By David Edelman, McKinsey Partner – Digital Marketing Strategy Practice
CEOs and executives have understood for a long time that a company’s brand is important and goes way beyond just a logo and tagline. But questions about the actual value of the brand have often relegated this vital asset to a fuzzy, feel-good, slightly nebulous item that rarely gets the executive attention it deserves.
It turns out that companies can determine how much a brand is worth. We’ve seen this most recently in the bidding war breaking out for Steinway, which is a brand that transcends time and technology. It has legendary cache, in a way that fabled brands like Kodak or Polaroid did not. We know that strong brands with good reputations have 31% better total return to shareholders than the MSCI World average. I love this quote from Kasper Ulf Nielsen, an executive partner at the Reputation Institute, on this topic: “People’s willingness to buy, recommend, work for and invest in a company is driven 60% by their perceptions of the company, and only 40% by their perceptions of their products.”
So how did Steinway develop such a valuable brand? Well, it starts with an excellent product. But to build a valuable brand, the company’s value and story must go beyond a single technology or product at a point in time. Coke, Nike, Starbucks all have this. There is an emotional resonance that justifies a premium. With the growth of aspirational high income households in developing markets, legendary brands like Steinway have staying potential — if the story can be extended and brought to life in new markets.
I actually believe that a company’s brand is becoming more important in today’s digital economy. There are so many choices that customers need to make today – products, services, upgrades, channels, etc. The digital revolution has led to a proliferation of touchpoints with brands. It can be overwhelming, so a company’s brand is a critical and reassuring reference point for a customer.
It’s also important to bear in mind that this isn’t just a B2C story. The power of brands for B2B companies is critical as well. B2B companies with strong brands outperform weak ones by 20 percent, according to an analysis my colleagues did recently.
I play the saxophone, but I know the power of a Steinway. And now at least a few investment companies do too.
So, how do you know how much your brand is worth?
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