How Much Is Your Brand Worth? Understand and Leverage Your Brand Value
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-Evaluate factors that influence brand strength. -Review practical examples of organizations that have successfully leveraged their brand value. -Explain appropriate methodologies, calculations, and considerations for brand valuation.
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How Much Is Your Brand Worth? Understand and Leverage Your Brand Value
- 1. 1 How Much Is Your Brand Worth? Understand and Leverage Your Brand Value Annapoorani Bhat – PYA, PC. abhat@pyapc.com Tim Roberts – Franklin Street tim@franklinstreet.com
- 2. 2 • What is brand value? • Why value healthcare brands? • Building brand value in healthcare • Valuation methodology • Examples OVERVIEW
- 3. 3 What Is a Brand?
- 4. WHAT IS A BRAND? A brand is the strategic cultural idea that guides how an organization delivers value 4
- 5. WHAT IS A BRAND? A brand is the strategic cultural idea that guides how an organization delivers value (Brand Promise) 5
- 6. 6 What Is Brand Value?
- 7. 7 WHAT IS BRAND VALUE ? Intangible Assets Brand Patents Trained workforce Tangible Assets Land Building Equipment Total Entity Value
- 8. 8 OVERVIEW
- 9. 9 WHAT IS BRAND VALUE ? Intangible Assets Brand Patents Trained workforce Tangible Assets Land Building Equipment Total Entity Value
- 10. 10 OVERVIEW $205.5 Billion Of $821 Billion
- 12. 12 “If a measurement matters at all, it is because it must have some conceivable effect on decisions and behavior. If we can't identify a decision that could be affected by a proposed measurement and how it could change those decisions, then the measurement simply has no value” Douglas W. Hubbard, How to Measure Anything: Finding the Value of "Intangibles" in Business POTENTIAL BRAND VALUATION NEEDS
- 13. 13 WHY VALUE HEALTHCARE BRANDS? How much should I invest in developing my brand name? How much should I pay for an affiliation? What was the impact of my investment in marketing/branding? Am I allocating my resources appropriately?
- 14. 14 Financial • Determine how brand contributes to the business WHY VALUE HEALTHCARE BRANDS? $205.5 Billion Of $821 Billion
- 15. 15 Marketing/Branding • Helps you communicate the significance of what you do • Helps you decide which brands to continue or to retire • Evaluate returns on marketing and other branding spends WHY VALUE HEALTHCARE BRANDS?
- 16. 16 Transactional • Provides guidance for negotiating affiliation terms: - Should a fee be paid? - If so, how much? - What does the fee cover? - What form should the payment take? WHY VALUE HEALTHCARE BRANDS?
- 17. 17 Building Brand Value in Healthcare
- 18. 18 BUILDING BRAND VALUE IN HEALTHCARE Brand Value Continuum Hospital Name Valued Brand
- 19. 19 BUILDING BRAND VALUE IN HEALTHCARE Brand Value Continuum Hospital Name Valued Brand Brand Promise
- 20. 20 BUILDING BRAND VALUE IN HEALTHCARE Build Credibility Valued Brand Build Awareness Create Emotional Connection Create Loyalty Hospital Name Low Value High Value Brand Promise
- 21. 21 BUILDING BRAND VALUE IN HEALTHCARE Brand Strength Affected by Competition Physician Referral Networks Rankings Patient Satisfaction & Preference Reputation
- 22. 22 BUILDING BRAND VALUE IN HEALTHCARE Reputation • Clinical accomplishments • Perception around safety • Perception around quality • Reputation of outcomes Brand Strength Affected by
- 23. 23 BUILDING BRAND VALUE IN HEALTHCARE Competition • Pronounced in urban areas • Service line focused • Curbing outmigration Brand Strength Affected by
- 24. 24 BUILDING BRAND VALUE IN HEALTHCARE Physician Referral Networks • Impacts financial performance • Enhanced by affiliations, acquisitions, JVs, etc. • Reach of referral networks promotes usage Brand Strength Affected by
- 25. 25 BUILDING BRAND VALUE IN HEALTHCARE Rankings • US news rankings • LeapFrog quality scores • Healthgrades • Hospital Compare – Staff Ratings • Affiliations with ranked experts – Mayo, etc. Brand Strength Affected by
- 26. 26 BUILDING BRAND VALUE IN HEALTHCARE Patient Satisfaction/Preference • HCAHPS • Net Promoter Score • Local Consumer Perception Research • Measures of In-Migration • Measures of Out-Migration Brand Strength Affected by
- 28. 28 VALUATION METHODOLOGY Brand Value Income Approach Based on the economic benefits anticipated to be derived from the asset Market Approach Based on transaction data involving similar assets or services Cost Approach Based on the anticipated cost to recreate, replace, or replicate the asset
- 29. 29 VALUATION METHODOLOGY Brand Value Income Approach Based on the economic benefits anticipated to be derived from the asset Market Approach Based on transaction data involving similar assets or services Cost Approach Based on the anticipated cost to recreate, replace, or replicate the asset X Difficult to determine Floor Value
- 30. 30 VALUATION METHODOLOGY Brand Value Income Approach Based on the economic benefits anticipated to be derived from the asset Market Approach Based on transaction data involving similar assets or services Cost Approach Based on the anticipated cost to recreate, replace, or replicate the asset X Difficult to determine Floor Value Adopt a combination of both methods
- 31. 31 Examples
- 33. 33 EXAMPLE 1: STRATEGIC PLANNING
- 34. 34 The initial valuation determined that UK HealthCare brand was valued at $64 million. EXAMPLE 1: STRATEGIC PLANNING
- 35. 35 Two years later, UK commissioned a second valuation; the brand value increased to $94 million. EXAMPLE 1: STRATEGIC PLANNING
- 36. 36 Example #2 AMC and Community Hospital Joint Venture
- 37. 37 Academic Medical Center (AMC) and Community Hospital (CH) form a new cancer center JV • AMC – Contributes brand • CH – Contributes all cancer center operations/assets EXAMPLE #2: JOINT VENTURE
- 38. 38 CH’s motivation for partnering with AMC includes: • Improve quality of care via better access to clinical expertise and resources • Better able to compete within their primary and secondary markets • Improved recruiting and retention of physicians due to affiliation with AMC EXAMPLE #2: JOINT VENTURE
- 39. 39 AMC’s rationale for wanting to affiliate with CH includes: • Its mission to provide high-quality healthcare to more people within its primary and secondary markets • Better utilization and leverage of key resources • Potential transfer of higher acuity patients to the AMC • Better positioning to compete within their primary and secondary markets (i.e. defensive marketing strategy) EXAMPLE #2: JOINT VENTURE
- 40. 40 Key financial issues related to the arrangement include: • AMC has a very valuable brand and desires to be compensated by the JV for using it • CH has space and equipment • Due to regulatory restrictions (e.g., the Federal Anti-Kickback Statute) – the financial terms of the JV arrangement must be at “fair market value” EXAMPLE #2: JOINT VENTURE
- 41. 41 Valuation Goal: Determine their relative value contribution EXAMPLE #2: JOINT VENTURE
- 42. 42 Example #3 MD Anderson Cancer Network
- 43. 43 EXAMPLE #3: MD ANDERSON
- 44. 44 EXAMPLE #3: MD ANDERSON
- 45. 45 EXAMPLE #3: MD ANDERSON
- 46. 46 Example #4 Virginia Tech Carilion
- 49. 49 Your Brand Is One of Your Most Important Business Assets
- 50. 50 How Much is Your Brand Worth? Understand and Leverage Your Brand Value Annapoorani Bhat – PYA, PC. abhat@pyapc.com Tim Roberts – Franklin Street tim@franklinstreet.com
Editor's Notes
- Anna to introduce: 2 mins Tim: Apologize slides have changed !!!
- Anna: 1 min Before we talk about the value of brands, and how we measure that value, let’s take a step back and ask ourselves a fundamental question.
- Tim : 1 min What is a brand? Anybody have a definition they would like to share? a person’s perception of a product, service, experience, or organization A gut feeling Reputation Its hard to define. I have worked in the world of brand development for over 30 years and have seen 30 years worth of different definitions.
- Tim: 1 min READ Strategic (connected to the vision of the business and how that business plans to win in the markeplace) Cultural ( experiences have to be about both patients and employees – that is a culture) Idea (imagination of a better way, a better life, a better world) And that strategic cultural idea guides how that organization delivers value. And how does this show up in the real world?
- Tim: 1 min Through your brand promise. Your brand promise is your commitment on how to deliver value in a your unique way.
- Tim : 1 min So its logical to understand, that if a brand delivers enough value, it becomes valuable. IF a brand delivers enough value, it becomes valuable. And therefore has financial worth.
- Tim: 1 min And with this chart, we can see how the brand’s financial contribution combines with other assets that contribute to the overall financial value of an organization. We have both tangible and intangible assets. With brands usually being the largest intangible asset.
- Tim: 1 min You can’t have a presentation about brands without referencing Apple…but bear with me, it is actually very relevant for this conversation. Every year, Forbes magazine ranks the worlds most valuable brands. And for the ninth straight year, Apple has been named the most valuable brand in the world. According to Forbes: Apple 182.8 B (Worth 41% of Apple’s total business value) Goolge 132.1 B Microsoft 104.9 B Facebook 94.8 B Amazon 70.9 B
- Tim: 1 min So we go back a slide and look at the orange section, where we illustrate the brand’s financial contribution to the overall value of company. Does anyone have any guess on how much that orange section represents in dollars to Apple?
- Tim: 1 min READ: So if Apple was not so good at keeping their brand promise, they might well be worth $200 billion dollars less.
- Anna Has anyone undertaken a brand valuation exercise for your organization?
- Anna: 2 minutes – Measure – not for its own sake, but to help influence decisions
- Anna – 1
- Anna – 1.0 mins Tim to add At the most financial/transactional level, brand valuations illustrate the role of the brand in creating business value.
- Anna :30
- Anna 1 Should a fee be paid? If so, how much? What does the fee cover (just the name, or clinical protocols, administrative support, etc.)? What form should the payment take? For example: royalty fee, upfront lump sum payment, equity interest, etc.
- Tim : 1 min
- Tim: 1 min At a very basic level, building brand value is about moving away from a commodity (just any'll hospital) to a valued brand.
- Tim: 1 min The business tool that helps us get there is your brand promise. Your commitment to delivering value in a way that is uniquely you.
- Tim: 1 min And we do that by building awareness of your brand promise. Your commitment to deliver value in your unique way. We build credibility through the stories we share and the experience your patients and families have. And if we do those well, we create emotional connections. Combined with good outcomes, we create loyalty and high perceived value of your brand.
- Tim: 1 min When Anna starts to look at how strong your brand is, here are some of the key areas that impact the overall brand valuation. Reputation, Competition, Referral Networks, Rankings, Patient Satisfaction & Preference.
- Tim: 1 min Reputation is valuable for many reasons – the most obvious is that reputation keeps you top-of-mind for your prospective patients. But for healthcare, reputation also buys you something almost as valuable… forgiveness. Because if something goes wrong god forbid, families and communities are much more forgiving if you have a strong reputation. Some of you may remember the University of Virginia baby story. Two young moms each gave birth to beautiful baby girl a few hours apart. Unfortunately, there was a tragic human error and UVA sent the babies home with the wrong parents. UVA had accidentally swapped babies. This was not realized until 3 years later. But UVA’s reputation was so strong, the community forgave them…knowing the mistake was not part of who they normally were.
- Tim: 1 min Brand value is also measured by how competitive you are in your service area. Ultimately, a valued brand is going to give patients a reason to choose you over your competitors.
- Tim: 1 min Your brand’s ability to attract affiliations, joint ventures, and referrals leads to increased utilization, which leads to the financial improvements that get measured in assessing your brand’s value.
- Tim: 1 min 3rd party measurements and rankings give an additional level of objectivity to the valuation.
- Tim: 1 min Patients give you a report card with every satisfaction survey completed. They tell you how strong their preference is for you every time they drive past a competitor just to be seen by you. The voice of your patient is a key measurement in your overall brand valuation.
- Anna
- Anna – 2 min Valuation needs may arise as it relates to specific transactions, or potential yet to be identified relationships, or for internal planning purposes
- Anna – 30 secs Valuation needs may arise as it relates to specific transactions, or potential yet to be identified relationships, or for internal planning purposes
- Anna – 1 Valuation needs may arise as it relates to specific transactions, or potential yet to be identified relationships, or for internal planning purposes
- Anna: Introduces the Case Studies: 1 minute Theses are real-life examples of why you would need to do a brand valuation exercise Remind the audience of the confidential nature of brand valuations so we cant be as indepth as we would like, we wanted to touch on some interesting points and give some examples
- Tim : 1 min Very simple example
- Tim: 1 Several years ago, Bill Gombeski, Director of Strategic Marketing, wanted to elevate the visibility of marketing through a tangible measure–the brand’s worth. According to Gombeski, “Marketing people know and talk about how important the brand is, but leadership struggles to understand this. Everything comes down to a financial matrix. We needed to quantify and elevate the brand asset to the level of other financial reports presented at the board level.”
- Tim: 1 At UK healthcare: The Brand Valuation process uncovered consumer perceptions were extremely favorable as compared to their market competitors. In fact, their market share was 13 percentage points higher than the system sitting in the second position. The initial valuation was valued at $64 million. The UK HealthCare leadership consider it a report card on their performance. Marketing budgets were increased and focused on building the brand, because they felt there was real ROI.
- Tim: 1 READ: This was not due only to the marketing work. Since conducting the brand valuation, UK HealthCare has expanded from 300 to 945 beds and is still growing. Annual admissions have increased from 19,000 to 38,000+ per year. Two years later, the brand value increased to $94 million. Leadership considers this a report card on their performance. Our CEO shared the valuation with the board. Since a third party calculated the value, it had credence, and the board had confidence in the number and could relate to the valuation process. An added benefit is the increased understanding with Trustees that the organization is performing positively. Knowing the value of your brand is important, but the real power of that knowledge comes into play when you have a joint venture or acquisition…
- Anna
- Anna: 1 minutes Academic Medical Center (“AMC”) and Community Hospital (“CH”) form a new joint venture (“JV”) to own and operate a cancer center on CH’s campus. CH will contribute its current cancer center operations to the new JV, which will be co-branded with AMC’s name. AMC will provide clinical and administrative services to the JV under separate professional services agreements. AMC will provide “know-how” related to clinical best practices, etc.
- Anna: 1 mins
- Anna: 1 mins
- Anna: 1 mins Assignment: Determine the fair market value of AMC’s “brand” to the JV for purposes of a capital contribution credit (i.e., in lieu of cash). Key Consideration – the additional market share (i.e., incremental revenue) that can be captured “with” the AMC’s brand as opposed to “without” it.
- Anna: 1 minutes .
- Anna : 1 min
- Anna : 1 min Brand strength is often service line specific: In a single hospital system, brand strength may be substantially different within various service lines Important to evaluate appropriate qualitative factors that drive preference and perception of value Many joint ventures are service line specific (e.g., cancer centers, etc.) Together with more than 25 members, MD Anderson Cancer Network® is advancing our mission to end cancer by raising the level of cancer care in communities nationwide.
- Anna: 1 mins. Total for case study 1: 9.5 minutes
- Anna: 2 mins. Total for case study 1: 9.5 minutes Cost benefit
- Tim : 1 min
- Tim: 1 And the last example of when you may want to consider doing a brand valuation exercise is when you're considering a joint venture with a University – perhaps for a school of medicine. VT and Carilion partnered on a School of Medicine and a Research Institute. The value of that partnership showed itself in a lot of interesting ways: • VT was able expand its medical program initiatives, have access to Physician teachers and more research opportunities, bigger footprint in Roanoke • Carilion was able to improve their residency program, hire more residents, hire more specialized physcians and grow their service line. The could more easily retain more physicians as they now had an academic connection So when you’re thinking about brand valuations, its important to think about all the ways the joint venture can bring mutual value to participants. And the valuators can assess a fair price.
- Tim : 1 min To build a valuable brand, think about your brand as a strategic cultural idea that guides how your entire organization will deliver value. (Value to patients, value to employees, value to donors, value to partners) Because as long as your brand is delivering value, it will become valuable… and therefore have financial value. Your brand is one of the most important business assets you have, and know you know you can identify the dollar value of that asset. And justify investing in it.
- Tim: Anna, have you seen an example where the more valuable brand was from a smaller entity – like a physician practice?” Anna: “You mentioned that an organization’s brand promise is what guides its delivery of value…how does an organization actually develop their brand promise?” Tim: Who typically reaches out from the client side for a brand evaluation? Tim: Should folks wait until a transaction is at hand before doing a valuation, or are their benefits to starting it … Tim: