In the earlier post ”Time to wake up” I referred to the report “The cirisis in creative effectiveness”. I also mentioned the Brand Orientation Index, a study on the financial results of companies focusing on brand building compared with companies which did not.
So it might be in its place to describe it a little more in-depth.
The study showed the more brand-oriented a company is, the more profitable it is. While the most brand-oriented companies, on average, reach an operating margin of 14 percent, the least brand-oriented companies are satisfied with an average of eight percent.
This was stated in the survey Brand Orientation Index – BOI, which was addressed to Sweden’s 500 largest companies and was conducted by Frans Melin Doctor at Economics and Senior Lecturer at Lund University together with doctoral student Johan Gromark.
It was a few years since they did their original survey, but it has been followed up and supplemented with a number of surveys. Both in Sweden and abroad. And it is equally relevant today, if not less, Johan Gromark told me when I talked to him a few weeks ago.
“We have done a survey of all other research in the brand area and everything shows the same relationship between brand orientation and profitability. This applies in a very diverse context, regardless of industry and type of company. Whether it is about mature markets or development markets”, Frans Melin has told me.
“It is also very interesting to note that the ‘standard strategy’ that is market orientation, does not have the same clear effect on profitability. One conceivable reason for this may be that market orientation has become a hygiene factor, which is not always handled with the professionalism required and with the brand as a starting point, “Johan Gromark said.
He is currently working on an upcoming doctoral dissertation, with Frans Melin as supervisor.
The dissertation is further based on the knowledge established in BOI and is entitled “A study of internal and external perspectives on the brand as a starting point for strategic orientation”.
There are few competencies that are as important in companies as brand awareness. From the board downwards.
If the Board understands the importance of brand focus, it will be included in their instructions to the CEO and become a priority issue for the management team. Something that would facilitate the marketing department’s work and the opportunity for long-term, strategic branding.
Six Important Facts from the Brand Orientation Index (BOI) Survey
It is profitable to be brand-oriented.
In general, it can be said that it is twice as profitable as not being brand-orientated. The study finds that the most brand-oriented companies have almost twice the operating margin as the least brand-oriented.
All companies can become brand-oriented.
The BOI shows that the issue is just as important for service-produced as goods-producing companies. Neither is there any difference in this regard between B2B companies and B2C companies.
Quarterly economics and brand orientation do not fit well.
An interesting factor, reported in the survey, is that listed companies are under-represented among the most brand-oriented. This may be because the IPO is forcing short-term profitability thinking, which is not compatible with long-term branding. Moreover, such a short-term approach is often combined with the view that investments in the brand are more attributable to costs than to investments.
Combining an internal and an external perspective is a success factor for brand orientation
BOI shows that the work of building strong brands requires a holistic approach. The successful companies have succeeded in creating value-driven organizations where employees are important brand ambassadors, while utilizing the brands as strategic means of competition in the market.
In brand-oriented companies, brand development is a management issue.
In the most brand-oriented company, the management team is very involved and active in brand-related issues. In addition, the study shows that decentralized brand responsibility rarely leads to brand orientation.
Brand-oriented companies attach great importance to setting goals and following them up.
Successful brand building is characterized by continuity and goal awareness. Long-term perspective and evaluation, both internally and externally. This is also very clear from the survey.
Can it be so much clearer than that?