Patrick Smyth

You have high quality support services and polices, and your employee satisfaction surveys show that your employees are happy. Are your customers actually experiencing service that matches your brand promise? Does the culture of your employee team match the values of your company? Are different employee groups delivering different experiences to your customers? Do sales and service speak a different language?

These variations confuse customers. They will always be adjusting to your company’s different styles, behaviors, standards of performance, and promises. They will have difficulty developing a sense of affinity and loyalty with your company.

The Service-Profit Chain developed by Heskett, Sasser and Schlesinger (1997) from Harvard Business School connects profit, customer loyalty, employee satisfaction, and productivity. The model suggests that profit and growth result mostly from customer loyalty, which comes from customer satisfaction.

Satisfaction is greatly influenced by the value of service provided to customers. Satisfied, loyal, and productive employees create value. Employees become satisfied from high quality support services and policies that enable employees to deliver results to customers.

The Service-Profit Chain model offers a vital base to assure that your employees deliver results to customers. However, focusing simply on employee support services and policies does not mean employees will delight customers. Nor does it assure they deliver on your brand promise.

You need a defined employee culture, and reward and recognition system that aligns actions with the brand promise of your business. This alignment will grow the bond of loyalty with your customers, lower the cost of support, and accelerate operating efficiency and sustained profitability.

In financial terms, the value of a brand can be a major part of the value of the company. The price paid to acquire businesses is often substantially higher than the appraised value determined from the tangible assets of the company. According to a study in 1995, "the average market value of American-based publicly traded companies was 70% greater than their replacement cost (e.g., their tangible net asset value.)" 1

Assessing the actual brand value of a B2B services company should include the customer facing processes. Are the various functions and people delivering performance consistent with the brand promise of the company? Brand value tied only to market awareness and market share can drive unrealistic prices. The real capability of the company to perform to its reputation may not be clear. Consider also significant variances between the company and its customers’ expectations for the future. Discounts should apply to brand value from elements that fail to deliver effectively.

In the case of Philip Morris: "In 1989, Philip Morris paid $12.9 billion for Kraft, six times its net asset value. According to Philip Morris CEO Hamish Maxwell, his company needed a portfolio of brands that had strong brand loyalty [i.e., customer relationships] that could be leveraged to enable the tobacco company to diversify [i.e., financial relationships], especially in the retail food industry [i.e., trade relationships]."2 Philip Morris paid billions for a set of relationships. They expected that those relationships would enable them to conduct business in entirely new ways in the future.

In addition to the purchase price of a company, the value of the brand and brand equity directly affects stock price of the company. A Cap Gemini Ernst & Young report issued in 2000 said, "…brand power can account for 5 to 7 percent of the change in a company's stock price." 3 A study of 220 companies identified that corporate brand image could be measured as follows:

- Advertising spending 30%
- Size of company 23%
- Low dividend 10%
- Earnings volatility 7%
- Stock price growth 8%
- Other factors* 22%

*(includes marketing events and publicity, industry relationships, product categories, message quality, etc.)4

Fifty two percent of the factors influencing the brand image relate to defining and communicating the message and promise. Creating a complete company-wide brand strategy will contribute greatly to the value of the company.

The well-defined steps to accomplish this can apply to any business. Measure the results in the improved performance of every function of the company. This leads to improved sustained profitable growth and continuing growth in stock equity.

1,2       Tom Duncan, Driving Brand Value, pg. 4.
3       "Name Brand Calculus or Imaginary Numbers?" US Banker, Volume 113, Number 6, Page 26, June 2003.
4       Ad Value, Leslie Butterfield, ed., Butterworth Heinemann, Oxford, 2003, "How advertising impacts on share price," James Gregory, pgs. 17-25.