Hidden Wealth in B2B Brands

Consumer marketers obsess about brand equity, as well they should. B2B companies would be wise to follow suit. Our quantitative, 16-year study of more than 450 firms shows that billions of dollars are locked up in B2B brands, yet managers consistently skimp on brand building. That’s an expensive mistake. Every corporation reaps the value of brand equity in two ways: as revenue, when it drives customer purchases, and directly, as a rise in market capitalization. Using a tool we’ve developed that gauges the relationship between brand perception and performance measures like revenue, profits, and cash flow, we have ranked the brand equity of all of our study companies and have statistically linked it with their financial data. The result is a measure of a corporate brand’s impact on stock performance—what we call “brand equity as a percentage of market capitalization,” which we refer to simply as “brand equity.” We’ve found that for B2B companies, the corporate brand is responsible for, on average, 7% of stock performance for the 47 industries we track. How Much Are B2B Brands Worth? What percentage of a B2B company’s stock price is due to its brand equity? When we looked at more than 450 B2B firms over 16 years, we found that some brands were far more valuable than others in the same industry, indicating a great deal of room for improvement. A fraction of a percent of brand equity can mean hundreds of millions of dollars in value. That figure may seem small, but bear two things in mind: First, it’s an average; the range spans from a low of 0.5% for new or unmanaged brands, such as electricity distributor PPL, to a high of nearly 20% for the best-managed B2B brands, like FedEx. The current dollar value for B2B companies’ brand equity ranges from a few million to tens of billions. This implies that with more strategic brand management, total brand equity for B2B companies could be worth billions of dollars more. B2B companies shouldn’t try to become consumer brands, of course, but they should seek to attain the maximum value possible within their industry. The average brand equity for B2B medical suppliers, for example, is 5.99%. However, the best-managed brands in that field are worth nearly 20%. If you are a medical supplier and your brand equity is 6%, then you know your brand management is only average, and you can reasonably set your sights on a goal of 20%. If you’re in the paper and forest products industry, on the other hand, 20% is probably unattainable. The best performers in your industry achieve brand equity levels just under 7%, so that would be an ideal target. B2B brand equity, when used as a dashboard measure, should be updated quarterly. It provides both a market cap percentage and a dollar-value metric that everyone in the company, especially the CEO and CFO, will understand. Most important, it can eliminate any doubts among B2B managers that brand equity matters.

Hidden Wealth in B2B Brands

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