brand value creation — internal business process
The series on brand value creation continues today with a look at how brands create value for companies in their Internal Business Processes. Although a brand’s ability to create value from the Financial and Customer perspectives is probably the most important, its impact on Internal Business Processes is the most fundamental.
Let me back up a bit. As a reminder, we’re using the Balanced Scorecard as a framework for identifying all the different ways brands create value for companies. The Internal Business Processes section of the Balanced Scorecard is intended to help leaders evaluate how well their business is running and whether its products and services conform to customer requirements.
A brand lends itself to such an evaluation if the company has adopted the “brand-as-businessTM” management approach.
What is the “brand-as-business” management approach? It is the deliberate and systematic management of the business around the brand — thinking of the brand as the business. The “brand-as-business” management approach is based on using your brand as a management tool, not simply a marketing asset. It’s about operationalizing your brand — integrating your brand and your core company’s operating system. (The American Management Association recently published an article of mine which explains “brand-as-business” in more detail.)
OK. So that was all to set up the discussion on Internal Business Process brand value creation. When the “brand-as-business” management approach is employed, the brand impacts the three primary processes of any business:
- product development
- supply chain management, and
- customer relationship management
– and the resources that drive each.
Processes. To the business processes themselves the “brand-as-business” management approach contributes focus, efficiency, and power.
- For example, in the product development process the brand focuses R&D on target requirements and value delivery as articulated in the brand platform. And the brand is used as a filter at each juncture of the stage-gate process. Evaluations of the fit and viability of new offerings happen faster and more easily with the brand providing a clear, consistent standard.
- A strong brand also reduces the cost of new product introductions and improves the success rate of line extensions, cross-selling, and up-selling by stimulating trial and adoption among existing customers. As noted in my post on Customer brand benefits, customers are more likely to try a new product if they already have a relationship with the brand.
- In the supply chain management process, a strong brand can give a business more negotiation power with suppliers, manufacturers, and distributors. Having the upper hand in negotiating inventories, logistics, and payment terms is certainly a desired advantage in the constraints of the current business environment.
- Brands impact the third primary business process, customer relationship management, by helping the company to establish relationships with customers in the first place. Over time strong brands engender trust, and when customers trust a company, they are willing to give the company information like personal data, insights about needs and preferences, and usage information which enables the company to create better customer contact and service strategies.
- Those advantages then help businesses retain customers by fostering relationships which are valued by customers. And instead of having to rely on instituting switching costs which deter existing customers from defecting to a competitor but which may also pose barriers to customer acquisition, companies with strong brands simply enjoy brand loyalty — which by definition prevents brand switching.
- Brands also make customer relationships more profitable — an increase of 5% in loyal customers in some categories delivers 95% greater profitability over a customer’s lifetime, according to brand loyalty expert Robert Passikoff who founded and heads up Brand Keys, a research consultancy specializing in customer loyalty.
- Furthermore, Passikoff’s research indicates it takes 7 to 10 times the cost to acquire a new customer as it does to keep an existing one.
Resources. At the resource level of Internal Business Processes, a brand-driven management approach is about optimization.
- A strong brand optimizes your human resources, for example. You can experience better results in recruiting because a strong brand attracts a larger and/or better applicant pool. One fast food restaurant chain experienced a dramatic increase in responses to its help-wanted ads simply by adding visual elements from the brand identity to its advertising.
- Companies which employ the “brand-as-business” management approach use the brand as a means for screening candidates, on-boarding new-hires, and training employees more quickly and effectively. In “The IBM Way”, former IBM marketing executive Buck Rodgers explains the approach his company adopted, “IBM begins imbuing its employees with its…philosophy even before they’re hired, at the very first interview…Basically, anyone who wants to work for IBM is told: ‘Look this is how we do business…We have some very specific ideas about what that means.’”
- By using the brand to inform, inspire, and equip people, companies produce a workforce that is aligned, focused, and motivated. In turn such a workforce produces more efficient operations, higher quality output, and increased employee retention.
- A strong brand also optimizes your technology resources and other tangible assets by facilitating relationships with other companies from whom you acquire or with whom you develop these resources. The greater your brand equity, the more desirable your company is as a customer or partner to these other companies.
Internal business processes and the resources which they draw upon are beneficiaries of a brand that is well-established and well-leveraged.
My next post will be the last in the series — Brand Value Creation — Learning & Growth. Stay tuned.