Brand scorecard

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Question - why would I bother to set up a brand scorecard?

Answer - to ensure that the brand marketing plan is integrated into the business plan, and that each element is tracked similarly to a Balanced Scorecard.

Key action points

In order to develop any strategy for a brand, you need to know where the brand is today.

The Mud Valley Brand Scorecard is an output of the Road Map process that assesses the current health of a brand.

It is designed to be complementary to the full Balanced Scorecard (should you have one), in that it has several sections intended to evaluate the different processes, opportunities and outcomes related to brand management. It is not intended to cover every aspect of your business.

Section 1: Segmentation and opportunity sizing

• Priority of each segment
• Segment definition
• Total segment size
• Total realistic sales opportunity within the segment
• Total realistic sales opportunity as a % of the total segment size

Section 2: Brand financial performance

• Sales
• Share of total realistic sales opportunity
• Net profit
• Net profitability

Section 3: Customer retention

• Number of customers
• Average sales per customer
• Average net profits per customer

Section 4: Underlying brand franchise

• Brand stature
• Brand intimacy
• Brand awareness
• Compelling proposition
• Market position/leverage
• Organisational intent to back the brand

• Message effectiveness
• Channel effectiveness

Section 6: Overall self-assessment of brand process competence

• Brand process effectiveness

In more detail……………

Since the success of the Kaplan & Norton Balanced Scorecard process, people have been proposing Brand Scorecards.

However, whereas the Balanced Scorecard process was designed to map your business model, and to identify the levers to drive you towards desired financial outcomes via excellence in one or two of:

• customer intimacy
• operational excellence
• innovation/regeneration

the proposed Brand Scorecards have usually been just a bunch of numbers, mixing hard measures, soft measures and financial outcomes.

How extensive a Brand Scorecard should be will depend on whether you see brand management as:

• your entire business
• a focus for the entire business (but not the entirety of the business model), and therefore a level above sales & marketing
• product/service management, and therefore a component of sales & marketing

We believe that the Brand Scorecard should be a sub-set of the Balanced Scorecard, but a relatively standard sub-set. Whereas there are many ways to model a business, brand management is more-or-less universal in its principles, requiring only minimal modification for any one business.

The Mud Valley Brand Scorecard is a natural outcome of the Road Map process, so each element should be backed by significant, and ideally on-going, brand analysis.

It is not expected that every aspect of the Brand Scorecard be updated every month, but the financial outcomes are likely to be (usually rolling 12 months figures), and the rest should be updated regularly.

The Brand Scorecard uses traffic lights:

• green for improving
• orange for static
• red for declining

If any area of the Brand Scorecard has not been checked for 6 months, those figures should have a white background.

Section 1: Segmentation and opportunity sizing

Brand management should always start with segmentation.

If you are not segmenting your customer opportunity base to identify profitable customer segments, you are “selling” (and maybe very successfully).

If you are segmenting your customers, but only demographically, with an eye to short-term sales and profit targets, you are “marketing” (and again, maybe very successfully).

If you have a full segmentation model based on situations, needs/attitudes/values, behaviours and demographics, and designed to deliver long-term profitable growth, you are practising brand management.

So, on any Brand Scorecard you need to know:

Within the Road Map process, you will have gone through a series of exercises to define your most profitable opportunity segments, and then to prioritise each segment partly by likely financial outcomes, but also by strategic fit and the degree of your long-term competitive advantage.

These segments will not remain static. They will grow, stabilise and decline. What you need to know is:

1. what your total realistic opportunity is in each segment
2. what share you have of that targeted opportunity
3. whether that target opportunity is growing or declining against the total segment opportunity

If you know this, you can make a judgment about your overall growth prospects at market level, and whether you are prioritising the right segments.

Section 2: Brand financial performance

It would be a rare brand that does not have growth targets. However, many targets are somewhat arbitrarily imposed.

To judge financial performance on fluctuating sales against arbitrary stretch targets can lead to the wrong decisions.

In brand management, wrong decisions usually lead to the undermining of the long-term profitability of the brand in favour of short-term sales and profits.

It is better, we would argue, to use rolling 12 months sales and net profits figures, and to judge whether you are growing in absolute terms, and in respect of your total realistic sales opportunity within the segment.

Section 3: Customer retention

One of the key drivers of sales and profits performance, given a healthy total realistic sales opportunity within the segment, is the average sales to existing customers.

In any business, give-or-take:

• 20% of customers are profitable
• 60% of customers are profit-neutral
• 20% of customers cost you money every time they order

You therefore need to get rid of the customers who are costing you money, so measures of customer retention are not enough.

If you are gaining customers, but each customer is worth less and less on average, this trend should worry you.

If you are losing customers, and each customer retains the same average value, this should worry you too.

If, on the other hand, you are losing some customers, but each retained customer is worth on average more, this should be a road to profitability so long as you retain a reasonable spread of customers.

So what you want to know is the trends within:

• Number of customers
• Average sales per customer
• Average net profits per customer

Section 4: Underlying brand franchise

An increase in the average sales per customer is a good sign, but it is behavioural.

To ensure that you are building a healthy customer environment, you need to examine your brand power and brand dynamics.

Your brand power is about what percentage of the target customers:

• Have some knowledge of you (informed awareness)
• Feel close to you
• Trust you, your products and your services

Your brand dynamics is about whether you have:

• A compelling proposition to the market in terms of your brand, your products and your services
• A strong market and channel position with regard to the overall clout and reputation of your company
• A determined intent to build the brand, its products and its services

The reason you should look at brand power and brand dynamics together is that you might have an excellent profile within a segment, but be in the process of undermining it with a weak current product proposition, weakening channel leverage (as is most likely in consumer retail markets), and under-investment.

You are unlikely to measure this on a monthly basis, although some businesses do, but you should measure it regularly.

Again, if you have several measurements, we recommend that you use 12-month rolling figures to flatten out the inevitable margin of error effects.

Section 5: Communications operational effectiveness

Within a brand management context, we then recommend that you focus on communications effectiveness.

There are two key issues here:

• Message effectiveness
• Channel effectiveness

While you may have an excellent brand proposition, if some of your communications are wandering off-message, this will impact the overall strength of the brand over time. Inconsistency undermines credibility, and inconsistency is inevitable across multiple communications channels unless messaging is deliberately managed.

The other issue is whether you are using the communications channels to the customer in the most cost-effective manner.

This is partly about judging whether you are using the right channels for each step in the buying cycle, but also about recognising the changing communications environment.

Since the Internet revolution, communications practices have changed radically. Generally speaking, people prefer to hear from you over the web or by e-mail. Not only are these channels preferred, but they are also relatively cheap.

Many brands today will have a contact strategy that lays down that key customers are contacted at least every two weeks to ensure top of mindshare. This is unaffordable via the press or TV, but perfectly possible via e-marketing.

Of course, some people will opt out of regular e-mail contact, but your best and most profitable customers will appreciate the more regular contact.

Section 6: Overall self-assessment of brand process competence

• Brand process effectiveness

You could build into a Brand Scorecard every aspect of the marketing mix, an assessment of brand skills, your training and succession policy, and trends within licensing deals – and maybe you will.

In our view, if you have Sections 1-5 right, you have probably got the rest more-or-less right too. So rather than try to build everything into the scorecard, we have included a catch-all – a self-assessment of how you are managing the branding process as a whole.

A full self-assessment will identify any additional areas of strength and weakness that you can address specifically within your Brand Scorecard.

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