April 3, 2017

Brand Equity - The NPV of Marketing Investment - Top Management Challenge

"If the CEO is not intimately familiar with what it takes to increase brand equity then it is only a matter of time until the company will see a brand in decline." - Mike Myatt

Branding is a Challenge for Top Management

Top management is responsible for maintaining the market position of a firm. Brands of the company define its market position. Brand equity can be measured and it is being measured today. An organization has a net present value (NPV) which is theoretically the equity values plus the debt of the company. Brand equity is the net present value (NPV) of the marketing investments made by the company in developing the marketing channels, communicating to the consumers and various incentives given to them to sample company's products, to make repeated purchases and to reward them for suggestions to improve products and processes. Top management has to monitor brand equity and make efforts to increase it. Branding is an area of top management attention and priority.


Business firms have to produce goods or services and exchange them with consumers to get revenues and make profits.

Production requires investment in plant and facilities and manpower recruitment and development. Similarly marketing investments have to be made to build a market position for the products of the firm based on which only sales take place. The market position of a firm for a product or products is termed as brand. When an item is not branded, consumers will not go to a shop and ask for the product made by a particular firm. They ask for a commodity by commodity name and whatever the retailer gives they take after doing some sample checking for their satisfaction. |But, if the firm creates a unique name, and makes it popular among the consumers, some will come to the retail store and ask for the brand, the specific product made by the firm. Retailers come to know the preference of consumers for a particular brand and they stock the brand.

Just as the production facilities are planned during the organizing phase of the firm and reorganized as necessary periodically, the market position or brand also needs organization. The feasibility of a business plan is based on sales created by the brand.During organization, the details are to be worked and planned.

What is a market position?

The market position starts from consumers who are aware of the brand and extends to the most loyal customers of the brand who buy nothing but the brand only. They take pains to visit more stores to buy the brand in case of non-availability in some retail stores and they recommend the brand aggressively to their contacts.

Brand awareness is built by communication. But loyal customers come into existence only when they are satisfied by the product, its delivery mechanism and after sales services. It is important to write here that a product satisfies the consumers only when it is built according to the consumer's unmet needs at any point in time.

It is needless to say that top management has to build the brand and has to make continuous efforts to maintain it.

Brand Equity

Brand equity is the differential response exhibited by the consumer of the product to the marketing/sales efforts of the brand made by a firm. A brand has positive brand equity when consumers react favorably to its marketing/sales efforts.

Building Brand Equity

There are three main sets of brand equity drivers

1. Brand elements:  brand name, logo, slogans, jingles  - the communication related elements

2. Product and service related elements

3. Linkages between the product and the celebrity persons, places and events

Role of CMO

Chief Marketing Officer of the organization is  the voice of the consumer to the organization. As markets continue to change rapidly, it is important for organizations to build a better understanding of the market’s evolving needs into everything that they do.

A key role of the CMO is to keep the CEO and the rest of the organization informed about the market by commissioning, analyzing and reporting strategic, insightful and actionable marketing research. CMOs participate in developing organization strategy (selection of products and target markets or segments) and contribute their knowledge so that the organization becomes better at addressing consumer insights. The CMO is also responsible for identifying the desired customer experiences at each customer touch point and then influencing the entire organization including sales, service, operations and strategic partners, to deliver those experiences. This requires endorsement by the CEO of the marketing programs proposed by the marketing department.

Organizations have to align their values with their customers’ values and  create a sense of community with their customers. Management teams have to realize that brands  play an increasingly important role in delivering profits to companies and their investors, the skills needed to maximize brands as assets must also assume greater importance and profile in the leadership team.

Martin Roll described the merits for greater involvement of marketing at C-level and Board-level in a post. “As the business landscape evolves, marketing also evolves into an organization wide strategic discipline,”  “Given marketer’s knowledge of the customers, it is imperative that the CEO and the corporate board have a representative of the customer to continually educate them.”  “In the future, the CMO will emerge as the strategic connection between the corporate boardroom, the top management team, the CEO and the customer.”

CEO's Role in Branding

5 New Things Every CEO Should Know About Branding to Keep Their Brand Relevant in Today’s Digital Marketplace

1. You have to develop a brand promise delivery plan and program.
2. Company sponsored advertisements are not the only source of product information. Many users are sharing the product information in social media.
3. Marketing data analytics are to be used.
4. To communicate you have to identify and use the popular media now.
5. Your employees communicate with the market in social media - Educate them about your brand and make them brand ambassadors.


Harvard Business School Team Research

An HBS research team's study of top B2B global brands (2007) revealed five characteristics of brand building success.

1. The CEO is a willing brand cheerleader, loves the brand heritage and is a great storyteller. The CMO sees his or her purpose as helping the CEO achieve this role.

2. The CEO understands that building brand reputation reduces commercial risk, insulates the company in a crisis and provides the common purpose that can bond all the company’s stakeholders.

3. Efforts are focused on a single, global corporate brand rather than individual product brands.

4. The payback on marketing expenditures is measured rigorously to the satisfaction of the hard-nosed engineers and finance staff who run the typical B2B enterprise.

5. Coordination of company websites worldwide to present a consistent face to stakeholders is the best way to get control of marketing communications that may have become too decentralized.

Mike Myatt, Leadership Matters--: The CEO Survival Manual, what it Takes to Reach the C-suite, and Stay There, OUtskirts Press Inc., Denver, 2008.


https://aytm.com/blog/research-junction/branding-factors/  - series of articles

The CEO as a Total Brand Manager, George Stalk, Jr., BCG, 1999


Brand Building - Subject Update - Maintained by NRao


http://knowledge.insead.edu/blog/insead-blog/five-best-practices-of-global-brand-management-4136 - Article by Martin Roll

Related Articles on Branding

Relationship Redefinition - New Development in Branding

This article is part of #AtoZChallenge 2017 for Blogging Posts. My These for the Challenge is Top Management Challenges - Full List of Articles  http://nraomtr.blogspot.com/2016/12/a-to-z-2017-blogging-challenge-top.html

Participants' Blogs visited today by me




http://filmmakingnaturally.com/always-plan-b-maybe-c-d-e-f/  - Film maker




  1. All really interesting stuff. :-)

    Cait @ Click's Clan

  2. Thanks for visiting my blog....in a populous country like India it becomes all the more important to establish your brand that companies realized long back... Its the cut throat competition in marketing that becomes the real challenge i think

    1. Thank you for visiting. In the knowledge workers, in general, commitment to maintain their knowledge is lacking. Then comes improvement.