What Is Your Brand Worth?
The Perception of Value
Your product is not your brand. Your company name is not your brand. According to Vistage branding experts Tryg Jacobson and Duane Knapp, a brand grows out of a set of tangible or intangible benefits that consumers associate with your product. The stronger this association, the greater the loyalty among your customers and the more willing they are to pay for it. The brand represents the consumer’s perception of its value.
As a result, everything a company offers should be designed to support the brand, or increase its value (”brand equity”) in the marketplace. Nothing else matters.
“Brand equity is the totality of the consumer’s perceptions,” says Knapp. “This includes the quality of products and services, the company’s financial performance, customer loyalty and satisfaction. It’s all about how consumers, employees and other stakeholders feel about a brand.”
Adds Jacobson: “A brand equals trust. To build trust, you need a perception of value and a promise of quality. First you create value, then you deliver on it.”
How does a business develop the perception of value? Start with quality. Of course, all businesses claim that their products and services have quality. But in the rigors and demanding circumstances of the marketplace, consumers quickly learn which products have genuine value and which ones don’t.
“A business must understand what quality means to the customer, and develop a culture and quality improvement process that supports this understanding,” Knapp says.
Jacobson agrees. “Quality, like beauty, resides in the eye of the beholder. To generate brand equity, a business differentiates its products from others in terms of customer benefits. Then it aligns all of its marketing and advertising efforts with what it actually delivers. Over time, a relationship grows between the company’s brand and the customer’s experience of that brand.”
In other words, the brand serves as a valuable tool for consumers forced to choose among the bewildering array of products and services in the marketplace. Consumers depend on “signals” that a brand sends out — those intangible associations with quality that it represents. Therefore, it’s up to the company to carefully influence and manage those signals at all times, in all encounters with their target markets.
“Customers develop their perception of value through a subjective process based strictly on their own needs, preferences, buying behaviors and habits,” Knapp says. “A company’s brand promises to meet those needs and deliver each and every time. Growth comes from serving customers better — not bigger — and concentrating on the brand’s unique area of competence.”
Sometimes, businesses attempt to create a perception of value by competing on price alone. Both Vistage experts consider this to be a foolhardy and misguided approach.
“Any time you lower your price to sell more, you devalue the brand,” Jacobson says. “When people place their trust in your brand, lowering prices sends the message, ‘You can still have that trust, but you can have it cheaper.’ This may capture some additional price-sensitive customers at first, but in the long run you’ll likely alienate those who have been paying your premium price.”
Companies that continually discount their products never achieve the depth of brand equity that can be gained through other strategies, he adds. “Rather than attract customers by lowering price, aim for larger markets (and even charging more) by creating new benefits and differences for your product. Invest in protecting, growing and preserving the value of your brand.”
A Capital Asset
“Part of a brand’s equity lies in the capacity of the organization to provide added value to its products and services,” Knapp points out. “An established brand enables a business to lower marketing costs, charge price premiums and expand opportunities for customer purchase.”
On the other hand, mishandled brands can result in negative brand equity — a situation where potential customers perceive less value in the product, regardless of any objective assessment of its benefits and features. The result? Diminished sales and the need to increase already-costly marketing campaigns.
What other advantages come with brand equity?
Easier consumer choices. Brand equity makes the purchasing process easier for customers.
Assurance. From the consumer’s point of view, an established brand represents a decision with less risk than “unknown” commodities.
Awareness. Brand equity equals top-of-mind customer awareness.
Leverage. Brand equity can be a strong foundation on which to launch new products and/or services.
Associations. In the minds of consumers, the company’s brand is associated with quality, dependability and a host of other positive, intangible attributes. Advertising dollars alone can never buy these associations.
Defense. Competitors hoping to encroach on an established brand face a difficult, often intimidating challenge.
“For all these reasons,” Jacobson says, “companies should consider their brand as no less important than capital assets like equipment and plant purchases. Invest in the brand. Protect it and nurture it with a long-term view of its maximum value to the organization.”
Tryg Jacobson and Duane Knapp