CEO and Founder,
440 Industries
A brand is a name, sign or symbol used to differentiate a firm’s offer from its competitors. A brand is an intangible asset that, over time can increase in value and can become one of the most important and valuable assets belonging to an organisation.
Firms, tend to approach their brand value – as well as other intellectual property assets – in a strategic manner, using it as an attestation of the company’s potential and using it as a currency when establishing licensing agreements. The value associated with a brand is called “brand equity” and can be intended in a variety of ways according to the context of reference. Despite being ‘intangible’ a firm’s brand equity incapsulates great value and can be quickly monetised, in a variety of ways.
As a brand is often defined as “a promise of consistency”, managers who work in fashion companies are required to manage a brand scientifically, reinforcing its consistency across media and growing its value, even if, as we will discuss, putting an exact price on a brand is very difficult to do.
The value associated with a brand – or its brand equity – is hard to describe as it can be identified with a series of elements.
In this post, we are going to discuss the value associated with a brand according to a variety of perspectives which will be discussed throughout the article.
From a “strictly financial” perspective, a brand has a financial value, which is taken into account by managers for a variety of processes, which may relate to merger and acquisition operations. The more potential a brand shows in growth potential, the more interest is will be able to attract from potential investors.
This perspective on a brand despite delivering the full extent of its monetary value can create misconceptions, by connecting a brand’s value only to tangible financial elements, which by definition have short-term relevance in relation to the lifecycle of the brand and its potential to grow.
A firm focused only on this particular perspective, may lose great opportunity from missing many, alternative values linked to the company’ brand. As we will discuss in the next section, brand value is more of a means to an end, rather than an end in itself, like in many other sectors of business, focusing on the immediate monetary value of a firm, is a short-sighted business strategy.
This alternative perspective relates to how companies are able to create line extensions for their products, covering through a more “elastic” brand concept a variety of products and services which will still maintain the brand’s DNA despite covering non-core product categories.
This element of “elastic branding” can be tested and studied in the so-called flagship stores, where the educational\theatrical elements of the brand typically allow to stretch a brand’s equity and to test its umbrella-effect potential over a wider variety of products and services. To learn more about how this can be done, we recommend reading this post: Flagship stores and the future of retail.
From an operational perspective, firms use this approach to generate new revenue streams connected to untapped pockets of value. In the case of masstige, high-end luxury firms establish licensing agreements with third-party manufacturers in order to produce commodity-level products which can be sold at premium prices because of the branded label.
As much as this can be perceived as a highly profitable endeavour, there are some risks. Companies which abuse their brand, making it accessible to an excessive range of products will incur in brand dilution. Another common risk associated with this strategy instead relates to developing line-extension products through third-party manufacturers which don’t reach the same quality level in comparison to the ones manufactured in the core product categories.
This is why licensing is a very powerful, yet risky strategic tool which needs to be used with care and far-sightedness.
This is the most important element of a brand’s equity, as ultimately the value of the brand is the one connected to its market and customer audience.
In relationship to its customer audience, a brand is required to develop a unique DNA which is capable of fostering memories and brand associations. These associations build towards brand awareness and develop the positive associations between the brand and the values it stands for. By reinforcing these brand associations companies are able to harvest an element of intangible uniqueness.
In this context, as brands pursue a high-end brand experience, being able to manage and control the relationship with customers at every point of sale (POS) has become a necessity as firms need to provide a consistent brand experience through their own brand ambassadors. A brand ambassador, is therefore much more than a simple sales assistant, as he\she is given the job to convey values which elevate clothing, accessories and other items to access a higher level of consumer awareness and loyalty.
Fostering and retaining customer relationships is not an endeavour to be taken lightly. This is because connecting with customers at the point of sale requires brands to directly manage direct retail operations. During a shopping experience, companies are able to tap into a wide set of intangible benefits that can make the difference between a one-time client and a returning customer.
Developing this approach requires fashion firms to pursue forward integration strategies connecting to their final customer via owned retail stores. The degree of complexity and managerial expertise required to bring to fruition this strategy cannot be underestimated, as the professional skills necessary to manage distribution is not the same that applies to design and manufacturing.
In the world of luxury, value associations are mostly drawn from the element of time. Time allows companies to create a narrative whereby a brand is personified acquiring values, a legacy and a heritage, that only a handful of companies can claim.
Companies which are able to develop a persuasive narrative and legendary upbringing behind their firms are able to establish a very convincing positioning strategy. To create this storytelling effect, firms work on 4 founding elements:
In order to fully leverage the appeal of heritage, companies have been developing new and innovative approaches to storytelling, for instance by creating museums. A museum is the ultimate celebration of the heritage values associated with a brand and a form a long-term value creation and consumer education. Museums, at first sight, may seem unprofitable for the bottom line, but on the contrary, they are investments which allow growing the intangible elements of luxury and prestige which associate fashion with the world of art.
In a world of fast-paced consumer goods, fashion never lets designers sleep, as they are constantly drawn to create and innovate, while pursuing new strategic business objectives.
Developing a strong brand is a form of financial security for a company. Through branding firms are able to maintain a set of values and associations which may for a long time, and exit the loop of fashion trends. Moreover, a positively-reinforced brand can gain higher customer loyalty and lifetime customer value.
All in all, the value of the brand, despite its intangibility has become the most relevant asset for a company as it provides firms with a ‘currency’ which allows them to develop a stronger position towards its stakeholders.
In the next article we are going to discuss how the brand vision needs to find its tangible counterpoint by inspiring the process of collection development and creation. We will address this in the article: Collection Development in the Fashion Industry.
I am an Anglo-Italian business lecturer and consultant based in Florence, Italy. In 2017 I started 440 Industries, an education and training company focused on fashion, music, and technology. Our mission is to help students, entrepreneurs and managers in overcoming the challenges of starting, developing and scaling their business in the creative industries. When there's a will, there's a way!
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