A few weeks ago, I attended a short session facilitated by Professor Richard Ettenson from the Thunderbird School of Global Management located in Glendale, Arizona down the street from my AlphaGraphics Phoenix location. Richard is the head of the marketing department at Thunderbird. In this session, his audience was a group of CFO’s from the Phoenix area. His main topic was trying to convince these CFO’s that the marketing departments are valuable assets in every company and essentially, the CFO’s should learn to appreciate them.
Just a little background on myself. Before I became an entrepreneur and started my AlphaGraphics printing and marketing companies, I was a partner with Deloitte & Touche in the audit department. I am still a non-practicing CPA and my love is still in the numbers.
Richard’s discussion was that as time goes by, a company’s marketing valuation make-up becomes more and more of the intangible variety and less and less of the tangible variety. In the intangible area, marketing and brand have become an increasing percentage of market valuation. He quoted Peter Drucker as saying in 1954 “Business has two basic functions–marketing and innovation. Marketing and innovation produce results; all the rest are costs.” Richard then went on to show how strong brands allow companies to charge a premium price while still controlling market share, thus being more profitable.
He then described the marketing and brand value chain. It went like this:
Marketing Activity-Promotes your products and services
Brand Image-What customers think of your brand relative to competitors
Brand Equity or Loyalty-The extent to which your brand image creates a preference for your brand
Customer Behavior-The extent of the change in customer behavior due to this preference
Business Impact-Incremental cash flow resulting from changes in customer behavior.
So Is Branding What It Used To Be?
During the breakout sessions where the CFO’s were supposed to come to the realization that the marketing departments are important and that the CFO’s should cut them some slack, I asked Richard how current his data was. My contention is that after the recession hit, brand loyalty took a big hit. The premium price that a brand was historically able to demand was then being compared to the price of the lessor known brands. I recited my personal experience that our customers were demanding that our prices match our lesser known competitors because price became more of an issue that loyalty and brand equity. Walmart grew while the premium brands suffered during 2009 and 2010. Richard did agree that more current data may show different results for those years, but in the end, the companies with great brand equities will become dominant again. I do agree that this is what I am seeing now. As time goes on, pricing has become less and less of an issue.
I also made the comment that the person in charge of building the brand needs to be protected from the CFO by the CEO. Branding is a long-term process and it needs time to develop. Richard responded that most companies with strong brands also have a very strong CEO.
AlphaGraphics and Branding
There are five key elements of branding:
Brand Position– This is what describes what an organization does and for whom, what its unique value is, how a customer benefits from working with it and what key differentiation it has from its competitors. Once this is identified, it can be put into a 25, 50 or 100 word version (elevator speech).
Brand Promise-What a company promises to deliver, every time.
Brand Personality-What a brand is known for. This should be 4-6 traits
Brand Story-The company history and a summary of products and services
Brand Associations-This is where AlphaGraphics really shines. Brand associations are the specific physical artifacts that make up the brand. This is the name, logo, colors, taglines, fonts, imagery, etc. Brand associations must reflect the brand promise, all of the brand traits and support the brand positioning statement. All of these factors are then displayed into the company websites, social media sites and in its marketing collateral.
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