Brand is commonly thought of as the marketing department’s responsibility. And if the marketing expense is high, that should translate into a high brand valuation. But brand is not just a marketing responsibility.
Truly Inc. published a podcast with Tracy Chong – co-founder of Strata Insights – about a brand method she helped create called Brand Economics. According to Ms. Chong, Brand Economics differs from Brand Valuation or Brand Evaluation because it considers all aspects of a business (human resources, operations, marketing, finance). These factors are then used to assign a financial qualification to the brand.
Brand drives revenue. In fact, according to a 2017 Strata Insights study, brand contributed to 34%-74% of the S&P 500’s value. Therefore, it is important to understand the brand’s ability to attract customers. According to Strata Insights, brand is not a marketing expense, it is an organizational opportunity.
As an organizational opportunity, a brand economics valuation looks at: the businesses customers, sales channels, distributors, product or service, pricing in each channel, partners, and the market at large. All aspects of the business can and does contribute to the customer’s experience with a brand.
A couple areas may be missing from Strata Insight’s model – although, Ms. Chong may not have disclosed every consideration during the podcast. The first is starting with the right name. If the theory of brand economics is a brand’s ability to attract customers, having the right name is a crucial starting point. Not only does the name have to be appealing, but it also has to standout from the crowd. Another reason why working with a naming professional is important for every business.
The second consideration focuses on the legal department and the enforcement of rights against unauthorized use of confusing similar trademarks. Ms. Chong explained that it is important to consider the entire business because any department can negatively impact the customer experience with a brand. One example she gave was the IT department designing a website to have three separate logins, which frustrates customers and creates a bad experience with the brand.
One reason to enforce trademark rights against confusingly similar marks is to prevent any negative experiences to be misattributed to your brand. This does not mean that a trademark owner needs to take on all comers, although bad trademark attorneys will say that you do. Enforcement needs to be strategic and thoughtful, but it is something that every brand owner should do because it could be the case that the brand economics assessment indicates that your business is doing all the right things to produce a high brand economic value, but the acts of another party is depressing the value of the brand.