Harvard Business Review recently published a study by Christof Binder and Dominique Hanssens that lay to rest a lingering debate. Which is more valuable: Brand equity or brand relationships? As the chart below shows, the financial value of brand relationships is steadily surpassing brand equity. Today, “the lion’s share of value lies in customer relationships.”
Why? Digital technologies are making brand relationship building easier and more effective. Companies can now have more direct interactions with consumers, shorten the distribution channel and dramatically reduce the cost of sales. Customer relationship management technologies provide detailed insight into customer behaviors and needs and continuous feedback allow companies to respond efficiently and effectively. The cost of managing brand relationships has gone done while the effectiveness has gone up.
Does this mean that branding and brand equity are irrelevant? Not at all. In fact a strong brand idea is even more important today–it must be sustained through product design, channels, pricing and promotions, CRM strategies, call centers, etc. The brand is the idea that integrates consumer experiences through time and space–and the brand experience is where relationships form and fall apart. We need research that illuminates the entire consumer/brand experience and identifies the effects of these experiences on key measures such as trust, word of mouth and loyalty.