Building and Sustaining a Brand Balance Sheet: How the Best Global Brands Win
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When looking at a successful business, it’s intuitive to think about its balance sheet. Investors pay attention to cash flow, valuation, profit and a host of other metrics to understand the overall health of the company. This quantitative approach is absolutely crucial, but it only tells one side of the story and misses the qualitative assets that make brands valuable in the hearts and minds of customers.
Brand balance sheets should also consider the qualitative assets that boost a brand’s value – things like consumer sentiment, satisfaction and trust that keep customers coming back time and time again. While these may be less intuitive than quantitative metrics, they are no less important. Everything from store and checkout experiences to product packaging and websites are either assets or liabilities. Interbrand’s annual report on the Best Global Brands takes a deeper look at the attributes of strong brands and shows that the strongest brands actually outperform the competition.
This shouldn’t be a strictly academic exercise either. A brand balance sheet should be a living document that the executive team builds and updates frequently. By tracking assets and liabilities, the team can measure their impact over time. They can systematically eliminate liabilities and manage assets to ensure they don’t move to the liability column.
I think back to my time at McDonald’s (No. 10 in Interbrand’s 2018 rankings) and one of its strongest assets was and is its French fries and the way they make people feel. Consumers know that at any one of its nearly 14,000 U.S. stores – hot, perfectly salted and delightfully crispy – those fries are sure to put a smile on your face. McDonald’s does everything to preserve that quality. They buy the best potatoes (10 years at a time) and outspend the competition to ensure they stay the best.
If McDonald’s was only thinking about the quantitative metrics, they might skimp on the potatoes, which would be short-sighted. McDonald’s consistent and delicious French fries make people happier and that happiness quotient doesn’t show up on a financial balance sheet, but it’s a real, albeit hard to measure, asset that impacts the whole brand by bringing customers back again.
A brand balance sheet will be unique to every company, but the first step is always to measure it via a brand MRI or audit, and brands should be sure to look at both sides of the ledger. Every product and customer experience are either an asset or a liability, and brands should be intentional about which side of the ledger things sit. Then create a plan based on the resources available to shore up liabilities or amplify assets to make the biggest impact in the short, medium and long-term.
Over the holidays I visited an Apple Store with family, and our experience from start to finish was delightful. As a brand, Apple (No. 1 in Interbrand’s 2018 rankings) ensures that every touch point with a customer supports its balance sheet. A beautiful store, memorable greeting at the front door, support at the genius bar and mobile checkout anywhere in the store – these are all intentional investments in assets. I could buy any other cell phone that will function essentially the same, but I go back to Apple because of the experience.
Walmart is another great brand with a different approach. Walmart’s goal is everyday low prices for its customers. The store is functional. The CEO’s office is small. If you visit the purchasing room at Walmart headquarters where million-dollar deals are struck, you will sit on a hard-plastic or metal chair. You won’t have the experience of an Apple Store, but that’s the point. They are fully committed to everyday low prices based on a deep discipline around maintaining everyday low costs.
Once brands understand their own brand balance sheet, the next step is to develop a plan for tracking and measurement. Companies can be intentional with their investment decisions and continue to stay close to their customer. The world’s greatest brands protect their brand balance sheet while managing changing customer expectations.
Think of a company like Sears whose greatest asset was the in-store experience. Over time that asset moved into the liability column. There were short, medium and long-term investments Sears could have made in their brand balance sheet, but they didn’t make them.
By taking the time to understand the brand balance sheet, a company can ensure its ability to stay competitive and maintain relationships with its most important asset – its customers.