Brands are the most valuable business tool invented

by Nigel Hollis

In an open letter to CMOs, Tom Roach, Managing Partner at BBH, shares data-points designed to prove that a strong brand is a company’s most valuable asset, and asks that his letter be forwarded to the CEO. If you check out the letter you will find that four of the proof points come from work done by Kantar Millward Brown.

Roach’s letter poses this question,

“Have you got a CEO or CFO who just doesn’t seem to ‘get’ brand? Are they happy to allocate budget to performance activity but likely to run a mile before giving you what you need for brand-building?”

While I would note that in reality brand-building is everyone’s job, not just that of the CMO, it is true that if your CEO and CFO do not believe in that a strong brand adds value to the business then brand building is going to be relegated to the ‘nice to have’ bucket instead of ‘mission critical’.

Roach then shares a simple briefing document, “free of marketing bullshit”, explaining why it is worth investing in brand building,

“A strong brand is a business’s most valuable commercial asset. It increases the chances of customers choosing your product or service over your competitor’s, attracting more customers, at a lower cost per sale, who are happy to pay a little more, and will buy it a little more often. A strong brand will deliver more revenue, profit and growth, more efficiently, year after year, and so generate more shareholder value. It can help attract, motivate and retain your second most important asset: your people. And can work as a barrier to entry for future competitors, creating a legal ‘monopoly’.”

Nice. And the thirteen supporting data points corroborate these assertions.

One of the most important elements addressed in the letter is the importance of pricing power. Roach offers Kantar Millward Brown’s proof that people pay more for brands that are perceived to be meaningfully different. The work quoted is the original R&D validation of our Brand Premium metric that combined behavioral data on price paid with attitudinal data. Subsequently my colleague Josh Samuel, Global Head of Innovations, Kantar Millward Brown, has updated the validation with more studies which finds that the difference in price paid between strong equity and weak equity is actually over 20 percent.

Roach’s letter ends with a quote from Warren Buffet that suggests pricing power is the most important decision in evaluating a business. He suggests that if business can raise prices without losing sales you have a strong business (and a more profitable one since price increases drop straight to the bottom line). Consumer research can help quantify the opportunity and the risk involved in raising prices. Given the likely pay off you would think that more might at least explore the option…and if Roach’s letter resonates, maybe they will.

Why do you think so few CEOs appear to believe in the power of their brand? And what else would you say to try and convince them? Please share your thoughts.