Mr.

Building value-based branding strategies

PETER DOYLE

Warwick Business School, University of Warwick, Coventry CV4 7AL, UK

Marketing professionals oversimplify the problem of building successful brands. As

companies such as Xerox and Procter & Gamble have learned, brands can have strong

consumer franchises yet still not generate value for investors. Brands that create shareholder

value have to meet four requirements: (1) a strong consumer proposition, (2) be

effectively integrated with the Ž rm's other value-creating assets, (3) be positioned in a

sufŽ ciently attractive market and (4) be managed in order to maximize the value of the

brand's long-term cash Џ ow. This paper shows that, when managers attend to all four

determinants, they can enhance brand values and develop more effective marketing

strategies.

KEYWORDS: Brands; shareholder value analysis; marketing; strategy

INTRODUCTION

In recent years many of the companies most renowned for their branding and marketing

skills have been seen to stumble on the stock market. Coca-Cola, Procter & Gamble, Marks &

Spencer, Gillette, Xerox and British Airways have all jettisoned their chief executives in the face

of sliding share prices. Brands have not been the promised panacea in today's highly competitive

environment. In contrast, many of the companies that have dramatically succeeded in creating

value for investors, such as Dell, Vodafone and General Electric, have not been noted for their

branding investments.

Many marketing-orientated companies such as Procter & Gamble and Gillette have oversimpli

Ž ed how brands add value to the performance of a business. Marketing has overwhelmingly

focused on the importance of developing an attractive consumer proposition and establishing a

relationship with the customer through consistent and continuous brand investment. In contrast,

this paper demonstrates that, if brands are to create value, four factors are required (Fig. 1).

Certainly an attractive consumer value proposition is the number one underpinning of a successful

brand. However, this is not enough. The brand has to be effectively integrated with the Ž rm's

other tangible and intangible resources, which are the foundations for its core business processes.

The market economics in which the brand operates must also permit returns above the cost of

capital to be earned. Finally, management has to pursue brand strategies that are directly linked

to shareholder value creation.

By focusing solely on their customer value proposition, managers can over-invest in brands.

Like Procter & Gamble they can overestimate the growth potential of their brands, which

in turn can trigger damaging erosion in their margins (Business Week, 2000). The results can

only be a declining share price and the unravelling of the company's corporate strategy. For

JOURNAL OF STRATEGIC MARKETING 9 255-268 (2001)

Journal of Strategic Marketing ISSN 0965-254X print/ISSN 1446-4488 online © 2001 Taylor & Francis Ltd

http://www.tandf.co.uk/journals

DOI: 10.1080/09652540110079038

marketing executives, ignoring the market realities and the Ž nancial drivers of the share price

leaves them exposed in the boardroom as functional advocates rather than genuine contributors

to the balanced development of the business. The remainder of this paper looks at the four

determinants of brand performance.

BRANDS AND THE CUSTOMER VALUE PROPOSITION

Marketers normally see their key area of expertise as building and developing brands. A brand

with a successful customer value proposition (Bcp) can be considered as consisting of three

components, namely an effective product (P), clear differentiation (D) and, most importantly,

added values (AV), which give customers conŽ dence in the functional or emotional beneŽ ts of

the brand. In summary,

Bcp = P Ч D Ч AV. (1)

Building a successful brand starts with developing an effective product or service. Unfortunately

today, with the speed at which technology travels, it is increasingly difŽ cult to build brands and

certainly to maintain them on the basis of superior, demonstrable functional beneŽ ts. Comparably

priced washing powders, personal computers or auditing Ž rms are usually much alike

in the performance they deliver. In order to gain and retain customers, managers need to look

at differentiating their offers further though design, logos, packaging, advertising, service and

similar. Besides making the offer look different, differentiation is the central way in which the

brand seeks to communicate its added values.

Added values aim to give customers conŽ dence in the choices that they make. Choice

today