Executives like to talk about strong brands as platforms for sustained growth. In the management literature, the link between brand equity and shareholder value is well accepted. So, why is the responsibility for brand-building not more actively managed in the executive suite?
In our work across sectors, we see companies often failing to “walk the talk” — unable to grasp the link between brand health and revenue commitment from customers. They treat brand-building superficially, believing that what matters is making brute-force impressions through large advertising campaigns.1 Yet brand health is based on more than image and, through a set of key interrelated measures, can be linked to business performance.
How does the concept of brand health compare to the notion of brand equity?2 Brand equity is linked to shareholder value.3 It is an intangible, long-term measure of a company, which is of little use to executives making investment trade-offs that affect top-line growth. By contrast, brand health is linked to current and future value with consumers and differences in competitive position. It is tangible and vital to managing brands and business performance on a forward-looking basis.
To measure brand health — and, contrary to conventional wisdom, it can be measured — is to obtain a 360-degree view of a brand in its marketplace, a wide-angle view of consumers and competitors. What is required is isolating underlying elements that matter, measuring them and linking them to business performance. “Companies don’t work hard enough to understand the dimensions, even while extolling the importance of brand,” says Charles M. Lillis, a director of Washington Mutual, SUPERVALU, Williams Companies and Medco.
Sustaining active brand management confers prime benefits for most companies. Our work, based on data gathered from over 7,000 consumers about 11,000 customer-provider relationships across large sectors of the U.S. economy, shows a statistically significant correlation between brand health and sales. The healthiest brands have twice the amount of customers reporting increasing spending than the worst-performing brands.
These findings, and the manageable metrics they suggest, will allow marketers and investors to “connect the dots” between key elements of brand health and business performance and to reconcile previously separate notions: brand and operations, the short term and the long term, investment and return.
1. P.F. Nunes and J. Merrihue, “The Continuing Power of Mass Advertising,” MIT Sloan Management Review 48, no. 2 (winter 2007): 63–69.
2. P.H. Farquhar, “Managing Brand Equity,” Marketing Research 1 (September 1989): 24–33; and K.L. Keller, “Conceptualizing, Measuring, and Managing Customer-Based Brand Equity,” Journal of Marketing 57, no. 1 (January 1993): 1–22.
3. T.J. Madden, F. Fehle and S. Fournier, “Brands Matter: An Empirical Demonstration of the Creation of Shareholder Value Through Branding,” Journal of the Academy of Marketing Science 34, no. 2 (April 2006): 224–235.
4. P.B. Berthon, M.B. Holbrook, J.M. Hulbert and L.F. Pitt, “Viewing Brands in Multiple Dimensions,” MIT Sloan Management Review 48, no. 2 (winter 2007): 37–43; and K.L. Keller, “Brand Synthesis: The Multidimensionality of Brand Knowledge,” Journal of Consumer Research 29, no. 4 (March 2003): 595–600.
5. D. Aaker, “The Power of the Branded Differentiator,” MIT Sloan Management Review 45, no. 1 (fall 2003): 83–87; and K.L. Keller and S. Sood, “Brand Equity Dilution,” MIT Sloan Management Review 45, no. 1 (fall 2003): 12–15.
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7. H. Schultz and D.J. Yang, “Pour Your Heart Into It: How Starbucks Built a Company One Cup at a Time” (New York: Hyperion; 1997): 248–249.
8. T.J. Reynolds and C.B. Phillips, “In Search of True Brand Equity Metrics: All Market Share Ain’t Created Equal,” Journal of Advertising Research 45, no. 2 (June 2005): 171–186.
9. S. Hill, R. Ettenson and D. Tyson, “Achieving the Ideal Brand Portfolio,” MIT Sloan Management Review 46, no. 2 (winter 2005): 85–90.
10. K.L. Ailawadi, D.R. Lehmann and S.A. Neslin, “Revenue Premium as an Outcome Measure of Brand Equity,” Journal of Marketing 67, no. 4 (October 2003): 1–18.
11. C. Christensen, S.D. Anthony, G. Berstell and D. Nitterhouse, “Finding the Right Job for Your Product,” MIT Sloan Management Review 48, no. 3 (spring 2007): 38–47.
12. D. Stiff, “So You Think You Know Your Brand,” MIT Sloan Management Review 47, no. 4 (summer 2006): 95–96.
13. K.L. Keller, “The Brand Report Card,” Harvard Business Review 78, no. 1 (January–February 2000): 26–35.