Procter & Gamble has struggled with the concept of full-fledged support of its corporate brand. While the main focus of their branding efforts should be where it is - on their product brands and understand and support that focus. On the other hand there is tremendous value to be gained from marketing the corporate brand, and it doesn't have to take away from product branding. Why then do some consumer companies fumble rather than capitalising on corporate branding?
The connection between corporate image and market capitalisation is evident from empirical research conducted by academics, consultants, and branding firms, and is utilised daily by enlightened corporations. Unfortunately, due to GAAP (Generally Accepted Accounting Principles) accounting standards the connection remains "virtual" by finance, rather than being universally recognised as a driving force for corporate growth. Measuring and valuing brands has advanced by light-years over the past two decades but the accounting industry has been slow to recognise the huge and growing value of intangible assets know as the "corporate brand."
CoreBrand's own twenty-year quantitative research study and regression models, collectively called the Corporate Branding Index®, provide continuous data, insights and corporate brand valuations for over 800 companies across 49 industries. This massive longitudinal study finds that the corporate brand accounts for an average of from 5% to 7% of market capitalisation, of the companies tracked.
Corporate brand value will vary significantly by type of industry and general economic conditions. For some industries, like building materials, the brand has relatively low impact, with only a 2% average value of market capitalisation. Consumer facing companies have much higher corporate brand values. In the beverage industry, for example, the corporate brand plays a major role, showing an 11% average impact on market capitalisation. For corporations where the company name and the primary product brand are the same the impact is even greater. For example the corporate brand equity value of The Coca-Cola Company is 21% of market capitalisation. This is a "premium effect" on stock performance over and above the expected impact that a brand will have on revenue, cash flow, earnings, and other financial factors.
Let's examine this premium effect generated by the corporate brand. We'll look at brand equity as a % of market cap and extrapolate the value based on the number of shares outstanding from two points in time 2002 to 2010.
Brand Equity 2002 (Brand Equity 2010)
Colgate-Palmolive: 17.9% = $5 billion ( 18.9% = $7 billion)
Procter & Gamble: 16.0% = $18 billion (14.7% = $26 billion)
Both Procter & Gamble and Colgate-Palmolive are primarily, and appropriately, focused on marketing and selling their product brands. Neither company is well known for building their corporate brands. So, why does Colgate-Palmolive derives a greater percentage of its market capitalisation from their corporate brand and Procter & Gamble has a declining score? Simply put, Colgate-Palmolive enjoys a corporate name that is the same as two of its major product lines.
P&G, on the other hand, takes great pride in not promoting their corporate brand. The Procter & Gamble name isn't to be found on their products, packaging, or advertising in the US. They steadfastly hold to the belief that product brand is the only thing that counts, and that the corporate brand need not be actively marketed. P&G's brand equity value soared from $18 billion in 2002 to $26 billion in 2010, which some would argue is proof of their strategy. Fair enough, but what about the opportunity cost? If P&Gs corporate brand equity were to equal Colgate-Palmolive's brand equity of 18.9%, the increased additional value would be $6 billion in increased market cap.
Practically speaking what would P&G have to do to achieve that higher valuation? Being very practical it wouldn't require a huge effort, and is much more of a mindset than a disruptive marketing campaign. First, I would recommend that all advertising carry the Procter & Gamble name and logo as part of the sign-off. All packaging should include the same name and logo in small type, in an unobtrusive corner. A modest but consistent corporate campaign should be developed, and run in business publications, describing the overall vision of the company as well as the breadth and depth of their product lines. Finally, an opportunistic but thoughtful campaign to the public - similar to the wonderful "They'll always be kids" - salute to mothers campaign during Olympics.
The total cost of this modest effort for a company the sise of P&G is estimated to be about $100 million a year. Over five years the $500 million invested would have a potential identifiable return of $6 billion - a potential ROI of 12:1. This is what we call, "Putting brand investment into a business context." The rest is up to them.
James R. Gregory ([email protected]) is CEO at CoreBrand