Why brand capital is the silent force behind business success
Sholto Lindsay-Smith, director and head of strategy at international brand and business consultancy Industry, discusses the often forgotten importance of brand capital and why strong brands perform better in tough times.
In an increasingly competitive world, your brand capital is one of the unsung secrets of enduring business success. Brand capital is like political capital: a type of currency that politicians use to mobilise voters, ride out a political storm or accomplish other political goals. It’s been described as a type of credit, or a resource that can be banked, spent or misspent, invested, lost and saved. It’s just the same with corporate brands. Businesses with strong corporate brands can use their brand capital to mobilise customers, ride out an economic storm and bring influence to bear to achieve their corporate goals.
With an economy battered by the impacts of Brexit, Covid, wars and a long run of high inflation, most businesses are enduring a tough time. But it is those companies with high brand capital that will outperform the market. There is robust evidence from multiple long-term brand tracking indices to show strong brands generate superior shareholder returns, are more resilient in a crisis and recover more quickly from economic downturns. For example, Kantar’s latest BrandZ report shows that despite the global turbulence of the last three years, the top 100 most valuable brands have grown from $5trillion in 2020 to $6.9 trillion in 2023.
The challenge is getting shareholders to take a long view, because brand building is a long-term strategic endeavour. It takes significant time, effort and discipline to build brand capital.
As the aptly named Transform Awards suggests, successful brand building is as much about business transformation as it is about identity change. More so, the best rebranding initiatives use an identity change as a catalyst to drive business transformation. Real success is achieved when that transformation results in a realignment of the business and everyone can see a straight line running from the core purpose through the business strategy and brand positioning to the brand identity and ultimately the brand experience that impacts the customer.
To win shareholders over requires elevating the brand discussion to a strategic level and making the case to invest in building an enduring competitive brand advantage that will deliver far greater returns than short term tactical marketing activity. Against a backdrop of strong economic headwinds, the argument may be a tough one, but it has never been more important.
As we witnessed with the financial crash and the global pandemic, companies with strong brands continued to perform better and bounced back faster. As we enter a period of sustained VUCU – Volatility, Complexity, Ambiguity and Anxiety – we can again expect to see those companies who have invested in building their brand capital fair better.
