A Question of Value: Why do brands create value?

Richard Huntington, Chief Strategy Officer, Saatchi & Saatchi

We do not build brands for the good of our health.

Creating a strong and healthy brand is a means to an end and that end must be a stronger and healthier business or organisation.

The Why

By and large this reward will be financial, whether growth in sales, increased margins or successful entry into new categories or activities. That’s obvious for most commercial organisations but its also true for other types of brand.

Destination Brands

Building a nation or destination brand is done to increase inward investment, build soft power and drive tourism. In other words for all the lovely pictures of tourist attractions there is a hard centre to this activity and that’s about making money, even if much if it is indirect like the taxation revenue from hotels that are full.

Celebrity Brands

It is tempting to be derisory about celebrity brands partly because celebrity fame often appears to be built on insubstantial foundations. But celebrity brands are usually built to offer the person concerned new sources of revenue as the source of their fame dwindles. This is particuarly the case in sport and music where the initial source of fame and brand appeal is frighteningly short lived, while most sustainable wealth is served by levering that brand into other activities. The musician that launches a music label and the sportsperson that licenses their name to a new spirit.

Charity Brands

Even a healthy charity brand is at heart about cold hard cash. Since a potent brand that people understand is addressing an important and pressing cause and doing so with effect will broaden their supporter and fundraising base. In recent years we have seen many charities bring together brand and fundraising activities where once they were split, as they recognise the principle reason to build their brand is to build their source of funds.

There are some exceptions of course…

Political Brands

The potency of a political brand is about acquiring and maintaining power. Strong political brands whether invested in a person or an arty build strong natural voter bases and periodically sway the undecided and floating voter. They don’t exist for monetary gain but to take the power that will allow them to implement their agenda. Though you could always ask for what reason and whether that is entirely altruistic.

The Royal Family’s Brand

Interestingly the Royal Family also need to manage their brand though not so much to maintain power but to legitimise the power and privilege they already have. There are few brands more carefully managed but also more vulnerable to changes in sentiment than the Royal Family. This is what brought it to crisis point in the wake of the death of the Princess of Wales and more recently in the experiences of Harry and Meghan and indeed the succession.

However, by and large it is a financial reward that is the prize for a well-constructed, positive and healthy brand.

The How

Pinning down HOW brands create value is notoriously difficult or at least is surrounded by general confusion and lack of clarity.

One of my favourite Southpark episodes involves a group of gnomes that are stealing all the underpants from the town. When they are questioned by the boys about their behaviour they reply that it’s a three part plan. The first part is to steal underpants and the third part is to make a profit. But they are remarkably sketchy about the second part, how stealing underpants will lead to profit.

And that’s what you see in so many organisations today. There is a general consensus that in some way having a brand and especially a strong one, is a good thing. And perhaps a sense that the business or organisation will be more financially successful if this were the case. But no real idea about how a healthy brand generates commercial value. This often leads brand building to be dismissed ornamental to the business not instrumental. A business lever that can offer huge returns over both the short and critically long term and one that will keep on giving provided your brand stays healthy.

So let’s try and fill in the second stage between brand building and profit because it’s imperative that we understand the way brands build value and can clearly communicate this to the people around us.

Fortunately, there are five principle ways in which strong brands create value. Real monetary value. This week I’ll take you through each of these: Volume; Value; Growth; Efficiency; Resilience.