Building Brands to Grow Value
Posted in — Apr 21, 2023
A Not-So-Brief Recap of Steve Fine’s Presentations at the 2022 Odyssey Investment Partners CEO Summit in Chicago.
Whether we’re in finance, ops, or marketing, we’re all engaged with businesses on a path of value acceleration. Growing equity in organic ways, or strategic ones. Building “moats” of competitive advantage, minimizing a range of market risks that could diminish value.
It can be a very logical path. Yet many companies, especially in the B2B space, pursue incremental advantages in small pieces of their business, while unwittingly commoditizing the whole.
It’s critical to view a business as a constant process of building a complete value proposition, and use the lens of brand value and brand transformation all along the way.
Product Plus Perception
What that lens will reveal is that most products have only partly to do with tangible necessity. After you make a list of the things you really need in life—air, food, water, shelter, love, medicine—what you buy starts sounding a lot more like wants than needs. More people than ever (sadly, still not everyone globally) spend more pursuing things beyond baseline subsistence.
Value is always a combination of real, tangible features and much less tangible perceptions that work together in a customer’s mind. How it adds up has to do with framing what you provide in terms of their overall experience. So all businesses have “hardware” and “software” elements, and they’re never sold separately.
B2B brands tend to take a practical or technical product view, though it’s rarely a sustainable advantage to just have the best widget. You can err on either side, spending too much time in the clouds of storytelling or in the weeds of product features. It isn’t always as logical as you might think.
Brand Imagination in Action
History is littered with companies who had a literal or limited perspective on their brand. Like the old railroads who never saw cars and trucks as looming competitors for what customers wanted: not trains, transportation.
Rory Sutherland, a well known advertising executive, likes to tell a more recent train story about how Eurostar answered traveler impatience by spending £6MM to shave 40 minutes off the London to Paris ride. For .01% of the money, they could have placated antsy passengers by installing WiFi to add productivity and engagement to the travel time. For a bit more, they might have hired supermodels to walk the isles pouring champagne, as passengers presumably prayed for the train to actually slow down. Reframing means asking fundamental questions about value creation, like is it better to spend £6MM to reduce travel time or spend <£1 MM and greatly increase the perceived quality of that time?
Rory goes on to talk about Austrian economist Ludwig von Mises who used a behavioral reference to blur distinctions between real and perceived value drivers in how people make decisions. His example was a restaurant serving Michelin 3-star food that was unkempt, with a terrible smell. Investing in food quality would be folly - unlocking the most value is entirely a function of the surrounding perceptual drivers. It’s risky to make distinctions between values that your customers will simply lump together into a whole experience; keeping the restaurant clean and fresh is just as valuable as the quality of its cuisine.
Some fascinating studies of perception show that most people don’t have discerning enough palates to know which wines should cost more - so they rate how wines taste based on the price displayed more than any other single factor. Raise the price and customers will often perceive it “tastes better.”
Price Reflects Total Value
The age-old “you get what you pay for” argument is largely true when considering the totality of what’s being paid for. Differences in product features are just the start; the power of re-framing can’t be overstated and the impact of perception is all around us every day. It’s obvious in luxury goods, but it’s everywhere always. It’s what makes a $4 coffee or a $100 bottle of wine. You have to look at all the ways you are adding real and perceived value every day, and delivering it to people.
While it is very obvious that brand drives price and margin, not all companies extrapolate from that to the value ascribed to the entire company. Yet when you layer in loyalty, perceived value, awareness, association, it’s as powerful an asset as you will ever have.
Flipping the Script
The hardest thing to wrap your head around is that your brand is an asset that lives in the minds of your audience. It has never been more important to be extremely clear on who you are and what you do for people inside and outside your company that help to create and perpetuate perception:
- Potential Recruits
- Even investors
All these audiences lump tangible and intangible experience together into one experiential value proposition in their brain to make decisions. Now they even go out and create/propagate their own media to share it. They don’t break things down the way you do, they add it all up.
Over the past 50 years the "power" in the marketplace has shifted. From a production/manufacturing model, to distribution/retailers holding the cards, to today when consumers (and even “creators'') have the advantage. You have to earn real estate in their minds by designing compelling experiences, connecting with them over time, being operationally consistent, fulfilling a promise in all you do. You have to think about drawing customers in rather than delivering messages out - you have to be PULL-y, not PUSH-y.
A Method, Not a Formula
To try and take a more methodical view on all this, we developed an approach we call Brand-Led Business Building™. It’s not a checklist, it’s a framework for reframing what you do to map how you operate (inside-out) from what the customer perceives (outside-in):
- Vision is the core purpose, values, distinctions that become your lens and rally cry
- Delivery (or Experience) is the systematic approach you take to consistent product/service experience
- Expression is how you capture the look, feel, sound, messages that relay it
- Traction is how you integrate paid, earned, owned media to earn customers (new and repeat)
All the elements in those areas have to flow together and test each other in all that you do. When they sync just right you have a brand that clings together - we call it Brand Integrity. It can’t be too much sizzle, not enough steak. But it also can’t be filet mignon in a stinky restaurant.
You can measure all this with traditional metrics: awareness, loyalty/repeat, price sensitivity, perceptions/attitudes. But more than that, you can feel it. You see it, the market sees it, and all the people you hope to hire to realize the vision will certainly perceive it, too. That’s how building brands grows value.
And now for a few case studies that show it all in action.