Revisiting the value of branding
It’s an ongoing question we hear from healthcare organizations: how can you prove the real, quantifiable value of branding for our organization?
The “New Science”
There’s been a lot of research on this issue, and many findings conclude that there is a demonstrable, bottom-line value to an organization from effective branding. Anecdotal evidence is abundant, but what about quantifiable proof? Two recent stories in BusinessWeek point to both the advances made in this area, as well as the ongoing difficulty in answering this question.
An article titled “What price reputation?” (July 9, 2007 issue) outlines how some companies are taking new approaches to measuring the value of their brand. The article calls it the “new science of reputation management,” and it involves the exhaustive study of hundreds or thousands of brand points over an extended period of time to measure their impact, separate from other influences such as changes in the economy. The author states:
“Indeed, a company’s reputation for being able to deliver growth, attract top talent, and avoid ethical mishaps can account for much of the 30% - to 70% gap between the book value of most companies and their market capitalizations. Reputation is a big reason Johnson & Johnson trades at a much higher price-earnings ratio than Pfizer, Proctor & Gamble than Unilever, and Exxon Mobile than Royal Dutch Shell.�”
The article frames a broad discussion about the value of such research, and the pros and cons of pursuing such a scientific approach to valuing branding. There’s even the voice of discontent from those who scoff at the notion of the impact of reputation and branding. For example, one investment pro is quoted:
“Very little, very little,” said stock analyst Raymond F. Neidl of Calyon Securities when asked how much he thinks PR influences his investment decisions on Southwest Airlines, which he covers. “The markets are smarter than that.”
What he seems to be claiming is that he, and the rest of the analysts, are able to objectively evaluate their financial options without any other influences, such as the charisma of a leader, the history of a company, the strength of the marketing and branding efforts, etc. Unfortunately for Raymond, reams of research and basic common sense would contradict his statement. These influences have a powerful effect on most everyone, regardless of age, intelligence or position.
But an imperfect science…
And unfortunately for us in healthcare, Raymond’s attitude about the impact of branding is fairly commonplace. How many times have you heard: “I’m a great physician with a solid quality record and certification – why do we need branding?” It’s the classic “build it and they will come” approach.
The article in BusinessWeek provides more evidence that branding does have an impact on a company’s bottom line, and it shows how some experts are going about measuring that impact. The difficulty in measuring the value of brand is apparent, if not intentionally, in another article, “Best Global Brands” (August 6, 2007). The article features the magazine’s rankings of the top 100 global brands, based on a methodology developed by brand consultant Interbrand. Interbrand is recognized as a preeminent authority in evaluating and quantifying brands, and BusinessWeek has partnered with the company for years in ranking the top domestic and international brands. Yet even these rankings have some deficiencies. For example, it relies on information available only from public companies, which eliminates huge brands such as VISA or Cargill. It judges individual brands, not collections of brands, so no Proctor & Gamble. Other whole industries, such as pharmaceuticals and airlines, were exempt for other reasons.
Later, in the description of the process Interbrand uses to evaluate brands, subjectivity seems rampant. At the end of the description, the author notes:
“BusinessWeek and Interbrand believe this figure comes closest to representing a brand’s true worth.”
So even the top experts in this area admit that an exact, quantifiable ROI on branding is elusive. But they’re trying. The ability to do this for an individual organization is a new “science,” but it’s here, and it only bound to spread as more and more companies see the value in measuring their brand. And as consumerism and market dynamics continue to change in healthcare, the drive to quantify brand value will continue to grow as well.