Brand improves the curb appeal of the business. Think for a moment about the curb appeal of a house: you begin judging a place from the moment you first see it. Is it well cared for? Do the owners know what they are doing? Am I more likely than not to find problems inside?
When it comes to business, brand awareness makes a difference. Consider well-known brands and their positive associations with consumers. Because of that, some companies get more money for their products than their competition. Therefore, a brand that is useful in driving sales/revenues adds value to a company. A brand that does not help drive revenue is not valuable.
Every seller wants the highest price for their business, so brand impacts what a buyer is willing to pay. When your brand doesn’t fully convey your company’s values, beliefs, or unique selling proposition, it needs a refresh.
Taking Care of Your Brand Perception
Your positioning (i.e., the image of your company) in the minds of your customers plays a vital role in the perceived value of your products and services and is based on these two criteria:
- Objective: quality, robustness, reliability, technical performance, accessibility, ergonomics, comfort
- Subjective: traditional, experienced, modern, young, good for health, etc.
To quantify a brand’s value, you must:
- Compare it to the value of other similar brands.
- Develop an income approach model, perhaps using a “relief of royalty” analysis.
- Determine the cost to develop the brand.
How to Act on the Brand Image
A strong brand uses the following tools to convey its worth:
- Company name
- Logo design
- Uniform communication measures
- Packaging or the product
- Corporate philosophy.
Building a brand image involves more than these apparent components. A brand stands for an attitude, tells a story, differentiates, conveys authentic values, and is the linchpin of the corporate culture. The brand defines a point of view, gives confidence, and arouses desire.
In short: A brand represents a promise made to customers that must be fulfilled.
Ideally, a brand has an extremely high recognition value. The external appearance is automatically linked to the logo, the values, and the company. To communicate authentically, all touchpoints must appear uniform.
The World of the Brand
A brand creates its world. The best-known example is Apple. All its products are designed so that you immediately associate them with the latest developments from Apple. You don’t even have to see the logo to know for sure that this new smartphone is an iPhone. But how did Apple achieve that? Or how does any brand achieve what Apple did? Do you know why it is so?
Founded in 1976 by two college dropouts, Apple is America’s first $700 billion company. Their inspirational branding strategy is driven by emotion and supported by their forward-thinking, creative vision statement: “Think different.” All their product launches are hyped by the secrecy that surrounds their new launches.
By positioning themselves as doers of something new and different, they have created an air of exclusivity about their products. Their customers seldom think about features; they simply want to own one because of the brand’s power and value.
Apple’s fine attention to detail in the design and aesthetics of its products has placed it as a luxury brand, a symbol of status that is driven by emotion.
A strong brand drives:
- Customer preference: Numerous new products are based on experience with other products. However, it is wrong to want to copy an already existing, successful brand simply. The already established brand will prevail because customers prefer the well-known brand even if your clone is cheaper. It is therefore essential to create a brand that differs from the competition. Make it clear from the start what your brand stands for. Spread your advertising message everywhere–on social networks, on your company website, in advertisements. Position yourself! Your brand will only get customers to prefer it if the positioning and target group are clearly defined and not constantly changing. No brand speaks to everyone. Nor do they have to. As long as the target group reliably knows what to expect, a brand will be successful.
- Purchase frequency: On the market, a brand becomes the central decision-making factor for consumer behavior. The more positive their contact with a brand, the greater the likelihood that customers will repeatedly return to it. The idea and opinion about quality and trust in brands have built up over the decades.
- Customer loyalty: For customers to remain loyal to a brand, reliability is critical. Customers of big brands are confident that they are getting exactly what they expect. When given a choice, consumers are less likely to switch. Strong brands offer their customers a promise which makes consumers more loyal to them.
- Customer advocacy: Word of mouth is constructive in building solid brands. Products from good brands urge consumers to go out of their way to recommend themselves and advocate on the brand’s behalf.
Branding and leadership go far beyond the selection of appropriate designs. A strong brand is created by anchoring your company and your products with positive experiences and associations in the customer’s memory over the long term. To position a brand profitably and sustainably in the market, you need staying power. Building a brand is a long and hard road for both the entrepreneur and everyone else involved in the company. It is challenging to convince customers that your brand stands for high quality, upholds values, and exhibits a personality in kind. Once your business, as a brand, overcomes these challenges, your enterprise value can soar.
How a Strong Brand Influences Enterprise Value
Helping Customers Make Choices
Customers put their trust in a brand. The reason for this is apparent. As products on the market become more and more similar, purchasing decisions become more and more difficult for the customer. A brand provides orientation. It emphasizes the uniqueness of a product and draws boundaries separating it from rivals. It gives the target group the feeling that they have made the right decision for the brand.
Tesla’s success is making life difficult for even the most upscale automakers. The valuation of the cult electric car brand exceeds BMW’s on the stock market. But how can that be? The traditional German brand and the American cult brand play in two very different leagues.
Stockbrokers appreciate the Tesla brand. What is crucial is that investors on the stock market see the Tesla brand as a better bet on the future. Tesla has quickly developed into a hip and cool cult brand, bought by technology freaks who often look like sect disciples. Tesla’s strong image and brand strength speak in favor of Tesla: the brand is emotionally charged. Their e-cars polarize and offer at least what feels like more technology than other models.
So, based on all these observations, I have deduced three main factors that help a strong brand influence its enterprise value.
- Repeatable or reoccurring sales
- Above-market earnings
- Future growth potential.
Repeatable sales. High seasonality means irregular sales income. To not negatively influence company value, the entrepreneur should consider how to counteract seasonal sales income and turn the sales pattern into a repeatable one. A good brand image removes sales irregularity which has a direct benefit on the enterprise value.
Above-market earnings. Brand sustainably increases the company’s value in many ways: for example, helping sales sell more successfully. A distinct brand promise that goes beyond product benefits the enterprise. Otherwise, any business can be compared. Customer preference and price premiums lead to better than industry earnings which ultimately reflect on your balance sheets.
Future growth potential. Advocacy is the backbone of future revenue and earnings growth for any business. Apple, again, serves as the best example here: Apple turns its product into an experience. With their brand value, they put usability and intuitive use before pure computing power. It is not the 16 GB of memory that makes using a computer a positive experience. Their focus is on the interaction between man and machine, not the fight for the performance sheets. Android phones have more features, are more versatile, and allow the user to make more decisions. But iOS devices are safer, easier to use, and usually have a higher brand value than the competition, thanks to the advocacy it receives from its customers.
More than Just a Logo and Advertising
Despite these clear examples, only a few companies focus on developing their brands. Most believe that focusing on the logo, tagline, and advertising is enough; but a brand is more than just advertising. A brand can do a lot more than advertise the company or a product. A brand is a company’s attitude, self-image, and identity–and that’s worth real money in the end.