growth and expansion?

Phase III: Develop Your Brand Asset Management Strategy

This phase encompasses five steps:

1. Positioning your brand for success.

Put simply, your brands positioning is the benefit you want the customer to associate with your brand. It begins by defining your target market, the business youre in, and key differences and benefits of your brand. For example, Tides might be: To homemakers, Tide is the detergent that gets clothes the whitest and brightest. Update the statement in line with the companys updates in overall growth strategies. Remember that your positioning is strongest when its supported by senior management, brought to life by employees, and, ultimately, customer-driven.

2. Extending your brand.

Successful brand extension is tied to keeping current customers happy, creating new ones and keeping your brand fresh. However, extensions must support, rather than weaken the brand. Extensions can be accomplished by extending the definition of your business, its points of differentiation, or its entire position in the marketplace. Use what youve learned about customer needs in earlier phases of the process. Evaluate challenges and opportunities and develop three to five specific, brand-based opportunities in response. An example of this process is Burger Kings Big Kids Meal. The Big Kids Meal started when the corporation studied the market gap between McDonalds Happy Meals (for young children) and the adult and teen market. The inbetween group of junior high-aged children (aged 11 to 14) was never targeted. Burger King took the simplest but most effective route to extend its products to this segment: It repackaged current offerings (such as the Whopper, 16ounce drink and large fries) and massively advertised directly at the target audience. During the exploration phase, the company most likely asked these questions: Does any other fast food company provide a meal specifically focused on this age group? Will anyone else do so soon? Has McDonalds? The answers were no, no, and no. And, yes, Burger Kings Big Kids Meal has been a resounding success.

3. Communicating your brands positioning.

In order to bring your brands positioning to life, its essential to develop and implement long-term communication strategies demonstrating your brands value to your target market. The message must be consistent with the brand value, persona and vision. It must be integrated into advertising and public relations efforts, event marketing and corporate sponsorships, trade, sales and consumer promotions, direct marketing and internal employee communications. Dont make the all-too-common mistake of relegating your branding efforts to your advertising agency. This and your advertising program in support of the brand must be controlled by insiders. The advertising agency is responsible for executing your brand vision, not creating it.

4. Leveraging your brand to enhance your channel influence.

Distribution channels are undergoing massive change. Manufacturers are increasingly following mass retailers rules. The Internet is maturing. Catalog sales are at all-time highs. To gain control of these channels, the goal is to have customers asking for your brand by name. The more direct your selling efforts, the more control you'll have over the outcome. Mega-brands such as Pepsi hold power because their brand portfolios have strength and diversity. Its the brand power that gives Pepsi the clout to tell retailers to stock Mountain Dew or do without Pepsi. Your brand may not have the clout of a Pepsi, but its still possible to influence the channels to carry your brand by providing quality products, funding to promote it, and a realistic pricing strategy.

5. Pricing your brand at a premium.

By nurturing your brand as an asset, you gain the option to charge premium prices and earn higher margins. This creates a host of other benefits. New products can be launched more cheaply than the competition. Development and launch costs can be recovered earlier. New customer acquisition costs are lowered. You create more control over distribution channels. The brand can be leveraged across other target markets without dilution.

Phase III: Supporting a Brand Asset Management Culture

As the saying goes, what is not measured is not managed. The final steps involved in initiating your Brand asset management strategy are to ensure you have the processes in place to measure the return.

A variety of techniques can measure your return on brand investment. Weve created or worked with 19 different metrics over the years, but most consistently focus on eight key metrics. These range from brand awareness and positioning understanding to brand-driven customer retention and loyalty measures. Which metrics you use may vary as different companies have different needs. Essentially, good metrics will help you strategically grow your brand by:

Showing how your brand performs over time both internally and externally; Providing information about ROI, and allowing for a return on overall marketing and branding strategies; Helping to sustain focus and consistent communications Enabling more effective allocation of resources Providing data for compensation

Establishing a brand-based culture across your organization is essential. Without it, the painstakingly designed brand asset management strategy will just sit on the shelf. Organizing around the brand is not without its challenges, however. For example, because few companies have established brand-based career tracks, managers think in terms of short-term brand decisions that get short-term results. Often those short-term results come at the expense of long-term success and brand value. Another obstacle lies in the fact that finance or operations people with little or no marketing or branding experience lead many organizations. This means the value of the brand, as an intangible asset, is under appreciated. Establishing a brand asset management strategy requires a new style of organization that demands that brand issues reach top management. The hierarchy should include a Chief Branding Officer and a brand asset management steering committee. This approach requires a resolution of the question of whether brand should be contained within the functional silo of marketing or grown as a cross-functional activity. Under this new construct, performance of the brand plays a role in bonuses and stock options.

Conclusion

Many companies address pieces of the brand puzzle. But the changing face of the customer, delivery channels, competition and the general business environment requires management to realize that the future success of the brand and their company will only be achievable with a new approach. Leveraging a brand asset management approach will help companies realize top

objectives for their brands: maximizing its long-term value while profiting from short-term results.