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AdrianDavisNickAnderson16thJuly20022“Thefundamentaltaskoftoday'sCEOissimplicityitself:Getthestockpriceup.Period.”“A15%-20%premiumisjustifiedforpremiumbrands”“Beingpassionateaboutbrandsisaquestionableattributeformarketingprofessionals;farbettertoberationalaboutmanagingthem”PeterDoyle,VisitingProfessor“IknowIamthrowingawayhalfofmymarketingbudget.ButasIdon’tknowwhichhalf,I’dbettercontinuetodoso”MorrisTabaksblatt,formerCEOTheview…3Fact…•Themostimportantobjectivefortoday’sCEOisdeliveringshareholdervalue•Brandscanbethesinglemostimportantcomponentofintangibleassets•Astrongbrandaddsrealvaluetoitscompany•Brandsdrivebusinesssuccess4ABrand:•Itisnotfamealone•Itisapromiseofquality,meaningandconsistency(whatyouaregetting,howyoufeelaboutitandwhoitisfrom)•Itisasourceofdifferentiation•Itisanentitythatrestsincustomers’imaginations•Itisadriverofshareholdervalueresultinginhigherprices,highervolumegrowthandlowercostsDriversofBrandValue5ForatypicalFMCGorganisation:9Trial(andhopefullyrepeat)9CustomerLoyalty9IncreasedPricePremium(Reputation)9RepeatPurchase(e.g.Multibuy/BOGOF)9IncreasedRegularityofUse9Stretchintonewmarketsorcategories9Lowercostsofadvertisingandmarketing9LowercostsofSKU’sandmerchandising9Lowerdiscountstomultiples9Economiesofscaleovermanyterritories(production,distributionandpromotionalspend)Strongbrands-strongperformers6AmericanExpress05001,0001,5002,0002,5003,0003,5004,0004,500909192939495969798990001S&P500(Us)AmericanExpressAtendSourceJCFQuantGeneralElectric05001,0001,5002,0002,5003,0003,5004,0004,500909192939495969798990001S&P500(Us)GeneralElect.AtendSourceJCFQuantGucci02004006008001,0001,200909192939495969798990001Aex(Nl)GucciGroupAtendSourceBrands…..•Commandapremiumprice•Gainadisproportionatemarketshare•Provideabarriertoentry•Createa‘breakaway’propositionBrandcanbeapowerfultoolforleveragingmarketvalue7IntangibleAssets195019752001%ofMarketValue0%100%Intangibleassets71%Bookvalue29%FTSEAllShare•BRAND•Customerrelationships•Patents,processes&know-how•Technology•Intellectualandhumancapital•OthergoodwillPwCResearch20018DirectlinkbetweenbrandvaluemanagementandimprovedshareholderreturnAWARENESS•Recognition•RecallIMAGE•Attributes•Benefits•ValuesBRANDVALUESHAREHOLDERVALUEBRANDEQUITYBrandRecognitionBrandAssociations••Highermarketshare•Strongersellingprice•HigherbrandNPV•Lowercostofcapital•Greaterpositivecash-flow•HigherexpectedearningsPERCEPTION•Quantifyingfinancialvalue•UnderstandingvaluedriversValueDeliveryMarketcommunicationBrandLoyaltyBrandDifferentiationDiageo-Aprimeexample9Quantifyingvalue“…drivingtoplinegrowthinourglobalprioritybrandsandmarkets,wecontinuetodelivergrowthinshareholdervalue”PaulWalshCEO30/6/20011Coca-Cola1Heineken2Gillette2Anheuser-Busch3Campbells3Nestle4PhillipMorris4Colgate-Palmolive5Proctor&Gamble5AlliedDomecq6Colgate-Palmolive6Unilever7PepsiCo7Tricon8Heinz8Diageo9Bestfoods9Pepsi-Co10Anheuser-Busch10PhillipMorris16GrandMet19Guiness1995-19971998-2001TSRmeasuresreturnfrommovementintheshareprice,togetherwithdividendsreceived•Abusinessphilosophylinkedtoshareholderreturn(ManagingforValue)•CalculatedbyTSR(TotalShareholderReturn),benchmarkedagainstcompetitiveset•EPdrivesbrandstrategy•Formsthebasisofdecisionmakingforbrandinvestment10TheimportanceofbrandtodifferentiateinincreasinglycompetitivemarketsOver70%donotandcannotmeasureROIinbrandbuildingDifferentiatethroughBrandStrategyDiscerningcustomersNewreportingrequirementsE-bizConvergenceGlobalisationNewbrandonlinenowrecognisedaswasteofs/hvalueContinuingtrendtowardsglobalbrands-upto50%incertainsectorsStakeholderswantmoreinformationonbrandequityMorethan60%statethatbrandingisanimportantconsiderationinNPDSource:Property&Casualty:MappingtheFuture,PwCSurvey,2001Majorstrategicdecisionstakenwithoutquestioningvaluereturns?11Thenewcorporateenvironmentiscallingforastepchangeinbranding12Stage41970s2000sP&GBrandManagementModelAdvertisingAgenciesBrandConsultancyBrandValueConsultancyStage1Stage2Stage31980s1990sBrandValueShareholderValueCreation•MarketingFunction•FMCGmarket•Advertisingfocus•Creativeexecution•Emphasisonvisuallogos•FocusoncommunicationsStrategicConsultingFinancialAnalysisEvolutionAnewperspective….13•Weplaceshareholdervaluecreationasthekeydriverofbranddecision-making•Wequestionandquantifythevalueofdifferentstrategicoptionstodeterminewhichroutewillgeneratemostvalue•Thisenablesinformedandrobustdecisionstobetakenon:–creationofnewbrands–brandmigration–brandre-positioning–brandmanagement–brandinvestment14Brandstrategyfocusedonthedeliveryofsuperiorearningsgrowth,throughmaximisingvaluecreationinthedevelopmentofbrandsAbusinessneedstofocusoncoreprocessesinmanagingthebrand15BrandValueManagementPrinciplesSelectplansandstrategiestomaximisebrandvalueCommunicateperformanceeffectivelywithinvestorsAllocateresourcestooptimisebrandvalueDesignincentiveschemestorewardbrandvaluecreationManagementreportingonvalue-basedmeasures12345Howdoesitwork?16ByfocusingonvaluecreationasthekeydriverofbrandstrategydevelopmentandmanagementBRANDREVIEWBRANDSTRATEGYBRANDVALUEBRANDMANAGEMENTBRANDADVISOR