How Branding Drives Shareholder Value

The primary objective of boardrooms is to build and sustain shareholder value, and deliver competitive returns to shareholders. One of the most effective ways to achieve this is to build brands with strong brand equity.

Brand equity is the reputational asset that any successful business builds in the minds of customers and other stakeholders. Strong brand equity is also one of the main reasons why the market capitalization of a company often exceeds its book value. Think the case of Apple!

In my last post Where Are All The Global Asian Brands, I discussed how Asian CEOs have an untapped opportunity in generating more financial value from brands. It requires a different mind-set in the Asian boardrooms.

Many Asian companies traditionally focused on asset-intensive industries. But it has been demonstrated by McKinsey that the most profitable Asian companies focus on intangibles such as human capital, exploiting network effects, and creating synergies based on brands or reputation, rather than investing in tangible assets.

Intangible assets like brands play a significant role in value creation and can become an important driver of shareholder value for many more Asian companies compared to a few today. On the New York Stock Exchange and NASDAQ, for example, intangible assets (brands) are known to account for 50–75 percent of the market capitalization of listed companies.

The boardroom plays an important role

A strong brand is characterized by a unique brand promise (the customer focus) and an outstanding brand delivery (the organizational system and performance behind the promise). The brand promise and the brand delivery must be consistently balanced in order to build and sustain strong brand equity.

Singapore Airlines is an excellent example as the entire organization is aligned strongly around the promise of great service which is delivered across all touch points. In the end, culture is the key driver of success over time. I have written in another article about How Culture Drives Performance.

The modern brand-driven organization is characterized by three distinct characteristics which set it apart from less brand-focused organizations:

• The right boardroom mind-set toward and beliefs about branding
• The right skill sets to build and manage brands
• The right allocation of organizational and financial resources to achieve the various business objectives and build sustainable brand equity

Looking at the organization, ask yourself: Does our boardroom have the right mind-set? Do they have the skills? Do they allocate the necessary resources?

My experience from interactions with C-suite leaders every week around the world has shown that the reasons for the lack of strong brand equity originate in the boardroom. Change needs to start there.

It is important to note that marketing as a function has come under increasing pressure to demonstrate financial results. Boardrooms must recognize this need and act accordingly. I have discussed the role and responsibilities of the Chief Marketing Officer (CMO) in this article: The Chief Marketing Officer – A New Boardroom & Strategy Role.

The first change is related to the role of marketing. As marketing is increasingly taking place along the entire value chain, marketing is not the responsibility of the marketing function alone. Instead, everyone in the organization should be involved. This requires a more cross-functional orientation of marketing, with a solid understanding of all the elements in the value chain including skills within engineering, purchasing, manufacturing, logistics, finance and accounting. It may require an upgrade of skill sets and on-going training of marketing personnel.

The second change required is related to the outcome of marketing. For the marketing function to become an integrated part of the boardroom agenda, the key issue for the future is to focus on demonstrating the financial consequences of marketing expenditures.

Finally the boardroom should recognize the critical importance of resource management in building strong brands. Therefore, the last cornerstone of successful branding refers to organizational and financial resources, their allocation and management. Training and involving more and more employees in delivering on the brand promise will result in the brand strategy becoming more efficient and competitive.

Are you ready to align your organization around the brand?

**********

Martin Roll is a business & brand strategist, and the founder of Martin Roll Company. He provides advisory and guidance on leadership, strategy and execution, and how to build and sustain high-performing, enduring brand-driven businesses and global, marketing-oriented organisations. Author of Asian Brand Strategy.

Specialities: Branding, Marketing, Strategy, Leadership, Change & Transformations, Business Family Transition, Business Coaching, Asia & Emerging Markets.

Read more articles >>