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Branding and the bottom line

There have been many articles, books and blogs written about brand equity, the value of a brand and its ability to add value to a company. However, many companies still view their brand as little more than an identity that helps to set them apart and make them more memorable. But informed marketers are focusing on just how it is that the branding process can create value that makes a meaningful contribution to the bottom line on their balance sheets.

Common sense tells us the more consumers favor one brand over another, the more the brand is elevating financial success. So, how does one measure the contribution brand equity makes? It is best determined when financial data is evaluated next to consumer-attitudinal survey data. This reveals the degree to which consumers’ beliefs about a brand drive their purchase decisions. It can also reveal the degree to which the brand is driving financial value compared to other business assets. In a 2013 study conducted by Milward Brown Optimor that measured the performance of the top 100 most valuable global brands based on available financial data, sales data and results from 150,000 consumer interviews, this portfolio of brands consistently outperformed their peers.

Another way in which a brand can contribute to the value of a company is measured in terms of vulnerability to economic crisis. Consistently over time the stronger brands have bounced back faster. When the performance between 2006 and 2013 of the top 100 most valuable global brands was compared to the S&P 500, these brands recovered from the Great Recession a year earlier and showed a 28% improvement in share price.

How much a brand can contribute to value also depends on the product category in which a company operates. A consumer product or service, let’s say a mobile phone or a resort, is more dependent on consumers’ desire to purchase the product or service than a brand that sells office equipment, for which purchase is heavily influenced by budgets as well as a company’s policies and other factors.

In the travel industry a brand can make a contribution to a company’s value at any price point, but it is greatest within the luxury tier. Here the connection to consumers is more emotional than functional, so it is happening at a deeper and more personal level. The consumer may feel the brand — and, in turn, the company — understands the customer better, and the result can be a stronger bond that is much more difficult, if not impossible, for the competition to break. There are many stories of upscale resorts where families have returned year after year and generation after generation. These are examples of how a brand’s status in the minds of consumers is driving its future earnings potential.

When working for a 100-year-old hotel on Martha’s Vineyard I observed a pattern among their peak seasonal guests who had been loyal for multiple generations. As the hotel’s offerings became more luxurious and diverse these families expanded the breath and depth of their relationship with the property, resulting in longer stays, much higher spending and a richer engagement with the brand. It became apparent that their relationship with the brand had become part of their own personal legacy.

So, when reviewing and defining the long-term financial objectives and short-term measurable goals for your hospitality venture also examine essential strategies for strengthening your brand. Your bottom line will be grateful.

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