If marketing chiefs can nail the value their brand contributes to company earnings, then the entire organization will benefit. This is where the concept of revenue premium – a currency based on sales data which shows brand teams how much more customers are willing to pay for their product versus a similar option – comes into play.
As well as offering the marketing department a revealing glimpse into just how much of their overall revenue comes from the strength of their trademark, measuring brand in this way allows sales to plan with a long-term lens and gives the executive team access to insights that can inform future investment.
Used in conjunction with consumer perception data, revenue premium can show how and why brands are moving in the market. It also enables chief marketing officers (CMOs) to see how competitor activity compares to their own. For instance, a dip in revenue premium may be indicative that a rival has increased their sales and is impacting another company’s share. On the other hand, an increase can signal improved brand reputation.
To truly benefit from this metric, however, decision-makers must first set actionable goals. Do they want to catch consumer trends early and tailor promotions accordingly, adjust the terms of their warranty in line with competitors, use these insights to inform entry into new markets or something else entirely? Success will look different for every business.
Why is it crucial for businesses to understand the value of their brand?
Cunningham: Understanding the power of brand offers marketers a new level of oversight into how people really view a company and the choices they make. It also allows chief marketing officers (CMOs) to get to grips with what consumers buy, what they repeat buy and how loyal they are. Brand leaders armed with these insights can reframe their strategy based on the strengths and weaknesses of their brand and ensure a clear oversight of how their competitors are performing.
If CMOs can deliver tangible insights on how their brand is positioned and what this achieves for them in terms of business performance, then they can start to involve other parts of the company in living and breathing that through choices made by the wider business.
From an exec perspective, having tangible insights into brand value helps leadership teams spot opportunities for investment, whether it’s a particular country or region, or a new category or industry. It also gives an indication of where profitable growth opportunities sit.
For sales, it shows how the promotions you run and the pricing you set impact your brand in a positive way or whether they’re doing more long-term damage than good.
Moy: Businesses that understand their brand will be armed with a third currency on top of sales and revenue.
Having a metric in place to assess the contribution brand delivers to profit allows marketers to measure the intangible strength and leverage their brand brings on the upside and on the downside.
It means the marketing department can identify strong brands in their portfolio which they can exploit and underperformers that might need work and support. It brings a new dimension for sales teams too.
So brand value is important; what are some of the painpoints for businesses in measuring it?
Cunningham: CMOs across industries tell us that while they’re all too aware of the impact their brand has on the business, they struggle to measure it in a commercial way. A lack of tangible key performance indicators means that, in a tough climate, it’s getting even harder for them to defend their brand investments.
This is weakening the importance of brand marketing, because CMOs can’t measure the importance of brand marketing.
Zooming in on the tech and durables industry, where the same brand marque is usually on every product sold, there are some more pronounced challenges. The Apples and Googles of the world don’t have the option to present different articulations of what they stand for across products, which requires tighter control over positioning across markets.
More than ever then, they need insights and data to give them a strong view about how to position their brand and the strategies they set, which can be adapted across regions.
Moy: In the fast-moving consumer goods space, because marketers are contending with a quicker purchase cycle, they must consider the “softer” elements of branding, which can make it tricky to assess the features that will differentiate them against competitors.
For bigger-ticket industries like automotive, CMOs need more granular data about the structure of the market and the buying mechanisms, so they can map out what makes them unique in the eyes of the consumer.
Elsewhere, COVID-19 has ushered more brands into the direct-to-consumer space and marketers are looking to understand more about their end-consumers to make the whole experience from the research through to after sales more seamless.
All this requires a solid understanding of how a brand name is contributing to the bottom line.
How can companies best quantify brand value?
Cunningham: Whatever their status, all brands will benefit from precise insights rooted in sales reality. At GfK, we assess this in two ways, and the first is through up-to-date point-of-sales data based on millions of transactions.
Calculating the revenue premium driven by a brand is the best way to measure how it’s driving success for a business. Put simply, this metric shows what consumers are willing to pay for one product over and above another similar choice.
Based on this, we can show a brand’s position in the market, against the volume and the premium it is achieving. This position is variable based on a number of factors and our insights show where a brand can expect to sit in the market versus competitors, as well as forecasting how a brand’s status might change over time.
Clients can then tailor their strategies to align with the status they’re seeking out for their brand. For some, this might be reaching the heights of a power brand, a status that achieves the winning combination of high volume and strong premium. For others, the ambition might be to cement the marque as a “mainstream brand”, which offers high volumes on low margins.
Moy: Regardless of category, marketers must measure consumer brand strength through the choices people make. In tandem with sales data, the second thing brands should be doing is using scenario-style trade-off buying exercises to derive how much consumers will pay for a brand versus its competitors.
In addition to traditional consumer panels, I’d advise marketers to use more complex modeling about the selections their end-buyers make. All this will ensure brands can identify the actions they need to take to drive long-term market success.