The Brains of the Outfit

I was talking to an executive from a background check company that had been acquired by one of my clients, who is trying to make a decision about how to deal with the acquired brand – basically, keep it or roll it into the current brand as a product line.

During this conversation I asked the exec what he thought should be done. His response was “Well, there are some of our brands that have some brand equity – we have websites and good rankings on Google.”

Before I get endless comments about the importance of a good website and SEO, understand that I both realize and believe that SEO is important, and a good website is important. However, neither of these things directly equate to brand equity. Are they influencers? Certainly. Are they enough to create brand equity by themselves? Nope.

First, brand equity as a concept is widely misunderstood. True brand equity is the financial value of your brand. There are a variety of measurements that are used to yield this value, but they all have to do with your brand as an asset. What most people are talking about when they speak of brand equity is visibility. And brand visibility is an influencer of brand equity. A highly visible brand with positive brand associations will likely have more equity than a similar brand with less visibility.

SEO and a good website will certainly help create visibility, but what about the other piece – positive brand associations? Where do those come from?

Another client of mine just illustrated this perfectly. Charted Path, LLC is a start-up organization, and the owner, Mike Cleland, literally just got off the phone with me about 5 minutes ago to tell me that he realized what I’ve been trying to help him with all along – building his brand through both traditional marketing and getting his feet (barely) wet in social media. His website and blogging efforts are paying off, but only because his brand is authentic, and can survive social media transparency. He very quickly has built positive brand associations by establishing himself as an expert in his field through his website and blog, but also through positive client interactions on the projects he’s completed. (Of course, it probably doesn’t hurt that he’s a genuinely nice guy who truly knows what he’s talking about.)

Mike has a nice website, and is currently doing reasonably on Google ranking. But those things aren’t brand equity. The combination of those things and positive brand association are helping him create brand equity.

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I love articles like this one. I think Kievman has missed the point of doing social media for business and of marketing in general.

Marketing is about ROI.

If companies haven’t been able to find the real-world results of their social media efforts, there are two distinct possibilities. Either they’re not doing social media effectively, or they’re not measuring it correctly.

I’d be willing to bet that DemingHill’s largest Fortune clients care about ROI as the first thing of importance, but they understand that all the activities that Kievman mentions in this article are tied to strategies that bring measurable ROI.

Relationship building creates ROI by creating brand equity and increasing net promoter score. Kievman mentions “creating communities of key constituents.” Why do you do that? Those key constituents are either going to be influencers or buyers. Another point Kievman misses is that customer service, brand monitoring, brand awareness, and crisis management can all be performed or influenced via social media.

This statement is really problematic to me: “…if you are not converting outside of social media, social media will not help you convert and improve your ROI.” If an activity has a net zero effect, that’s truly money for nothing. The whole raison d’etre of marketing is to increase conversion. Does it have to be direct? No – very few marketing activities are direct.

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I find myself continually faced with the same problem, and it’s a marketing classic. How do you measure brand equity? Or more to the point, how do you communicate it in a way that makes sense to non-marketers, particularly those in small business?

brand equity – the monetary value of a trademark or distinctive name identifying a product or manufacturer beyond any amounts spent building it.

I’d argue that most businesses aren’t really interested in the asset value of the brand, particularly the small and medium businesses that make up the majority of my clientele. The question most of my clients would love to hear answered is this: “How much market share, revenue, or profit will be contributed by this campaign beyond that which we can directly measure in conversions?”

To quote a friend of mine: “I’m sorry, but I’m fresh out of clairvoyance.”

There are some pretty simple rough measurements you can do periodically that will give you an idea of what your brand is worth in revenue terms. At the simplest level, it’s the difference between the stock value of your company and the book value of your assets. If you don’t have stock, it’s still not terrifically difficult. Assume a growth rate based on historical figures and do a net present value calculation of your forecast revenue for the assumed life of your business. (20 years is a common figure.) The difference between that and your asset value is the value of your intangible assets. For most small to medium businesses that don’t have significant technology or R&D, that’s roughly equivalent to the incremental revenue generated by the brand. But that still doesn’t help with the clairvoyance problem.

Here’s what I’m getting at – while brand equity is a good reason to do some projects that don’t have significant, measurable ROI, it’s important that you look at those projects closely, as marketers will frequently use brand equity creation as an excuse to do questionable projects. If you hear a marketer making brand equity claims, ask a few questions.

• Is brand equity creation a priority for me right now?
• Are there other projects with more measurable returns that are more valuable to me?
• Am I willing to make an attempt to measure my brand equity over time? If not, am I willing to trust this marketer to create brand equity that neither of us are likely to measure?

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I was sitting in a branding interview yesterday, and had a bit of surprise. The gentleman I was interviewing was one of the principals of the company, and the evangelist for the company’s services.

The thing that surprised me was this – he knew his company’s place in the industry. He actually knew and could explain their value proposition. If I had handed him a blank Bowman strategy clock, he could easily have placed his company on it. I’d be willing to bet he could have easily explained to me his positioning relative to Porter’s Five Forces.

This type of thing shouldn’t be unusual, but it is. I interview more people within more companies who know themselves well, but are lost as to their industry and position within it, especially within service industries. For example, the employee assistance program who doesn’t know their market is commoditized and how to deal with that.

Therein lies a problem. If you don’t know your industry environment, you can’t create marketing strategies to deal with that environment, and it’s easy to fall for whatever some slick ad salesman throws your way. I even catch some of my clients in that act – they’ll get a spam promising them the world, and consider it as an option, in spite of the fact we have a solid, planned, measurable marketing strategy for them that is getting results. Luckily, my clients are all smart enough to forward it to me first and ask if it’s a good idea to pursue.

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Early this morning I was negotiating with a client who wants to change her deal structure with me. Normally I don’t entertain these offers, because I find them too risky, but in the interest of client retention, I’m making an exception.

The offer on the table is structured in such a way that we discount our fee for a future percentage of profits. While talking about the deal structure, the client says that we’ll only get a percentage on business we bring in directly:  literally, only on business that we can track directly to a marketing campaign.

Herein lies the problem. As I told my client, that doesn’t take into account the value of the brand equity that we’re creating. Her response was that she already has brand equity – her reputation over the last 13 years in her industry is excellent.

Brand equity has a number of components, but most of them can be put into two categories. One of them is reputation, or what people think about your brand, and the other is visibility, or if people recognize your brand. My client has half of the equation – her reputation with her clients and people who know her work is stellar. However, nobody outside of a small group has ever heard of her company. Increasing her brand equity with the right types of campaigns that showcase her reputation and create visibility with her target audience should be compensated.

While I always encourage comments, I really want feedback on this post. How should I structure this deal? What’s an acceptable measure of risk? Should brand equity be a part of it?

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My dad is a pretty close follower of my company. He’s a fan of Realize on Facebook, claims that he reads my blog occasionally, and generally watches out for us.

I got an e-mail from him about a week ago. Apparently, he clicked into my Facebook profile and saw the word “crap.” Now you have to understand that I have no idea where the word “crap” appeared in my profile. Possibly one of my friends posted a comment with the offending word in it, but who knows? It brought about an interesting point about a major pitfall of social media – you don’t have 100% control over it, no matter what.

So how do you deal with it? Aside from some basic care about the choices you make in your networking, I think the answer is largely that you don’t. And it’s okay. Your brand will live, and thrive in the messy world of social media conversations.

Marketers like to think that we have control over our brands. We carefully craft messages. We push them to appropriate channels. We create tracking to make sure that we know people are reading them. We painstakingly design and craft and push and track and think that we control the brand.

Not so.

Sure, we can control what messages get put out in what channels, and who says what when we’re pushing our brand out there. But what we don’t control is brand perception – the ways in which those messages are received. We, at best, influence opinion about our brand, and thereby our company and product or service.

Social media gives us an opportunity to both push our messaging, and receive immediate feedback about the perception. But it does another thing, as well – the lack of control creates a level of humanity. People connect with people more than brands. Yes, you can argue brand involvement here, but overall, people connect more quickly and readily with the human. Also, people are willing to explore your brand if it has a viable social media strategy – it gives them a voice in what they like, don’t like, and allows them, at some level, to self-qualify.

And what’s better than that? I like having lots of prospects in my pipeline, but the prospects I like best are the ones that understand my business, what we can do for them, and realize there’s synergy.

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Of the four P’s, promotion may have been changed most by Web 2.0… or has it, really?

If you’re on social media, think about the posts, status updates, tweets, and other media that you receive from businesses. The majority of them are pretty blatantly ads. They’re designed to do what advertising and promotional activities traditionally do – create brand equity, create loyalty, create conversions, and drive sales.

Social media mavens talk about creating a community. Sure, you’re creating a community. But really, what is a community? It’s loyal customers and people potentially interested in doing business with you. Sounds like a loyalty program, combined with some basic promotion, to me.

By the way, none of this diminishes the value of Web 2.0 constructs. These are valuable channels that create really high return on investment for our clients and others. The point, however, is this – you can’t go into these ignoring basic marketing constructs.

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