I often like to ask my clients this question because it reveals their belief about what a brand can – and cannot – do for their business.
I am always surprised when they choose a strong brand over a strong business model. The evidence from my research (see particularly my article on Value-based Brand Management and Measurement) is that a strong brand magnifies the value of a strong business model, but does little to increase the value of an unprofitable business. Based on a sample of 140 companies over a 10 year period, we found that brand strength increased the value of low profitability companies by 20% versus their more weakly branded peers, but increased the value of high profitability companies by over 50% versus their more weakly branded peers.
The implication of this is that we need to think of brands primarily as a means to magnify the value of already successful companies, not as a means to redeem poorly-performing companies. A brand’s value is largely determined by the quality of the underlying business.
As an aside, that is why I find the issue of brand valuation so misleading – it encourages you to think of the brand as a separate asset rather than as an integral part of your “go to market” strategy.
