Brand equity and its relationship to a good brand story

By Mark Di Somma

brand equity and brand story

Like most people I’ve probably tended to silo the financial value that brands generate from the story they tell. Purpose, values and story defined a brand in my view; margin and financial worth were the outcomes of a brand well executed. More recently, I’ve been wondering whether in fact these items are not so disparate after all, and whether in fact they should be directly linked: whether the margin that a brand is able to sustainably generate, and thus the value that it achieves, is attributable and proportional to the strength, relevance and longevity of its story.

David Aaker has defined brand equity as the value added to a functional product or service by associating it with the brand name. It is in effect, he says, a set of assets, including brand awareness, loyalty, perceived quality and brand associations, that are attached to a brand name or symbol. Increasingly, I believe, those assets are generated, or at the very least increased, by the stories brands tell and the experiences they deliver.

This article about brand valuation makes a number of points that appear to support my theory: “The world’s most valuable brand, Coca-Cola, is more than 118 years old; and the majority of the world’s most valuable brands have been around for more than 60 years. This compares with an estimated average life span for a corporation of 25 years or so. Many brands have survived a string of different corporate owners.” In the case of Coca Cola specifically, the product itself has not changed (In fact the one time it did change of course it was a disaster). Coke have indeed told a strong and evolving story over time – and on the basis of that, it appears, their stock value and their brand value have continued to climb. Coincidence?

A lot of people talk about the fact that brand value is momentary because it is a financial measure employed mainly on a balance sheet. But brand equity, I would suggest, is also pointillistic – it covers the impact for a brand to generate margin at a particular point in time. And it too is volatile. The brand equity of Nokia is not what it was. Nor is Blackberry. The brand equity of Starbucks dipped and then climbed again. As Carol Phillips at Brand Amplitude rightly identifies “Brand equity resides in the minds of customers”, based as she says on the sum of a customer’s experiences with the brand.

And customers can and do change their minds about what a brand is worth – to them. When they do so, that change in attitude can also have a detrimental effect on their loyalty, perceived quality and brand associations.

If there is a direct relationship between brand equity and story, how might it work? Story is critical to keeping brands exciting, and a sense of currency stimulates and sustains ongoing interest which is reflected in a brand’s ability to charge what it charges and to earn what it earns. If the story a brand tells starts to fade, it soon starts to lose its attraction. As that happens, its inherent likeability falls and consumers are drawn to other options. As consumers fall away, the brand loses market share, the ability to command higher margins and, ultimately, financial value.

So here’s my hypothesis. Exciting brands generate affinity. That affinity converts to brand equity. And that of course makes excitement itself valuable. It also makes sense that those brands that continue to be exciting will develop increasing affinity, and thus brand equity, over time. Brands with sustained brand equity reflect that in their brand value. (The “over time” element is critical because it enables brand owners to see sustained gains rather than just momentary surges as fads.) Equally, if excitement can rise, it can also fall, making it inherently volatile.

That leads to new questions. What story will you need to tell not just to stand out from your competitors but to generate the levels of excitement needed to make the money you want to make? And how will you judge your story to be a success?

Perhaps this changes the role of the brand strategist: from one of defining a position to one of defining and developing a storyline capable of generating (valuable) excitement over time. Perhaps it also changes the role of communications companies – from being in the business of generating ideas to being in the business of revealing more aspects of an exciting story. And perhaps it changes the role of the marketing manager from one of driving the brand to one of controlling the excitement that a brand generates in the market in order to make the returns it needs to make (too little excitement, and a brand is underwhelming; too much and it can burn out or expend unnecessary resource for the value it is generating).

As I said earlier, story isn’t the only criteria for success. But if a brand has a competitive  product and they are delivering a competitive experience, they should be able to judge, and even test, the power of their story against how their equity is trending, and what it means for the margin the brand commands, relative to competitors. (That said, of course, a great story won’t save an inferior product or justify an uncompetitive experience.)

How hard is your story working to generate you value? How do you know?

Acknowledgement
Photo of “Brands 2” taken by Emily Berezin, sourced from Flickr

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One thought on “Brand equity and its relationship to a good brand story

  1. Branding on the Web | Blogging is Fun!!

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