Growing Your Brand AND Enterprise Value
A brand that has both good pulls in terms of good consumer demand (e.g., price positioning, the balance between perceived quality and price, brand strength) and push (e.g., operational factors, low advertising and promotional investments, and on-shelf sales) will be able to sell more expensively than a brand which does not focus on those factors. Growing that successful brand, however, is when problems often arise.
The brand can, in some instances, constitute an essential element of the company’s value. Financial evaluation is also necessary when the balance sheet shows the brand as an asset. A valuation may also be helpful in the context of consolidated accounts if a company is a subsidiary company of a group and falls within the scope of consolidation.
When a business is sold, the objective is to get “value” exceeding the company’s tangible assets, which include property, equipment, etc. To achieve this, building the company’s “goodwill” is essential. Goodwill, an intangible asset, broadly represents the value of customer/client loyalty. Intangible assets representing goodwill include the company’s people, skilled workforce, special company procedures, patents, and distribution agreements that give the company an advantage over its competition. Such intangible assets have value and contribute to growing company value further.
According to a study by Ocean Tomo, which represents the proportion of value represented by tangible versus intangible assets, “Intangible assets had gone from representing 13% of the value of the S&P 500 in 1975 to 87% of its value in 2015.” When updated in 2017, the report revised the 1975 number to 17% and the 2015 number to 84%.
Key Elements to Growing Brand Value
Four key elements determine brand value:
- Brand awareness: Simply put, brand awareness refers to the differentiating and unique quality of a particular product or service. Two elements that contribute to creating brand awareness are brand recall and brand recognition. Customer behavior, advertising, and management of the brand are key factors that cultivate brand awareness. Brand awareness also indicates how the brand performs in a competitive market.
- Brand attributes: This refers to the features that highlight the brand’s unique aspects. Brand attribution surmises that people rely upon their past experiences with your brand (product or service), and these past experiences are known to influence future buying decisions. In simpler terms, brand attribute refers to the characteristics of a brand.
- Perception of quality: This is your customers’ opinions of your services and your ability to fulfill their expectations. Even though it may have little or no relation with the actual quality of service or product, it can be determined from market image and the type of engagement it commands from customers.
- Brand loyalty: Brand loyalty is an amalgamation of brand awareness, brand attributes, the perception of quality, and customers’ or clients’ previous experience. Note that loyalty to a brand is affected by an individual’s personal preferences.
A strong brand can be an essential element of growing enterprise value. To build a valuable brand, focus on increasing positive brand awareness.
How to Increase Brand Awareness
The following four variables have a significant impact on your brand:
Take Care of your Brand Image
Making a good impression is important for your business. Customers create an impression about your brand, product, or service based on several factors, like your company website, your stores’ look, feel, and even the way you design your business cards. However, customers’ criteria for judgment may vary for different brands, as it depends on the product’s or brand’s characteristics and the advertisements and reputation of the brand. It might look easy, but it takes a lot to make a brand recognizable to consumers.
Brand image involves more than the company logo or slogan; it refers to the visual elements (e.g., brand mark, color palette, typography, graphic elements, imagery, etc.) and brand associations (e.g., speed, trustworthiness, and quality). To sustain a consistent brand image among customers, it is vital to maintain a consistent and constant brand image. Consistent, stable brand image directly affects the consumer’s relationship with the brand. The more often a business or company delivers on its brand promise, the more easily customers recall it and what it represents to them. Brand image can be qualified as positive, negative, or neutral.
For example, Kraft Heinz and Miller Coors both valued their brands at more than half of each firm’s asset value and adjusted their financial reporting to reflect that value on their balance sheets.
Measure your Notoriety
One of the strongest drivers of consumer buying is their ability to recall a product. Increasing brand awareness is essential to understanding what works in the brand’s favor and what doesn’t. Do customers and clients know your brand and your company?
It is a difficult notion to measure but important to do so. Four ways to measure brand awareness include surveys, website traffic, analysis of search volume data, social media feedback.
In 2013, Coca-Cola spent $3.3billion worldwide on its advertising and marketing campaigns. The brand is exceptionally well known and has become a generic term representing a collective class of products. It’s no wonder that customers often ask for a Coke even when they want a different brand of cola.
Communicate the Quality of Your Products or Services
Frequent, transparent communication helps cultivate long-lasting relationships. This also applies to products and services: the brands with the most faithful clients are the ones that make an effort to communicate with their loyal patrons.
Authenticity drives sales. Once the customers are convinced of the quality of their purchase, they automatically gravitate towards the superior product or service. With so many options available in the market, the superior quality of your offering will help you consistently deliver a customer experience that exceeds expectations.
Depending on your business niche, several solutions exist to help distinguish your product superior to others: labels, certifications, diplomas, processes (contact, estimate, organization, etc.), and expertise.
Check Customer Satisfaction
Satisfaction results from comparing the customer’s expectations and his experience upon service completion or product consumption. However, measuring customer satisfaction is not easy. According to a Helpscout study, 80 percent of companies say they deliver “superior” customer service, but only 8 percent agree.
For example, any SaaS company must retain loyal customers because acquiring new customers is more time-consuming and costly than building an existing client relationship.
When customers are happy, they remain loyal. With multiple options available, dissatisfied customers have no problems taking their business elsewhere. Customer satisfaction is also an indicator of growth and measures against client churn. Customer satisfaction is also an important element in measuring perceived value. Do not hesitate to send a satisfaction survey at the end of service, then two or three months later if necessary.
Growing your Brand Value: Summing Up
Based on a survey of 300 companies, brand value represents 17 percent of enterprise value, and your brand represents about 20 percent of your company’s market value. This is because brand perception influences customer preferences. Their attraction to a brand strongly influences overall sales and thus strongly influences the enterprise value.
As a business owner, you know your business. To sell it successfully, you need to understand the numbers, too. A professional business valuation ensures that you get an accurate assessment of your company’s current worth. Since 2003, Quantive has performed over 3,000 business valuations. Contact our valuation specialists for a no-cost consultation today.
