When executives talk about return on marketing investment, they usually look at e-mail, direct mail and other easily measurable forms of communications. Most of the time, branding doesnât even enter the ROI discussion.
But branding efforts can provide measurable ROIâat least thatâs the contrarian conclusion that can be drawn from a quarterly study of brand equity conducted by branding consultancy CoreBrand.
The study quantifies the dollar value of a companyâs brand as well as the percentage of a companyâs market capitalization that can be attributed to its brand. Companies that are not building their brands are potentially forfeiting millions, or even billions, in market cap, CoreBrand CEO Jim Gregory said.
"It doesnât require a huge volume of marketing dollars and
effort," he said. "What it really requires is a mindset that the corporate brand is important and that youâre going to measure it and that youâre going to treat it as a business asset."
Calculated through CoreBrandâs proprietary formula, the top three b-to-b brands in the fourth quarter of 2003 (in terms of the absolute dollar value of their brands) were Microsoft Corp. ($53.9 billion), General Electric Co. ($53.6 billion) and Exxon Mobil Corp. ($36.5 billion).
While the top three didnât change places between the fourth quarter of 2002 and last yearâs fourth quarter, all increased their brand equity. Microsoftâs rose $2.8 billion; GEâs gained $11.0 billion; and Exxon Mobilâs increased $4.5 billion.
GEâs growing brand equity may be due, in part, to last yearâs extensive branding campaign, which changed the companyâs tagline from "We bring good things to life" to "Imagination at work."
"I think that really shows the longevity of the brand, the vitality of the GE brand," said Brad Puckey, CoreBrandâs director of research.
Overall, the top 30 companies increased their average brand equity value from $14.1 billion in the fourth quarter of 2002 to $17.2 billion in the fourth quarter of 2003. Puckey attributed the gains to the rising stock market, which lifted the market capitalization of most companies, as well as to the perceived value of their brands.
But most companies are not Microsoft or GE, and they canât reasonably aspire to reach a multibillion-
dollar brand equity value. For most b-to-b businesses, a more important measure of brand value is the percentage that brand contributes to total market capitalization, Gregory said.
As of last yearâs fourth quarter, the top three companies based on the percentage that brand equity contributes to market cap were FedEx Corp. (19.0%), United Parcel Service of America (18.9%) and Microsoft (18.3%).
In addition to ranking individual companies and their brand equity values, CoreBrand calculates the average brand equity score by industry. Consumer categories post the highest average brand equity value as a percentage of market cap. The average of the category"consumer-staples" is 10.2%, and the average of "consumer-cyclical" is 8.9%.
Categories that are more b-to-b oriented had significantly lower percentage scores: telecommunications (5.8%), industrial (5.6%), technology (5.3%), finance (5.3%) and health care (4.4%).
"B-to-b companies have every reason to build and leverage their brands," Gregory said. "They are not second-class citizens compared to consumer brands. They are leaving money on the table if they are not building their brands."
CoreBrand has been gathering data on more than 1,000 corporations for 12 years. Via interviews with executives, the company tracks the familiarity and favorability scores of these corporations, tabulating the results quarterly.
Through a complex, proprietary algorithm that factors in familiarity and favorability scores as well as cash flow, growth rate and other measurements of performance, CoreBrand calculates the value that a companyâs brand contributes to its stock price.