Why Customers Control The Value of Your Brand
December 7, 2017
Marketplace intelligence begins with listening– to your customers, the market, industry experts, your competitors, and anyone that is mentioning your brand online. Business leaders and companies must measure the impact of social influence on their brand presence. This means mining, managing, and analyzing vast amounts of data across millions of digital sources to understand customers better to properly re-calibrate business programs.
I have had numerous conversations with private equity leaders on calculating the value of the brands that they own or invest in. Sometime when I explain that the value of any brand is inherent in what the customer is saying about that brand – the advice falls on deaf ears.
A brand can often be seen as something intangible and it can be difficult for people to understand the value that a brand brings to a company.
When I explain that there is a significant cost associated with positioning a brand, then the measurable value of brand presence becomes more apparent.
Consider the costs related to lead generation, which can include: advertising, promotions, digital presence, publicity, loyalty programs, etc. These expenses produce more than leads – they provide actual economic advantages when businesses get ready to sell:
- If consumer demand remains high, the brand can enjoy favorable price elasticity
- If consumers are willing to pay more to purchase your branded products instead of a lesser-known competitor, this indicates the economic value of your market position
In other words, higher brand value leads to favorable price elasticity. Favorable price elasticity can lead to premium pricing— and premium pricing can lead to higher brand equity.
“Branding is the art of aligning what you want people to think about your company with what people actually do think about your company. And vice-versa.”
– Jay Baer
When measuring brand presence for private equity clients, we clarify the importance by explaining that this metric will enable us to understand if customers have aided or unaided recall of products and services. This ability to recall could lead to lower user acquisition costs because of viral growth and the brand gaining acceptance and positive perception.
The two factors that we prioritize when measuring brand presence are:
- Brand Awareness measured through the volume of mentions the resulting reach occurring because of those mentions
- Brand Amplification measured through the volume of engagement that occurs once audiences are aware of a brand
Benchmarking these metrics against the competition helps to specify overall brand presence and indicates the share of voice existing across the marketplace. Increasing that share of voice and the number of consumers who can recall a brand is usually integral to establishing marketplace dominance.
Brand presence is one of six marketplace variables private equity should consider when conducting due diligence on a new acquisition or pre-sale assessment. So much of a brand’s value cannot be captured on a P&L statement. By limiting the evaluation process to standard financial data analysis, firms are leaving readily available market intelligence untapped. It can tell you how a business stacks up against its competitors and if customers will or will not buy from a company— and why.