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Is there value in values?

Earlier this month I had breakfast with my old friend Anne Bahr Thompson in New York. She is an exceptional thinker who used to run the strategy practice at Interbrand.
Anne has invested the better part of the last three years developing the notion of what she has trademarked as "BrandCitizenship".

Her contention is as powerful as it is simple.

The  data from  three years of this research suggests that in a world where paternalistic structures are increasingly impotent, some brands seem to have the ability to command the respect traditionally attributed to institutions like government, the judiciary and the fourth estate. In other words, her work suggests that we are far more likely today to believe what an Apple or a TATA were to say, than we would The Wall Street Journal or even Mr Obama. As a corollary, Brand Citizenship seems to suggest that brands and businesses that enjoy high "citizenship" ratings  ( BODYSHOP at one time) will score highly on measures like disposition and leadership.

The last ten brand valuation clients I have been involved with, represent a little over $ 25 billion in market capitalization, across diverse categories like media, travel, food products, chemicals, financial services and speciality retail. It is indeed telling that on average, just under a quarter of the value of these businesses lies in their corporate reputation alone ( traditionally grey stuff like ethics, transparency, governance and community participation). In simple terms, a fourth of the economic profit generated by these firms is a direct result of the way people think about the company (as against the delivery of their products or services)

All this then begs the question of what investors( both institutional and retail) might look for in their investments. For my money, in  the not so distant future, the focus of due diligence and disclosure will shift from the financial statements to the strength and character of your reputation.
Think about it: would you put serious money as easily into an opaque high performer as you would into a committed leadership with a transparent long term focus.

Why are we more excited about new friends but always lean on old friends. Is it because old friends have generally been more dependent at crunch time. Anne's thesis  is that there is a certain dependability to businesses that demonstrate high citizenship values. As such, we tend to look up to them (leadership) as well lean on them( disposition)

Now if Brand Citizenship can drive up a brand's leadership and disposition metrics with its customers, thereby accelerating demand, then it just makes sense to manage and measure it by design.  In my view, the most effective way to achieve this is to encrypt the idea of Brand Citizenship into a firm's  performance metrics. It is then possible to create a real cause and effect relationship between business performance and brand citizenship.

In overcrowded, transactional markets of the kind that we mostly operate in, I  can't think of a better way to build demand resilience and hence lower forecast risk.


Tell me what you think.

5 comments:

Mathew Anthony said...

An absolute necessity for brands to lead the way in what Abraham Lincoln called "the better angels of our nature" to bring sanity in the way we live to give heft to the greater good. Brands must have the ability to unite its franchise around a cause to move from transactional relationship to a transformational one.

Pritam said...

Brand citizenship requires taking a long term view - but in today's world where the share market requires growth every quarter and only measures and rewards the bottom line, what chance is there for values?

Deepak Pramanik said...

I quite agree with the viewpoint. In fact we defend for brands even if they fail occasionally by saying that how can you believe that brand X could have such a failure.

Transparency, I believe is the key along with the courage and conviction for accepting the brutal truth. My experience tells me that the degree of criticism by a loyal customer is directly proportional to the passionate love for the brand and is therefore to be interpreted positively.

At Aidias Consulting we have defined brand as a relationship which is by choice.This definition has actually helped us craft some interesting strategies for various brands that we have consulted with.

Deepak Pramanik

Kuruvilla Abraham said...

Do you mean to suggest that old money is more reliable than new money? I wonder if such a hypothesis is statistically significant considering the fact that many a Victorian value set to disadvantage the financially weak is now being seriously questioned

sachin kamat said...

This is a very interesting notion and indeed great to build demand resilience as you/she puts it.

It would be interesting to know how we could go about creating/measuring this value.

Any ideas?