Executive Lecture Series – Protecting Corporate Assets
Quantifying Brand Value: A Practical Strategy For Brand Preservation
Survey any fifty executives and ask them to define “Branding,” and chances are you would get fifty different answers. Some would describe brand attributes, others would focus on image and reputation, and still others might respond by simply listing examples of strong brands like Google, Coke, or Nike. But when asked to estimate the value of a brand, or how to protect it, this same group gets as quiet as E.F. Hutton.
Historical Perspective on Branding
The original practice of “branding” actually dates back to the Egyptians in 2000 B.C., as evidenced by intricate tomb murals and paintings, and has been used in some form in every country and civilization since then. For most of us, however, a more colorful, contemporary, and familiar branding touch-point hearkens back to the rugged iconic era of the Old American West, when an iron rod featuring a unique insignia was placed over an open flame, heated until red hot, and then plunged deep into the side or hindquarters of a piece of livestock.
In those days, a brand was a symbol of ownership – a visible, lasting, and indelible mark – and for the life of that animal, it was forever linked with the family or owner associated with that brand image. When a runaway was located, the true owner could easily be determined from the brand insignia, and the unique mark enabled any steer to graze freely among other cattle on the open-range, with the knowledge that cowboys could quickly separate the cattle during a round-up for driving them to market.
Over time, however, brands in early America came to represent much more. In addition to simply marking livestock as personal property, the brand came to stand for the entire operation itself – the ranch, its family, owners, workers, reputation, and even its traditions. While the actual brand consisted of a simple letter, word, numeral, character, or symbol, it was the entity BEHIND the brand that gave it intrinsic value, and served as a unique differentiator. Like a coat of arms in the Middle Ages, the Old West practice of designing, deploying, and displaying what has been called the “heraldry of the range” served the enduring purpose of providing a visual and visceral demarcation between people and their unique property.
Branding in the 21st Century
In spite of the significant intellectual and technological advances over the past 4000 years, the concept of branding really hasn’t changed that much from Ramses to Renaissance and from Range to Rodeo Drive. While communicating brand messages no longer involves fire, the goal is still the same – to sear into the psyche an indelible message – an overriding, all-encompassing impression or feeling directed towards a specific company, person, or thing. In its simplest form, a brand is simply a promise – actively promulgated by an entity – and etched into the conscious and subconscious mind of the market or audience, with the goal (like ranchers before them) to establish a positive imprint with such impact that it can be separated from the rest of the herd when driving a product, company, or idea to market.
A perfect example of this was this year’s Super Bowl – the most spectacular advertising, branding, and media event of the year. Over the course of the 11-hour coverage, viewers were exposed to scores of commercials, each showcasing a specific company, product or message, and each with a unique branding imprint goal in mind. Just like livestock, each brand presented during this marathon television event was allowed to “graze freely” among other brands – but it was the strength of the brand message, and the company, person, or firm BEHIND that message that separated the winners from the losers in driving mind-share, revenue, and profits to these firms.
Consider some of the best brands around: Lexus, Rolex, Harley-Davidson, Sony, Apple, even McDonalds. While some of these represent ‘high luxury,’ the ‘best brands’ aren’t necessarily the ‘best products.’ The best brands are the ones that have done the best job of establishing an expectation (or promise) in the minds of consumers, and then delivering on that promise.
What is a Brand Worth?
According to a recent study by global research company Millward Brown Optimor, Google’s brand had an estimated worth of $66.4 billion, ranking #1 in the world and edging out other top brands including GE ($61B) and Microsoft ($54B). Former CEO of Quaker Oats John Stuart once proclaimed, “If this business were split up, I would give you the land and the bricks and mortar, and I would take the brands and the trademarks, and I would fare better than you.” Clearly this leader understood the inherent value that a brand can command, as historically, the determinants of a company’s worth are comprised of 31% “Book Value” (cash, receivables, real estate, inventory, and investments) and 69% “Intangible Value” (trademarks, perceptions, and brand), and while you can’t cover payroll using “brand identity,” you CAN leverage it to command premium pricing, customer loyalty, realize enviable and sustainable profit margins, buttress against encroaching competitors, and negotiate a superior value during M&A or sale of the company. The fact that the brand valuation of Coca-Cola was over $50 billion, while the total stock value was less than $40 billion, further demonstrates this phenomenon, and provides even more impetus for protecting this most valuable, yet vulnerable, asset.
You Protect Other Corporate Assets, Why Not Your Brand?
From deadbolts, badges, keypads, and passwords, to firewalls, fire alarms, and surveillance cameras, chances are your firm is already utilizing a growing list of safety precautions to actively protect the physical assets and tangible property comprising the portfolio of your corporate infrastructure (your “Book Value”). But what about the other 69% (“Intangible”) value of your company? When you consider:
- The true value of your brand
- How much has already been invested to design, deploy, and display your brand
- The ongoing costs to sustain and advance your brand
- How fragile your brand actually is, and
- How easily your brand can be compromised,
it is shocking to consider how little is done by most firms to protect this extraordinarily valuable corporate asset.
For example, if your supply warehouse was burned to the ground, while the event would be tragic, it would still be recoverable via an insurance claim for replacement costs, construction of a new facility, and ultimately a return to productivity. If, however, your company were to have its brand diluted, compromised, or tainted by scandal, the immediate damage could be even MORE costly, and the ongoing damage to your reputation, integrity, brand image, and brand VALUE (stock, premium pricing, market share) could be irrecoverable.
One need only rewind two years ago and the media explosion surrounding Michael Phelps to understand the impact of brand degradation, as the “Butterfly Effect” of his exposure in a compromising situation tarnished his stellar personal brand, cost him his Kellogg’s endorsement contract, led to countless potshots from the media and blogging community, not to mention any number of other potential downstream revenue opportunities. Or consider just a short list of other personal and corporate brands that have suffered over the past 20 years: Bill Clinton, Elliot Spitzer, J & J (Tylenol tampering), Enron, AIG, Lehman Brothers, and yes, even E.F. Hutton.
The brand impact on the people, profits, firms, and families is incalculable, and very often turns out to be insurmountable, as was the case with Riggs Bank, which was fined $25 million for violation of money-laundering laws. After pleading guilty to charges from a Justice Department investigation and paying another $16 million in fines for violating the U.S. Bank Secrecy Act, the bank and the Allbritteon family agreed to pay $9 million to victims, the remaining family members resigned from the bank Board, the Riggs name was officially retired, and the entire operation was acquired by PNC Bank. In fact, even in industrial espionage cases like Lubrizol, where a disgruntled employee clandestinely sold company secrets to South Korean competitor SK Chemicals, the impact to the corporate brand can be significant, even though the wrongdoing was via the actions of a single rogue employee.
But rather than simply reacting by spending big bucks on press releases, image makeovers, and other damage control measures, savvy firms are choosing instead to proactively invest in strategic countermeasures designed to aggressively protect their corporate assets and preserve the wealth of their corporate brand.
Leveraging Social Media For Brand Protection: An Innovative Approach
As more and more organizations are recognizing the value and vulnerability of their brand, an increasing number are placing a higher priority on protecting their corporate integrity and preserving their industry reputation and are leveraging social media to accomplish these objectives. Progressive firms are realizing that brand protection is not a sprint, but rather a marathon – requiring ongoing rigor and vigilance – and this approach requires both offensive and defensive strategies to succeed.
Organizations are embracing the integration of social media platforms to go on the offensive because these low-cost and no-cost tools enable them to efficiently and effectively reach their market anytime and anywhere. The global reach of social media is unparallel within traditional media, and the transparency of these conversations (along with the unfiltered feedback between company and consumer) naturally lead to a greater sense of brand intimacy and authenticity, and therefore brand loyalty. These brand loyalist will often voluntarily assume the role of brand ambassadors and advocates, incrementally aspiring to be even more vocal and influential within their circles, and in the process becoming increasingly valuable to organizations for test market feedback, focus group opinions, and crowdsourcing projects. And finally, it is traditionally these same people who are the first to intervene on your behalf in defense of the brand should something go terribly wrong.
If something goes wrong, and there is a sudden setback, emergency, or catastrophe (think BP Oil), the speed and scale of social media can be leveraged for brand protection and to minimize brand degradation by quickly implementing damage control measures and “getting out in front” to control (or at least influence) the message, versus simply standing by and watching as the totality of the message is controlled by others. Having a CEO or corporate leader both on camera and on social media platforms calmly explaining the dynamics of the crisis and the steps being taken to bring it to resolution have consistently shown to go a long way towards bringing back a sense of order, integrity, and leadership – even if it does entail a complete mea culpa with promises to make it better in the future.
Remember, anywhere-anytime-anyone social media channels must be handled as the “nuclear options” that they are, with both the power to reach worldwide audiences with positive messages about your brand, as well as the capability to destroy your brand in a single rogue Twitter post, Facebook picture, or YouTube video that goes viral.
When is the Best Time to Protect My Brand?
Now! In a cluttered cultural landscape diluted by generics, knock-offs, and scams, true brand authenticity demands attention and commands a premium – benefits which must be both prized and protected. It takes years and millions of dollars to create and build goodwill and positive brand images, and yet much of this can be lost in a single day. In these perilous times, companies that invest so much time, effort, and capital in their brand on the front end cannot afford to neglect their vulnerability on the back end. Strike while the iron’s hot! Take steps now to leverage social media to protect your assets and preserve your brand because, as they said in the Old West, “It’s too late to close the door when the horse has already left the barn.”
Chief Content Officer
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