Brands Matter: An Empirical Demonstration of the Creation of Shareholder Value Through Branding

Abstract

This research responds to the attendant need for empirical evidence pertaining to how marketing affects firm performance. Using the Fama-French method, common in finance, and a leading marketplace measure of a brand’s financial equity value, the authors provide empirical evidence for the branding-shareholder value creation link. The results extend previous research by showing that strong brands not only deliver greater returns to stockholders than does a relevant benchmark but do so with less risk. This finding holds even when market share and firm size are considered.

Success in Business-A Brand Equity Perspective

“…Results showed that companies with higher focus on the brand values performed exceptionally well and have fetched better results in respect of the monthly returns than the lesser brand concerned organizations. The results of the research also showed that a considerable amount of shareholders value creation was possible as reflected through the regression analysis (Madden et al, 2006).…”

“…In order to create a long lasting effect of the brand among the prospects and the customers, organizations have used various marketing techniques. Among the marketing techniques used, advertising has been one of the most popular methods (Wang et al, 2009;Madden et al, 2006). However it is noted that the initial effect of the advertising of the brand values disseminates within a period of three to fifteen months.…”

“…In order to strengthen the brand equity organizations also look for the Information technology alignment and the integration of the overall supply chain management, which will result in their better performance of the organizations (Seggie et al, 2006). In order to find out the link between the shareholders value and the brand equity a research was conducted by Madden et al (2006). Results showed that companies with higher focus on the brand values performed exceptionally well and have fetched better results in respect of the monthly returns than the lesser brand concerned organizations.…”

Customer satisfaction and brand equity

“…The Interbrand measure addresses criticisms concerning the lack of objectivity in BE measures based exclusively on customer mind-set, such as the one Millward Brown uses (Ailawadi et al, 2003). Madden et al (2006) defend the use of Interbrand data as the most well-known and widely used brand valuation method (Haigh and Perrier, 1997).…”

Three laws of branding: Neuroscientific foundations of effective brand building

“…Study after study demonstrates that strong brands create higher amounts of shareholder value, by increasing revenue and margin growth and decreasing the riskiness of a company ' s cash fl ows, more effectively than weak brands (see Millward Brown, 1 Interbrand 2 and Madden et al 3 ). According to some authors of popular management books, building such brands requires the application of simple ' laws ' of branding (see, eg Alsop 4 and Ries and Ries 5 ).…”