SOONER OR LATER, all employees in leading corporations will in some way be made responsible for the brand. If you think that's an exaggeration, just think about how the importance of brands has shifted in the last decade. In fact, top management today is looking at brands as key assets in their organizations, requiring broader management tools than those provided in the past solely by the marketing department. As early as 1994, the importance of "part-time marketers" in service industries was discussed. While managing brand equity is more a necessity than a luxury in today's hyper-competitive world, the philosophy behind this thinking needs to be more widely understood: Implications of brand equity management can sometimes be quite elusive. Yet more firms today see the need to financially evaluate their brands on an ongoing basis. They need to recognize how mismanagement of a brand through strategically misaligned decisions can affect their company's bottom line.
Generally, managers feel that they have a good grasp of how much money should be spent on marketing. However, that knowledge is based on either benchmarking last year's spending vs. sales, or looking at what the competition is doing. Increasingly, investment decisions will have to be made based on data and information that affect the long-term growth of the brand, and as a result, its impact on future cash flows.
The so-called "commodization" of brands can only be tackled by a deeper understanding of how consumers perceive the value of a specific brand or product. Functional product benefits, once thought to be critical for differentiation, have now become obsolete with technology, making it easier for competitors to copy. The market today requires brands to broaden their differentiation through added benefits that address both the sales process and relationship-building components of the consumer's value perception.
Coca-Cola knows that one of the surest ways to guarantee future income from customers is by having a successful brand. In addition, maintaining a price premium guarantees a greater return to shareholders. Coke generates over 50% of its profit from its brand, and if all of its manufacturing and distribution plants burned down tomorrow, Coke would still be able to get financing for its operations based on the value of its greatest intangible asset. Continuous monitoring of companywide brand-related decisions is critical if a company is to manage short- and long-term effects on their brands. Once companies begin to monitor the equity components and worth of their brand(s), it makes it easier for them to decide where an investment needs to be made to show positive results. In general, results from such key measures as awareness, penetration, price elasticity, loyalty and several others are used to better understand trends and brand equity growth or erosion. The commitment to this process ensures that management recognizes the importance of brands to the business and marketers can make more informed strategic decisions rather than intuitively taking shots in the dark.
Once the marketing and finance departments are brought closer together, a greater interest is generated by the organization in terms of how and why money is being allocated to certain marketing activities. The old ways of allocating budgets, ranging from, "What did we spend last year?" to "What is our competition spending?" are changing to more effectiveness based measures such as "What return on the particular communications investment will we achieve with this particular target?" and "How are we taking advantage of this investment in terms of adding value to our brand?"
Since most organizations today are creating new criteria for measuring success such as customer retention and profit per customer/customer group, marketing managers are required to tie spending and media choices to the needs of narrowly defined segments and microsegments. By becoming more familiar with the psychographics that define a particular segment, marketers are also able to determine how most relevantly to target those segments or customers that generate the greatest value.
Gone are the days when marketers could single-handedly differentiate brands or products through functional benefits. Ranging from Saturn to Starbucks, brands have proved that to consumers, premium and value-added means going beyond having a "reliable" or "great-tasting product," requiring implementation of extended benefits such as the sales and relationship processes.