Brands in the Boardroom: the business side of branding
I love the business side of branding. To my surprise, I discovered long ago that I share this perspective with many Board members of companies I’m working with. Instead of looking at the ‘magic’ of branding, they’re much more interested the ‘logic’. This is by no means meant to disrespect the ‘magic’ creative side of branding; it’s crucial for brands to form some sort of an emotional bond with its audiences, for which you need the creative side of branding. However, I find that for Boards to make decisions on what, where and how much to invest in brand, it is key to have the more ‘logical’ side of branding prevail at the Boardroom table. To give some insights into how brands are being debated about in the Boardroom, I’ll be sharing my top considerations on branding from a Boardroom perspective in a series of articles. This is the first article in the series, looking at the business side of branding.
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‘Brand equity’ doesn’t exist in the Boardroom
For brand marketers and communicators, brand equity is all about orchestrating the intangible relationship between brands and their stakeholder groups. Naturally, these are often customers or clients, and increasingly other audiences such as employees, suppliers of products, services and capital, and society as a whole. The extent to which brands generate more preference, loyalty or ultimate value, is referred to as brand equity. Looking more in-depth, this can be split into brand drivers, the ingredients that make up brand equity. Marketers around the world are educated to understand these mechanisms and to operate them in real life – the science and art of marketing.
In the Boardroom however, brand marketers and communicators do not always have a seat. On the contrary, most boards consist of non-marketers or no marketers at all. More often, the common denominator for backgrounds of Board members stem from finance, business and increasingly also from IT and digital. Also, the Boardroom ‘speak’ is financial and factual language and not marketing speak. It’s the language of the capital markets, the economy and 100% captured in systems for financial reporting; be it IFRS, FASB or US GAAP or whatever regulations apply for a listed company.
The appearance of the brand in a balance sheet
So, here’s the thing. In a balance sheet, ‘brand equity’ is not visible, it doesn’t show. You can see ‘Brand’ under Intangible Assets at the left top of a balance sheet. And you can see ‘Equity’ under Capital at the right top of a balance sheet. For both ‘Brand’ and ‘Equity’, the financial community has been working for hundreds of years to create a framework of definitions – so practitioners understand exactly what’s what (the first book on this was by L. Pacioli in 1445!). They are two different things altogether for this community.
"Brand equity does not exist in the financial world."
So, what happens if brand marketers or communicators bring up ‘brand equity’ in Boardroom conversations? They run the risk of being misunderstood. The same applies when they start talking about ‘brand in the balance sheet’, as that is mostly interpreted to only be in the balance sheet when a brand has been acquired from another company, and only then when the buyer has decided to keep it. Internally developed brand value can never be shown on a balance sheet. This is why, for example, the brand value of LinkedIn is shown on the balance sheet of Microsoft, whereas the brand Microsoft itself – funnily enough – is not.
As a manager of the brand, by not adhering to the business speak of a topic, you immediately start off on the wrong foot and might be disconnected from business conversations. Also, you’re effectively reinforcing the image of the marketing and communications domain; that it’s about spending money and value only comes into the equation later.
Translating data into insights
This is also a plea for data, data and data. In the digital age we have access to tons of data and this should be interpreted and translated into insights. Whenever I consult on rebrand programmes, one of the key areas is investigating what we can learn from data, which then becomes crucial input for the programme. For example, when merging the banking activities in the Baltic states for DNB and Nordea, data showed that the new name, Luminor – a new generation bank – would really work well with local audiences. Similarly, when rebranding travel agency Arke to TUI, we knew that 50% of the turnover was online, and to convert that many A-B tests were conducted to ensure a seamless transition for website traffic. Data also taught us how much money to invest in performance-based marketing.
"Translate data into insights: it can teach you how much money to invest in marketing."
My recommendation here is to always speak about brand as the most valuable intangible asset and to demonstrate how this asset can support business performance, which is why I love the business side of branding. On average, brand value represents around 20% of the market capitalisation of the top 500 companies in the world (Brand Finance, 2017). If you are able to demonstrate how brands generate value and can orchestrate the intangible relationship between an organisation and its stakeholders, you will be heard in the Boardroom. After all, exhibiting this relationship is not an easy, one-dimensional thing – but it’s what Board members understand. Achieve this and I predict that you will instigate questions like, ‘Okay, how does that work then and what do we need to get it right?’. And right there the journey of making the business case and roadmap for your brand growth begins. This thinking will enable you to sketch out the why, what, and how to go about this, and to obtain the mandate that goes with it to start your journey. You’ll soon be coordinating the brand to drive business performance. And isn’t that the most valuable brand purpose?
*This article was featured by Brandingmag
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