bCo

Business Horizons (2009) 52, 1591661. Why dont shareholders showinterest in branding?

In the business-to-business (B2B) arena, does brand-ing create sustainable economic value for compa-nies and their shareholders? Or, are other variablessuch as innovation, research, and manufacturingexcellence the predominant business drivers? Overthe last few decades, the topic of branding hasattracted increasing interest; however, little re-search has been conducted on the link betweenbranding and the financial performance of compa-

nies in the B2B segment. In many cases, business-to-consumer (B2C) activities have been the focus ofresearch, while industrial branding has been treatedas the intellectual step-child and been somewhatneglected. Academic research in this field has beenlimited, and the scholarly literature has neitherprovided a comprehensive theoretical basis nordocumented an empirical relationship betweenbrand value and shareholder value (Kerin & Sethura-man, 1998). The result is that branding research inthis field is frequently based on shaky foundationswhereby key results and findings are debatable.Bold claims shared by Balmer (2001) and Gronroos(1997) challenge the widely accepted perception

KEYWORDSB2B branding;Financial performance;Return on branding;Market orientation

Abstract Is branding an effective tool for generating shareholder wealth forcompanies that are active in a business-to-business environment? Or, do other factorssuch as innovation and manufacturing efficiencyor the lack thereofcreate ordestroy shareholder wealth? Based on an examination of almost 1,700 companieslisted either on the United States or European stock exchanges, this study reveals thiscrucial relationship could be described as a W-shaped curve with five distinctivephases, depending on the strategic branding position of the company. Used strategi-cally, business-to-business (B2B) companies with a balanced corporate brand strategygenerally yield a return to their shareholders that is 5%-7% higher. It is therefore vitalthat key executives, including the board of directors, systematically assess andmonitor the strategic branding position of their company and how their brandinginvestments are performing against key competitors. This study reveals that share-holders should insist on systematic performance feedback from the corporationregarding all key items in the balance sheetincluding branding. As disclosed herein,very few of the companies analyzed possessed an optimal balance between brandingand financial performance.# 2008 Kelley School of Business, Indiana University. All rights reserved.

E-mail address: lo.int@cbs.dk

0007-6813/$ see front matter # 2008 Kelley School of Business, Indiana University. All rights reserved.doi:10.1016/j.bushor.2008.10.004B2B branding: A financial

Lars Ohnemus

Copenhagen Business School, Porcelnshaven, 2000urden for shareholders?

penhagen F, Denmark

www.elsevier.com/locate/bushor

that branding always creates wealth, and suggest on the research presented in the article and ulti-

sistent, and focused brand strategy has providedglobal scalability and branding efficiency, which

160 L. Ohnemusthat in reality branding can, therefore, frequentlybe a major cause of wealth destruction for share-holders.

In addition, branding is becoming more andmore a question of survival, since many companiesface the universal challenge of converging bothquality standards and manufacturing costs. This isprompted not only by global manufacturing, en-hanced knowledge, and design sharing possibili-ties, but is also due to the fact that companieshave increasingly easier access to the same finan-cial resources and international distribution chan-nels. Put more succinctly, innovation and time tomarket are important, but have lost much of theirvalue as strategic tools that protect against me-too products; FLSmidth experienced this, forexample, when protecting their global leadershipposition in the cement plant industry against ag-gressive Chinese competitors. This being the case,branding may represent one of the last remainingmeans by which a company operating in theindustrial field can achieve a sustainable competi-tive advantage. Ultimately, this has wide ramifi-cations, particularly in a B2B context. A wellpositioned and powerful brand provides a highlyeffective barrier against competitors, and in-creases information efficiency and attracts cus-tomers, since it reduces the risk of making wrongpurchase decisions. It also creates a competitiveadvantage which translates into enhanced pricingand distribution power.

For European companies in particular, brandingincreasingly constitutes a major strategic chal-lenge, because their brands are less well knownon a global scale; according to Interbrand, only 23of the top 100 global brands are of European origin(Kiley, 2007). Historically, American B2B companiessuch as General Electric, Honeywell, Intel, andCaterpillar have been much faster to establish glob-al brands than their European competitors. Increas-ingly, European players are also getting squeezedby East Asian competitors like Tata, Mitsubishi, andLenovo.

The principal objective of this article is to pres-ent and discuss the strategic relationship betweenbranding and financial performance in a B2B con-text, and to address the fundamental researchquestion: Can the financial benefits of brandingbe measured and, if so, what are the conclusionsfor shareholders investing in B2B companies? Giventhis ambitious starting point, a series of mattersrequire addressing. What definition of brandingand brand equity apply to the B2B field? Wouldother critical variables, such as innovation andmanufacturing costs, exert a disruptive influencetranslates into enhanced shareholder performance.Furthermore, mass communication can be used

to a much lesser extent than it is in the field of fast-moving consumer goods. The focus is also different,since B2B brandingas a general rulerequires thedevelopment of a positive reputation, goodwill, andthe commitment of the entire company to a set ofmately lead to biased and inconclusive findings?Furthermore, is there truly any difference in brand-ing strategies between industries, or are we dealingwith universal methods and approaches that can beapplied to all companies and product types? Theseintriguing questions are analyzed and discussed inthe following sections.

2. Branding in B2B context: Is itdifferent from B2C activities?

Conceptually, the difference in marketing orienta-tions between companies producing consumergoods versus those producing industrial goods orservices is significant. There is also a major theoret-ical difference in their approach to branding.A general assumption exists that there is closelong-term cooperation (sales orientation) betweenproducers of industrial goods and services and theircustomers, whereas consumer goods companiesfocus more on the short-term marketing mix andsegmentation models (Anderson & Narus, 1998;Kotler & Pfoertsch, 2006).

The level of complexity in this field is exception-ally high, because firms can apply radically differentbranding and pricing models, and have industry-specific distribution models, and the extensiveuse of patents can either increase or decreaseoverall average profitability. The brand expecta-tions of B2B customers are also significantly differ-ent from other segments. A well positioned brand inthis field should provide substantial reassurance tobusiness customers, since the purchasers entirefate could be totally dependent on it. The strongerthe reputation and inherent goodwill of the brand,the greater the likelihood that the company pos-sesses competitive advantages and more pricingpower which would ultimately provide its share-holders with above-average returns. General Elec-tric is a prime example of how this can be achievedconsistently on a global scale. In this research sam-ple, GE spent 6.5% of corporate turnover on brand-ing activities (including the costs of runningsubsidiaries), while other players in this field spentup to 14%-18%. The application of a universal, con-

given brand values. In most segments of the fast- There may also be a direct relationship between

B2B branding: A financial burden for shareholders? 161moving consumer sector there are millions of po-tential customers, whereas the power balance andnumber of customers is totally different in thebusiness-to-business segment. For example, in itsglobal power plant business unit, Siemens has lessthan 2,700 potential B2B customers (Vortmeyer,2004); in contrast, Coca-Cola has a potential globalcustomer base exceeding 1 billion clients. The ad-vantage for Siemens is that the market is welldefined and focused, but the company remainsheavily dependent on face-to-face interaction,which has the downside that specific product andtechnical informationmight overshadow brand com-munication.

Product-based (rather than company-based)branding in the B2B field is demanding, as experi-enced by IBM in the mid-1990s. The appointment ofnew CEO Lou Gerstner, as well as the developmentof a new brand strategy and the firing of 70 globalagency partners, was required for the company toshed its brand image of being a product-focusedmainframe manufacturer in favor of becoming afirm offering business solutions in an e-economy.Another dimension in this debate is the degree ofcomplexity: industrial goods are often character-ized by a significant and multifaceted number ofproduct specifications, lines, and variations. Fur-thermore, the decision-making process also varies,since there are frequently more decision makersinvolved than in the fast-moving consumer goodsfield.

The B2B segment is also unique in that compa-nies and suppliers are closely interlinked and havea symbiotic relationship as described, amongothers, by IMP researchers Hakansson and Snehota(1995) and Ritter, Wilkinson, and Johnston (2002).Strategically, when compared to consumer goods,segmentation models are often considered to berudimentary or non-existent, because customersare regarded as unique. Different behavioral andcultural patterns in diverse industries could alsohave a major impact, while conversely the desirefor heterogeneity drives companies to searchfor customers with similar purchasing patterns.Furthermore, relationship skills, networking capa-bilities, and profound technical product under-standing are clearly more important then whenselling and promoting fast-moving consumergoods. In most cases, it is significantly easier toestablish causal links; expressed differently, Mar-keters in the B2B categories can employ a mea-surement system of perception, performance, andfinancial metrics that is data-rich, because thedata is at the customer level (Munoz & Kumar,2004, p. 384).the underlying pricing or cost model applied in anindustry and financial performance. In this respect,classic manufacturing technology is generally linkedwith cost-based pricing. This may be true of sectorsnot exposed to strong competition or globalization,but most companies are eventually forced to followa market-based pricing strategy.

Many new industries have recently focused onbranding, in order to avoid becoming commoditizedin the wake of ever-increasing price pressures andglobal competition (Harris & de Chernatony, 2001).The ubiquity of technology is currently decreasingthe potential for sustained competitive advantage,and managers are focusing more on differentiatingtheir brands on the basis of unique emotional, ratherthan functional, characteristics. They are also in-creasingly being forced to re-think their globalproduct strategies. It is obvious that branding canprovide a competitive edge, but is there any funda-mental difference between product and corporatebranding?

2.1. Product versus corporate branding

The dividing line between corporate or productbrands has always been rather unclear. Some indus-trial companies (e.g., ABB, Siemens, GE) follow aone brand (corporate) strategy. Hence, brands inthis field are often corporate ones, the focus ofwhich should be on communicating and presentingthe true underlying values (innovation, reliability,safety, etc.). Most fast-moving consumer companies(e.g., Nestle, Procter & Gamble, Kraft), however,have a wide range of different brands. Seen from abroader strategic perspective, the decision to useoneas opposed to manybrands is more tacticalthan strategic. Industry behavior, management riskprofiles, tradition (including nationalistic associa-tions with a brand), and product portfolio consid-erations are some of the trigger points which canhelp inform the decision whether to have one orseveral brands. Trans-national and multi-domesticbrand strategies have been applied successfully, butthey are not easy to implement and control. How-ever, standardized global brand strategies andperformance lead to significant economies of scalewith respect to brand investments (Kotler &Pfoertsch, 2006). The emergence of multi-channelmarketing and purchase methods will further re-duce the attractiveness of multi-brand strategies.Therefore, quite deliberately, no distinction ismade in this study between branding at a corporatelevel as opposed to a product level sincein allcircumstancesbranding expenditures should beconsidered as an investment.

2.2. The consequence of branding on with direct and indirect marketing expenditures.

162 L. Ohnemusfinancial performance for B2B firms

When a corporation is branding there will always bea financial impact, even though in most cases it isnot reported directly in the annual accounts. B2Bbranding will surely lead to more relevant informa-tion, additional product or service trials, and repet-itive purchase patterns. Management of a particularindustrial brand should be able to establish anindustry-given ratio that can benchmark whetherthey are over- or under-investing in their brand ascompared to key competitors. If one isolates andeliminates all other key variables including R&Dwhich has, in the past, provided many B2B compa-nies with a competitive edgethe company withthe highest and most consistent branding intensitywill, or is likely to, develop a competitive advantageover time (Buzell & Gale, 1987). This observationconfirms the assumption that higher branding inten-sity generally leads to enhanced financial perfor-mance because it reduces inefficiencies caused byasymmetric information between two or more firms,thereby ultimately leading to greater market trans-parency. This aspect is particularly important in aglobal marketplace which is becoming increasinglycrowded, and in which decision making is becomingmore complex due to new factors such as environ-mental and compliance requirements, includingCO2 emissions. If appropriately handled, brandingenhances customer perceptions and ultimatelytranslates into enhanced financial performancefor the company. But because a B2B corporationcannot expand its investments indefinitely, it willreach a point where the law of diminishing marginalreturns is applicable, and over-branding will have anegative impact on shareholder value.

2.3. Can brand equity be defined, andhow should shareholders measure it?

How can shareholder value and brand equity bemeasured in a uniform way? In a B2B context,branding is generally a well accepted notion, butlacks a uniform academic definition. Over the yearsvarious definitions of brand equity have been pro-posed, based on a set of brand assets and liabilities(Aaker, 1992) or on a methodology based on the netpresent value of future cash flows (Schuetze, 1993).While these definitions are certainly valid, theyappear to be too narrow in scope when aiming tomeasure branding and shareholder performance in aB2B context. More specifically, in this study corpo-rate branding expenditure refers to all marketingexpenditures, including sales related general andadministrative costs, and distribution costs, togetherThis wide range is particularly relevant in an indus-trial context, where indirect sales costs and indirectsales staff outweigh the cost of marketing specialistsand direct marketing expenditures.

Today,approximately80%ofafirmsassetsarenon-material or intangible (Simon & Sullivan, 1993). Itwould therefore be logical to expect that such valueswould be reported to shareholders, consistently andmethodically. This applies not only to brand equity,but also to R&D expenses, patent registration, andother immaterial assets. The reality is somewhatdifferent, however: surprisingly few companies haveinstituted a systematic program of analysis whichallows them to gauge their brands performanceandmore importantlyto link them to businessperformancemeasures and report back their findingsto the shareholders (Munoz & Kumar, 2004). In fact,remarkably few shareholders obtain a concise andconsistent picture of one of their largest, if not thelargest, assets on the balance sheet: the brand. Thecurrent situation is almost grotesque, given that 97%of all CEOs claim theirmain objective is to create andincrease shareholder value (Black, Wright, & Davies,2001). They still lack a systematic way of measuringbrand performance; furthermore, there is no reasonto believe that this debate should be any less impor-tant in the B2B sector than in any other.

One way of overcoming this weakness would be todevelop a specific company or industry model whichwould measure and benchmark branding expendi-tures and financial performance against key com-petitors. For this present study, a special regressionmodel was developed which consisted of 14 differ-ent variables:

Financial performance fbranding variables;other firm related and industry variables

This whereby financial performance is measuredeither by Tobins Q, which compares the marketvalue of a companys shares to the replacementvalue of its tangible assets (Tobin, 1969), or bythe return on assets/return on equity. In this partic-ular case, Tobins Q was applied. As previouslydescribed, branding for this study is defined as allmarketing expenditures, including sales relatedgeneral and administrative costs, distribution costs,together with direct and indirect marketing expen-ditures. Other firm related variables are measuringelements such as firm size, market capitalization,investment intensity as measured by capital ex-penses from the cash flow statement to propertyplant and equipment, stock market beta, and R&D.Furthermore, other variables are also includedwhich measure ownership, global market share,

diversification, industry classification, and capital

Intel, Cisco) to those with significant raw materialstocks (e.g., Exxon, Shell). Therefore, selecting

involving almost 1,700 companies active in the B2B

branding and its five phases

B2B branding: A financial burden for shareholders? 163Tobins Q can reveal the opposite of what mightinitially be expected. This deviation is probablycaused either by a structural imbalance in a givenresearch method (B2B companies are frequentlycompared to other sectors with major raw materialstocks in their balance sheets, which can distort theresults when making the link between financialperformance and branding), or no appropriate esti-mate is used for replacement value. These structur-al barriers can, in many cases, be overcome byapplying return on assets or on equity as perfor-mance benchmarks.

2.4. The time horizon of branding

When measuring financial impact, one also needs tomake a careful decision regarding what time horizonshould be applied. Conventionally, marketing hasbeen used to establish a brand and gradually buildproduct or brand awareness. The focus has fre-quently been on measuring short-term impact onsales and turnover. In many cases, these brandinginvestments have been treated as an add-on featureto sales related activities, whereby the only finan-cial yardstick was the annual marketing budget. Noreal considerations were given to what would hap-pen in subsequent years, and the actual impact onlong-term shareholder performance. The controver-sy over selecting the right time horizon is funda-mental in terms of measuring the financial impact ofbranding. Research in the early 1990s establishedthat the impact of brand advertising generally lastsfor about 4 years, while for other product categoriesand servicesespecially industrial goodsthis timeframe could be as low as 1 year or even less. Thisserious timing problem can probably be explained bypsychological differences. With respect to brandingactivities and campaigns, it would seem advisablenot to consider short-term fluctuations, but rathertake a medium-term strategic view. In this case,medium term refers to a 3-5 year period.

3. Shareholder value and branding:Key findings

The findings presented in this section are based onempirical research conducted from 2003 to 2006,structure by long-term debt to total assets.Industry classification and the selection of bench-

mark criteria are general challenges in this context,since the entire B2B field is extremely wide anddiverse, ranging from high-tech companies (e.g.,Conceptually, these key findings raise the questionof what explains the probable relationship withinthe observed pattern, and what is the appropriateinterpretation. How should shareholders relate tothe five observed key phases, and how can they beexplained from a managerial perspective? Explan-ations of the five phases follow here.

4.1. Brand aspiration

The original raison detre of many business-to-business enterprises is based on a technical innova-tion or adapted product concept, frequentlyprotected by one or more patents, or by a changein manufacturing process or in the nature of ap-proach to customers. Initially, the company gener-ally has a rather narrow strategic focus and isrestrictive in its branding activities. In most cases,the company has none or only a limited number offoreign subsidiaries. The internal focus is on techni-cal and manufacturing aspects, and sales activitiesthat can best be described as pull-driven. In thisgroup, Hyundai Engineering, Chubb, Samsung Indus-tries, and Korean Industrial Development are allclassified as having global ambitions, but also assector. Only listed American and European compa-nies were included in the study, since they aresubject to stricter disclosure rules and reportingrequirements than those from other regions. Ingeneral, they also provide more financial informa-tion about their branding activities than their un-listed competitors.

The branding expenditures were sub-divided intofive intervals: 0%-2%, 2%-5%, 5%-10%, 10%-20%, and+20% of current turnover. Branding was thus mea-sured as a percentage of current turnover or as areturn on assets. The initial research, based onmarket-to-book value, revealed that companiesachieve the highest return on assets when investing5%-10% of their turnover in branding. Conversely,branding in the 0%-5% and 10%-20% ranges leads todeteriorating performance. Thus, there is a clearoptimal branding range for a firm and its share-holders. Interestingly, companies with an appropri-ate strategic branding position achieved a return ofup to 7% higher than other companies in the sameinterval. The B2B sample reveals a W pattern (func-tion) between financial performance and branding,which raises the issue of strategic causation and itsimplications.

4. The W-curve: A strategic bridge to

clearly under-investing in their brands. The same 4.3. Stuck in the middle

164 L. Ohnemuscan also be observed of Haldor Topse, a worldleader in industrial catalysts, whose owner andchairman opposes any kind of branding activitiesas a matter of principle.

In Phase 1, minimal branding activities tend toachieve a below-average return because they aretoo limited (0%-2% of turnover), ultimately yieldinga negative financial impact. Furthermore, the com-pany has short-term difficulties in achieving econo-mies of scale from a branding perspective, since therelative investments are too high compared to themagnitude of market potential. Another strategicdilemma leading to value destruction is when firmsare convinced they are only selling commodities,and deny making any branding investments. Com-panies in this group include Murphy Oil, Centex,Oriental Petroleum, Fecto Cement, Aegon, CheratCement, and Uni Chemical Industries. Cemex andTata are examples demonstrating that the oppositecan be achieved, howeverwith considerable eco-nomic success for shareholdersin industries per-ceived as commoditized.

4.2. Brand focus

In Phase 2, the technical strength and superiority ofthe company often starts to be recognized, not onlylocally, but through international sales. Frequently,it is a segment leader and has a sustainable com-petitive position in its field. The company starts tofocus on branding, committing substantial resources(2%-5%) to these new activities, and sales growrapidly. B2B branding investment in this range re-inforces the values associated with the firm, elimi-nating any communication barriers between currentand potential purchasers, and reduces the risk of acustomer making the wrong purchase decision.

The outcome of our research showed that there isalways a positive and robust correlation betweenbranding activities and financial performance insuch a situation. This is not surprising, when wecompare these results with previous findings inother industries (Ohnemus & Jenster, 2007). Com-panies in the Brand Focus segment include Ricardo,which has a unique combination of product innova-tion and branding such that it has succeeded inbecoming a leader in supplying engineering solu-tions to companies in the global automotive andtransport sector. It also encompasses companiessuch as Stillwater Mining and Schlumberger, whichare moving up the value chain by focusing on brand-ing. Interestingly, GE is just on the fringe of thisgroup, since its branding expenditures fluctuatebetween 5%-6%, depending on the actual year andmeasurement methods applied.Further international expansion or expansion intonew business areas or segments, combined withextensive branding activities, leads to wealthdestructionand most companies are strategicallystuck in the middle. In Phase 3, branding expendi-tures ultimately approach 5%-10% of turnover. Thishigh investment, combinedwith theweaker strategicposition, leads to deteriorating financial perfor-mance. The bottom line is that the company is over-extended and attacking too many new markets orsegments, at the expense of financial performance.One additional explanation is that companies in busi-ness-to-business sales are often faced with highertechnical and languagebarriers thanother industries,anti-competitive forces are more pronounced (asobserved in Japan, China, Switzerland, and France),and the market penetration period is longer, whichhas a negative impact on return on investment. Com-panies in this group include Sumitomo Corporation,Kerr McGee, PLB Engineering Berhad, and Embraer.These firms all have aggressive international plansincluding significant investments in brand building,which haveat least, during the research periodresulted in below-average shareholder performance.

4.4. Brand heaven

As the company achieves a larger scale through itsbranding activities in the different markets andsegments, it gains international synergy throughthese activities, as observed in many U.S. or Japa-nese multi-nationals. It also achieves a strongerstrategic position, and the returns increase. Again,it is evident that there is a positive balance betweenthe current branding investment and market posi-tion. This was confirmed by Buzzell and Gale (1987)in stable markets, where market leaders on averagereap 25 percentage points more ROI than smallbusinesses. In Phase 4, the brand has obtained asolid position whereby shareholders and clients en-joy an optimal situation termed brand heaven. Ex-pressed differently, the brand promise is fulfilledand all key stakeholders are satisfied. Companies inthis group include Intel, SKF, Degussa (Evonik), ABB,Siemens, and Toshiba. These are all corporationswith strong brand perceptions globally, which havesucceeded in striking the right balance betweenbranding and financial performance when consid-ered from a shareholder perspective.

4.5. Over-branding

Once the company has achieved a given size byinternational standards, it starts expanding into

new and different activities (again), thereby increas-

propriately high level of investment in branding wasobserved especially during the dot.com era. One fre-

leadership result in a competitive advantage,

B2B branding: A financial burden for shareholders? 165quently observes the phenomenon of over-brandingin this business-to-business segment. Managementgenerally tries to justify it on the basis that brandingconstitutes a barrier to entry for potential new play-ers; however, no equilibrium has been establishedfrom an economic perspective in this context. Share-holders ultimately pay the price, and the companymust undergo frequent restructuring processes inorder to avoid becoming a potential takeover target,if an economic equilibrium fails to be re-established.Akzo Nobel, one of the worlds leading industrialcompanies and first in the global paint industry, is atypical example in this group: despite frequent re-structuringat thegroup level andheavy investment inbranding, they have not yet succeeded in striking theright balanceand the shareholders are paying theprice. Other companies in this group include Aker,Martime, Fiskars/Wartsila, and Jungheinrich.

4.6. First step toward analysis

The branding position of a company should not,generally, be allowed to become static over time.While some companies are able to maintain thestatus quo, there exist in the database companieswhich have deliberately changed their strategicbranding positions. It is therefore vital that brandingbe analyzed in a dynamic perspective, and thattheoreticians and practitioners have both a perfor-mance and time-driven reference model for brand-ing. The concept and research presented hereinshould be seen as a first step in this direction.

The sample group only covers business-to-business companies listed on a leading stockexchange. Many premier European companies orcompanies based in the Far East are still run orcontrolled by the founding families (e.g., TetraPak, Grundfoss, Danfoss); these entities could not,therefore, be used for this research, but there areno obvious reasons to believe that the five phasesshouldnt be applicable to them.

5. Lessons to be learned forshareholders

Shareholders in the business-to-business field mustensure not only that innovations and producting its branding expenditure and ultimately decreas-ing its financial performance in Phase 5. Spendingmore than 20% of current turnover on branding relat-ed activities is not sustainable. Other companies inthis range are typically start-ups, for which an inap-but also that branding expenditures are treatedas an investment that must yield an adequatereturn. The present study confirms that share-holders should insist on systematic performancefeedback from the corporation on key financialratios including branding, otherwise they could befaced with major strategic and economic prob-lems. Very few of the companies studied had anoptimal balance between branding and financialperformance. Managers of companies currentlypositioned in Phase 1 or Phase 5 might be tooquick to conclude from this research, and theirown experience, that branding does not addtrue value in a business-to-business context. Theymight, then, continue their business focus on R&Dand manufacturing activities. However, such aconclusion and approach would be flawed andmisconceived.

Modern database tools, advanced regressionmodels, and more enhanced reporting standardsnow permit financial performance to be measuredsystematically. From a research perspective, thereis a clear recommendation that shareholders shouldbe insisting on receiving a report regarding wherethe prevailing strategic optimum level of theirbranding activities and expenditures exists for thecorporation. The research also indicates that thestrategic branding position of a company should beanalyzed andmanaged dynamically, since it can leadeither to value creation or destruction as viewedfrom a shareholder perspective. By doing that, fi-nancial performance can be better optimized andshareholders would not be forced to be reactive.Furthermore, effective branding is a way of ensuringinformational efficiency, providing customers withrisk reduction, and preventing products and servicesfrom becoming commoditized. Both aspects arecrucial for companies operating in the industrialsector.

This article highlights the fact that there isa significant correlation between branding andfinancial performance. These empirical business-to-business results yield what could be described asa W-curve with five distinct phases, whenmeasuredagainst Tobins Q or return on assets. It is evidentthat there is a strong need for reengineering ofbranding strategies for many companies ina business-to business environment, if they areserious about remaining competitive and providinga superior return to their shareholders. Brandingis clearly not the only way to establish a competi-tive edge, but particularly for many Europeanand Asian companies, it could also provide anincremental advantage that they have not fullyexploited in the past.

Acknowledgment

The author would like to thank Kunde & Co., whosegenerous research grant made this study possible; T.Ritter, Steen Thomsen, Jens Gammelgaard, P. Jen-ster, and H. Mathiesen for their valuable remarksand insights; and Brian Bloch for his editing.

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166 L. Ohnemus

B2B branding: A financial burden for shareholders?Why dont shareholders show interest in branding?Branding in B2B context: Is it different from B2C activities?Product versus corporate brandingThe consequence of branding on financial performance for B2B firmsCan brand equity be defined, and how should shareholders measure it?The time horizon of branding

Shareholder value and branding: Key findingsThe W-curve: A strategic bridge to branding and its five phasesBrand aspirationBrand focusStuck in the middleBrand heavenOver-brandingFirst step toward analysis

Lessons to be learned for shareholdersAcknowledgmentReferences