Many CMOs are challenged with the question, “Where is the quantitative proof that brand investments pay off?” Put simply, return on brand investment is the measure of your brand’s performance, gauged by the strategic movement and growth of your brand.  Determining ROI is difficult, as looking at your people, IT and organizational culture do not provide the kinds of quantitative evidence you need in this case. Thus, organizations must find other ways to measure ROI.

How to Determine Return on Brand Investment

To help brands accurately determine if their investments were justified, Robert Jacobson and I conducted two studies in which the impact of brand equity on stock return was measured using time series models. The first database included nine high-tech firms such as Apple, Dell, HP, Microsoft and Oracle.

Quarterly data over 8 years provided 250 observations. Brand equity was based on an attitude measurement (percent having a positive view minus the percent having a negative one). The model compares the impact on stock return on two variables: changes in accounting ROI during a prior period, and changes in brand equity also during a prior period.

We know that accounting ROI impacts stock return from finance research and observation of the stock market. The impact of brand equity on stock return was shown to be about 70% of the impact of accounting ROI.

The second database included 34 firms such as AMR, AT&T, Citicorp, Exxon, Hershey and Ford. Brand equity was based on an annual survey of consumers who evaluated each brand along an 11-point perceived quality scale. There were 102 data points.

Using a similar time series model, it was found that brand equity had nearly the same impact as accounting ROI (23 vs. 25). When added to the model, advertising impact was insignificant and did not change the results (though it could have impacted indirectly by enhancing brand equity). So, we can rather definitively say that, on average, brand equity matters. It improves brand value through impact of stock return for brands.

Calculating Brand Value

We suspect that brands driving sales for a business within a firm should be similarly impactful on profit streams going forward. Second, the efforts to evaluate a brand provide evidence that brands have asset value. A brand value is obtained by:

“Value of a Business X Percent of That Value Due to Brand = Brand Value”

A knowledgeable team estimates the percent of value due to brand subjectively. They reflect on how much of the business value is due to the brand versus intangible and tangible assets. This estimate, even with a team of knowledgeable people, will be rather crude but it does provide an indicator of a brand’s asset value. It also provides a perspective on brand value that frames the quantitative discussion.

The Impact of Branding on Sales & Margins

What would happen to sales and margin if the brand were lost or degraded? The answer is usually quite sobering. The percent of a business assigned to a brand ranges from:

• Around 10% to 15% for brands like GE, Accenture, Caterpillar, and Chevrolet
• 40% to 50% for brands like Google, Nike and Disney
• Over 60% for brands like Jack Daniel’s, Coca-Cola and Burberry

Even 15% can generate a huge value. While these estimates are less than precise, they are instructive and provide evidence that, on average, brands matter. They also provide a frame of reference.

ROI of Branding Example: Toyota Corolla and Chevrolet Prizm

A nine-year experiment was conducted that proved very informative. From 1989 to 1997, a car was made in the MUMMI automobile plant in Fremont California that was marketed as the Toyota Corolla and the Chevrolet Prizm (or GEO Prizm for part of the time). This car had virtually the same design and was made in the same plant by the same people. It should therefore have the same price, sales and ratings of owners and experts. But it didn’t.

The Corolla brand was priced 10% higher, depreciated less over time, and had much higher sales than the Prizm. Most remarkable of all, consumers and experts both gave it higher ratings. A defect for the Corolla was excused as “one of those things” but a defect from the Prizm confirmed what was expected from a new Chevrolet compact car.

The only real difference between the two cars was the brand. Toyota Corolla was introduced in 1968 into the U.S. and had long been one of the leading brands in the marketplace. The Prizm was a new brand. Further, Toyota had a higher reputation for innovation and quality than Chevrolet. As a result, Toyota Corolla had higher awareness and credibility (the elements of relevance) plus higher perceptions of quality and features. These brand equity elements explain much of the differences in price and sales.

I’ve stated many times before that the only way to grow, with some exceptions, is to innovate and create “must-haves” that define a new subcategory (or category) and then manage that subcategory so that it wins in the marketplace and so that your brand becomes an exemplar. When this happens, subcategory competition becomes the focus rather than brand competition, and this can be a foreign concept to most marketers.

Subcategory/ Category Labels

A key part of the process is the subcategory or category label or “brand.” The brand that can define and manage the label will be in a position to both help the subcategory win and become its exemplar. A recent article in the Sloan Management Review provides insight into the importance and dynamics of category labels based on a study of several categories. They observed that categories usually start with multiple labels before a dominant category label emerges. Premature labels exit because the category technology changes over time.

The “credit card” label, which describes cards sponsored by banks, was preceded by “charge cards” and “charge-a-plate” as the technology changed over some 30 years. Sometimes, early efforts to describe the category emphasize different aspects and become obsolete as the category evolves.

So “smartphones” were variously called a “camera phone,” “game deck,” or “PDA.” Sometimes the early labels just aren’t very good. Snowboards were first called Snurfers. There is a fine line between a brand like Telsa creating a subcategory label and being an exemplar for a category that is not defined by any label but by a set of characteristics that may be a half dozen or more in number.

“The only way to grow, with some exceptions, is to innovate and create “must-haves” that define a new subcategory.”

Creating a label means that the brand has more control over the subcategory. A brand that aspires to be the category leader should make an effort to be the brand that introduces the dominant label, or identifies it early and becomes its exemplar. The goal is to infuse the category with the characteristics on which the brand is strong so that the brand can obtain exemplar status. Think of stories like Burton, who created the Snowboard label and proceeded to imbue it with characteristics that the Burton board excelled at.

Parity with Defining Characteristics of the Category

A late mover needs to conform to the label and demonstrate parity with respect to the defining characteristics of the category. The assumption is that the category, when defined by a dominant label, is unlikely to change in any brand idiosyncratic way. In overlaying my ideas onto the research stated in the article, I would make the following observations.

1. While category dynamics are important, there is actually more action in subcategories because they occur more frequently. So instead of accepting a fixed category and striving to become relevant, a latecomer should try to innovate and add a new “must-have” to the category thereby creating a subcategory for which the brand can dominate.
2. The concept of reliance helps the dynamics with respect to subcategory (and category) competition. A goal of category or subcategory creation is to make all other options irrelevant. Competitive brands lose not just because they are not preferred, but rather because they are not considered. One objective of the dominant brand is to manage the subcategory definition over time, changing or adding “must-haves” so that it’s harder for competitors to stay relevant. They are always on the defense fighting a relevance challenge.
3. There are times when the label of a subcategory (or category) is the brand itself. Xerox represents copy machines, and Google represents search engines. People “Xerox reports” and “Google it.” Tesla competes in the “electric vehicle” category but because of its set of “must-haves” it really defines a subcategory of which it is the only member. It thus achieves the ultimate goal of subcategory-based competition—forming a subcategory in which all competitors are irrelevant.
4. There are times in which a subcategory gets a very descriptive label such as “low fat” or “organic” food. The exemplar brand often gets to define the subcategory. Making it complex can mean the customer might have a hard time understanding and recalling the boundaries. However, it also means that competitors will have a hard time becoming a relevant player. I have suggested elsewhere that subcategory (and category) competition can be more important than brand competition. The ability to develop and control good labels is part of the process.

For more on my thoughts of the topic, see my books Brand Relevance and Aaker on Branding.

Brand building is key for sustained, positive customer relationships that lead to increased recognition and sales. How do you build a brand?

It starts with a brand vision, which provides an articulated description of the aspirational image for the brand: what you want the brand to stand for in the eyes of customers and other relevant groups, such as employees and partners. It ultimately drives the brand-building component of the marketing program and greatly influences the rest.

When the brand vision clicks, it will reflect and support the business strategy, differentiate the brand from competitors, resonate with customers, energize and inspire employees and partners, precipitate a gush of brand-building ideas, and generate consistent, “on-brand” brand building over offerings and segments. When absent or superficial, the brand will drift aimlessly, and marketing programs are likely to be inconsistent and ineffective.

7 Steps for Building a Successful Brand

When building a brand, use the brand vision model (formerly the brand identity model) as your starting point, as it provides the structural framework for the development of a brand vision with a point of view that distinguishes it from others in several ways.

Follow these seven initial steps, based on the brand vision model, when building your brand:

1. Define the Key Elements of Your Brand

It may be based on six to 12 vision elements. A single thought or phrase cannot define most brands, and the quest to find this magic brand concept can be fruitless or, worse, can leave the brand with an incomplete vision missing some relevant elements. The vision elements are prioritized into the two to five that are the most compelling and differentiating, termed the “core vision elements,” while the others are labeled “extended vision elements.”

The core elements will reflect the value propositions going forward, and drive the brand-building programs and initiatives. For the University of California, Berkeley Haas School of Business’s brand, for example, they are: “question the status quo,” “students always,” “beyond yourself” and “confidence without attitude.”

2. Identify Extended Vision Elements

They add texture to the brand vision, allowing most strategists to make better judgments as to whether a program is “on brand.” The extended vision affords a home for important aspects of the brand, such as a brand personality, that may not merit being a core vision element, and for elements, such as high quality, that are crucial for success but may not be a basis for differentiation.

Such elements can and should influence branding programs. Too often during the process of creating a brand vision, a person’s nominee for an aspirational brand association is dismissed because it could not be a centerpiece of the brand. When such an idea can be placed in the extended vision, the discussion can go forward. An extended vision element sometimes evolves into a core element, and without staying visible throughout the process, that would not happen.

3. Customize the Model to Your Brand’s Specifics

Key elements of your business— what types of good or services you offer, how you interact with customers, and what segment of the market you serve, to name a few— affect how you should use the brand vision model. Organizational values and programs are likely to be important for service and B-to-B firms but not for consumer packaged goods, for example. Innovation is likely to be important for high-tech brands but less so for some packaged goods brands. Personality often is more important for durables and less so for corporate brands. The dimensions that are employed will be a function of the marketplace, the strategy, the competition, the customers, the organization and the brand.

4. Prioritize Brand Associations

It is the associations that the brand needs to have going forward, given its current and future business strategy. Too often, a brand executive feels constrained and uncomfortable going beyond what the brand currently has permission to do. Yet most brands need to improve on some dimensions to compete and add new dimensions in order to create new growth platforms. A brand that has plans to extend to a new category, for example, probably will need to go beyond the current image.

5. Find Your Brand Essence

When the right brand essence is found, it can be magic in terms of internal communication, inspiration for employees and partners, and guiding programs. Consider “transforming futures,” the brand essence of the London Business School; “ideas for life” for Panasonic; or “family magic” for Disneyland. In each case, the essence provides an umbrella over what the brand aspires to do. The essence always should be sought.

However, there are times when it actually gets in the way and is better omitted. Mobil (now ExxonMobil) had leadership, partnership and trust as the core brand vision elements. Forcing an essence on this brand likely would be awkward. If the essence does not fit or is not compelling, it will soak up all of the energy in the room. In these cases, the core vision elements are better brand drivers.

6. Adapt Your Brand to Product-Market Contexts

Having the same brand vision in all of your brand’s product-market contexts is elegant and convenient but not feasible in today’s complex marketplace. The goal should be to create strong brands everywhere, not the same brand everywhere. Managers need flexibility to adapt the brand to their context while still avoiding programs that are inconsistent with the vision. The brand vision can be adapted in several ways. Those employing the brand in different brand contexts can emphasize different elements of the brand vision, can interpret vision elements such as quality or innovation differently or can augment the vision with additional elements.

7. Create a Communication Guide Using Brand Position

The current positioning often emphasizes the brand vision elements that will appeal and are now credible and deliverable. As organizational capabilities and programs emerge or as markets change, the positioning message might evolve or change. The centerpiece of the position often is a tagline communicated externally that need not and usually does not correspond to the brand essence, which is an internally communicated concept.

“When the brand vision clicks, it will reflect and support the business strategy, differentiate the brand from competitors, resonate with customers, energize and inspire employees and partners.”

What is your higher purpose? Sales and profit goals can no longer be the prime motivator if they ever were. In my book, Aaker on Branding, I note that more and more brands have a higher purpose that is meaningful. It is increasingly becoming more about “why” in addition to “what.” A higher purpose can provide inspiration, an aspirational goal, a work-together logic, respect, motivation for social programs and paths to growth. In particular, it can:

Inspire employees

P&G’s purpose to improve the lives of the world’s consumers, now and for generations to come elevates the work experience of all employees. General Motors’ passion for “earning customers for life” affects employee decisions on a day-to-day basis.

Set a high aspirational performance bar that can stretch the organization

Apple’s Steve Jobs famous mission to create “insanely great products” removed the ceiling from product development at Apple. The Virgin mission, “to embrace the human spirit and let it fly” provides energy to employees to be sure.

Help promote cross-silo collaboration

Develop a common purpose that encourages people to perceive colleagues as teammates instead of being irrelevant or competitors. Employees should inherently ask, “How can I make us succeed?” before “How can I get ahead?” IBM has used its drive toward “a Smarter Planet” to overcome the inhibiting power of silos units by providing a rationale for creating and leveraging synergy.

Provide a route to customer relationships

Abbott’s quest to help customers live life to the fullest provides a way to connect that means something. Patagonia is the ultimate in having environmental considerations in their heritage, products and programs, and that attracts customer loyalty among those that share their values.

Provide an umbrella under which a host of social programs can live

Nike’s passion for sports and fitness has led to programs to create facilities that enable more kids to participate. PepsiCo’s intent to have a positive imprint on society and to become a truly sustainable company provides a home for a host of social programs.

Stimulate growth options

Roche’s diabetes team has a higher purpose, to “enable people with diabetes to live their lives as unrestricted as possible.” It’s a purpose that provides direction for both product development and brand building. Further, it can foster innovation. If Crayola conceives itself as making crayons that would define a narrow production/sales operation. But if its goal is “to help parents and teachers raise inspired, created children” there are a host of routes to product innovation.

“A higher purpose can provide inspiration, an aspirational goal, a work-together logic, respect, motivation for social programs and paths to growth.”

Nearly all firms that look to a higher purpose have several or even many of them, each of which direct programs. For example, Unilever has a set of purposes that include sustainability (the Unilever Sustainable Living Plan), give, a better future for children (oral health and nutritional programs), and a healthier future (the hand-washing program that reached over 200 million people in 2012), enhancing women self-esteem (Dove’s Campaign for Real Beauty), and more. Whole Foods Market strives to provide the highest quality natural and organic products, strives to “delight and nourish” customers, serve and support the local communities, and celebrate the sheer love and joy of food.”

What strategies are behind the success of Uniqlo, a Japanese casual wear designer, manufacturer and retailer?

I was recently in the Uniqlo store on 34^th street in Manhattan and was blown away by the quality and styling of the clothing, the store size and product scope, the presentation, the breathtakingly low prices, the service experience, the innovations and the energy. How did Uniqlo pull that off?  And why has Uniqlo experienced dramatic profitable growth over two decades?

“In fiscal 2014 it will continue a sharp sales trajectory with sales around 14 billion dollars.”

In 1994 it had approximately 100 stores in Japan. In 2015, it will have 840 stores in Japan and 1,170 stores outside of Japan, 820 of which are under the Uniqlo brand (and another 270 under the GU brand, which is a low-priced version of Uniqlo). In fiscal 2014 it will continue a sharp sales trajectory with sales around 14 billion dollars becoming a top-five global “own brand” clothing retailer.

6 Key Strategies Behind the Success of Uniqlo

Uniqlo’s success didn’t just happen by chance. There are certain strategies that have been key contributors to the company’s noteworthy progress. Here are six key elements that other brands can learn from.

1. Uniqlo has a clear vision of its brand.

To provide high-quality, performance-enhanced, basic casual wear at the lowest prices. Its clothing is up-to-date and fashionable, but not trendy.

Its fabric innovation and in-house design provide exceptional and unique functional performance. Uniqlo provides “made for all’ clothing that can be worn whenever and wherever. It is not, like some competitors, a firm that sells copies of the latest runway fashions.

2. Uniqlo brands its innovations.

This provides substance to its quality and performance positioning and sets it apart from most price-driven, value retailers. One of their signature innovations is HeatTech, a fabric developed in conjunction with a material science firm that turns moisture into heat and has air pockets in the fabric to retain that heat.

The HeatTech fabric is thin, comfortable and enables stylish designs very different from the standard for warm clothing. The HeatTech innovation keeps improving over time with new fiber technology. In 2003, 1.5 million HeatTech products were sold while in 2012 over 130 million units were sold over 250 items.

Not to mention their AIRism (a stretchy fabric) and Lifewear (a blend between casual and sportswear) technologies and more. All are branded, which means competitors have an uphill struggle to match this point of differentiation.

3. Its operational strategy gives it both a cost and agility advantage.

Its low-cost operation is based on Uniqlo’s ownership of product planning, design, manufacturing and distribution. The direct link between the stories and a stable group of suppliers means that what is being sold is directly translated into manufacturing orders.

There is no six or nine-month planning cycle, but stock is upgraded in weeks or even days. The customer thus has a direct influence on the ordering process, because what is being made is based on what they are buying.

4. The driving force is a charismatic owner-founder.

Tadashi Yanai is a hands-on leader who supports a strong, unique culture that is hard to duplicate. His influence is everywhere, as the values and goals of Uniqlo are translated into processes, measures, organizational structure and people. The organization is flat, and employees are encouraged to make suggestions.

He made a decision, a very rare one in Japan, to conduct all the business of the firm in English. Without question, this has enabled international success. He also has managed to avoid the most serious silo problems that hold back most Japanese firms, in fact, most firms, which go global. The culture he has put in place supports innovation, customer experience, teamwork and organizational goals.

5. The emphasis on the in-store experience is over-the-top.

And, it involves hiring, training, and micro-managing all touchpoints. Every activity undertaken by every employee, from a person’s folding technique to the way advisers (floor salespeople are called advisers) return charge cards to customers (Japanese style, with two hands and full eye contact) are recorded and analyzed. Each morning, employees practice the ways in which they are taught to interact with shoppers including the six standard phrases such as “Hello, my name is (blank), how are you today?” The financials are completely transparent, and sales are charted and posted each day. The firm is now building a Uniqlo University in Tokyo where 1,500 new store managers will be trained each year.

6. The firm thinks big.

Yanai wants to move beyond the primary mission to enrich people’s lives by providing truly great clothing to offer customers everywhere the world’s best stores, services and products. He wants to exceed Zara and become the top private label retailer in the world. Already tied for the number 2 brand spot in Japan (and HeatTech is in the top 50), Yanai wants to become the number one brand in every country where Uniqlo operates.

In 2004, that ambition grew as the Uniqlo Way was developed under the theme, “Changing Clothes. Changing conventional wisdom. Change the world.” There is an element of corporate social responsibility there that shows how serious Uniqlo is about contributing to the world. Their recycling effort, for example, has moved tens of millions of discarded Uniqlo clothing to needy people around the world.

Test your organization by asking employees two questions.

• What does your brand stand for?
• Do you care?

If employees are unsure of the brand vision or don’t care, there is little chance that you will successfully implement your business strategy. There are several benefits to having a strong internal brand. A clear, compelling internal brand provides direction and motivation to employees and partners. People and teams will be more likely to know if a decision or program is “on-brand” if the internal brand is successfully communicated.

The internal brand can inspire employees to find and implement creative, breakthrough brand-building programs, to stretch for a “big” idea. An employee base that is energized by a strong brand will be motivated to talk about the brand to others on social media and elsewhere. A solid brand, especially one with a vision that includes a higher purpose, is likely to provide an employee with meaning and job fulfillment. An activated internal brand strategy can support the organizational culture which can be a foundation of a strategy and its implementation. As Peter Drucker once said “culture eats strategy for lunch.”

So how do you communicate the brand to employees?

There are three stages involved: learning about the brand vision, believing the vision and that the brand can deliver it and living the brand by feeling inspired, empowered and becoming a brand advocate internally and externally.

Learning About the Brand Vision

The learning path can and should involve all the communication vehicles available such as newsletters, workshops, brand videos, brand books and personal efforts by individuals such as brand ambassadors, senior managers and influencers.

A brand vision can both capture the vision and reflect its importance to the culture especially if the CEO uses it regularly. But the learning effort should go beyond communication. It should link the vision to the business strategy and make clear that there is a reason for it to live. Executives explaining the “what and why” behind the business strategy and the role of the internal brand vision should play a key role in person. The learning effort can be motivated by highlighting gaps between the aspirational brand vision and the current reality.

Believing in the Brand Vision

Problems such as “the customer experience is not on-brand” or “the innovation stream is not adequate” can be posed to get traction. If there is excessive focus on the vision itself, there is a risk of precipitating an “I disagree” position. The believing stage involves putting substance behind the vision to signal organizational commitment. Three steps can make the point.

1. Put visible programs in place to make the brand vision and its associated business strategy actually succeed. That might mean a culture-changing training program, offering an innovation plan, an advertising program or a customer experience enhancement. It should have substance and will involve investment.
2. Align the evaluation and reward people and programs around the new initiative. Measurement and rewards drive behavior. In the early 1990s, IBM was poised to be broken up into seven parts, but CEO Lou Gerstner entered with a brand vision to deliver integrated solutions for clients—solutions that spanned the firm. As part of his culture-changing effort, employee evaluation was changed to emphasize organizational rather than silo performance and the company added a dimension reflecting the ability of people to demonstrate cross-organization cooperation. This sent a huge signal to the firm.
3. Create a brand champion—an individual or a team that is in charge of the brand vision and willing to carry the flag. He or she should be a primary internal brand spokesperson and communicate the brand idea to colleagues and encourage them to find creative ways to communicate the brand to others. The brand champion might create a team of brand ambassadors—credible people to represent the brand throughout the organization.

Living the Brand Vision

The living stage, where people are inspired to action, is the most difficult and crucial. Participative workshops where employees are asked to build visual montages, find role models, evaluate existing programs, portray a customer interaction or develop new programs can play an important role. Task forces can add energy, visibility and action. Microsoft, for example, has the “Microsoft Green Teams” that look for ways to further the “green” initiative through outreach programs into the community or through internal communication programs.

“An activated internal brand strategy can support the organizational culture.”

Getting employees in front of customers can be one way to make the brand vision come alive. P&G, for example, puts executives in front of customers regularly in the home (living it) and in the store (with shop-alongs or as behind-the-counter participants). Zappos.com encourages its people to engage by tweeting, and more than 500 do so regularly. An organization that lives the brand will use brand values as a criterion for selecting and retaining employees. Zappos.com has values that include delivering “wow” experiences and being a bit weird. One of the screening questions is to name something weird that you have done.

The Zappos trial period evaluation focuses on a fit with its brand values. Harrah’s, which hires people who are exceptionally upbeat and positive, holds an “American Idol”-type audition with a set of judges to screen candidates. The Haas School of Business admits students in part by how well their personality matches the school’s values. Power brands are built from the inside out, and internal branding needs to be a priority. It must go far beyond brochures and a CEO pep-talk.