The business world seems to believe that branding is the preserve of consumer conglomerates and has little to do with small- to medium-sized enterprises (SMEs). “Big companies spend money on branding, smaller companies just get on with the job.”
And yet the facts don’t support this view. A research study carried out by Brand Finance, showed that brands and other intangibles account for the bulk of shareholder value in many market sectors. A surprising 72 per cent of the value of companies surveyed was not reflected on their balance sheets.
Replace the word “brand” with “reputation” and it’s easier to come to terms with the idea that the importance of a strong reputation/brand, applies equally to SMEs as it does to Apple Corp or Coca Cola. And there’s a lot to be gained by creating brand value. A company with a strong brand is able to command a higher price for its products or services and is more likely to achieve higher sales volumes and a greater market share.
But the benefits to be gained aren’t only on the demand side, as there are advantages on the supply side too. Greater trade and consumer recognition and loyalty results in lower sales conversion costs and more favorable supplier terms, whilst increased sales achieve economies of scale.
The value of a strong brand can also express itself in other ways. For example, there’s the ability to transfer the values associated with a brand into new market categories. But for brand extension to be effective the core value of the brand needs to be image rather than product led.
Although the validity of branding for SMEs may still be questioned today, John Stuart, chairman of Quaker, circa 1900, had no doubt about the commercial value of a brand and expressed his belief as follows: “if this business were to be split up, I would be glad to take the brands, trademarks and goodwill and you could have all the bricks and mortar – and I would fare better than you.”