Harnessing The Intangible: Creating Brand Value Through Consumer Perception & Business Thinking

"If this brand were split up, I would give you the land and brick and mortars, and I would take the brands and trademarks, and I would fare better than you".
- John Stuart, chairman of Quaker, in 1900

Increasingly, more and more CEOs are placing more emphasis on their companies’ brands and are discussing their commitment to their brands more openly. So much so that they have even started communicating about the value of their brands over time in their annual communications with their investors as well. Brand assets today account for almost one-third of the value of Fortune 500 Companies. But, is there a rationale for brand valuation? How do you measure the value of something intangible? How do you factor in consumers’ perception of a brand and how does that impact the value generated by the brand?

While earlier, tangible assets like Manufacturing Assets, Land and Buildings, Financial Assets, etc. were the main source of business value, intangible assets like Brands, Technology, Patents, People, etc., albeit recognized, were hardly explicitly valued. However, soon after, the difference between a company’s book value versus their market valuation started attracting attention. Brands like Rowntree (developers of Kit Kat) and Pillsbury Co. were bought for 2.55 Billion Euro (3.3 Billion Dollars) and 5.7 Billion Dollars each and these transactions were recorded as “goodwill” in the books. Mind Blowing, right? How can that be?

Why does the Brand of a Company hold so much importance? Why are they the most important asset in many businesses? Because of the economic impact that they have. They have the power to influence the choices of consumers, employees, investors and even government authorities. Sounds simple, right? Not really.

Strategizing for brands is not easy. While a lot of key brand strategy decisions rely on qualitative analysis and intuition, managers still look for a business case that goes further. They analyze the impact of the brand across various scenarios like Customer Experiences, Customer Journeys, After Sales Services, Product Experiences, Customer Lifecycle, etc. to understand the overall financial impact on business over time. While your other assets might depreciate, brand is the only asset that doesn’t. In fact, it has the potential to appreciate over time and provide sustainable competitive advantage. Thus in the bigger picture, your brand argument can drive the business case.

But how do consumers impact brand decisions?

With the changing dynamics of business comes another factor of changing consumer behavior and habits. Consumers today appreciate brands that are more transparent and ethical. Initiatives like the “Open Network” by Airtel or “Nikebiz” by Nike are proof that customers value brands that are transparent and honest in their communications. The more open they are, the more credible and virtuous they seem to the consumers, ultimately enhancing consumer satisfaction and raising their brand value.

Consumers also appreciate good storytelling by brands. Storytelling can play a huge role in brand building. By designing compelling narratives that resonate with consumers' aspirations, values, and emotions, businesses can imbue their brands with meaning and relevance. Stories have a profound impact on human cognition thus allowing brands to design memorable experiences and forge deeper connection with their audiences. Additionally, by being more forthright and genuine in their communications and storytelling, brands can foster genuine connections with consumers, thereby enhancing brand loyalty and advocacy.

Studies by leading institutes and agencies confer that brands account for more than one-third of shareholder value and that companies with strong brands outperform the market.

So, how do you calculate this value and, how do you account for consumer perception and feeling?

There are various methods that brand managers and strategists can employ to measure Brand Value. One such method takes customer attitude into consideration and attempts to quantify customer preferences of brand-related attributes. It is called the Brand Asset Valuation model developed by Young & Rubicam, an American marketing and advertising agency. It includes factors such as brand awareness, advertising (share of voice), market penetration, level of distribution, etc. that indicate brand strength. This method interprets and measures consumer’s perceptions which ultimately affect their purchase behavior. By referencing a wide range of perceptive measures such as level of awareness, knowledge, familiarity, relevance, etc. they use statistical modeling to calculate an overall brand equity score. This model has its own limitations though. For example, it does not account for factors like R&D, design & brand thus not establishing any correlation between specific marketing KPIs and the financial performance of the brand. Hence you will not be able to measure the performance of your marketing efforts. To put simply, the scores might indicate that a brand is performing well in the market but it might still not be creating any real financial or shareholder value.

Looking at the broader picture though, we can conclude that successful brands are not merely symbols or identifiers but rather powerful stimuli that evoke emotions, memories, and associations in consumers' minds. Brands can ease the decision-making processes, enabling consumers to navigate the plethora of choices in the marketplace. By establishing strong brand identities and associations, businesses can foster trust, loyalty, and preference among consumers, thereby driving sales and market share.

Some of the best practices that brands can follow to create value via consumer perception and emotional connect are-

By understanding the psychological impact of human emotions and perception on consumer behavior, brands can align their branding efforts accordingly and cultivate strong relations with consumers. This will also help them create a differentiation in the market and ultimately generate more business growth.