- May 04, 2015
The Value of Brand Management to Enhance Market Value
Whether you sell products or services, it is essential to develop a vibrant, compelling market position. In other words, how do you create something that consumers want? And how do you create something that in 10 years will attract a potential strategic buyer? Exactly what is your Brand Management strategy?
Many small businesses get overly caught up in revenue creation and growth, which is understandable, as both facets of any operation are vital. As a result though, they could lose sight of the skills and marketable characteristics that build measurable business value. Owners often fail to thoroughly analyze the sources that create maximum profit, and therefore shortchange their brand.
As a result, their offerings become commoditized. But instead of blending in to the market with a nearly indistinguishable product, what if you were able to showcase the value-added aspects of your offerings?
During growth periods, you must build value for a future profitable exit through development and investment. Specifically, your objectives should be to:
- Build a distinctive brand in your sector
- Market that brand aggressively within the industry
- Demonstrate price discipline
Though seemingly relatively simple, these actions are often overlooked. In this paper we will focus on building a brand. In subsequent papers we will explore the topics of marketing the brand, and exercising price discipline.
Why You Should Brand Your Business
Why brand your business? Branding a business—and product or service offering—creates value, pricing stability, and enhanced profit. If your “brand” is recognized as a leader in a particular field, then customers and clients will be willing to pay for that product or service. Subsequently, you will have created a uniqueness that other companies would find attractive as they look to invest or acquire other entities.
In effect, as a business owner, you must execute a plan that allows a strategic investor to both notice and locate you; then the buyer will pay a premium for your business. Ultimately, when you are deciding on how to manage your brand, you may want to ask yourself: how do I maximize my branding efforts to create business value that will lead to a successful exit strategy?
How You Should Brand Your Business
A successful brand will:
- Maintain a sharp focus
- Demonstrate expertise and therefore enhanced quality
- Engender trust due to repeatable performance
Your business will “stand out in a crowd” when your brand stands out; likewise, your brand will stand out when your product and services stand out. So when you begin to experience success, it might seem to make sense to expand your offerings and product lines. But in reality, your best chance to thrive is to remain committed to a narrow focus.
Additional Benefits to Brand Management
There are tangential benefits in managing a singularly focused brand as well. It will be easier to evaluate and hire subject matter experts; of course, they will want a position in the company that is the industry leader too. As an organization, you will speak one common “language” instead of many. Also, by creating repeat customers and referrals, you will be able to redirect resources that would have been spent marketing and delineating a myriad of diverse product and service offerings.
Brand Management Scenarios
The following brief business scenarios follow the development of two companies, each of which is a contract research organization (CRO). [A CRO provides outsourced clinical trials to pharmaceutical and biotech firms to develop and approve medicines. Eventually, these companies seek approval from the U.S. Food and Drug Administration to sell promising formulations within the healthcare market place.]
Company A stayed focused on brand and market position. Company B did not make the same choices. As you will see, the results are not a matter of size. The outcomes reflect executive focus.
Company A is a $300 million CRO with multiple global offices. Entering its fourth decade, Company A provides full-service clinical trials in phases one through four in multiple therapeutic areas. With more than 2,000 employees, the firm generates 15 percent profit against $300 million revenue.
By remaining generally focused, following good clinical practices, and providing quality services to the client, the firm is profitable. However, what is their brand? Their brand is to provide good service but they exist as a “me too” CRO. This is analogous to a commercial airline or a large department store. Without a brand, this company is in danger of being commoditized and will have to compete on price more often than not. Ultimately, if they were to sell, who would want their brand? What would be their strategic multiple if they continue to be “pretty good” at many things instead of being excellent at one thing?
Company B is also a CRO, but it specializes in patient recruitment in the oncology therapeutic market. Oncology patients are difficult to recruit. This business has been operating for eight years. With revenues of about $50 million and a profit of about 20 percent, the company has 400 employees.
Company B offers a distinctive brand: management focuses exclusively in oncology patient recruitment. They are experts in this field and utilize a disciplined pricing model. Clients seek them because of their fast, responsive patient recruitment. The business owners attend oncology conferences; in addition, Company B will solely advertise and market to oncologists. They have keenly branded themselves in the $23 billion oncology industry as “the” experts in patient recruitment.
Key Learning Point
Company B is clearly more profitable, and their ability to manage their brand is a significant factor. If you were an investor, where would you put your money? As the owner and major shareholder, does it make sense to seek an adviser to provide objective branding strategy?