Friday, October 31, 2008

Investor Perspectives on Corporate Brand Strength

As a member of the the American Marketing Association I participate in several active discussion boards on topics around marketing strategy, B:B marketing, and branding. Recently a discussion started around the question if a well-marketed, well-branded corporation carries more merit to to investors, and possibly clouds their views.

I really liked one of the responses contributed by Charlie Henderson, Director of Marketing for Aastra. He noted:

I don't agree that the brand is the strongest intangible asset. It may be the biggest but as we have seen over and over it is an asset whose value can be destroyed in an instant. Sometimes to be rewon (Tylenol) sometimes to be lost forever (Arthur Anderson). The value derives not from the marketing of the brand but the performance and behavior of the company over time. If the day to day exeperiences of the firms clients, constituents and investors meet or exceed the promises made by the brand then value is created. If the experiences are counter to the promises then value is diminished.

Too often marketers approach branding as something that is confined to messaging and visuals. What Charlie emphasizes are two components that are notoriously left out of the marketers' equation: peformance and behavior. When considering performance there are a myriad of metrics to consider, but from an investor's POV they include financial, market penetration/share, share of wallet, and future earnings.

But from a behavior standpoint, the metrics that matter the most (to investors or anyone else for that matter) is the alignment between what is said and what is done. Those companies that are focused and do what they say -- delivering on their promises -- they are the ones that garner a solid reputation, and strengthen the value of their brand.

Charlie goes on to say:

Brand value is won not by ads or mailers but by subsequent actual encounters. Even people who do not shop Wal Mart, FedEx or Lexus accept the value of the brand because they know that if the promises made by the brand were not being delivered the companies would not have been successful or would not have maintained the messaging over so long a time. GM has poor brand value becasue they tend to deliver poorly on the promises made by their advertising and thus change the brand images and messages frequently.

Can good marketing overcome poor execution or bad business models? Sure, but only up to a point and seldom to investors who are looking at the fundamental ability of the company to execute a sound busines model over time.

I think Charlie nailed this point. Investors are wary of companies that shift their focus and waver in terms of their identity. They want to minimize the risk in their investment. However, I've seen investors pour money into brands that may be underperforming financially, but are highly focused and have strong alignment between their brand, their target customers, and their business strategy. They know, as we have seen in many cases, that those companies are more likely to succeed in the long run.

-- David Kinard, PCM

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