The value of brands explained by this extract based on Open University Business School course material
"In future the brand will be the most important asset of the firm."
This prediction was made in 1992 by the French brand researcher Jean Noel Kapferer.
We can trace the origins of brands as identifying devices to Greek and Roman times, when shopkeepers displayed pictures or symbols outside their shops to enable illiterate people to recognize the products they sold. This early use of 'brands' enabled producers and traders to differentiate and label their services and products through unique names and distinctive logos.
"If this business were to split up, I would be glad to take the brands, trademarks and goodwill and you could have all the bricks and mortar - and I would fare better than you."
- John Stuart, former Chairman of Quaker Oats Ltd
Brands set out values for an organisation. Brands are a major competitive asset for organisations: those with strong brands can have market values that exceed their book values by far. This was famously demonstrated by Nestlé's purchase of Rowntree for £2.55 billion in 1988 (equivalent to 22.9 times Rowntree's earnings). Even though Rowntree's tangible net assets were worth only about £300 million, the potential earnings from its brands such as KitKat, Polo and After Eight Mints made the company far more valuable to Nestlé in building its strategic position as a leading global player in the chocolate and confectionery market.
Successful brands are those that represent valuable marketing assets through the coherent blending of marketing resources. Through well conceived and effectively managed brands, organisations can build favourable reputations which enhance the confidence of buyers, clients and users. To move from a commodity to a brand, the core offering needs to be augmented with added values. These are the extra functional or emotional benefits that differentiate the organisation's brand from the core service or commodity and other competitors' brands.
An example of functional added value might be in the washing machine market, where brands compete mainly on a functional basis, the inclusion of a self-diagnosing fault chip could give one brand an added value. If the machine develops a fault, it displays a number on the panel. When the consumer rings the helpline and states the fault number, not only can an engineer be promptly scheduled but also the appropriate replacement part ordered. The added value does not just come from the visible part of the brand (fault number display) but from the invisible systems that ensure good internal co-ordination and the prompt arrival of a well trained engineer with the correct part.
An example of emotional added value might be in the credit card market where competing brands generally offer the same functional benefits of enabling cardholders, wherever they are, to buy goods and services without having to carry cash. Yet American Express worked with its advertising agency to develop a unique personality for its brands, portraying its user as a global traveller who is sophisticated, discerning, reliable, amenable and dependable. The brand's ability to make this personality statement about its user is seen by many as added value.
It is more difficult to copy a brand's emotional added values. First Direct has a unique culture because it recruits staff who believe in the importance of customer service and gives them special training. This culture gives First Direct a sustainable, emotionally based, added value relating to the way its staff deal with customers. First Direct's Chief Executive, Alan Hughes, attributed its steady increase in customers and high levels of customer satisfaction to 'totally integrated customer services', enabling staff to see a total picture of customers. First Direct's call centres also have very little scripting. Staff are encouraged to treat customers as their friends and respond to their mood.
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Content last updated: 25/10/2005
About this article
This article is based on extracts taken from Open University Business School courses Marketing in a Complex World (B825) and Managing Knowledge (B823).
