Brand value is all the buzz these days, thanks to the recent release of Interbrand’s Best Global Brands report.  I preempted the action with a post a few weeks ago called “The Problem with Brand Valuation.”  In it I took issue with a specific aspect of most valuation methodologies — a factor to account for the impact of brand on purchase decision which gets applied on a category basis to each company’s market value.

This is just a quick follow-up to pass along 2 additional perspectives that I thought you might find interesting:

1.  2010 Best Global Brands – The Stock Market & Risk — a post on the blog of digital agency Sparxoo by David Capece.  The piece does a deep dive into the market performance of the “best” brands to answer some really important questions about the real, uh, value of brand valuation:

• Do changes in brand value predict changes in stock value, or merely reflect information that is already priced in?   Apparently they have in all of the past 10 years except 2010.
• Do the brands with the strongest momentum hold up in recessions? The answer to this question is a little more involved:  Yes, the largest brands tend to retain their brand value over time.  But it also appears that those brands that had the strongest momentum leading up to a peak are the very ones which performed the poorest immediately into the recession.
• Can the Best Global Brands report provide insight into the broader market? David makes some really interesting observations about what the relationship between past brand performance and value indicates about the current market.

Check out the entire post — it’s really informative.

2.  Interbrand’s Rankings Are Nonsense — a post by brand strategist, author, and speaker Jonathan Salem Baskin.

While I have to respectfully disagree with some of Jonathan’s more provocative statements like “brands don’t exist” and “there are no brands, just constant acts of branding,” the post offers up a very compelling alternative model for measuring brand value.  It incorporates measures like:

• efficiency — a company’s ability to create things not just faster, but more economically than lesser-known names
• risk — a company’s ability to produce lower insurance exposure and higher business performance expectations, and
• sustainability – a company’s ability to endure a product failure, corporate crime, or other negative impact.

I find a lot of merit in this way of thinking about brand value.

I hope you get as much out of reading different perspectives on brand valuation as I do.  Please share the resources you have on the topic on the comments here!

related posts:

• the problem with brand valuation
• best global brands dos and don’ts
• brand value creation — financial

Consensus Advisors just released their 2009-2010 Retailer Health Ratings (RHRs) report.  The RHRs measure and compare retailers over a five-year period on:

• healthy growth
• asset utilization
• pricing power
• balance sheet strength

The report and webinar were really interesting and so I thought I’d share some of the insights and my reactions.

1.    weaknesses of comparable store sales as a measure of retail performance

I wrote a post about this awhile ago and so I was pleased to discover Consensus shares my concern with comp store sales, which indicate the growth or decline of sales of stores that have been open for a year or more compared to the same period the year before.

Although they are the primary means of reporting retail results, “’Comps’ are short-term focused and potentially misleading when viewed out of context as they can be driven by unhealthy margins, inventory levels, advertising spend and consumer credit practices. Comps also say nothing about a retailer’s financial leverage, brand strength or ability to manage efficiently the assets on its balance sheet.”

The RHRs, in contrast, provide a more balanced and longer-term evaluation of a retailers’ performance.  Consensus uses 15 different measurements and weights them according to their correlation to the retailers’ results on commonly used financial metrics such as return on assets, net income margin, total investment return and return on invested capital.

For example, they don’t just look at the sales growth of a retailer – they also take into account sales volatility, cannibalization, and sales momentum.  And then they adjust that result to reflect operating profitability.  With this more detailed view, I find the strengths and weaknesses of a company relative to its competitors become much clearer.

2.    pricing power as a measure of brand strength

By looking at change in gross margin as well as gross margin volatility, Consensus claims they assess the strength of a company’s brand.  They explain, “As a brand distinguishes itself first from commodity competitors and then from branded competitors, its desirability to its customers can command a price premium.  Sometimes this premium is reflected in an increased price to the consumer; sometimes it is reflected in a stable selling price which does not go down as costs are reduced. Healthy companies enjoy brands that command steadily improving gross margins.”

I agree pricing power generally reflects brand strength from the consumer point of view – I’ve made this point myself.  But I wonder about how the Free economy changes this.

As Chris Anderson points out, “Virtually everything Google does is free to consumers” and yet one could argue that Google is one of the strongest brands today.  (BusinessWeek/Interbrand’s 2009 Best Global Brands report ranked Google as the #7 brand in the world and estimated its brand value at nearly $32BB — an increase of 25% from the prior year.)

For free offerings, user preference, perceived differentiation, esteem, etc. are probably the best measures of brand strength – and publicly available financial metrics such as the ones tracked by the RHRs may be limited in their ability to fully or accurately reflect brand strength.

3.    brand focus vs. product focus

Pointing to the recent struggles of youth apparel brands Pacific Sunwear, Hot Topic, and Zumiez, Michael O’Hara, Chief Executive Officer of Consensus, remarked about the risk associated with too specific of a focus.  After I submitted a question about this, he clarified his point saying that retailers need to have a flexible store concept that gives them the ability to migrate away from something that once was not but is no longer.

“Pac Sun,” he explained, “will always have to be about the beach, but to the extent that the beach goes out of style, then I wouldn’t want to be Pac Sun.”  He contrasted this with lululemon athletica which he perceives is more flexible because they’re associated with exceptionally high quality, high performance fashion apparel.  And so while right now they are into yoga apparel, he argues, if women suddenly got into ice hockey for example (but let’s hope they never do), lululemon can go there too.

While I don’t necessarily agree with him because I believe yoga defines lululemon, I do think he makes an important distinction.  In my mind the difference between these two examples is brand vs. product.   If your brand is tied to too narrow of a product assortment, it’s harder to evolve your offering as trends come and go.  But if your brand is defined more by values and personality attributes, you have more flexibility.

This is a particularly important point for apparel retailers where product demand changes so quickly.  Brand focus is indeed important but so is the ability to shift product focus — within the brand context — between categories and types.

There are lots of other juicy insights in the report so I encourage you to take a look (purchase required) or at least download the webinar presentation.

related posts:

• free to be free
• six best practices in retail

Last week I had the pleasure of serving as a panelist on the marketing track for the 26th Annual Southern California Business Growth Conference.  Co-hosted by the Harvard Business School Association of Orange County and USC Marshall Alumni Association, the conference attracted over 1,000 of the region’s elite business leaders, innovators and entrepreneurs.

Between the keynoters, Tony Hsieh (CEO of Zappos and the Author of “Delivering Happiness“) and Bob McKnight (Chairman of the Board, CEO and President, Quiksilver Inc.) and my fellow panelists, I gleaned a lot of insights.

Here are some of the best bits I took away from the day:

on thinking about business differently

Tony Hsieh:

“We’re hoping in 10 years people won’t even realize that we started selling shoes…  Maybe Zappos could run an airline.  We would be like Virgin which is so many different businesses but while Virgin is about being hip and cool, we’d be about providing the very best customer service.”

“Customer service shouldn’t be a department; it should be the entire company.”

“We don’t tell [people about customer service], they experience it. We do things like surprising them with overnight shipping, we don’t use scripts, we don’t upsell.  If we’re out of stock on an item, we’ll look at competitors’ websites and let people know 3 different sites that have it in stock and direct people to buy from there.  It’s not about maximizing every transaction; we’re trying to build lifelong relationship with customers.”

“People ask us if we’re afraid of being so transparent [about our culture and values] with our vendors.  We actually think it’s a good thing – because now we have an extra 1,500 pairs of eyes watching what we’re doing and helping us co-manage our business.”

on the importance of having a great product

Bob McKnight:

“It’s all about product – it has to be compelling, innovative and exciting.  We need to inspire loyal fans and first time customers alike to see something they have to have.”

“We have to really be on our feet on product.  In a recession, people aren’t buying just for the sake of buying; they buy for a new product, style, or technology.”

“We’re focused on product development leadership across all of our brands.  We devote all of our talent to fantastic, high quality, innovative products that help build our brand integrity.”

on fostering culture

Tony Hsieh:

described the hiring process at Zappos:  every candidate goes through 2 interviews.  One is with the hiring manager, who ensures the person has the right skill set, relevant experience, etc.  The other is with human resources, who interviews for fit with our culture.  People must pass both to be hired.

“Your values must be committable, meaning you have to be willing to hire and fire based on whether people are living up to them regardless of job performance.

Bob McKnight:  “Of course we enjoy the $300,000 orders from Nordstroms but we focus on the $300 order from [independent surf shop] FrogHouse.  We always need to focus on the core [customer] and if we do that, we can’t lose.”

on why brands matter

Michael Distefano, Chief Marketing Officer, Korn/Ferry International:

“If you give a man a fish, he eats for a day.  If you build the man a brand, all the fish swim to him.”

“Brands take away the guesswork.” [brands lay the foundation of trust with customers so you can cross-sell]

Ray Baird, President and Founder, Rieches and Baird:  “Brands create value for companies.” [brands represent an average of 66% of assets on the balance sheet for B2B companies, according to Interbrand/Business Week]

on brand development

Ray Baird:  “Alignment with the business strategy is key.  Oftentimes I have to tell clients, ‘you don’t need a brand; you need a strategy.’”

Mark Anderson, Managing Director, TrueNorth International: “There are 3 things when it comes to visual expression of the brand:  it must be consistent, it must be tightly controlled, and it must be pervasive.”

Peter Bretschger, CMO/CFO, Integrated Marketingworks discussed the need for an inciting marketplace condition in order to introduce a brand:  whether you take advantage of something that just happened (e.g., Ford seizing the moment during Toyota’s recalls) or you create the condition through a PR campaign, you need to build a heightened awareness of the need for the solution you’re selling.

Michael Distefano:  “For service providers, you need to be flexible [about your brand strategy].  You need to get input from your stakeholders and make adjustments because they’re the ones who have to buy it in order to sell it.”

Tony Hsieh – “The telephone is one of the best branding devices out there.  You’ve got 5 minutes with a customer and if you get that interaction right, they’ll tell their friends and family and they’ll become loyal customers for life.”

Ray Baird discussed the trade-off between building a brand fast, cheap, or well, saying “ The big idea makes time for itself…nobody remembers us for how fast we got something done or how much they paid us for it.”

Recently several manufacturers have announced that they are initiating an e-commerce business.   I’m not sure of the motivations behind these moves but it seems to be a growing trend. Although many manufacturers have been offering direct sales for many years through their own e-commerce sites, it seems we’re seeing a new surge of interest in doing so from players who have historically shunned the idea.

And this got me thinking about how a manufacturer could do e-commerce in a way that doesn’t simply cannibalize the sales would be generated by a third party distributor or retailer, but instead would increase the value of the brand which is delivered to the customer. I can think of three ways a manufacturer might do this.

First:   exclusive product selection. Whether it is a wider selection of product that is available in other channels and/or special product that is not available in those channels, a manufacturer’s own website is the best place for it to merchandise the best product selection that they have to offer.

Kipling is an example of a brand that has strategically used product selection on its own website.  Kipling is a maker of travel bags, handbags, backpacks, and other accessories.  Its products are primarily sold through department stores, travel goods retailers, and a select number of Kipling retail boutiques.

Several years ago the Kipling team launched its own e-commerce site — and with its exclusive product selection, it was able to strengthen its brand perceptions.  You see, Kipling was growing its handbag business but some retailers were not interested in carrying a wide selection of Kipling handbags because it was an unproven product line competing for shelf space with established choices.  So Kipling used its own e-commerce site to roll out and promote its full product lines of handbags.  As such, it was able to expand the brand footprint and merchandise the best of what the brand was becoming.

The second way a manufacturer can increase the value of its brand through its own website is by offering customized product — either the ability to select certain features on products and/or allowing people to add their own personal touches to the product.

A good example of this is NikeID.

On the NikeID site, people can customize nearly every kind of Nike product.  In many cases, the ability to customize is quite extensive.  On footwear, for example, customers can indicate their preference on functional, performance variables like base material and cushioning technology – and they have style-oriented choices like selecting the color of the shoelaces and having their name or other text stitched onto the shoe.  Customers can also use the site to show off their designs to others and/or view designs from around the globe for inspiration.  As such, the site serves to further the promise of self-expression which is at the core of NikeID brand.  And this is only possible through NikeID’s own channel.

Manufacturers can also use their own sites to foster brand community.  Many retail sites feature their own community (e.g., Best Buy’s Twelpforce), but that community is focused on the retailers’ brand.  A manufacturers’ e-commerce site enables the manufacturer to develop an exclusive community for its own brand fans.  A good example of this comes from LeCreuset, the cookware brand established in 1925.

The folks at LeCreuset had noticed that LeCreuset customers loved sharing with each other on other cooking sites recipes, tips for usage, and stories about the LeCreuset brand and the importance of it in their lives.  They wanted to participate in the conversation and lead and inform it, so they launched their own e-commerce site.  In addition to giving users the ability to post content, create profiles, and share recipes, the brand team posts interesting tidbits about the brand, introduces new products, and solicits new ideas, etc.  Through the site, LeCreuset not only sells directly to consumers but more importantly engages with consumers and fosters the kind of community that builds brand affinity and loyalty.

Earlier this year I had written a post called “can anything retailers do, manufacturers do better?” It was inspired by a conversation I had with someone about the unique advantages that retailers have over manufacturers.  It was written in part as a response to the many retailers who were developing their own product lines as a way of trying to compete with the manufacturers’ brands they carried.

At that time I suggested that if retailers were indeed going to try to compete with manufacturers, rather than simply creating their own product lines (which may or may not be the same as or better quality or value than the manufacturer’s brand), they should instead focus on the things they can do that manufacturers can’t.  This post is almost the reverse of that one – the above are things that manufacturers can do that retailers can’t.

Between the two posts there are the common themes of differentiation and added value, both of which are important concepts for brand-building and business growth.   I would suggest every strategic business move including introducing a new website ought to further differentiate the brand and/or deliver additional value to customers.   Otherwise, why do it?!

If you’re only going to launch something in order to be comparable to existing alternatives, the growth that comes from that launch is inherently limited because the most you can hope for is to steal share from those existing options.  However if you are truly differentiating your offering and adding value for customers, not only can you get a larger slice of the pie, but there’s also the potential to grow the size of the pie itself.

related post:

• can anything retailers do, manufacturers do better?

Why should stockholders care about a company’s brand? That’s the subject of today’s post, the 3rd in a series on the many ways a brand creates value for a company.

I’ve discussed brand value creation from the Customer perspective and from the Financial perspective of  immediate revenue generation.  I also want to describe brand-driven Financial value creation in terms of market valuation.  Specifically, does a brand impact shareholder value and how?

The market share and margin benefits produced by a strong brand (explained in my previous post) certainly impact earnings, which in turn deliver dividends or distributions for shareholders.   A strong brand also increases the market value of the business to Wall Street and investors.

The evidence

Research from Interbrand, Brand Finance, and other respected brand valuation firms, as well as academics from Columbia University Business School, Cornell University’s Johnson Graduate School of Management, and Dartmouth College, has proven the power of a brand to increase share price and stock valuations.

One particularly compelling example:  An investigation by Harvard University Business School and Boston University School of Management professors Thomas Madden, Frank Fehle, and Susan Fournier provides empirical evidence of the value to stockholders of a firm’s brand-building activities.

Examining monthly stockholder returns data for the period 1994 to 2001, they found that a portfolio of brands identified as strong (based on a well-known, widely-accepted methodology by Interbrand and used by BusinessWeek for its annual Best Global Brands report) displayed statistically- and economically-significant performance advantages such as stock returns and returns on equity versus the overall market. Commenting on the findings, Fournier wrote, “The effects of brands on shareholder values were powerful and dominant and far outweighed commonly acknowledged factors such as market share and firm size.”

The research even goes one step further, finding that firms which had developed strong brands created shareholder value with less exposure to risk.  The professors conclude that their results “support the role of the brand in reducing the volatility and vulnerability of cash flows.”

So it’s clear a strong brand makes a business robust for shareholders — but why?

The explanation

Brands produce higher market valuations due to:

• stronger customer equity (defined as the total lifetime values of all of the company’s customers) — brands are the primary conduits through which loyal customer relationships are formed, nurtured, and maintained
• development of intangibles — brands drive differentiation and perceived value to customers beyond that which a company’s tangible product or service produces
• more efficient business processes — brands optimize the 3 primary processes of any business (product development, supply chain management, and customer relationship management) and the resources that drive each (this will be discussed in more detail in my next post — I’m using the Balanced Scorecard as an organizing framework for this series and am making my way through the 4 quadrants, in case you’re wondering.)

Questions?  Comments?  Please share.

Here’s Post #2 in a series on how brands create value.  I’m using Kaplan and Norton’s Balanced Scorecard as an organizing framework and kicked the series off with the Customer perspective.  Today, the topic is Financial brand value creation.

How brands create financial value is such an important topic (it’s really where the rubber meets the road, right?!) and there are so many data points and examples to reference, I’m actually breaking down the Financial quadrant into 2 posts.  This one is about the short-term, immediate value which brands stimulate for their owners.

Many analyses have proven a stronger brand shifts the demand curve and produces gains in market share and margin. The following are a few specific data points.

1.  According to Millward Brown (MB), one of the world’s leading research companies, stronger brands enjoy higher market share than weaker ones. The firm’s analysis compared over 350 brands using two key measures:

• “Presence” — how many people know about a brand and understand what it has to offer. MB explains, “A brand with a high level of Presence will enter a buyer’s consideration set more easily than a brand with low Presence.”

• “Voltage” –  how efficiently a brand converts people’s knowledge into loyalty. “Because higher levels of loyalty are associated with increased probability of purchase, a brand with a high Voltage score is positioned well to grow its share of sales in the category.”

The result?  The average market value share (defined as a brand’s share expressed in terms of monetary units – not volume sales) of those brands that scored higher on both Presence and Voltage was 15%. In comparison, those brands that scored lower on both measures held only 3% share on average.  MB’s report concludes, “Brands are valuable to companies because they are valuable to consumers.”

Kimberly-Clark Corporation, the paper products company, provides company-specific evidence of the effects of brand-building on market share.  After introducing a new feminine care brand strategy in Korea intended to increase the differentiation of its products and to target specific consumer needs, the company’s market share in that region grew from 20% in 1995 to over 60% in 2003.

2.  A brand’s positive impact on margins is demonstrated in another Millward Brown analysis (reported in the same paper).   In this research the firm examined over 200 consumer packaged goods brands. It found that brands in the top third of consumers’ esteem (defined as “I have a higher opinion of it than others”) garnered a median price that was 11% higher than the category norm.

By generating such a substantial price premium, MB explains, brands drive higher margins. “The consumers who care about getting the right brand will pay more for it if they can be convinced that it offers key advantages over others,” according to MB.

An industry proof point for the role of a brand in driving higher prices comes from DuPont.  The chemical company conducted a price premium analysis to ascertain the value of the Teflon brand, a non-stick coating for pans and other cookware.  In a test market, the company sold two pans which were identical except one carried the Teflon brand name, the other a generic name.  The experiment revealed that the Teflon brand commanded a price premium of $2 per product. What’s more, it also achieved a higher sales volume than its non-branded counterpart.

These are just a few select analyses and examples that speak to the Financial value of brands.  In post 2 of the Financial quadrant, I’ll review the longer-term, bigger picture dimensions.

Hope this series is helpful and interesting to you — comments and questions are always welcome.

Today I’m launching a short series on brand value creation.  My intent is to outline the ways brands create value, organizing the points by the four quadrants of The Balanced Scorecard.

But let me give you the background first.  The other day, a colleague* and I were discussing the role of marketing and the bad rap that marketing and marketers sometimes get.  We agreed that certainly some people misuse marketing, using it to manipulate and deceive; but on the whole, we believe that marketing is a good thing.  “Marketing is really a service,” my colleague affirmed.

The discussion got me thinking about the role and value of  brands — I firmly believe a strong brand is a good thing and actually have included a section in the first draft of my book about the value the brands create.  So I wanted to share my thoughts here and get your reactions and comments.

Because there are so many ways that a brand creates value, I’ve adapted The Balanced Scorecard, the performance management tool introduced 15 years ago by Robert Kaplan and David Norton, as an organizing framework.  I find The Scorecard serves as a helpful tool for identifying all of the areas of a brand’s positive impact.   In fact, examining the benefits of a strong brand across the four sections of the Scorecard — Financial, Customer, Internal Business Processes, and Learning and Growth – reveals how critical one is to a business.

Today’s post covers brand value creation from the Customer perspective (the next 3 posts will deal with the other 3 quadrants.)  The obvious impact brands have on customers makes the Customer quadrant of the Balance Scorecard the easiest of all to adapt to detail the benefits of a strong brand.

Generally speaking, brands help customers navigate the myriad of choices they face in today’s marketplace.  The average supermarket has 25,000 products on its shelves.   There are nearly 19,000 restaurants in New York City alone.   Americans have over 19,000 magazine titles  and over 115 television channels to choose from.

Here are a few ways brands simplify and facilitate purchase decisions, thus creating value for Customers:

• A strong brand gets people’s attention and puts specific products and services on their radar screen.  It helps customers find the product, service, store, or experience they’re looking for.  Plus brand awareness and familiarity alone have been shown to lead to brand liking.  As such, a brand can reduce the perceived risk of a new purchase simply by being well-known.
• Furthermore brands help customers edit their choices more easily and quickly because the associations people have with different brands help them differentiate between choices.  If, for example, you are looking for a nutritious cereal, you would look for the Total cereal brand; whereas a search for a fun, kid-friendly cereal would lead you to Cheerios instead.  You easily distinguish between these choices based on the associations you have with each brand.
• Providing reasons to buy is another way brands impact customers.  By embodying meaningful benefits that represent value to customers, brands encourage purchases.   In today’s economic environment, brands actually help customers justify their purchases — to themselves and to others. And in some cases, brands help justify paying more for something.

Some might accuse brands of having too much of an impact on customers, blaming brands for the over commercialization of our culture.  The counter argument says that brands serve as engines of our economy, driving business growth, improving people’s lives, and contributing to the progress of society. Net net, I believe the positive value created by brands for customers outweighs the negatives.

Check back in a couple of days for my thoughts on brand value creation from the Financial, Internal Business Process, and Organizational Learning and Growth perspectives.  In the meantime, I’m eager to hear your comments on how brands create value for customers.

* Thanks goes to Brad Bennett for inspiring the series — Brad is a dear, dear friend and former colleague (we worked together at Spiegel catalogs, which was my first job out of school!) Brad runs his own ethnographic research firm and is a valued strategic adviser to Kraft, Clorox, and other big brand companies.

Last week, Interbrand Design Forum the retail arm of the global consultancy of the same name released The Most Valuable U.S. Retail Brands 2009 report and it is a must-read for anyone who wants insights into the retail sector.

The actual most valuable brand rankings in the report are, as with all brand valuation lists, a bit misleading as the list omits privately-held companies, so retail gold-standards like Apple stores, Trader Joe’s, and REI aren’t ranked.  But the reason to read the report is all the supplementary content.  In addition to a brief analysis of each of the top 50 retail brands, the report includes educational and provocative research and editorial on a range of brand topics.

Some excerpts:

• from “Lessons from the Most Valuable Brands“:  Initiatives will always need to be built around shopper frequency, loyalty, margin, relevant assortment and top-and-bottom line growth. The notion that’s new to most [retail] companies is that brand — one great idea that generates value — drives them all. An overarching retail brand strategy can align these initiatives, making them more effective in total.

• from “Where are the Department Stores?“:  The [department store] format is still distinguished by a high level of departmentalization, which presents a challenge to the brand experience.  Its functional and merchandise specialization needs to be guided by the master brand to prevent a muddle of sameness between competitors, and to halt the loss of brand equity.

• from “The Misnomer of Specialty Apparel“:  Fashion retail presents great opportunity and great risk — the ability to generate high margins with the uncertainty of the duration of trends.  However, the lack of differentiation among the top brands suggest that the field is suffering from risk avoidance.

• from “Scale Alone Does Not Make a Grocery Brand“:  Traditional grocery earned the weakest customer loyalty scores.  Over-reliance on discounts, rewards and promotions undermines any move towards a meaningful proposition and results in low brand strength…As long as their vendors continue to pay for play, supermarkets may see no need to understand and serve the shoppers in their stores.  Brand thinking begins with the idea that addressing shopper needs increases frequency and basket size.  Without it, a store is simply a box full of other makers’ brands, and a master of none.

• from “Every Brand Tells a Story“:  According to our research, about half the population does not believe retail experiences are delivering against the promises made by the brand advertising.  They find innovation in both merchandise and experience is lacking across all retail…Shoppers will always need a reason to buy, but a branded shopping experience can help build long-term equity that will matter in an up or down economy.

• and the best points of the report (from “The Curious Case of Walmart“):  There’s a difference between “selling” and “branding.”   Selling is putting great deals on the shelf and promoting them.  Branding puts an idea into the customer’s heart and mind by selecting great deals that are relevant to people’s needs and desires…You can’t just out-operationalize the competition anymore.  Now that the low-price bar has been set, an emotional connection is the strongest bond a retail brand can have today.

Last week’s Ad Age juxtaposed 2 pieces worth noting:

First was an excerpt from David Aaker‘s latest book, “Spanning Silos:  The New CMO Imperative.” Its main thesis was, “Autonomous silos defined by products, countries or functions, often operating in isolation if not in competition with each other, are no longer a viable option…However, that does not mean the answer is to blow them up, or even that the goal of the organization should be to centralize or standardize. Rather, silo-driven problems should be addressed using a variety of approaches, each geared to the context at hand.”

It went on to provide recommendations for addressing silos such as “One route to getting the CEO onboard is to align the role of marketing with that of the CEO’s priority agenda” and “Another route is to use hard numbers to show the relationship between marketing and financial performance.”

While I agree with these points, I found them quite intuitive and was left wondering what the big “a-ha” is.  I am a big fan of Aaker’s (his Managing Brand Equity and Building Strong Brands texts have largely shaped the thinking and practice of my 18+ year career in brands), so I’m taking a risk by questioning what’s the news here.

But I do hope the book provides more prescriptive and specific advice, and gets into what the piece features as its last sentence “The key is to provide the freedom that will empower the silos to hit home runs and give the organization communication and sensing power to identify great marketing when it does occur; and the process power to test the ideas and roll them out.”  Learning how to do that would be great.

The second of the 2 Ad Age pieces was a commentary by Jonathan Salem Baskin, author of “Branding Only Works on Cattle.” I’ve only recently gotten to know Jonathan, but the more I learn his POVs, the more I really value them.

His piece discussed how Steel City Re developed an innovative way to objectively measure their brand’s value.  Their methodology, Jonathan explained, “quantifies ‘reputation’ as the sum of non-balance-sheet assets that can be managed and changed — that is, the business processes that drive quality, affirm sustainability, create security, ensure safety and promote integrity.”  For a company like Steel City Re, their “reputation” functions like their brand, so essentially they’ve developed a forward-looking management tool that helps them assess and manage risks to their brand.

Jonathan ended his column by saying, “Thinking of brand as the outcome of business performance rather than what’s applied to business performance would open up both resources and ideas (and not just nice words and images) that should be applied to the dire challenge of selling stuff.”  Wow — that’s a big idea!

And it’s a great answer to the challenge to “reframe marketing as strategic — a driver of the business strategy instead of a tactical management function” which Aaker issues in his piece.  Thanks, Jonathan, for outlining one way to make “brand as business.”

Matsushita Electric Industrial Co. has officially changed its name to Panasonic Corp (see release.)  The company also ditched its National brand, which has been in use for over 80 years for white goods in Japan, and intends to have all of its products carry the Panasonic brand, which has long been the firm’s brand name abroad and for audiovisual appliances sold in Japan, by the end of March 2010.

The change is reported to be costing the company 40.0 billion yen ($380.0MM US) — a hefty investment given that the company’s ad spend was only $50MM last year, excluding online, per Nielsen Monitor-Plus.

Moving to a single brand yields efficiencies in marketing and simplicity in communication — and in Matsushita’s case, adopting a brand name with the stronger awareness should bolster equity with consumers as well as other stakeholders (suppliers, distributors, investors, etc.).  Further it facilitates equity sharing across product lines, so established attributes in one product category can provide a positive halo in others.

However tying all of the company’s activities more closely together does come with some downsides.  One is exposure to risk — if one product experiences a recall, for example, all of the company’s products are associated with that quality issue.  Likewise, it may hinder expansion into new categories or markets if the limits of the brand’s elasticity cannot be stretched — consumers may not give Panasonic “permission” to get into productivity devices, for example, because the brand is too closely associated with entertainment.

Apparently the company’s leadership felt the trade-offs were acceptable.   In making the move, the company says it is “bringing the achievements accumulated through the three different names of Matsushita, National, and Panasonic under the one single name of Panasonic to enhance its brand value.”

Panasonic’s current brand value is $4,281BB according to BusinessWeek’s Best Global Brands list (based on analysis by Interbrand) — so it’s #78 on the list.  Other electronics brands are more valuable:

• Samsung — $17,689BB/#21
• Sony — $13,583BB/#25
• Canon — $10,876BB/#36
• Nintendo — $8,772BB/#40
• Philips — $8,325BB/#43

So the brand certainly lags these days.  It will be interesting to see whether the change yields the brand value payoff the company is seeking.