A Business Case for Brand Management: Putting a Value on an Intangible Asset - Inspired Studio

A Business Case for Brand Management: Putting a Value on an Intangible Asset

Written by guest contributor: David P. Deitzer, Fixed Focus Consulting

 

David P. Deitzer, Fixed Focus Consulting
David P. Deitzer, Fixed Focus Consulting

As a former business owner of a Strategic Accounting Firm I’ve had the pleasure of seeing what happens behind the scenes of the most successful organizations in many different industries. And the most often overlooked asset by organizations who crave success is the ability to create value from something intangible: a brand.

Now, as a business consultant and founder of Fixed Focus Consulting, I’m anxious to share practical tools to aid in business profitability. And I’m making a case for brand management.

It is no secret that marketing professionals and finance professionals speak different languages most of the time. So, when it comes to building a brand, branding a product or brand management, there is often a struggle within the organization to understand why. The struggle is a result of many misunderstandings which prevent the creation of a compelling business case for devoting resources to building and maintaining a brand. Ultimately, avoiding to do so will harm the overall organization. I believe the proper way to look at a brand is as a business asset.

For instance, when you have a building worth $1.0 MUSD, you will have to spend a significant amount of resources to maintain the ability to utilize that building to the maximum benefit of your organization. Resources for maintenance, management, insurance and others. But what if instead of your building, it was your brand that was worth $1.0 MUSD? You would never see that on the balance sheet of your organization—it would be seen as a conceptual unknown when allocating the organization’s resources. In this example, a very valuable asset is given improper consideration when it should be maintained as an important asset.

Recently, financial guidance has begun to value a brand and record that value on a balance sheet for management purposes. This is a much more beneficial way of viewing a brand so the businessperson can use the data to allocate resources in the best way possible, creating financial benefits for the organization as a whole. While there are many methods to value a brand, they are not always relevant to small businesses. 

Here is a simple example: As of the writing of this article, to purchase Tylenol, the brand-name version of acetaminophen from Johnson and Johnson costs $9.47 per bottle. The same quantity of generic acetaminophen tablets in a “no-name” bottle is $4.27. That is a $5.20 difference, for essentially the same product. Therefore, if there are 10 million bottles of Tylenol sold in one year, the brand delivers $50.2 MUSD of additional revenue… per year!

That may seem extreme, but the same dynamic applies to a sole proprietor. Let’s say you charge $100 per hour of your time, and you bill 1,500 hours per year. If your brand gives you the ability to bill an additional $25 more per hour, then you will receive $37,500 more revenue within one year. If you continue that for the next 10 years, that is worth approximately $230,000 today. So the business case is, how much should you be willing to spend to build and maintain an asset worth $230,000?

And, what if you didn’t manage your brand? How many more struggles with time and effort would be necessary to reach the same margin? If you ever were able to attain your goal at all.

This brings us to the biggest question of all: “What leads to a brand development?” 

Many businesspeople think it is marketing and advertising that lead to strong brands. This is a bit short sighted. The way to think about creating a strong brand is to realize that it arises from the congruity of three main areas of your business: people, performance, and perception. 

  • People refers to the treatment of your employees by your organization’s leadership—the internal human resource. 
  • Performance is the overall value that your operations deliver to your customer. 
  • Perception is the way others outside your organization view your organization. 

All three P’s must be aligned to maximize your brand value, as shown in the Venn diagram below:

As you can see, the more alignment of these key areas of your business, the stronger the brand!

The key to aligning the three P’s of an organization is to know the organization. “Know thyself” is an ancient Greek saying that is central to life. In this case, it is the force that binds an organization together, whereby all messages from all areas are consistent. Knowing your organization aligns:

  • People: Hire and appraise based upon the characteristics and competencies that match your organization’s products and services, why you exist and the values you uphold.
  • Performance: Operate and make decisions based on what solutions you provide, why you exist, and the values you uphold.
  • Perception: What you are and why you exist should be the cornerstone of your organization’s message.

In this way, the force of knowing yourself, knowing the Perception, Performance, and People of your organization, will provide the maximum level of brand strength—every activity you undertake, every solution you provide, every marketing decision you make, will have the added benefit that a strong brand brings.

 


 

A special thanks to Dave for being a friend, mentor and consultant for me since I started Inspired Studio in 2012. His methods are a perfect mix of practical, methodical, individualized, and supportive… all with a healthy dose of humor! Being a creative, his perspective from a left-brain thinker has been a tremendous asset in growing my business, and ultimately, my brand. Thank you for bringing your wisdom to Inspired’s audience.

🖤 Maria Conigliaro Traino
President/Creative Director/Lead Inspirer