The Brand Multiplier Effect

The Brand Multiplier Effect

Brand Value – The Multiplier Effect

Brand is unquestionably a powerful business tool for any company.

Brands have intrinsic value and a quick look at the numbers in the latest Interbrand report confirms it. In 2001 the cumulative brand value residing in the world’s top 100 brands was $988 billion. Today, that value stands at $2.13 trillion— representing a 4.4 per cent average CAGR (compound annual growth rate) and more than a 2.1 times increase in total value. These figures behind The Best Global Brands report tell a clear story: in such a fluid market landscape, investing in brand is key to long-term success.

However, we live in a time of shifting sands. Access to technology has meant customers are more informed, more connected and more demanding than ever before. This is a brand new world that puts enormous pressure on brands to keep moving and evolving to keep pace with the needs and expectations of the market. That means that looking to the horizon for future success is an imperative for brands. However, in order to look forward, a brand must have some grounding in today. To create both long-term and short-term results, a brand needs to know who it is, what it stands for and where it should go next.

One of the most effective ways to respond to a changing world is through branding – but not branding as you know it. The days when brand was just a marketing function are over. Brand is now a leadership issue.

Your brand is not something you add to your business. Brand is the reason your business exists. Your brand is the purpose and passion that propels everything your company does.

Whatever products you manufacture, or whatever services you sell, somebody else can do it better, faster and cheaper. If not today, then tomorrow. It is your brand, and the purpose and passion it embodies, that people will buy into.

Brand is your reason ‘why’. Why I should believe you. Why I should work for you. Why I should choose you. Why I should endorse you.

So why is your brand great? Why does your brand matter?

Purpose, or your brand’s mission, is the key ingredient. And it should link effortlessly with your products and services. Making up a purpose or linking to an ‘of the moment’ social cause will not see your brand through to achieve long-term financial success.

Raj Sisodia reports in his book Firms of Endearment that companies which put purpose and passion at the heart of what they do are outperforming the S&P500 average, in fact, they grow collectively at a rate of a little over 1000 per cent in 10 years, whereas the Standard & Poor 500 grew 122 per cent.

Once a brand is clear on what it stands for, it needs committed ongoing investment. The recent work by Les Binet and Peter Fields has shone a very clear light on how this is done.

As summarised by Incorporated by Royal Charter, their work proves brand building is the main driver of long-term growth and involves the creation of memory structures that prime consumers to want to choose a brand. Without brand strengthening, growth will be weaker, activation will be weaker, pricing power will not improve and profitability growth will be severely reduced.

However, all brands also need sales activation. This is what dominates short-term sales uplifts and involves behavioural prompts to encourage consumers to ‘buy now’. It is strongly boosted by brand building and is essential for efficiency. Without it investment will be weaker and growth will suffer.

The optimum balance between brand building and activation varies by context depending on the relative ease/difficulty of the two tasks.

The most recent and famous example is Nike’s 30th Anniversary campaign, showcasing Colin Kaepernick a former quarterback for the San Francisco 49ers. During the 2016-17 season, the NFL star famously used his public platform to make a bold statement against racial injustice and police brutality.

The campaign was a great opportunity for Nike to reinforce its values such as never giving up, rising to the challenge and sacrificing for the greater good. It also showed the brands courage to recognise its core customers and get behind them as opposed to trying to be all things to all people. The financial results speak for themselves.  As reported by Fortune, shares surged as much as 9.2% in early U.S. trading after its second-quarter results soared past projections, particularly in its two most important regions: North America and Greater China

That said, Nike’s house has not been totally clean. It has had ethical issues along the way, for example supporting the Women’s Soccer World Cup but facing a lawsuit over alleged gender discrimination in pay, and not following through on claims of diversity and inclusion.
Nike’s brand has been somewhat tarnished by such issues, but it will survive because they established what the brand stood for early in the peace and have continued to invest in the brand.

Brands are valuable. Brands with a relevant purpose with continual investment are more valuable.