CHAPTER II: How to Measure the Success of Your Brand | Financial Metrics
In Chapter I, I’ve mentioned how branding sounds extremely abstract for many people and that its power is usually underestimated. I’ve defined it as: “The reputation you build and the visibility you gain in time.” to ensure it’s not only seen as poetry.
In order to invest in your branding, you need to be convinced that strong brands make more sales and have better awareness, right? So let’s have a look at possible ways to measure their success:
There are mainly three quantifiable signs to do this: financial, brand-related and customer related. In Chapter II, we’ll first focus on the financial aspect, as money is the easiest thing to measure right? Here we go:
Strong brands simply sell more and have a higher market share in their own category. China’s oldest wine brand Changyu for instance is in world’s top five most selling brands and celebrated its success by selling over double the volume – 15 million cases to Great Wall’s 7 m in 2016.
One important note though: In order to come up with a reasonable evaluation, one must take into account if the business arena is growing or declining. For instance, the wine market has been struggling in Turkey for several years now due to political reasons and this has also negatively affected tourism. It’s quite difficult to evaluate the success of Turkish brands in the local market, as the conditions do not really favor growth.
Revenue & Profitability
Well, if you are a successful doctor or a lawyer, you probably have good income and possibly you sell your service at a higher price than others, correct?
Same thing applies to successful brands. An Italian company Pambianco did an interesting research by analyzing the balance sheets of 171 Italian wine companies. The high-end wineries (48 of the star brands) such as Antinori, Frescobaldi, Banfi and Masi showed 7.8% growth in 2015. However, 123 of mid range wineries showed only 4.6% in the same year. The big difference is a result of the strength of these brands, for various reasons such as outstanding and consistent quality, UPS, distinctive brand image and more. This research also revealed that Sassicaia had a revenue of €27 million and over 55% EBITDA being the highest among others. Sassicaia’s success also depends on various factors but the turning point for this brand is known to be the year of 1985 when it got 100 Robert Parker points.
Regarding profitability, according to Deloitte's various analysis, in general larger wineries have higher profitability as they achieve economies of scale. On the other hand, wineries that follow luxury brand strategies (focusing on excellence in quality, hand crafted products and scarcity) can achieve high profitability as well. For example, Domaine de la Romanée-Conti was the most profitable label for Sotheby’s last year, topping rankings over the last three years.
The growth rate is also another indication of success. However, extraordinary circumstances such as financial crisis again have an important role in evaluation.
For example, Chilean wine giant Concha y Toro showed 7.2% increase in volume sales in 2016. Despite market conditions due to exchange rate devaluations, their premium category grew 8.6% according to Christian Lopez's (corporate export manager) interview with The Drinks Business. They showed highest expansion in Asia with solid growth in China (90%) followed by Japan and Korea. In order to reach these results, the company opened an office in Singapore to be closer to the market and have people on the ground. Furthermore, they realized that consumers in Asia cannot remember the name Casillero del Diablo but the emblem they placed on the bottle is memorable for Asian customers which is the “red devil” or “red ghost”. The brand also uses Weibo (China’s Twitter) and sponsors cultural and sports events. These are all market-focused brand and marketing strategies that result in high growth rates.
Last but not least, the stronger your brand is, the less negotiations you will have with buyers. If you brand has the ability to create the desire and become a “must to have” instead of “nice to have”, you’ll spend less time on finding buyers and instead you will try to figure out how you allocate your brand.
Don’t forget that, the importance of these metrics differ depending on the size, positioning and promise of the company. We’ll continue with brand-related signs in the next chapter!
Meanwhile, if you have any branding/marketing project in mind, feel free to drop a line to firstname.lastname@example.org
Emanuele Scarci, High-end wineries growing faster and posting higher profits