Study finds branding drives increase in business value (Spoiler)

branding business case

Branding‘s big pay-off.

We often hear the sentiment that branding is a ‘soft’ business investment. It’s considered a ‘nice to have’ and ‘hard to measure its value’.

Having spent the last 28 years working with clients to build their brands, our experience over hundreds of businesses is that the value of what we do is often overlooked or limited by an ‘it’s only branding’ mindset. Whether relaunching a feminine hygiene brand to 1500% increase in sales, or launching Australia’s first trampoline centre brand with such velocity it created a new global category – we’ve seen how the power of brand can make a significant difference to clients time and again.

Hard research demonstrates the value of branding.

A recent study by the Lubin School of Business at Pace University in New York has demonstrated the case for branding as a generator of business value. The study found a direct correlation between positive brand perceptions and increased brand equity, which were found to be significantly associated with perceived price above and beyond book value and earnings information.

‘Evidence of this value is supplied by recent examples of the substantive sale price of a brand even after bankruptcy and liquidation of a firm’s remaining assets, writes Amy Zipkin, a source quoted in the study.

The value of a business reflects investor perceptions of the current and future earnings potential of all its assets, both tangible and intangible (Simon and Sullivan, 1993). Investors view brand equity as ‘the capitalised value of the profits that result from associating that brand with particular products or services.’ 

Thus, anything that might positively change investor perceptions of brand equity will affect the businesses value due to positive perceptions of impact on future earnings.

Investors recognise the role that brand plays in a business’ ability to attract and retain customers. As investors’ perceptions of a business’ brand strength increase, the market reacts accordingly, adjusting perceptions of the financial valuation of the business.

The study found incontrovertible evidence that a strategically considered and professionally executed brand increases the value of a business beyond book value and earnings.

Whilst investors recognise the value of brand, for many businesses it is not a priority. This creates a plethora of rich opportunities for organisations across every category to include brand in their strategic planning and take advantage of their competitors lack of commitment to building this valuable business asset.

Dave Ansett
David is the founder of Truly Deeply, a brand agency with 25 years experience working with brands to position them for growth. His deep expertise is in the creation of high engagement brands that attract the attention of their audience and stand out from their competitors. David has extensive experience working with corporate, retail, food & beverage and entrepreneurial clients. Find out more here
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If you’d like to read the study; The Impact of Brand Value on Firm Valuation, click here.

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