Creating a Strong Masterbrand
By Graham Hales
“The financial valuations will look at the business units’ ‘economic profit’ so the relative contribution of each business unit can be compared and contrasted. As importantly, the financial component of the brand valuation uses a five-year forecast, so the anticipated growth of individual business units is evident.”
Indian business is characterized by large, highly diversified businesses that are often still influenced by dynastic family ownership. While the achievements and successes of these businesses are beyond question, they often present particular challenges in terms of brand management.
- How is it possible for one brand to have resonance and meaning across so many diverse markets?
- How can the brand of the business be positioned in such a way that it is relevant across its diverse markets without becoming the lowest common denominator?
- How can the brand become recognized as an asset that everyone in the business feels engaged in contributing towards?
- How can business units target their own markets effectively without fragmenting the master brand?
The very success of these diversified businesses ultimately creates a complex and challenging environment for brand management.
Brand valuation can become the ultimate ally of the Chief Marketing Officer in such situations.
First, valuing the brand enables the organization to realize the economic asset value of the brand. Now, that’s great in providing a figure around something that is too often characterized as a “soft” or an intangible asset, and that in itself provides an impactful headline that will increase the innate sense of corporate respect for the brand. But the recognition of the flow of economic equity to and from the brand is equally important in helping business units recognize how they “put into” and “take” from the brand. This highlights the reliance and dependency of each business unit upon the brand for their continued success, and therefore their overall commitment to the masterbrand is maximized.
The change of mind-set between contribution and extraction is significant and provides a profound moment of clarity within the organization. While it’s always been true notionally, a quantified economic value flow clearly demonstrates the business units’ ability to contribute to the brand, as well as its reliance on the brand. This creates a maturity, wisdom, and cohesion across the disparate desires and objectives within brand management that would otherwise be impossible to achieve.
The economic valuation enables the master brand to be seen as a quantified economic asset, and therefore, like other business assets, strategies should be put in place to grow the value of the master brand, so that its overall value to the organization increases. This advocacy to support investment in brand fundamentally shifts the mind-set of brand being seen as a cost, to brand being seen as a quantified investment.
But how should that strategy to optimize brand value be formulated?
The process of valuation should directly inform the brand strategy, as the calculation reveals how the brand creates its value, therefore indicating where the fertile opportunities for potential brand value growth will lie.
The brand valuation calculation has three components; a financial analysis, a Role of Brand analysis, and a Brand Strength analysis.
The financial valuations will look at the business units’ ‘economic profit,’ so the relative contribution of each business unit can be compared and contrasted. As importantly, the financial component of the brand valuation uses a five-year forecast so the anticipated growth of individual business units is evident. The combination of contribution to the masterbrand’s value and prospective future growth equates to investment strategies that are objective and clear, removing subjectivity or corporate instinct to indicate metaphorically, which “horses should be backed” and are most worthy of investment budgets. This can create the identification of hero categories, so finite budgets aren’t spread too thinly across the entire organization, but instead are prioritized towards the business units that will create a halo effect that the whole enterprise will efficiently and effectively benefit from.
Beside the financial component of the valuation, within the process there are two principal elements that are most affected by marketers and brand managers.
The first is Role of Brand, which measures the portion of the decision to purchase that is attributable to the brand. Within a diversified business, by definition some business units will have greater reliance upon the brand than others. Comparing the role that brand plays across the business units objectively shows the relative importance of brand to the business unit, which plays into its proximity to the master brand as both contributor and extractor.
Secondly, Brand Strength measures the brand’s ability to create loyalty and, therefore, to keep generating demand and profit into the future. Brand Strength is measured on a 0-100 scale across ten key factors. Comparing brand strength across business units means that the brand’s relative strength across the factors is apparent within each business unit. This means that there is a numeric score card that can show business units relative marks across the brand strength factor, so best practices reveal themselves, or perhaps the business as a whole has a particular strength or weakness within the brand strength framework that can be worked upon across silos. In its own right this can create an agenda for change within the business where business units combine to work together on key initiatives. And because such innovations are seen within the valuation framework it is entirely possible to economically quantify the upside of any improvements in brand strength so investment budgets can be grounded in the anticipated upside.
India has some great businesses, with successful brands, but as ever, India presents some unique complexities. The process of brand valuation helps clarify these complexities, providing rigorous and robust frameworks that enable brand and enterprise values to be maximized. Brand valuation is the ultimate ally of brand management, helping the multiple “micro-brand” agendas of diverse business units to cumulatively combine in the long-term interests of the “macro-brand” they all serve and benefit from.