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Archive for the 'roi' Category

Jun

The true value of your brand and how it should be figured

By Kirk Closed

Categories: brand essence, loyalty, management and roi

You already know intangibles are the difference between one brand and another. But do you know how much those intangible assets add to the financial value of your brand?

It used to be that brands were valued based primarily upon their hard assets, such as buildings, equipment, and inventory. However, in the last several years, valuation has changed in favor of intangibles, such as intellectual property, business processes, market share, and brands.

This shift is discussed in a recent article in Advertising Age by Bob Liodice, president-CEO of the Association of National Advertisers, Jez Frampton, global chief executive of Interbrand, and James Gregory, founder-CEO of CoreBrand.

They point out, as an example, that Coca-Cola’s total hard assets, according to its 2009 annual report, were $48.6 billion, yet its year-end market capitalization was $132.8 billion. The $84 billion difference “represents the value of the company’s intangible assets, largely its brands.”

In another oft-mentioned example, Volkswagen bought Rolls-Royce in 1998 for $790 million, but didn’t buy the Rolls-Royce name. BMW snapped it up for a mere $66 million. Today, BMW’s Rolls competes head-to-head with VW’s Bentley.

So how is the value of an intangible determined?

A number of methods exist, which consider everything from how much the brand has spent on marketing in the past to how much cash it might generate in the future.

Brand valuation companies such as Interbrand and CoreBrand have developed their own proprietary formulas. However, there is no universally accepted method.

Liodice, Frampton and Gregory would like to change that. They ask, “Isn’t it time for the marketing and financial communities to establish generally accepted brand-valuation standards?”

Seems like a good idea for a lot of reasons. Here are three:

A standard would change the perception by some business managers that marketing is an investment in the future value of the brand, and not simply an expense.
A standard would inform marketing strategy, such as the trade-off between achieving short-term cash flow vs. building long-term brand value. Discounting to drive sales would be viewed in light of its impact on brand equity.
A standard would guide decisions to merge, acquire or partner with other brands.

Not to mention that, with a generally accepted valuation standard, CMOs would wield more power and shoulder more accountability.

Note: For more on how intangibles differentiate brands, see “Why intangibles are the more sustainable competitive advantages” and “The 9 criteria for brand essence.”

Feb

Advertising’s swimsuit competition: the Super Bowl

By Kirk Closed

Categories: advertising, event marketing, mass media and roi

istock_000010686107xsmall Let’s be honest.

This week, when we chat online or around the water cooler about the Super Bowl commercials, we will not be judging them based upon which are most effective at doing what they are supposed to be doing, which is actually selling something.

Instead, we will talk about which spots we “like,” which spots we find most entertaining. We’re judging style, not substance.

In pursuit of being popular during and after the game, advertisers and their agencies push the limits to engage us. And we reward them with a couple of week’s worth of buzz.

But how successful are these creative efforts really? Long-term, how many widgets do they sell?

In Advertising Age, Tom Denari blames online ratings. “Super Bowl ads are now dangerously close to a series of Saturday Night Live skits, designed to bombastically amuse the viewer. While I would admit that an ad’s biggest crime may be to be forgotten, Super Bowl ads have become a contest where each competitor sees who can out-gross, out-animal-talk or out-uncomfortable-body-part the next ad. The hype and ratings have continued to erode the quality and integrity of ideas.”

There does happen to be a venue for recognizing the most effective advertising. It’s called the Effie Awards. Effies are given based on results rather than entertainment value. Additionally, the Effie organization shares with the industry its accumulated wisdom by showcasing great ideas that work.

Heard of the Effies? Probably not. They don’t have a football game.

Dec

Best posts of 2009

By Kirk 2 Comments

Categories: art direction & design, brand essence, budgeting, client-agency relationships, copywriting, identity, loyalty, new business, roi, standards and strategy

This month BrandSTOKE is one year old.

I’m honored that you take the time to read and comment. My goal for 2010 is to engage more conversation. If you have any suggestions for topics or improving the blog, please let me know.

Thanks for your interest and support. I’ll try to do better next year.

Here’s a list of some of the most popular posts as well as a few personal favorites from the last twelve months:

On brand building:

On brands vs. commodities:

On simplicity and effectiveness of messaging:

On smarter strategy:

On getting hired:

Just for fun:

Oct

What every non-marketer should know about branding

By Kirk 3 Comments

Categories: brand essence, loyalty, roi, standards and strategy

The words “brand” and “branding” are thrown around in casual conversation so frequently now that I’m still surprised to find not every business person knows what they mean. (In fairness though, I don’t understand supply-chain logistics.)

Some business managers refer to their products as brands, probably a carryover from the early P&G days. Some still think their logo, package or trademark is the brand.

Some mistakenly believe they have total control of their customer’s brand experience. And many think branding is just another word for marketing.

Here’s a list of the basics for the non-marketers in your organization:

Your brand resides inside your customers’ minds.
It got there through their experiences with your product, service, or organization.
In one way or another, every person in your organization contributes to shaping your customers’ experiences with your brand — even if they don’t face the customer.
Likewise, every dollar spent by your organization contributes to shaping your customers’ experiences with your brand.
Your customers’ brand experiences occur at every touchpoint, no matter how small or seemingly inconsequential.
For these reasons, branding is not solely a marketing function. It’s an organizational function.
Maintaining consistency of brand experience is a challenge for most organizations. (No surprise.)
The ROI of branding is 1) trial and 2) loyalty.
Trial results from being intrigued by the promise of the brand experience. Loyalty results from having a series of consistent, singular and favorable brand experiences.
Branding generates results long-term, unlike promotion-based marketing which aims at the short-term.
In addition to consistency, the other hallmark of a brand is differentiation — giving the customer a reason to choose your brand rather than your competitor’s brand.
Consistent use of the brand’s properties (logo, colors, theme, packaging, advertising elements, etc.) is critical for building brand awareness and preference. They are the identifiers of the brand.
Your brand will not be strong unless the entire organization understands and embraces branding, starting at the top.

Okay, there’s more to it than that. But it’s a start. Do you have any basic points to add to the list?

Sep

CFOs vs. CMOs: where’s the ROI?

By Kirk 4 Comments

Categories: budgeting and roi

istock_000008321652xsmall Suppose that in 2008 you invested in a barrel of crude oil.

And why wouldn’t you? Every year from 2002 to 2008 the annual average price per barrel has gone up, from $23 to $91. As an investment, it’s a no-brainer.

Unfortunately, today your investment is worth $66 (date of post), down 27%. Obviously, a poor ROI.

What caused the drop? Supply and demand. OPEC. War in the Middle East. Hurricane Katrina. The recession. Staycations. In other words, variables outside of your control.

Investments in marketing are no different. Consider the retailer who places advertising to promote a weekend sale. He is at the mercy of an infinite number of variables, such as competitive sales, football games, and Mother Nature.

Marketing budgets are no more risky than financial investments, which is to say CFOs are right to question them. The accountability of marketing for producing measurable results has always been a sensitive topic.

Many CFOs attempt to hold marketing to the highest of ROI standards. Some perceive it as a soft cost, one that is inept at proving its own value. They view excuses, such as “Sales were hurt by the blizzard,” as, well, excuses.

CMOs, on the other hand, accept that by definition, the marketplace is chaotic. Question their strategies, however, and you hit raw nerve. Deep in their hearts, marketers are troubled by their own inability to guarantee results.

Both sides agree: Marketing is an inexact science. CFOs use this knowledge as a bludgeon. They expect every campaign to be “Where’s the beef?” CMOs avoid the conversation, knowing that you don’t hit a gusher without a lot of dry wells and expense.

Ideally, marketing investments should be reviewed like financial ones. Managers should consider customer trends, competitive activity, market influences, pricing strategies, and the organization’s ability to deliver, as well as recommended marketing messages and channels.

Smart investors are not gamblers. Instead, they make informed decisions, based on calculations of risk and opportunity.

Do your CMO and CFO work together to make wise marketing investments?

Apr

Now’s the time to buy market share … cheap

By Kirk 1 Comment

Categories: advertising, budgeting, mass media, retail, roi and strategy

price tag on white The news focuses on the negative — and there’s a lot of it. What is perhaps being missed is that we are living in the buyers’ market of our lifetimes.

In all likelihood, nothing will ever be this cheap again.

That dreamhouse is selling for 10-25% less than it would have a couple of years ago. Mortgage rates are at a record low.

Autos dealers are selling cars for less than invoice. Gasoline is relatively cheap.

With an abundance of airline, hotel and resort deals available, it’s a great year to travel inexpensively. Condé Nast calls it “The world on sale.”

And none other than financial guru Warren Buffett says now’s the time to buy undervalued stock.

Do you know what else is on sale? Your competitions’ market share.

You steal it by aggressively marketing now.

“This is not the time to cut advertising,” says John Quelch in The Financial Times of London, February 2008, and Harvard Business, September 2008. “It is well documented that brands that increase advertising during a recession, when competitors are cutting back, can improve market share and return on investment at lower cost than during good economic times.”

And because advertising revenues have declined sharply, ad rates have been cut to attract spending.

“Brands with deep pockets may be able to negotiate favourable advertising rates and lock them in for several years,” Quelch says.

For brands with long-term plans, now may be the best opportunity ever to catch competitors offguard and grow market share.