Why is Branding important?
Now we can see the value of a branding investment. If Toyota ever struggled to determine the value of spending money over the years to build a brand in the competitive automotive marketplace, it is suddenly becoming clear. With the revelation that 2.3 million cars must be recalled and tested for a potentially deadly flaw – their sticking accelerator pedal. This in addition to the recent recall of 4.2 million Toyota and Lexus automobiles, the car manufacturer is getting a clear revelation of the precise
This represents a serious dent to Toyota’s sterling brand. Have they been successful in building brand equity? Have they built enough to withstand this collision? Is their brand a resource they can rely on in times of trouble? It could be. And a CNBC Poll today indicates it is doing a remarkable job. In that poll, slightly over half of respondents indicated they would not consider buying a Toyota now, and surprisingly almost half said they would consider buying a Toyota. They still believe in the brand. This could change over time depending on how things play out, but today’s indication is significant.
Distressed sales?
It could be expected that after revealing these potentially deadly mistakes that much more than half the respondents would have indicated they would not consider buying a Toyota at this time. But almost half still would consider buying a Toyota. That’s remarkable. How can it be explained aside from the power of the brand? (Join the update poll)
Intangible assets.
I wouldn’t be surprised if Toyota management understood the value of building a strong brand from day one. Sophisticated businessmen do understand these intangible issues. In fact, taking advantage of their understanding, all leading companies achieve valuations much higher than book value. For example 70% of Disney’s valuation cannot be attributed to book figures. For Heinz the ratio is 75%, Coca-Cola is 80%, Microsoft is 98%, and take a guess at Apple’s percentage. Most of this premium is due to the brand equity they have created.
We’ve seen brand value provide protection in the Tylenol tampering episode of the 80s, and with the disastrous introduction of “New Coke,” etc. Building a strong brand does provide insulation from negative events associated with the brand. This is one of the primary reasons savvy companies . For one thing, a brand can provide protection. It gives the company the “benefit of the doubt,” it provides breathing space to allow the company to recover.
The value of customer retention.
Customer retention is very valuable. Many studies have been conducted on this issue. And they’ve all demonstrated that dramatic financial leverage is provided by achieving only an incremental increase in customer loyalty. In a study by Bain & Co Research, it was demonstrated that companies that improve the retention of their best customers by as little as five percent can increase the enterprise profitability by as much as seventy five percent.
What do you think?
Tags: brand, Branding, building a valuable brand, communications strategy, competitive advantage, competitive marketplace, evaluating brand value, Toyota
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Good post. Interesting read. I honestly think that Toyota are gonna struggle to win the customer over. The whole point of a Toyota was it was Mr Reliable. Not any more!
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We have had a Toyota for years and never experienced a problem. I am still concerned if the problems are real or if this is just the way the current administration is trying to help out Detroit.
Incredible! Thank you! Am i allowed to quote part of your post to my blog?
Aw, this was a really quality post.
You’re right. Very very few business owners understand that branding can become insulation. Buyers give strong brands more leeway for failure than weak brands. Weak brands are dropped instantly when there is even a hint of disappointment.
Toyota’s investment in brand building is the same as buying an insurance policy.