Accessing the Untapped Brand Leverage Potential: A Strategic Framework from a Capital Market View

Abstract

Do firms fully capitalize on the financial strength of their customer-based brand equity (CBBE)? If not, how large is the gap to a benchmark condition where CBBE is financially fully leveraged? Which market strategies, if any, should the firm emphasize to close the gap? This research addresses these questions. The authors introduce a framework and methodology that enables firms to identify and measure their “brand capabilities gap,” which captures the firm’s potential for leveraging CBBE into firm value when the most effective and efficient brand leverage strategy is in place, and, if necessary, take corrective action to realize their brand leverage potential. The authors further examine three market strategy moderators that firms can steer via their marketing programs and tactics to close the brand capabilities gap. The application of the framework and methodology to a wide-ranging sample of firms from 2005 to 2013 reveals that, on average, firms only realize 35% of their financial brand leverage potential. This translates into an average brand capabilities gap worth $2.1 bn per brand, which represents 4.3% of firm value. These findings have important implications for strategic brand analysis and planning and can help firms design a more effective financial brand leverage strategy. This paper was accepted by Raphael Thomadsen, marketing. Supplemental Material: The online appendices and data files are available at https://doi.org/10.1287/mnsc.2022.00670 .