“If you can’t measure it, you can’t manage it.” Peter Drucker
This wisdom of Peter Drucker holds true for brand equity. But to measure or manage it, you must first understand it. Executives and marketers alike are often confused about what brand equity actually is. Is it the asset value of the brand? Is it the price premium that the brand is able to command? Is it the reduced price sensitivity that it can create? Is it the emotional connection that the brand makes with people? Is it the loyalty that customers demonstrate toward the brand? Is it the brand’s personality? Is it the brand’s positive associations? Is it the unique identity that it brings to its products and services? Is it the degree to which the brand personifies those products and services? Is it the way the brand is able to share values with its customers and serve as a self-expression vehicle for them? Is it the goodwill that the brand generates? Is it the memory triggers that the brand creates in people’s minds? Is it the ability of the brand to create meaning that extends beyond one product category allowing for brand extension? Is it the brand’s promise? Is it the brand’s unique value proposition? Yes, it is all of these.
If a brand has equity it implies that the brand is an asset that has value. In fact, many studies over time have demonstrated that brand equity is a significant contributor to stock price, company valuation and shareholder value.
So what should the purpose of brand equity measurement be?
- To measure the brand’s health and vitality
- To understand how well the brand is positioned against its competitors
- To serve as a diagnostic tool
- To uncover any underlying weaknesses that require intervention
- To identify opportunities to further strengthen the brand
- To provide the information from which a brand scorecard can be built
That is, a brand equity measurement system’s output should be diagnostic and actionable.
Every brand has a truth point – and that point is always the point of contact: the moment when the customer makes contact with the brand, to buy, to ask, to complain, to enquire…Everyone whose studied marketing for any time nods at this obvious point. But interestingly, while all brands acknowledge contact as the truth point and most wax lyrical about customer service and having a customer promise, far fewer resource for it or prepare their people thoroughly to deliver on it. A surprising number still don’t explain to their own people how to apply the brand to what they are working on in their day. They seem to just expect it to happen.
As a result, brand lives in the minds of many staff as nothing more than words and paperwork that they are expected to comply with: more process; more stuff that they have to fit into their already busy schedules. That’s no surprise either. Marketers and brand owners do much of their thinking about brands on paper – they think through and apply the theory to the wider competitive situation as they see it. They spend many hours wordsmithing the customer promise – until it is the form that everyone agrees to be most compelling. They craft values and personality; they write customer value propositions and work with their agencies to arrive at a tone and manner. There’s a huge amount of work in that, and it’s very important.
But the three questions that often don’t get asked are three questions that really matter – because they are the questions that turn that valuable thinking into invaluable doing:
Is Apple Music a brand? And, from a brand point of view, is Apple Music the same or different from Yahoo! Music? What about iTunes or the F150?
To answer these questions, I want to take you on a journey to the middle part of the brand architecture spectrum (the part that falls between Branded House as represented by Accenture with just the one brand and House of Brands, as represented by P&G with its many different brands). This middle part of the spectrum is where companies try to find the right balance between their company brands and sub/product brands. It can be a murky place where the lines between what is and is not a brand are not crystal clear.
In the world of cars, you can see the architecture progression from Mercedes which distinguishes its model ranges as B-Class, C-Class etc keeping the focus on the Mercedes brand to General Motors which has distinct brands like Cadillac and Chevrolet which, in turn, have another set of distinctive brands below them (Escalade, Camaro). Then there are companies who mix it up like Ford with its F150 trucks on one side and its Mustangs on the other.
Mercedes gets the advantage of only having one brand to support. It’s simple and efficient but it has to compromise on specificity and has to find aspects of its brand that are true for price points that range in its case from $35,000 to $250,000. Whereas the Chevrolet Camaro can be very specifically positioned and targeted but GM has to spread its marketing dollars to support its entire brand portfolio.
Although there’s no right or wrong place to be on the spectrum, the bias these days is towards fewer brands, less complexity and less cost. The question companies ask or should ask themselves is what is the simplest solution that works? Where can superfluous branding that adds both marketing and administrative cost without adding back enough value be eliminated? This kind of thinking drives companies towards the Mercedes end of the spectrum. But, however much companies embrace the need for simplicity and efficiency, the pure Company brand + pure descriptor model can be too limiting. Companies often want to keep a touch of branded distinctiveness between products.
The shock announcement this week that Google is about to rename itself Alphabet sent business and marketing magazines into tailspins of confusion. It’s entirely typical of the marketing cognoscenti to have no clue what the move means. A tiny company changes its font or updates a logo and an army of so-called opinion leaders climb over themselves to offer half-assed commentary and dodgy analysis, but when the fifth-largest company in the world embarks on the biggest brand change in its history, the move is met with stunned silence and the odd question mark.
So let’s break it all down step by step.
This is a brand architecture play. That’s huge because when a company the size of Google alters its architecture its always big news – on a par with the announcements of HSBC (1998), Unilever (2004), Procter & Gamble (2011) and Coca-Cola (2015), all of which also introduced new architectures for their organizations. What makes this particular move so fascinating is that unlike all the brands mentioned above, Google is moving in the opposite architectural direction. The theme of the past decade has been brand consolidation and the move towards a single ‘branded house’ approach to brand architecture. Google is doing the exact opposite by creating a pure ‘house of brands’ with Alphabet as the silent holding company.
Ignore the marketing critics claiming that the name is too generic or mumbling about not owning the web rights or Twitter handles. The whole point of a house of brands structure is that the corporate brand becomes essentially invisible to the outside world, only relevant to senior employees and investors.
The move makes strategic sense on a number of levels. First there is the simple issue of scale. When you start a business (and usually until you pass $100M in revenues) the advantages of a single brand far outweigh the impediments: a single marketing budget, one organizational culture, one employer brand and one senior leadership team all make the branded house the de facto approach for brand consultants like me when we advise clients. But with success comes growth and with growth comes complexity and scale. As Google has grown and diversified the sheer size and scope of its mission demands a more efficient and structured approach.
There’s crises and dangers everywhere we look. From ISIS to mass shootings, pandemics to weather events, Greek debt to commodity slumps, the actions and repercussions stream onto our devices in a seemingly endless scroll. In that sense the world we live in has changed little from when I was a child. We may consume the news differently and the dangers themselves may be different and much more widely covered, but the media thrives on uncertainty and as news consumers we lap it up, just as we always have. Chances are many believe the world feels uncertain. Depending on their politics, some may even see situations as unresolvable.
So what’s any of this got to do with brands and branding?
Context. It’s about the backdrop against which brands operate and the question of how much brands should acknowledge or react to the dangers and threats that are pasted across our daily news.
Some news affects brands directly of course, both reputationally and at a transactions basis. But beyond that brands have tended to steer clear of the bump and grind of daily news headlines. That’s generally been a wise move.
However, as consumer interactions with brands have changed, so it seems, have their expectations. A recent McCann Worldgroup study showed that involvement of global brands in large-scale change is an increasing expectation particularly among younger consumers: “people want brands to do more than just sell them soap or soda…younger generations place even more faith in the power of global brands to make the world better…84% of the 30,000 people surveyed across 29 international markets, including India and China, believe brands have the ability to effect more positive change than governments.”
If that faith is real, then it is significant because it suggests that brands are now seen as much more than producers or suppliers. They are expected to provide some level of comfort and also to act as transformers. In some ways, that’s not surprising. As brands have continued to scale and to assume global profile, their place in consumers’ awareness (if not necessarily their lives) has also increased. Faced with challenges that seem too big to solve, this study implies that consumers are looking instead to entities with the perceived presence and influence to address these macro issues and calm their concerns.