To Brand or Not to Brand
"To be or not to be" is the opening line the infamous soliloquy in William Shakespeare's play, Hamlet. These few words are perhaps the most quoted of all literary quotations. Likewise, from senior executives I often hear the words, “to brand or not to brand” or “is all this branding really worth the investment?” I recently had this discussion with the CEO of a Fortune 500 company. Now, this CEO, like all CEOs is accountable to the board to grow stock value. He lives or dies based on stock prices. The decision to brand, then becomes 100% a financial rather than emotional decision. Below is a recap of that discussion. Your sole responsibility and accountability to the board is to increase stock-holder value, is that fair to say? Yes. Did you know
- “In 1980 most market capitalization of S&P 500 consisted of tangible assets. In 2010, tangible assets accounted for only 40-45% of S&P company capitalization.” (Grow, How Ideals Power Growth and Profit, by Jim Stengel, past CMO for P&G.)
- Harvard study concludes: Interbrand Best Brands out preform S&P 500
- Using a statistical technique called conjoint, one client of mine (and this was their competitor) quantified the additional profit at retail and the number of lost shoppers if specific retailers did not carry that brand. The study proved the brand brought shoppers and dollars to retailers and enabled me to help them quantify the lost revenue if all that distribution was lost.
- According to study conducted by Interbrand and JPMorgan, brand equity accounts for more than 1/3 of stock value. (View pdf)
- McDonalds – 71%
- Coca-Cola - 51%
- Amazon and Apple (32% and 58% growth respectively)
The decision to brand or not to brand is an executive strategic decision.
There are really only 2 strategic alternatives to creating value:
- Participate in extremely profitable industries, like illicit drugs, beverages or pharmaceuticals
- Establish and maintain a competitive advantage. (Now, illicit drugs may just be in the top 10 percent of valuation industries, but this was not where my client played. Nor were they in beverages or technology. In fact, their industry is much closer to the commodities end of the industry continuum. Creating and sustaining a competitive advantage was their only choice.)
There are few proven strategic alternatives to creating value:
- Be the lowest cost producer. (If you choose this alternative, you must honestly believe you can get your product to market significantly cheaper than anyone else in your space, you must believe that you can maintain this advantage for many years in the future and you must believe this advantage will be more profitable than any alternative.)
- Brand building. (Build that indispensable relationship with your clients/customers so they are willing to pay a premium, or drive further to obtain your product. If you choose this alternative, you must build value through innovations, service and branding tactics that meet consumer/customer needs.)
What do you think he decided? One final note, in today’s world with the complexity and explosion of social and digital media, if you do not create and manage your brand, the crowd/community will and it may not be pretty. How are you managing your brand equity/image? I would love to hear your best practices/tactics for listening and managing the conversation? Your image?
Kathleen Turner contributes over 3 decades of experience working with Fortune 500 companies in senior executive positions in strategy, insight and innovation in CPG, retailing and healthcare, as well as start-ups to create and sustain a competitive advantage and build stockholder value. Kathleen’s experience spans consumer and shopper insights and marketing, brand management, strategy and innovations for a number of wide ranging industries including: Consumer Products, Retail, Healthcare, Pharmaceutical, Medical Devices, Digital, Technology, and many others.
Ms. Turner’s contributions in Insights, Innovation and Strategy resulted in product growth and new revenue streams for internationally recognized clients such as: Alcon Laboratories, American Heart Association, Andrew Jergens, Bayer, Baxter, Baylor, Boston Consulting Group, Frito-Lay, Coca-Cola, Planters LifeSavers, Merck, McKinsey & Co., Verizon/GTE, Ernst & Young, Walmart and many more. Notable start-up consults include: Linqualcare, Group One and OraMetrixs.
Kathleen is recipient of several distinguished awards including: American Hospital Association - Touchstone Award, Legal Marketing Association - Your Honor Award, Internet Marketing - Platinum Award and she is cited in “Marketplace Masters - How Professional Service Firms Compete to Win.”
Owner, President, i2s Advantage