A summary of Kevin Keller and Donald Lehmanns (…) on how shareholder value ultimately stems from a chain of events – starting from the marketing program.
- How does brand value get created?
- The Brand Value Chain -> Tracing the value creation
- Assuming the brand value resides with the customers
In short – Firm makes branding activity -> Which in turn influences customers -> Which in turn dictates brand performance -> And thus ♥ shareholder value ♥ –
- Marketing program investment entails:
The marketing effort such as communication and product - Customer mindset entails:
How well and which customers recognise and recall the brand, the strength and availability of the brand, how loyal the customer feels, generel attitude toward the brand and how much the customer uses and talks about the brand - Brand performance entails:
Price elacity and how much does demand change with price changes – also market share - Shareholder value entails:
Stock price, price to earnings ratio and market cap
How well each value stage performs depends on three marketing multiplers: Program quality, Marketplace conditions & Investor sentiment.
Marketing program investment -> Customer Mindset
– Is affected by program quality
Customer mindset -> Brand performance
– Is affected by marketplace conditioning’s
Brand performance -> Shareholder value
– Is affected by investor sentiment
Program quality entails:
– Will consumers properly interpret marketing efforts, is it relevant to consumers, is it unique compared to competitors and is it consistent
Marketplace conditioning’s entails:
– how effective branding is compared to competition, how well branding is supported by other channels/intermediaries and the size and customer profiles
Investor sentiment entails:
– Brand growth potential, the likelyhood of this growth (affected by metrics such as competition), brand size of overall portfolio, overall dynamics & risks
Own reflections
While shareholder value is characterised by stock price, price earnings ratio and market capitalisation – this fails to capture dilution of shares outstanding – thus elements such as eps or book value pr share or valuation ratios such as price earnings or price book are stronger measurements of shareholder value.
Kevin Keller and Donald Lehmanns argue that differentiation/uniqueness of the marketing program relative to competitors – as an indicator for how efficient marketing expenditures are – though somewhat contradicting their second point of relevance to marketing customers – as biggest market players rarely will be using niche strategy – appealing to customer needs and wants (highest conjoint utility) – should be in most cases prioritised above differentiation.