Brand and Shareholder Value in the Context of the Marketing Value Chain: Part 1

There's a huge amount of literature of varying quality available on what a brand is, where it fits in, and how it works for you or your business. It can be confusing and indeed tiresome to go through even a small fraction of these. Having presented on brand and the marketing value chain to global academic and business audiences over the years, here is my blog on the position of 'brand' in the end-to-end marketing plan.

Brand has only one objective - to position itself within the mind of your target audience, the higher the better. If your brand is 'top-of-mind' in your target audience, in other words, that your customer thinks of your brand when he requires the products or services connected to that brand, then you've pretty much got it made as far as branding is concerned. The 'measure' of how well you have positioned yourself in the mind of your customer is known as 'Brand Equity'

In the end-to-end world of marketing though, Brand Equity is not enough. It's positioned at the start of the value chain (and indeed overarches it), but somehow this needs to be converted into cash in order for your brand to be meaningful. So far, you simply have a promise, but no delivery on that promise. These are just some of the questions you need to answer when delivering on the brand promise is considered:

• Can you accurately identify your target market? The more vague or general the definition, the tougher it will be to support and grow the brand
• Do you actually have a product that reflects your brand promise? If you don't, your brand is worthless
• Do you have a channel to get that product to your target market? If your channel does not reach your target market, your brand is worthless
• Have you priced the product appropriately? Pricing matters, and depends on the market, your product, and the alignment between your operations strategy and the market - low cost (volume) or premium (niche)
• Have you got a support service in place to support your customers on acquisition of the product? After sales service is probably one of the most under-rated components of building a sustainable business
• Do your staff live the brand? If your staff present a different message to that which your brand is conveying, note that your customers will pick up the dissonance and probably end up NOT buying from you

The above is an element of the process of generating the sale, which converts some of the potential held in Brand Equity, to be converted into cash.

Now that you have a customer, the next consideration is how to resell to that customer. The 'measure' of the resell potential of a customer over time is known as 'Customer Lifetime Value', and the sum of all the Customer  Lifetime Value of all your customers is known as 'Customer Equity'. Your next job is to continue building on your relationship with your customer to leverage your Customer Equity.

So far we have Brand Equity, Customer Lifetime Value and Customer Equity. What else remains in the marketing value chain?

At some point, sufficient data will have been collected on your customers to determine how volatile, or regular, their purchasing behaviour is, and how profitable they are for you. This assessment is made in the same type of Risk-Return methodology used in investment analysis, where volatility represents the risk of the customer in the customer portfolio, and return represents the profitability of the customer in the customer portfolio.

• Low volatility, low profitability customers typically make up the bulk of your customers, your bread and butter
• Low volatility, high profitability customers are your cream, and should be nurtured and treated especially well. They are your best advocates for word-of-mouth marketing
• High volatility, low profitability customers do present an opportunity, but are probably best avoided in young companies given the effort required to manage them
• High volatility, high profitability customers also present an opportunity, but could also be the death of a young company given their feast-or-famine nature. Too high a proportion of customers in this quadrant creates a huge sustainability risk for your business

Now that we understand where our customers are in our Risk-Return portfolio, we need to create special customer management strategies around these.

Finally, all of these activities end in the measure of shareholder (or owner) value created for the business, and this measure can be contrasted with the potential for value within that customer base, which in turn will close the feedback loop back into your marketing strategy.

To see the academic research I conducted which gave rise to this context, please see http://slidesha.re/lwQWP4 on my LinkedIn profile, as presented to the peer-reviewed Academy of Marketing in the UK