Thursday, July 02, 2015

Brand Equity and Customer relationship Value: A Dramatical Shift

For the longest time brand equity has been one of the key priority of businesses in order to stand out of the competition. A strong brand implied great values, and the ability to develop sales growth and value to companies over a long period of time. 

This is the reason why a lot of M&A happened in order to acquire those brands. The value of one company was linked to how people tend to perceive their equity. This is actually what is going on right now with a lot of FMCG companies like Unilever or Procter & Gamble or Mondelez which are trying to sell some "non strategic" brands in order to be more efficient in developping the other one.

"This graph, based on data from the MARKABLES database, represents brand and customer relationship valuations as a percent of total enterprise value. The percentages come from fair value assessments done by purchase price allocation experts according to established accounting standards."
You can clearly see that companies and the way they are valued tends to spend more focus on customer value than on brand value. And actually, companies that succeed are doing this shift.

Let's take the example of Amazon. Amazon has a strong brand, but it has not been built on any advertizing or standard bolding of the brand. It is due to the customer service it provides, which create the brand in the mind of customers. Also, focusing on customer relationship management allows company to have a more direct link between the investment and the return on investment, which is hard to perceive while analyzing brands.

Now don't get me wrong, I still believe branding is key and important, and a real asset for one company. But as standard loyalty reward programs the business has changed so much the way companies work their brand around has fundamentally changed, especially due to social media.

Therefore,we can clearly see the reason why customer service, CRM and social media investment are so important in order to create value for one company.