Evaluating Brand Value in the Digital World

Billions of dollars are spent every year by organisations to build brand loyalty within their customer base. One of the traditional cornerstones and outdated views of marketing theory is that consumers are loyal, unfaltering followers of a brand, whether through aspirational desires or simply because customers are content with the convenience that a brand gives them – a classic tale of the satisfaction of needs and wants.

But the world is changing, driven in part by the digital revolution but also by the recession-fuelled demand for cheaper goods and services – substance winning over quality. We are becoming less loyal to brands and as a consequence, brand holders need to adapt their traditional strategic marketing plans to appeal to a greater audience through both aspirational and functional spending decisions.

Hundreds of books, theories and so-called experts try to convince organisations how they can evaluate the performance and value of their business.  The most obvious way if a business is listed on a major equity index such as the London Stock Exchange to assess financial performance is to look at share price trends and financial statements, although they won’t necessarily show exactly what’s going on under the bonnet.  Likewise, accepted industry-standard customer experience metrics such as Net Promoter Score (NPS) will indicate how customers feel about a brand, assuming they are motivated to complete a survey, but can’t show how that translates into actual sales or efficiency.  The most respected brands according to a NPS scoring index may be so because they are known for their charitable approach or social responsibility rather than actually making any money for their stakeholders and investors thus making it difficult to be considered a true measure of brand value or loyalty.

We are often told who the most respected brands in the world are, with the same names topping the list year after year.  Amazon, for instance has revolutionised the shopping experience moving in from the High Street into cyberspace (and now trialling the idea of moving in the opposite direction), more so than any brand in the digital world, but it’s hard to compare like for like operational performance against a traditional bricks and mortar business such as Walmart or Tesco.  But if you look at the list of the most respected brands a bit closer and why they are on the list you can define a formula that in theory should make any brand a winner, namely.

Exceptional Customer Experience + Innovative and Desired Products + Cutting Edge Digital Technology + Community-Focused = A global winning brand

Virgin, Apple, Google, Waitrose, BMW, Disney.  All consistently in the top 10 of the most respected global brands.  Each could be said to be market leaders or pioneers, but they also all displays traits that others want to imitate.  However, is this the only measure to determine the value of a brand in the digital age?

The world’s most famous, and successful investment entrepreneur is undoubtedly Warren Buffet and he has a different view on the most successful brands, looking at it not from a customer interaction angle but from a financial slant.  He defines the most successful businesses by their pricing power:-

“The single most important decision in evaluating a business is pricing power. If you’ve got the power to raise prices without losing business to a competitor, you’ve got a very good business. And if you have to have a prayer session before raising the price by 10 percent, then you’ve got a terrible business.” 

This metric could certainly be applied to a number of respected brands. Apple, for instance do not believing in standing still and will look to introduce updated models for their products on a regular basis, essentially adding more features in return for a higher retail price,  Likewise, BMW believe in designing cars for the next generation of motoring.  What today are extras that we can put in our X5s or M3s at additional cost become included in the price in future models, which in return have a higher retail price.

Price rises for products we use on a daily basis are now part of life.  Our subscriptions to mobile phone networks, broadband providers, satellite TVs and even basic utilities do not go backwards, nor do they tend to rise with inflation (especially as that is essentially zero in large areas of the world). These organisations are simply trying to pass on the increase in costs they have to bear from their suppliers as well as trying to provide a better product.  The rise in the cost of satellite TV and especially the sports channels is a great case in point.  Increases in subscription charges has driven more people to look at illegal streams of services, which means the satellite companies have to increase their costs by implementing detection and enforcement services.  This is on top of having to pay more for the same rights to cover events, such as the last Premier League TV deal which netted the top 20 clubs in England more than £8.3 billion.

For economists and investors, a robust pricing strategy is certainly an important part in determining the attractiveness of a brand, especially for those organisations who have a subscription-based pricing model but like the YouGov Annual BrandIndex, which looks at customer perception, it is simply another way to cut the subjective data.  YouGov BrandIndex’s Index score which is a measure of overall brand health calculated by taking the average of Impression, Quality, Value, Satisfaction, Recommend and Reputation which naturally favours those brands with the bigger marketing budgets.

Young & Rubicam, the global marketing communication agency, developed some years ago another measure that could be used to value a brand’s perception and loyalty.  The BAV (BrandAsset Valuator) is a tool they developed to measure the power and value of a brand based on four different views:-

  • Differentiation: The defining characteristics of the brand and its distinctiveness relative to competitors.
  • Relevance: The appropriateness and connection of the brand to a given consumer.
  • Esteem: Consumers’ respect for and attraction to the brand.
  • Knowledge: Consumers’ awareness of the brand and understanding of what it represents.

This measure is certainly more subjective than the other measures discussed as the perception of a particular brand to one user may be very different to another.  For instance, as someone who is a heavy Apple technology user, my rating of the brand based on the four measures above would be very different to my friend and technology journalist Barry, who swears by Microsoft and Samsung products.  Both provide leading edge technology, both can count hundreds of millions of global users and both would class their products as being respected and attractive.  In fact a large percentage of consumers will actually use both brands in their daily lives.  There is no right or wrong score when looking at a company via the BAV.  If a large enough sample was used then perhaps some credence could be associated with the scoring but often the BAV is used as part of a Balanced Scorecard (a strategic performance management tool used by many organisations) to determine the non-financial health of an organisation.

Being a respected brand will almost certainly lead to imitation, which as the saying goes, is the greatest form of flattery. Alas, in the realms of intellectual property (IP), imitation can also mean counterfeiting which damages revenues, reputations and consequently band value if not properly controlled.  In every aspect of life there has to been pioneer so by default there will also be followers.  In the years that followed Henry Ford’s launch of the first automobile, the Model-T in 1908, dozens of car manufacturers sprung up not only across America but the world.  Today, whilst the consolidation of brands has in some ways commoditised the car industry, there are still hundreds of car plants across the globe and all of them can trace their ancestry and in many cases, approach to production, back to Henry Ford’s first factory in Detroit. Pioneers by default have a very high brand value, even if history sometimes covers their tracks.

After all, there is often no value in re-inventing the proverbial and in the case of Ford, actual wheel, so why not simply copy the brand values or customer experience that others deliver? That’s acceptable as long it doesn’t infringe on any intellectual property.  Companies such as Coke, Nike and McDonalds have spent billions developing their advertising campaigns so would understandably take a dim view of someone else using their digital assets such as domain names, infringing on trademarks or simply copying product design or marketing slogans.  But likewise, competition from companies offering similar products such as Pepsi, Adidas and Burger King has ensured these brands have never been able to lose their focus on innovation and customer experience. So perhaps with this in mind, another measure of a brand’s value is that of its own digital and intellectual property risk.

By assessing not only the negative impact on a brand but also the potential opportunity cost of not addressing online intellectual property infringements, a clear return on investment calculation can be made on the cost of implementing actions to detect, analysis and enforce against brand infringers and abusers.

There are two types of organisations when it comes to looking at cybercrime and intellectual property infringement.  Organisations who have been impacted and are taking mitigating action and organisations who have been impacted but do not know or understand the consequences of inaction. Having a strategy to ensure there’s no erosion of brand value through intellectual property infringement is as essential as being able to manage the impacts of marketing campaigns, customer service and consumer experience.

Organisations tend to use formalised brand protection and IP abuse strategies to combat one (or more) of four main reasons: –

  • Revenue Impact – Intellectual property infringements are clearly impacting legitimate revenue streams either through counterfeiting or brand and reputational damage, with genuine consumers being duped into buying inferior products;
  • Brand dilution – Counterfeit goods are devaluing the genuine products, turning luxury and aspirational brands for instance into mass-market, poor imitated everyday goods;
  • Partner Management & Monitoring – Legitimate goods and services being offered through unauthorised channels – the “grey market” or third party making claims of authentic brand patronage;
  • Executive Directive – Legislative regulation may means organisations have to take steps to ensure compliance in certain areas;

The Internet can sometimes resemble the early days of the Wild West with little regulation and enforcement, and brands having to take whatever measures they can to protect themselves and their valuable intellectual property. An effective brand protection strategy should today be as vital to an organisation as any marketing campaign or pricing strategy.  If they are not plugging the holes at the bottom of the brand infringement bucket, all of the great stuff that is being delivered through innovation, customer experience and sales at the top end will be diluted.  Therefore, a brand risk score should be as important a measure to a business as their NPS, Respect score or the BAV rating.

By tackling the issue of brand and reputational damage head on, consumer confidence, customer experience and sales of legitimate products will rise.  Global brands such as Ugg, Canon and Barbour have seen the importance in not only having a brand protection and enforcement strategy but also educating consumers.  These brands have web pages dedicated to consumer information not only about the risks associated with buying counterfeit branded products but also how consumers can report infringing products, turning their customers into advocates of the brand.  Unless a brand has a control on its intellectual property then it makes marketing and more importantly, pricing decisions significantly harder, with justification of return on investment diluted.

There is no right or wrong way to value the worth of a brand but the adoption of a brand protection and enforcement strategy is possibly the most cost-effective and fastest way by which an organisation can improve the overall value of their business.  The first step for any brand holder is to recognise how and what nefarious activity in the digital world could be damaging their brand value, reputation and of course ultimately, revenues. Being proactive is certainly a key element in growing brand loyalty, being part of the solution rather than the problem.

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