4 Ways to Build Brand Equity

One of my very worst habits, hands down, is Starbucks. The most ironic thing about having a Starbucks location just a few steps away from the front door of my office building is that we brew our own fresh coffee at the office multiple times throughout the day, and I even bring in my own selection of  teas. But at various points throughout the day, each and every day, I begin to feel that tug and pull calling me downstairs to go and visit Starbucks. Even though I will admit I’m not a huge fan of the quality of their coffee, I will say there’s something special about the experience. What then, lies at the very core of this addiction?

According to branding expert Ron Strauss who with Bill Neal co-wrote the book Value Creation: The Power of Brand Equity and who recently spoke at the October Reno-Tahoe American Marketing Association luncheon, 83% of a company’s market value today is represented by their intangible assets (brands, quality processes, relationships, etc.) compared to 1975, when it stood at only 17%. Part of this shift in value from tangible to intangible can be traced to the information age: we’ve become less dependent on tangible, industrialized goods and more desirous of products and services that we can trust and that make us feel good. According to Strauss, building brand equity is the key component for driving sustainable and profitable growth:

The most powerful value creation and destruction potential lies in the intangible brand attributes, the emotional, emotive brand attributes that deal with trust, integrity, personality, self-image, and other psychological constructs. These are powerful because they can create a unique differentiated context for the company’s products and services.

Indeed when I think about Starbucks, I am perhaps subconsciously reminded of the many Starbucks experiences I have had over the years which, when combined, may carry greater weight in my purchasing decisions. It seems that Starbucks has become something of an old, trustworthy friend, filled with warm memories and positive experiences. This is essence of intangible brand value.

For a better understanding of what it takes to be a top brand, one need look no further than Interbrand, the world’s leading brand consultancy. Perhaps best known for their annual “Top 100 Global Brands” list, to determine a top brand there are three key measures: 1. the financial performance of the branded products or services, 2. the role of brand in the purchase decision process, and 3. the strength of the brand. (Click here for a short video regarding their 2011 event.)

So, how do you build on this idea of intangible value as a marketer and transform that into something tangible for business leaders? Using the lessons from above, here are four ways you can build brand equity for your product or service:

  1. Define value– Research the customer’s experience and dig deep within the company to uncover what it is of value that you can uniquely offer, that competitors cannot.
  2. Strategize – Once these truths are uncovered, align business goals with marketing strategy and determine the best way to share the information.
  3. Share your story – Execute the marketing strategy as creatively and strategically as possible.
  4. Measure your efforts – Determine whether or not the methods and tactics employed are achieving the desired results.

For further information on how to measure your brand’s equity, check out Ron Strauss’ book, Value Creation: The Power of Brand Equity, where  he demonstrates how to measure brand value and brand equity in a way that is both understandable and actionable.

2 comments

  1. The 17% to 83% 1975 ratio I shared with you is for all S&P 500 companies
    and reflects how market value is assessed. Today, investors and analysts
    are much more aware of the value of intangible assets, and more willing to
    reflect their value in the firm’s overall market value.

    In the U.S., accounting standards as reflected in GAAP and FASB rule 142
    call for ‘home-grown’ brands to not be counted on balance sheets, only for
    acquired brands to be counted subject to ‘rules of impairment.’

    Internationally, accounting standards (IFRS 3 and IAS 38) allow companies to count their acquired brands value on their balance sheet separate from Goodwill.

    Also, this year marked the establishment of ISO (International Standards Organization) 10668 which is the first standard on monetary brand valuation that’s stated in non-technical language so it opens up discussion to non accountants. The U.S. was not involved in the creation of this standard.

    The new international standard provides a valuation framework which also includes legal requirements and, crucially, ‘behavioral aspects’ of the brand which is usually the domain of marketing. Accountants will need to become more familiar with marketing and brand analysis in order to comply fully with the ISO standard.

    This lack of reporting on home-grown brand value in the U.S. creates a lack
    of transparency and a disconnect between risk and reward in how investor’s
    allocate their capital. This, in turn, creates arbitrage opportunities.
    Warren Buffett has famously taken advantage of these opportunities.

    Ron Strauss
    Founder and SEO, Brandzone
    Co-author- “Value Creation: The Power of Brand Equity”
    404 371 8973 (O)
    404 405 4366 (C)
    ‘Your brand works as smart as you do.'(SM)
    Network: http://www.linkedin.com/in/ronstraussbrandzone
    Follow: http://twitter.com/#!/ronster9
    Read: http://www.newvaluecreation.com

    • Ron! Thank you so much for stopping by and for your valuable input and clarification on the concepts discussed. You’re doing great work and we really enjoyed having you as a speaker. Thanks for sharing your knowledge with us. ~Tiffany

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