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Brands And Shareholder Value
 

Brands And Shareholder Value

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    Brands And Shareholder Value Brands And Shareholder Value Presentation Transcript

    • How Brands Create Value for Customers and Shareholders Presented by: Adnan Galabhai 21077819
    • Introduction
      • Marketing is under fire (Sheth and Sisodia, 1995)
      • Two schools of thought in marketing:
      • One undermines the credibility of brands
      • The other places brands at the centre of value creation
      • 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
    • But first…What is a brand?
      • Brand is a Value-System
      • 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).
      • Shareholder Value Perspective: A brand is an intangible asset representing a source of current and future earnings of the firm (Hill and Lederer, 2001)
    • I. How do brands create value for customers?
      • Identification
      • Promise of Quality
      • Image
      • Relationships and Intimacy
      • Hedonistic and Experiential Rewards
      Source: Kapferer (2004)
    • 1. Identification
      • Emphasis on brand name, sign, symbol, logo or design (AMA definition)
      • Identifies the goods and services of the seller and differentiates its from competitors
      Source: Adapted from Keller (2008)
    • 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 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)
    • 4. Brand Relationships Source: Adapted from Fournier (1998)
    • 5. Experiential Value
      • Brands eliciting sensory and emotional responses
      • Consumption is a holistic experience
      • Eg. Disney, Apple Macbook
      Apple Macbook Laptop Fashion Statement/ Stylish Design Source: Adapted from Schmitt (1999)
    • II. Brands and Shareholder Value
      • Traditional Domain of Marketing: Creation of Customer Value
      • Modern Day Domain: Creation of Shareholder Value
      • Marketers need to speak the language of the CEOs.
      SHAREHOLDER VALUE = CORPORATE VALUE – LONG TERM DEBT CORPORATE VALUE= FUTURE CASH FLOWS OF THE FIRM Let’s see how brands create shareholder value…
    • 1. Increasing Cash Flow
      • Higher prices : Consumers willing to pay premium for strong brands Eg. Louis Vuitton
      • Higher volume growth: Strong brands can be leveraged to create brand extensions Eg. Coke Zero
      • Lower Costs: Unit marketing cost lower for market leading brands
      • Higher asset utilization: Brands with high market share can generate economies of scale through larger volume
    • Relationship between Brand Strength and Cash Flow
      • A market share advantage of 3:1 translates into a cash flow advantage of app. 6:1
      Source: Whitwell et al. (2003)
    • 2. Increasing the residual value of the business
      • Residual value = Net present value of the business
      • Brands sustain the long-term ability of the business to keep generating cash
      • Coca Cola, Kit-Kat, Cadbury have been around for up to a century
      • 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
      • Reflects investor confidence in companies with strong brands
    • 3. Reducing the risk associated with cash flow
      • Strong brands are not easy to copy Eg. Apple iPod
      • Brand loyalty promotes stability in cash flow
      • Cost of winning new customers > cost of retaining existing ones
    • Concept of Brand Value
      • 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.
      • One method of measurement is the Brand Asset Valuator (BAV): Translates Brand Equity into Financial Value
      Source: Pahud de Mortanges and Van Riel (2003)
    • 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
    • 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
    • Conclusion: Brand Value Chain Product Communications Awareness Associations Attitudes Attachment Pricing Power Market Share Cost Structure Profitability Cash Flow Intangible Assets Residual Value
      • Brands are key customer and shareholder value drivers requiring pro-active and consistent investment, management and measurement.
      • This view of brands is essential if marketers want to re-affirm marketing’s role as a top level strategic driver of the firm
      Source: Adapted from Keller (2008)
    • Questions?