Brand value: what is the ROI of investments in Branding?

Apr 15, 2021

Making the case for Brand Assets and Brand Management Tools

Making the case for investments in branding can be difficult. But we know it investing in it is how you grow your brand value. How do you calculate the ROI and make the bottom-line business case for a new logo, Style Guide or Brand Book?

In this article, we discuss making the case for investments in branding in general, using the example of a Brand Book specifically to show you how to lead with arguments about the core value of branding. If you then have to resort to throwing numbers to pacify opponents to your plans, we also offer you some resources for that. 

How to get people excited about revising the brand

People often don't realize how much of an opinion they have about their organization's brand. Until you start changing it.  

“Why did we have to go and invest [X amount of money] in this new logo? I don't even like it. I think the old one worked fine as it was. And then just wait ‘til we're told we have to cut costs again... 

Changing anything about the brand can result in all kinds of reactions, and will only have a meaningful beneficial impact if you get all the relevant stakeholders on board. That means not only the marketing team and some of your sales colleagues. Relevant stakeholders include – but are not limited to – the board of directors, management, employees, business partners, vendors, and last but not least your customers.  

If the majority of all these groups of people understand why it's important to introduce a new element or document to the core of your brand, or to change it altogether, you'll have a much better chance of seeing your project succeed and bring value in the long run. Talk about your ROI. 

Now, how do you get all these people on board with a change and a new investment in anything brand? 

Making the case for investments in branding - brand stakeholders & brand value

Your brand occupies the space between the intangible ‘gut-feel’ that people actually have when they think about your organization, and the way you want them to feel when they do. Your brand identity is most often described as a collection of all of the ways your brand is made tangible – for instance with the visual assets you use. 

Brands are intangible assets, but at the same time we know for sure that they carry financial value. You can see this in the valuation of companies on the financial markets and in the models financial analysts use to gauge, monitor and predict a company's value.  

But what we need to understand is that the financial value is the external end point: the value of the brand starts from within your organization. 

Your brand is based upon the core idea, the Purpose – the mission or story that drives your organization and the people in it forward. It is the story that binds them to each other and the story that binds your partners and customers to you as well. 

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As such, a brand is not only an asset for marketing; it's an asset for management, for HR, and recruitment, first, and an asset for marketing and sales, second. That's because making people in the market feel your brand starts with people in your organization feeling the brand, first. This is all the more true in the open-wide, incredibly transparent internet-era we live in, today. 

The case for your Brand Book 

Now, let's look at the creation of a Brand Book as an example of a specific brand asset you would like to invest in. A Brand Book is a great example for two reasons. One reason is that creating a good Brand Book is a very good way to pin down your brand identity and it therefore adds a lot of value – the other reason is that creating a good Brand Book can be a fairly substantial investment. 

A Brand Book is related to, but different from a Brand Style Guide. A Brand Style Guide helps the people inside and outside of your organization who use your visual brand assets, to use them consistently and correctly. 

download brand book and style guide template

A Brand Book is a tool for brand management that sits closer to the core of your brand identity. It inspires and helps keep people in your organization aligned with the Purpose or core idea of your organization, and helps them think, communicate and act from that Purpose as a starting point.  

There are many ways to go about creating a Brand Book. However, as we believe it to be a fundamental tool to reinforce an existing or new brand identity throughout your organization and any stakeholders that you feel it may be of value to, we advise that you take the project very seriously. 

That means making space, time, and resources available. Think about finding an (internal or external) brand identity specialist and the hours this person needs, but also photography, visual design and styling. You also need to think about the interviews with internal and external stakeholders that will help you answer the questions you need to answer in order to tell your brand story in a compelling, complete and correct way. 

Making the case for your Brand Book is therefore something you need to take seriously as well: you have to make sure that all relevant stakeholders are on board with the investment it will take to create one. How do you do that? It depends on the situation you're starting from. Very broadly speaking, it usually makes most sense to create a Brand Book (or any other new asset) in one of the following situations: 

  1. You’re working on a re-brand 
    If you happen to be in this situation when thinking about creating a Brand Book, it's simply one of the tools that you will list in your plan as to how to solidify, implement, and manage the newly formed brand identity.
     
     
  2. You want to solidify your existing brand 
    Various internal and/or external circumstances can trigger a desire or perceived need to solidify an existing brand. Perhaps your organization is having trouble in maintaining a consistent brand identity in outward communications.  
     
    Perhaps you feel employee engagement is dwindling and you need to reinvigorate a sense of pride and purpose for your employees. Perhaps customer satisfaction research has shown alarming facts and you feel that reinvigorating a sense of Purpose and aligning everyone's connection to the brand and its purpose can be of help. 

In this situation you'll have to make the case that the asset you want to create can help in these areas.  

What you will want to do is of course make the case for the Brand Book as if it were any other investment in the invaluable intangible asset that is a brand – to that end we refer you to the arguments listed in the section under “Making the case for investments in Branding” above, and the section under “Making the financial case” below 

However, the main argument for creating a Brand Book specifically, aside from its aiding in managing and strengthening your brand from the inside out is: 

There is no better way to solidify the core idea and the story of our brand or organization than to sit down with the relevant stakeholders, come to a unifying story, and to then write it down.  

There's also no better way to guarantee that a newly formed or consolidated brand identity will be properly managed carrying forward into the future, than to have the right stakeholders involved in the process of pinning it down.  

Lastly, this point applies to more than just a Brand Book.  

Creating or changing any significant brand asset – a new logo, design style, Style Guide - or the entire brand identity, requires getting stakeholders involved and on board. The process you have to get through to get there, is invaluable in and of itself when it comes to solidifying and reinforcing the newly formed brand identity/asset.  

Making the financial case 

As noted above, a Brand Book is a great example of an investment in your brand that brings fundamental value yet also requires substantial resources. So, let's stick with that example for a little while longer. 

Managing the project around your new Brand Book properly means making space, time, and resources available. Much like with any other larger scale project or investment you want to do to strengthen your brand.  

Sometimes, you'll have to deal with pushback on the resources it would take to see your project come to fruition. And sometimes, you won't be able to convince every stakeholder with more essentialist, philosophical arguments about the value of a brand. 

So, what are the financial arguments you could use? 

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The financial value of a brand (book) 


Brands create financial value for their owners, and well-managed and consistently used brands more so than others. 

According to Millward Brown Optimor’s analysis, in 1980 almost the entire value of an average S&P 500 company was comprised of tangible assets (chairs, factories, inventory, et cetera). In 2010, tangible assets accounted for only 30 to 40 percent of a company’s value. The rest is intangible value, and about half of that intangible portion, close to 30 percent of total business value, is attributed to brands.  

In 2015 Millward Brown showed us that in the 10 years before that, the strongest brands in the BrandZ Top 100 Most Valuable Global Brands list increased in value by 102.6%. In contrast, the MSCI World Index, a weighted index of global stocks, had appreciated by only 30%. 

Even during the turbulent period since 2006, the BrandZ™ Top 10 Most Powerful Brands Portfolio of stocks grew two-and-a-half times faster than the S&P, proving that investment to create and sustain strong brands delivers superior shareholder returns. Brand building is an investment, not a cost. 

Furthermore, brands that are consistently presented can expect to see an average revenue increase of 33%.  

Estimating the ROI of Branding 

So it's fairly obvious. Brands irrevocably add value to a business. Managers know it, and financial analysts and investors know it as well. Although even in financial markets the intangible asset that is the brand of a company is getting more and more weight over the last few years, any method or model to gauge it is, essentially, only an estimate.  

As Wally Olins has said: ‘There's only one true way to gauge the value of a brand, and that is to sell it.’ 

We feel strongly that the arguments for creating a Brand Book and investing in it, should be mainly strategic. However, it may be the case that you have more bottom-line oriented decision makers you need to get to agree to your plans. How do you go about it? 

Various methods exist to measure the value of a brand, and to estimate the ROI of an investment to increase the strength and value of it. If the stakeholders you need to get on board for your Brand project need more convincing than with the information and arguments we have already shared here, pick one of the methods listed here, do the (tangential) math and give them the final push for persuasion with the expected ‘bottom-line’ numbers:

  1. Assessing Attributes

This subjective means of assessment assigns values to attributes such as satisfaction, loyalty, awareness and market share that are either tracked separately or weighted according to industry. Young & Rubicam has also developed a “Brand Asset Valuator” — an attribute assessment approach based on differentiation, relevance, esteem and knowledge. Other approaches no doubt exist, but the concept remains the same. Such methods often use an assigned value, rather than a measured value, and thus are subject to challenge.

  1. Brand Equity

This approach combines three elements — effective market share, the sum of market shares in all segments, weighted by each segment’s proportion of total sales; relative price, a ratio of the price of goods sold under a given brand, divided by the average price of comparable goods in the market; and durability, the percentage of customers who will buy that brand in the following year.

  1. Brand Valuation

Brand valuation methods seek to take the most robust financial data available to the model in order to arrive at a plausible valuation of a brand. While these methods are also subject to challenge, they at least strive to create an objective-as-possible marker or view of a brand’s strength.

  1. Algorithmic

WPP performs an annual valuation published as “The Brand Z Top 100 Most Valuable Brands” report. This uses a company’s financial data as well as market dynamics and an assessment of the role of a brand in income generation, and then forecasts the future on the basis of brand strength and risk. There are other similar “blended” formulas that can be developed or used to assess what is, through a particular lens, most important in a brand.

  1. Royalty Relief

Brand Finance publishes its own Global 500 study annually using a “royalty relief” approach that calculates the net present value of the hypothetical royalty payments an organization would receive if it licensed its brand to a third party.

  1. Net Promoter Score

A popular measure is “net promoter score” or NPS. NPS is a metric developed by Fred Reichheld, Bain & Company, and Satmetrix. Its power is its simplicity. Customers are asked “How likely are you to recommend company/brand/product X to a friend/colleague/relative?” and score their response from 0 to 10. “Promoters” give a 9 or 10 score, “passives” a 7 or 8, and “detractors” a 0 to 6 score. The NPS score is the percentage of promoters less the percentage of detractors, and ranges from −100 to +100.

All of these methods have strengths and weaknesses, but the important thing is to establish an organization’s brand as an intangible asset that is worth a significant amount of money — and it should be respected and managed accordingly.

Where does your brand add value?

Financial value

As you saw from the many ways of calculating your brand value, there is no one way to define what counts as value. One, perhaps the most common way to attribute value to a brand is of course through financial value. How much money does branding add to your bottom line?

Since this is a very vast topic, we’ve written a whole ebook on it with example calculations that you can follow to start defining your brand’s financial added value.

Customer value

The second component where a strongly managed brand adds value is to your customers. Concepts like brand trust, brand recognition, and brand awareness are all linked to how your brand resonated with your (potential) customers.

See these resources for detailed information:

Operational value

Branding initiatives add operational value by improving efficiency, processes, workflows, as well as consistency. Well-thought out branding activities don’t only add value through customer loyalty and recognition, they also save time, effort, and resources.

Here are some good posts on this:

Employee value

Last but not least, employee value. We know that an increasing number of employees would rather work for a company whose values and mission they share. A clearly communicated brand will increase employee retention rate, employee happiness, motivation, and brand ambassadorship.

Some additional resources in case you’d like to dive a little deeper:

 

How Unilever creates brand value [Case Study]

As we’ve learned, there are tons of ways to measure brand value and none of them is ‘the right one’. What you should measure depends on your brand management strategy. But to give you a concrete example of how others have tackled this challenge, I’m presenting this brand value business case from Unilever, one of the largest consumer conglomerates in the world.

unilever

Unilever was valued at 42,3 billion US dollars in 2020 and they spend billions on branding and marketing each year. It has been estimated that reputation accounts for about 27% of a company’s valuation. Here’s what makes Unilever’s brand unique and valuable:

Increased focus on sustainability

Unilever states: “We’re a company of brands and people with a big purpose: to make sustainable living commonplace. We want to push our business – and the way business is done – further than ever before. Find out how we’re taking action on the issues affecting our world.”

11 years ago, Unilever launched its ‘Sustainable Living Plan’ which includes several initiatives that tackle a variety of sustainability issues, from climate change to ending world hunger. Out of the big brands that are Unilever’s competition (like Nestle and Procter & Gamble), they have been unique in their vast efforts in prioritizing sustainability. This approach has certainly contributed to Unilever’s brand value, which was ‘only’ 18,8 billion US dollars in 2012.

Creating dialogue with customers

“Brand-building is like a relationship; you need to work at it all the time, it just doesn’t float along. If you’re not constantly working at it, seeking to understand what the other side in the relationship wants and thinks, that relationship will disappear.”  –  Unilever Co-Chairman, 2002

Unilever is known for its human-first, often controversial campaigns. Dove, a major beauty and personal care brand, shook the market by using real women (instead of models) of all sizes in their advertising campaigns. They communicated their values of inclusivity and body positivity and have since launched supporting initiatives, like the Dove Self Esteem Project, to further help people suffering with their body image.

Having a consistent story

While Unilever is a major player, a multi-brand company with more than 400 brands, the values of the parent company connect all the brands together, across markets. Like Unilver puts it:

Doing good sits at the heart of everything we do. So when you spot a Unilever logo whilst scrubbing, brushing, licking or sipping one of our products, you can feel proud that we are committed to creating a better world for everyone by supporting good causes.

Having a consistent message that resonates with your target customers and is communicated in interesting and fresh ways is the best you can do, a sort of ‘Hall of Fame’ of brand management. In our opinion, there is no better way to grow brand value, and in the end, the whole company.

The single source of truth for your brand assets — DAM platforms 

Lastly, it's great and clearly very beneficial for your organization to have a clear, well-managed and consistently used brand, including all of the assets you can think of. But it's equally great to have guidelines, processes and structures in place to help everybody who handles your brand assets to do so correctly.  

This is why a cloud-stored Brand Book that everyone can have centralized access to, is a good idea. The same applies to a Style Guide. These are both great tools to help you manage your brand. 

A DAM (Digital Asset Management) system then, could be the master tool to manage your brand and its consistency. It is the centralized location where you can store not only your Brand Book and Style Guide, but also every brand asset (logo, colors, photographs – and every publication anybody in your organization has ever created). 

Especially for marketing teams who are collaborating remotely with each other, their internal and external marketing ecosystem and other internal and external stakeholders, a Digital Asset Management platform like Lytho can add a lot of value. Applied strategically, you will be sure to get the most value out of your brand and the related assets by using a DAM system. 

A few things a Digital Asset Management system can help you achieve are: 

  • Using one source for all content 
    Instead of scattering your content over different tools, a DAM gathers all your marketing content in one place. This is also why a DAM platform is the most logical place for your digital Brand Book to live. 
  • Creating your own designs  
    With a DAM that incorporates ‘Create & Publish’ functionalities, everyone is a designer. Predefined templates make it easy to create advertorials, websites or brochures within your content hub – and always on-brand.  
  • Saving up to 70% of your time  
    Advanced search options and easier feedback processes within DAM systems such as Lytho allow you to spend time on what matters1. 

Want to learn more about the benefits of a DAM system to your brand management efforts? 

  • To learn more about the added value of a DAM system for managing your brand, download our whitepaper “Improve your Marketing Performance with DAM.” 
  • To learn more about the Lytho DAM platform and its core capabilities, click here or go right ahead and book a demo with us. It's free and online, and takes up no more than about 20 minutes. 
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