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The importance of brands

Updated Wednesday, 26th October 2005

The value of brands explained by this extract based on Open University Business School course material.

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"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.

Sign suggesting you place your brand there Creative commons image Icon ONT Design under CC-BY-NC-SA licence under Creative-Commons license

Identifying brand values
There are several ways for organisations to 'surface' – or make explicit – their brand values.

For example, working with a facilitator, a small group of employees is brought together and asked to consider a series of questions such as:

  • What are the values of your brand?
  • What core values do you personally bring to work? (That is, the values are so central to you as a person that you would hold them regardless of being rewarded.)

This procedure can be used to produce insight about brand values. To obtain additional insight, another workshop session could be held. A facilitator might explore the visible manifestations (photos, brochures, packaging and so on) of the brand and formulate hypotheses about what core values are common across them. In the workshop, examples of such material could be presented and the group encouraged to talk about their assumptions of their brand's values from examination of the materials.

Another part of this workshop might relate to 'critical events' for the brand. The participants could be asked to think back about the history of their brand and to identify any critical events and actions taken, to stimulate conclusions on what inferences could be drawn about their brand's values.

The challenge would then become one of identifying which are the few core values.

Core versus peripheral values
The procedures outlined above will produce numerous values. Managers need to be clear about which are their core values, that is, those that will always be a central characteristic of their brand regardless of the external or competitive environment.

An example of a brand being true to its core value but allowing its peripheral values to change is the American retailer Wal-Mart. Its core value of exceeding customer expectations has been continually emphasised by each generation of management, yet one of its original peripheral values - welcoming customers - has been relaxed as customers' expectations have changed, so customer greeters are no longer always used.

To identify which of their values are core values, James Collins and Jerry Porras (authors of Successful Habits of Visionary Companies) encourage managers to ask the following questions:

  • Would the team want to be true to these values for the next hundred years, regardless of environmental change?
  • Does this value provide a clear guide for behaviour, communication and continuing development?
  • Is this value credible and consistently achievable?
  • Does this value set your brand apart from competitors?

In addition, we would add the questions:

  • Is this value based on some logic?
  • Is this value understandable and able to inspire staff?

Strategic use of brands
Identifying core brand values is an essential strategic activity for any organisation. The brand acts not only as the basis for setting internal objectives, but also as a guide to internal behaviour, enabling staff almost to sense what they should (and should not) do in order to contribute to the brand's success. For this reason, senior managers use their organisation's brand to stand for a clear set of values, helping staff appreciate desired types of behaviour. This is particularly evident in the services sector (for example The Hilton Hotel) and the not-for-profit sector (such as the Red Cross).

One of the contributing factors to a brand's poor performance is a lack of consistency in the staff's perceptions of its values. It is very important that there is an internal communication programme before any external communication. Furthermore, it is wise to communicate any brand changes to all staff, regardless of whether or not they have direct contact with clients or customers. All staff act as ambassadors for the organisation's brand and it is important that they all present similar and consistent messages about the brand.

Many experienced organisational leaders believe that brand is the most important part of an organisation's assets, and need to be cherished and nourished to ensure organisational success.

"We believe that the most important assets of United Biscuits are its brands. Buildings age and become dilapidated. Machines wear out. Cars rust. People die. But what lives on are the brands."
- Managing Director, United Biscuits

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).





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