Creating Brand Value through Strategic Brand Management

As the main goal of the strategy is to create value for customers and maximize firm value, the purpose of strategic brand management is to create and maximize brand value (added value), by designing, communicating, and transforming the created value and delivering value to customers consumers, and then capturing a portion out of it (in terms of additional profit) for its benefit. Additionally, the practice of strategy and strategic brand management is indispensable in creating and sustaining a competitive advantage. Both are interconnected and require concurrent efforts. A strategy helps to build and grow the business and strategic brand management helps to build the brand. Moreover, in the long-run, a successful brand in its development phase reaches a stage in which the brand name and product name closely get connected (or become synonymous) with each other in the minds of consumers. For example, Coke links to Coca-Cola, and toothpaste links to Colgate. And eventually, the product becomes the brand.

Branding requires a long-term vision and brand strategy, and which is just not a short-term marketing program such as creating a product or service, giving it a brand name, and then communicating to the outside world that such a product or service exists. In practice, it requires a firm’s long-term involvement and commitment of resources. A powerful brand name acts as a lever for differentiation that sets apart a firm’s products through its name and values from its competitive offerings that then command premium prices or premium market share. Brand building is a two-way value creation system that requires creating a useful product or service first and then implementing effective brand marketing strategies to build brand loyalty.

The brand value in financial terms is called financial brand equity, which is the ability of a brand to generate additional cash flows or profits in the long-run future above-normal profits, and normal profits are profits in the absence of any contribution by the brand power towards profitability. In fact, a brand has no financial value if it is not generating additional profits. The term “value” in a business perspective or financial terms (cash) translates into shareholder value. Therefore, powerful brands help to generate additional value for shareholders. Because shareholders are the owners of the firm’s equity, therefore, brand value is also known as brand equity value.

Just like strategy, brands affect the long-term performance of a firm. It takes time to build a good brand. As the business grows, and if the firm is lucky enough, with time, the brand also grows through the “halo effect.” ¹ With time, the brand name gains awareness, status, and trust. For example, Nike started its business with its name (no brand image when they started) on a pair of shoes. However, with no brand management system in place, brand development may take many years. For example, Audi took 25 years to build its desired brand image. By having an effective brand management system in place, the gap between the current brand image and the desired brand image can be reduced considerably.

Due to the close interconnection between strategic management and strategic brand management, the strategic brand management process steps can be defined in terms of the strategic management model as described by Wheelen and Hunger_. ² Accordingly, the strategic brand management process steps would include brand strategy formulation, brand strategy implementation, and evaluation and control. Brand strategy formulation (brand planning) processes involve establishing a brand vision, direction and objectives, brand identity, brand awareness, brand positioning, and developing brand marketing programs. The brand strategy implementation process involves the implementation of brand marketing programs in light of the brand value chain.

The brand value chain framework is a powerful analysis tool to plan and implement brand strategies. In the brand strategy formulation process, the brand value chain helps to identify the sources of competitive advantage (through branding) and to understand financial issues related to the brand marketing investment. The brand strategy implementation process focuses on brand value creation through investing in marketing programs. Kevin L. Keller proposes a “four value stages” model for the brand value chain: marketing program investment, customer mindset, market performance, and shareholder value.³ In this model, the “marketing program investment” stage refers to brand-related activities (including 4ps of marketing: product, price, promotion, and place) that provide the largest contribution towards brand value creation. The brand value chain activities should be properly integrated into the strategic brand management processes to realize the long-term benefit of brand value. The individual activities of the brand value chain can be explored to understand how and where brand value is created and to identify the sources for improvements. The value chain also helps to understand the return on marketing investment (ROMI) related issues. The purpose of a carefully developed and effectively implemented marketing program is to maximize ROMI.

Brands are intangible assets, and therefore, measuring the brand value is a challenging task. Moreover, numerical evaluation of all the sources of value is extremely difficult. Value-based management (VBM) techniques can easily be applied to measure brand value if the sources of this value can be identified, understood, and estimated.

References and Further Reading:

1. J. N. Kapferer, The New Strategic Brand Management (London: Kogan Page Limited, 2013), pp. 57-59 & pp. 170-172.
2. A. Chernev, Strategic Marketing Management (USA: Cerebellum Press, 2014), Chapter 2.
3. T. L. Wheelen & J. D. Hunger, Strategic Management & Business Policy (New Jersey: Prentice-Hall, 2000), p.1 Chapter 1.
4. Kevin Keller, Strategic Brand Management (New Jersey: Pearson Education, Inc., 2013), pp. 100-101.