Nice feelings about brands - BD Feb 2001

What did your brand do for you today? If that question makes brands sound human it was supposed to. Brands are reflections of their mortal consumers and possess similar traits and fragile egos. When a famous cold drink is contaminated with either benzene or some form of poison, our trust in the brand lessens and we become wary of using it. If we learn that the running shoes we flog along our jogging route are made by Asian slave labour, our respect for the brand is diminished. These human responses find their way into sales decreases and adversely influence our previous willingness to pay a premium price for the brand that suited us so well. The brand owner loses turnover and also the one thing that distinguishes a brand from a product: its ability to earn incremental profits. It is in danger of becoming a nobody.

A study recently completed by Honours student, Jonathon Prangley in the Department of Business Economics at Wits and which replicates a famous Harvard Business School survey demonstrates the link between self and brand image. Prangley conducted research among senior scholars at a Johannesburg school. About 90 students were involved in the study which had them assessing their own self image according to a set of psychometric scales, and then rating three brands, VW motor cars, Diesel and Mr Price clothing, in similar terms. He was able to demonstrate, in this limited study, that brands are a reflection of self-image.

Brands start their lives as products with legally protected trademarks. Skilfully marketed they slowly develop what in brand valuation terminology is called a Brand Knowledge Structure. This is the network of awareness of the brand name and the attributes and benefits associated with that recall of the name that become entrenched in the memories of consumers, and which are then used to guide purchase decisions.

It takes many years and a quantum of investment in communications and promotion to build a successful Brand Knowledge Structure around a brand, but only a moment to destroy it. The carefully protected Brand Knowledge Structure is what makes leading brands so valuable. That is why the world’s top marketing companies like Unilever, Proctor & Gamble and Coca –Cola place so much emphasis on brand building and stewardship. It also explains why, when a branding calamity occurs – as was the case with Coke a few years ago - damage control can include replacing the chief executive. These are valuable assets with fragile personalities.

Only in recent years have methodologies been developed that can capture both the financial and consumer dimensions of brands in valuation models. These complex mathematically based approaches produce valuations that can be used for accounting purposes, the sale of brands and also as measures of marketing success or failure. They are powerful business tools because they not only measure the premium profits the brand is able to generate over and above a non branded version, but they also keep track of consumer feelings about the brand. The stronger the Brand Knowledge Structure, the better the profit generating future of the brand.

For this reason marketing companies are paying greater attention to the approaches used for valuing their brands. The days when any accountant or attorney could apply a quick, read from a book, method that used dated theories and hugely flawed guesswork (which was the case until quite recently), are gone. Today brand valuation is as complex a science as psychology – and often as controversial.

A brand is the product of a person’s feelings towards the brand multiplied by his or her willingness to pay a premium price for it and by his or her frequency of purchase. Normally the stronger the feelings the more they will pay and the more often they will buy. To use an approach to brand valuations that fails to capture this basic concept would, well, hurt the brand’s feelings.

ends