Brand Value Chain – Meaning and 4 Stages

The set of actions a company takes to build and deliver a valuable product or service is known as the Brand value chain. The brand value chain has about four value stages, and some key elements build up each value stage. It is a linear process; hence, each value stage influences the next. Its multiplier defines the effect on each following step.

For example, in the first stage, Marketing Program Investment affects Customer Mindset.

However, the multiplier that is program quality of the marketing program investment defines whether it creates a desirable customer mindset. It is also possible that your brand will get an unwanted customer mindset if the marketing program quality is not good enough.

THE BRAND VALUE CHAIN

  1. Marketing Program Investment
  2. Customer Mindset
  3. Market Performance
  4. Shareholder Value

The Brand Value Chain

1. Marketing Program Investment

  • Product
  • Communication
  • Trade
  • Employee
  • Others
  1. Customer Mindset

  • Awareness
  • Associates
  • Attitudes
  • Attachment
  • Activity

3.Market Performance

  • Price Premium
  • Price Elasticities
  • Market Share
  • Expansion Success
  • Cost Structure
  • Profitability
  1. Shareholder Value

  • Stock Prices
  • P/E Ratio
  • Market Capitalization

Stage 1 – Marketing Program Investment

The Brand value chain starts with the marketing program investment.

Any marketing program investment that can contribute to brand value development is included in the first value stage.

Marketing activities included are product research, employee training, trade or intermediary support and marketing communications such as advertising, promotion, sponsorship, direct and interactive marketing, personal selling, publicity, and public relations.

The Coca-Cola Company, one of the biggest beverage manufacturer, spent a record of $4.24 billion on global advertising in 2019.

The Coca-Cola advertising budget is often used in print, radio, television and other advertisements. It is also used in marketing campaigns, point-of-sale merchandising and sales promotion.

It is worth noting that the promotion budget is for global operations, but the United States market accounts for about 20% of the total budget.

Multiplier – Program Quality

  1. CLARITY

Clarity indicates the marketing campaign’s messages and their forms of communications.

  1. RELEVANCE

Marketing program should be relevant to your customers.

  1. DISTINCTIVENESS

Amongst the innumerable marketing campaigns available, your marketing program should be able to stand out compared to other competitors.

  1. CONSISTENCY

The marketing program should be consistent and include a combination of different channels that the program utilizes.

Stage 2 – Customer Mindset

The Resonance Model suggests 5 A’s that highlight vital measures of the customer mindset

  1. Brand Awareness

The degree and comfort at which consumers recall and recognize the brand. e.g. Coca Cola.

  1. Brand Associations

The strength, favourability, and uniqueness of recognized qualities of the brand benefits it in the longer run. e.g. Apple.

  1. Brand Attitudes

Comprehensive evaluations of the brand concerning its quality and the satisfaction it generates. e.g. Ikea.

  1. Brand Attachment

The extent of loyalty the customers feels toward the brand.
e.g. Xbox users.

  1. Brand Activity

The limit to which customers make use of the brand, influence others to use it, seek out brand information, promotional activities and events, etc.

Example – Go Pro

A very few brands have as strongly embraced User Generated Content (UGC) such as GoPro. The company immediately realized the value of UGC and developed various incentivizing programs to keep its content streaming across online platforms.

For instance, The Million Dollar Challenge offers a fair share of $1 million to every user whose clip submitted is used in the brand’s legendary, year-end highlight reel as it only accepts entries shot on the latest high-end camera.

Multiplier – Marketplace Conditions

  1. Competitive Reactions

The reactions of the competitors to one company’s marketing campaign affect the overall performance of that marketing program investment.

  1. Channel Support

An ideal marketing investment plan utilizes all available channels, both online and offline.

  1. Customer Size and Profile

The marketing programs that target a more significant audience size should have a considerably higher investment budget.

Stage 3 – Market Performance

There are six brief ways in which the customer mindset affects how they react in the marketplaces.

  1. Profitability This is when these five outcomes combine and yield brand profitability which is the sixth outcome.
  2. Cost structure which focuses on reducing marketing program expenditures that aided by the prevailing customer mindset.
  3. Brand expansion talks about the ability of the brand in bearing line and category extensions.
  4. Price premiums
  5. Price elasticities
  6. Market Share, that estimates the success of the marketing program in pushing the brand sales.

Example: Apple

Despite the cut-throat competition, Apple has succeeded in creating demand for its products due to the quality it offers.

The above mentioned six points are very much in favour of Apple.

Price Premium- On the low-end devices, Apple’s CEO Tim Cook told Bloomberg Businessweek in a 2013 interview, “We never had an objective to sell a low-cost phone. Our primary objective is to sell a great phone and provide a great experience, and we figured out a way to do it at a lower cost.”

Cook’s thoughts were influenced by Steve Jobs, whose strategy for Apple had four pillars:

  1. To offer a small number of products.
  2. To focus on high-end usability.
  3. To give priority to profits over market share.
  4. To create a halo effect that keeps people excited for new Apple products.

Multiplier – Investor Sentiment

Financial analysts and investors consider a host of factors in arriving at their brand valuations and investment decisions, such as:

  1. Market Dynamics- Interest rates, investor sentiment, and supply of capital?
  2. Growth potential- PESTEL Analysis
  3. Risk profile- What are the possible risk factors for the brand? How might the brand reduce these factors?
  4. Brand contribution-How valuable is the brand to the firm’s brand portfolio?

Multiplier – Investor Sentiment

The financial marketplace forms opinions and assessments that have a direct financial impact on brand equity based on all available current and forecasted information about a brand.

Listed three important indicators for the same are

  1. The Stock Price
  2. The Price/Earnings multiple.
  3. Market capitalization for the firm

Strong brands not only deliver higher returns to stockholders, but they can do so with lesser amount of risk.

Example: Apple

Apple Inc.’s market value crossed $1 trillion for the first time a few years ago – Apple’s stock market entered undiscovered waters.Thanks to more than doubling since August 2019, it’s weighting in the S&P 500 just leapfrogged IBM’s in 1985 to become the biggest in 40 years.

At 6.5%, the iPhone maker’s share in the S&P 500 just surpassed the record 6.4% that IBM held 35 years ago, data compiled by S&P Dow Jones IndicesBloomberg show. Apple’s overall market cap stands at $1.875 trillion, about 7% away from $2 trillion.