How Brands Create Value for Customers and Shareholders Presented by: Adnan Galabhai 21077819
Introduction <ul><li>Marketing is under fire (Sheth and Sisodia, 1995) </li></ul><ul><li>Two schools of thought in marketi...
But first…What is a brand?  <ul><li>Brand is a Value-System </li></ul><ul><li>Consumer Value Perspective:  A brand is a se...
I. How do brands create value for customers? <ul><li>Identification </li></ul><ul><li>Promise of Quality </li></ul><ul><li...
1. Identification <ul><li>Emphasis on brand name, sign, symbol, logo or design (AMA definition) </li></ul><ul><li>Identifi...
2. Promise of Quality HALO EFFECT Source: Adapted from Kapferer (2004)
3. Brand Image Ralph Lauren =  SUCCESS Physique  = Energetic, Proud Reflection  = Young, rich men of good social standing ...
4. Brand Relationships Source: Adapted from Fournier (1998)
5. Experiential Value  <ul><li>Brands eliciting sensory and emotional responses </li></ul><ul><li>Consumption is a holisti...
II. Brands and Shareholder Value  <ul><li>Traditional Domain of Marketing: Creation of Customer Value </li></ul><ul><li>Mo...
1. Increasing Cash Flow <ul><li>Higher prices : Consumers willing to pay premium for strong brands Eg. Louis Vuitton </li>...
Relationship between Brand Strength and Cash Flow <ul><li>A market share advantage of 3:1 translates into a cash flow adva...
2. Increasing the residual value of the business <ul><li>Residual value = Net present value of the business </li></ul><ul>...
3. Reducing the risk associated with cash flow <ul><li>Strong brands are not easy to copy Eg. Apple iPod </li></ul><ul><li...
Concept of Brand Value <ul><li>Brand Value is the dollar value of a brand, calculated as Net Present Value (NPV), or today...
Brand Valuation: Interbrand Method Source: Interbrand (2007) World’s Most Valuable Brand in 2007 was Coca Cola with a bran...
Linking Brand Value to Shareholder Value Brand Value 1.Branded Revenues 2.Intangible Earnings 3.Brand Earnings Present and...
Conclusion: Brand Value Chain Product Communications Awareness Associations Attitudes Attachment Pricing Power Market Shar...
Questions?
Upcoming SlideShare
Loading in …5
×

Brands And Shareholder Value

2,443
-1

Published on

0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total Views
2,443
On Slideshare
0
From Embeds
0
Number of Embeds
0
Actions
Shares
0
Downloads
54
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide

Brands And Shareholder Value

  1. 1. How Brands Create Value for Customers and Shareholders Presented by: Adnan Galabhai 21077819
  2. 2. Introduction <ul><li>Marketing is under fire (Sheth and Sisodia, 1995) </li></ul><ul><li>Two schools of thought in marketing: </li></ul><ul><li>One undermines the credibility of brands </li></ul><ul><li>The other places brands at the centre of value creation </li></ul><ul><li>To re-affirm the view that brands are top level strategic drivers, marketers need to articulate the customer and shareholder value-creating capabilities of their brands </li></ul>
  3. 3. But first…What is a brand? <ul><li>Brand is a Value-System </li></ul><ul><li>Consumer Value Perspective: A brand is a set of mental associations held by the consumer, which add to the perceived value of the product or service (Keller, 1998). </li></ul><ul><li>Shareholder Value Perspective: A brand is an intangible asset representing a source of current and future earnings of the firm (Hill and Lederer, 2001) </li></ul>
  4. 4. I. How do brands create value for customers? <ul><li>Identification </li></ul><ul><li>Promise of Quality </li></ul><ul><li>Image </li></ul><ul><li>Relationships and Intimacy </li></ul><ul><li>Hedonistic and Experiential Rewards </li></ul>Source: Kapferer (2004)
  5. 5. 1. Identification <ul><li>Emphasis on brand name, sign, symbol, logo or design (AMA definition) </li></ul><ul><li>Identifies the goods and services of the seller and differentiates its from competitors </li></ul>Source: Adapted from Keller (2008)
  6. 6. 2. Promise of Quality HALO EFFECT Source: Adapted from Kapferer (2004)
  7. 7. 3. Brand Image Ralph Lauren = SUCCESS Physique = Energetic, Proud Reflection = Young, rich men of good social standing Relationship = Social Distinctiveness, Exclusive Personality = American Way of Life, Elite Culture= American, Luxury Self Image= I belong to my time, I am fashionable Source: Kapferer (2004)
  8. 8. 4. Brand Relationships Source: Adapted from Fournier (1998)
  9. 9. 5. Experiential Value <ul><li>Brands eliciting sensory and emotional responses </li></ul><ul><li>Consumption is a holistic experience </li></ul><ul><li>Eg. Disney, Apple Macbook </li></ul>Apple Macbook Laptop Fashion Statement/ Stylish Design Source: Adapted from Schmitt (1999)
  10. 10. II. Brands and Shareholder Value <ul><li>Traditional Domain of Marketing: Creation of Customer Value </li></ul><ul><li>Modern Day Domain: Creation of Shareholder Value </li></ul><ul><li>Marketers need to speak the language of the CEOs. </li></ul>SHAREHOLDER VALUE = CORPORATE VALUE – LONG TERM DEBT CORPORATE VALUE= FUTURE CASH FLOWS OF THE FIRM Let’s see how brands create shareholder value…
  11. 11. 1. Increasing Cash Flow <ul><li>Higher prices : Consumers willing to pay premium for strong brands Eg. Louis Vuitton </li></ul><ul><li>Higher volume growth: Strong brands can be leveraged to create brand extensions Eg. Coke Zero </li></ul><ul><li>Lower Costs: Unit marketing cost lower for market leading brands </li></ul><ul><li>Higher asset utilization: Brands with high market share can generate economies of scale through larger volume </li></ul>
  12. 12. Relationship between Brand Strength and Cash Flow <ul><li>A market share advantage of 3:1 translates into a cash flow advantage of app. 6:1 </li></ul>Source: Whitwell et al. (2003)
  13. 13. 2. Increasing the residual value of the business <ul><li>Residual value = Net present value of the business </li></ul><ul><li>Brands sustain the long-term ability of the business to keep generating cash </li></ul><ul><li>Coca Cola, Kit-Kat, Cadbury have been around for up to a century </li></ul><ul><li>Research done by Madden et al. (2006) – A $1000 investment in companies in the World’s Most Valuable Brands (WMB) List generates a return of 4 times vs. only 3 times by the overall stock market </li></ul><ul><li>Reflects investor confidence in companies with strong brands </li></ul>
  14. 14. 3. Reducing the risk associated with cash flow <ul><li>Strong brands are not easy to copy Eg. Apple iPod </li></ul><ul><li>Brand loyalty promotes stability in cash flow </li></ul><ul><li>Cost of winning new customers > cost of retaining existing ones </li></ul>
  15. 15. Concept of Brand Value <ul><li>Brand Value is the dollar value of a brand, calculated as Net Present Value (NPV), or today’s value of the earnings the brand is expected to generate in the future. </li></ul><ul><li>One method of measurement is the Brand Asset Valuator (BAV): Translates Brand Equity into Financial Value </li></ul>Source: Pahud de Mortanges and Van Riel (2003)
  16. 16. Brand Valuation: Interbrand Method Source: Interbrand (2007) World’s Most Valuable Brand in 2007 was Coca Cola with a brand value of $65.3 billion
  17. 17. Linking Brand Value to Shareholder Value Brand Value 1.Branded Revenues 2.Intangible Earnings 3.Brand Earnings Present and Future Cash Flows Corporate Value Shareholder Value
  18. 18. Conclusion: Brand Value Chain Product Communications Awareness Associations Attitudes Attachment Pricing Power Market Share Cost Structure Profitability Cash Flow Intangible Assets Residual Value <ul><li>Brands are key customer and shareholder value drivers requiring pro-active and consistent investment, management and measurement. </li></ul><ul><li>This view of brands is essential if marketers want to re-affirm marketing’s role as a top level strategic driver of the firm </li></ul>Source: Adapted from Keller (2008)
  19. 19. Questions?
  1. A particular slide catching your eye?

    Clipping is a handy way to collect important slides you want to go back to later.

×