Coca-Cola, Apple, and Amazon are three well-known and extremely valuable brands. In 2017, Forbes reported Apple’s brand makes up 41% of the company’s value. What does a valuable brand do for an organization? Why do companies spend massive resources to enhance a brand?
Brands do two things. They increase sales volume and often increase gross profit margins. Ideally, brands increase both volume and total gross profit.
Brands are not static, therefore the value of a brand must continually be monitored. Competitors are investing in their brands, requiring consistent improvement and investment. Otherwise, brand values can, and do, go down.
In today’s crowded, changing and challenging healthcare space, we rely on powerful brands to differentiate our organization. In the face of intense competition, our brands must signal high-quality patient care and outcomes to our communities, attract and retain top clinicians, and evoke loyalty and trust among our patient base.
How do we know definitively if our brands are powerful enough to influence the performance of our organization and people? Many healthcare entities are leveraging Brand Valuation, a tool to measure the value and performance of a brand.
Brand Valuation provides a deep analysis of an organization’s brand and provides a clear picture of how the brand contributes to the business’ results today and ensures it delivers even more in the future. Acknowledging and managing a company’s intangible assets taps into the hidden value that lies within it, while also creating a common language for leadership.
Knowing the brand’s value creates the opportunity for marketers to communicate the significance of what they do, and leadership to set a course to maximize profits. It also helps you decide which brands to continue, whether to rebrand and how to arrange your brand’s architecture.
UK HealthCare’s Brand
Bill Gombeski, Director of Strategic Marketing, leveraged the power of Brand Valuation at UK HealthCare. His original motivation was to elevate the visibility of marketing through a tangible measure–the brand’s worth.
According to Gombeski, “Marketing people know and talk about how important the brand is, but leadership struggles to understand this. Everything comes down to a financial matrix. We needed to quantify and elevate the brand asset to the level of other financial reports presented at the board level.” To assess their market position and strength, Gombeski’s team needed to answer:
- Does the health system license its name to any partners, and how much does it charge?
- What is the marketing strategy for the next five years, and how will its performance be measured?
- How have the key customers’ perceptions of the organization changed over the last five years and why?
The Brand Valuation process uncovered consumer perceptions were extremely favorable for UK Healthcare as compared to their market competitors. In fact, their market share was 13 percentage points higher than the system sitting in the second position. The initial valuation determined the UK HealthCare brand was valued at $64 million.
For Gombeski, the Brand Valuation process was a success. “Our CEO shared the valuation with the board. Since a third party calculated the value, it had credence, and the board had confidence in the number and could relate to the valuation process.”
An added benefit is the increased understanding with Trustees that the organization is performing positively. While Brand Value helps project and justify marketing spends, marketing is just one of the many factors that had an impact on UK’s brand value; new facilities, patient satisfaction, clinical outcomes, physician and staff behavior, all impact brand value.
The UK HealthCare leadership consider it a report card on their performance. Since conducting the brand valuation, UK HealthCare has expanded from 300 to 945 beds and is still growing. Annual admissions have increased from 19,000 to 38,000+ per year. Two years later, UK commissioned a second valuation; the brand value increased to $94 million.
The Marketing Budget is always at risk.
Many healthcare marketers are under increased pressure to justify budgets and the impact of marketing activities. But common marketing metrics like brand awareness, preference and net promoter score don’t necessarily resonate with the C-suite. When an organization’s brand has an established monetary value, branding and marketing budgets are seen as true investments, not an expense to be cut. “Marketing and the Brand Valuation experts work with Finance, which adds credibility. Normally, Finance sees Marketing as a cost center. Now Finance understands and appreciates brand investments, and pause before suggesting a cut to the marketing budget,” says Gombeski.
Is it time for a Brand Valuation?
Organizations that benefit most from a Brand Valuation are ready to shift their attention away from daily fiscal and operational fires to a long-term business strategy mindset. When Brand Valuations are performed every few years, leadership can track business performance over time, and determine the degree to which those strategies are successful.
Brand values can be used as collateral for financing, helping with negotiations with vendors, payers, partners, and potential buyers, and determining financial terms for licensing arrangements. Knowing the organization’s brand value allows marketing and brand budgets to be properly established. The days spent believing your health system’s brand was worth the investment but never having the power to defend and justify the investment are over.
How do you get started?
Franklin Street’s brand valuation partner, PYA, is an expert at performing brand valuations for healthcare organizations.
Download their white paper to learn more about the process and benefits of conducting a brand valuation for your organization.
What do you think your health system’s brand is worth? What are you doing to build brand value? As always, we’d love to hear your thoughts.