How to Gauge Your Brand’s Health

By Richard Czerniawski and Mike Maloney

Wall Street measures business health based largely by profit growth. Accordingly, companies typically measure the health of their brands using the same yardstick. However, profit growth doesn’t tell the whole story. Managers are skilled in managing profit growth by cutting costs and eliminating investments. This strategy may increase profits at the expense of the brand’s strength.

If profit growth isn’t a failsafe indicator of brand health then what is? Here are 10 elements that serve as lead indicators of and, ultimately, contributors to, brand health. The first nine are quantitative indicators while the last three are qualitative in nature.

1. Category/Segment Growth — A healthy brand participates in a growing category and/or segment of the market. Ideally, healthy brands are drivers of new market creation, versus market sharing (i.e., costly battles for market share).

2. Brand Sales Growth Rate — A healthy brand displays increases in sales growth versus the previous period (except in seasonal businesses) and the same period a year ago. A healthy brand has a higher sales growth rate than the category or segment in which it competes.

3. Return on Investment — The productivity of each dollar invested in marketing generates increases in sales. This resultant productivity exceeds the return on investment of competitive expenditures and that of the category as a whole.

4. Brand Loyalty — We can determine brand health by reviewing such customer behaviors as repeat purchase rates and growth in number and size of transactions, along with key attitudinal factors such as increases in future purchase interest.

5. Spending Mix — A healthy brand is evidenced by spending more in equity building drivers such as product development and advertising than in short-term sales drivers such as trade promotions. An indication of eroding brand health is increases in the percentage of, and growing dependence on, promotion spending.

6. Awareness — The level of “unaided” awareness, particularly “first mentions” can be used to diagnose brand health. A high level of unaided awareness both in the absolute and relative to competition may indicate a healthy brand. Growth in this area serves as a lead indicator of sales productivity. This is especially true when coupled with strong brand linkage—the customer associating the brand name with a meaningfully differentiated benefit.

7. Lifecycle Management — Healthy brands are aggressively engaged in creating ways to extend the lifecycle. As we alluded to in point 4, this is characterized by intelligent investment in R&D. Specific R&D activities to look for: clinical studies to establish new indications that extend patent protection and deliver meaningful differentiation; product improvements that enhance the value proposition for customers; line extensions that broaden the target-group.

8. Compelling Advertising — This means advertising that has been proven not just to increase awareness but also to build the business. Compelling advertising is determined by an increase in top-box “purchase intent.”

9. Proven Business-Building Initiatives — Healthy brands have an arsenal of “proven” business-building initiatives. This spans product developments, package extensions, follow-up or backup advertising campaigns, new promotions, etc. These initiatives have been demonstrated to have strong business-building capabilities through in-market testing. They don’t represent mere hope or a repetition of what has been successful in the past but, instead, powerful tools proven beyond doubt to productively grow sales. Healthy brands are continuously testing new initiatives so that they can predict, and drive, growth and return on investment more accurately. Moreover, these business-building initiatives are available on a timely basis. They are not late to market.

10. Power Positioning — A competitive, enduring and ownable brand positioning serves as the foundation to a healthy brand. If any other brand were to attempt to use the same positioning, it would be false. That’s because the brand goes beyond mere product attributes to encompass a constellation of “values” that are relevant to the target. These values form the basis of the brand’s reputation and equity — the special value customers attribute to the whole entity of the brand. It is a function of customers’ experiences with the brand along with the marketer’s communication of its positioning in every marketing mix element. Accordingly, the brand stands out with compelling brand positioning values in everything it does, as opposed to a plethora of messages, which diffuse the brand’s intended positioning.

11. Company Commitment — The health of a brand may be gauged by determining the company’s commitment to the brand. Is the financial role of the brand that of a cash cow or a star? How the brand is perceived internally is a sure indicator of future health. We can usually get a feel from this by reading annual reports and paying close attention to marketplace activities.

12. Management Competence — One of the key criteria used by investors for stock selection is company management. We also need to look to the brand management team to gain a perspective on brand health. All of us have witnessed the impact, either positive or negative, of a change in company and brand management. A healthy brand results from competent brand leadership. A super healthy brand grows from exceptional brand leadership.

Richard Czerniawski and Mike Maloney can be contacted through BDN Brand Development Network International, 430 Abbotsford Road, Kenilworth, Illinois, 60043. Phone: (847)256-8820; Fax (847)256-8847