In the industrial and manufacturing sectors, the balance sheet is usually dominated by tangible assets: heavy machinery, inventory, and real estate. Marketing, by contrast, is often relegated to the income statement as a fluctuating expense, a "cost center".
However, for modern industrial scale-ups and holding companies, this view is a financial miscalculation.
Based on rigorous academic research, including my meta-analysis of brand equity dynamics, we know that a brand is not merely an aesthetic choice; it is a financial lever. This article explores how transforming your reputation into Customer-Based Brand Equity (CBBE) directly impacts unit economics, risk profiles, and ultimately, company valuation.
The "Soft" Asset with Hard Returns
The skepticism regarding branding in the industrial C-Suite is understandable. "Brand" feels abstract, whereas engineering is precise. However, Customer-Based Brand Equity (CBBE) provides a framework to measure this intangible asset with engineering-like rigor.
Research defines CBBE not as a logo or a slogan, but as the "added value" with which a brand endows a product. It is the measurable, differential effect that brand knowledge has on consumer response.
In practical terms, this means if you present a technical buyer with two identical motors—one unbranded and one carrying your brand—and they react more favorably to yours (regarding trust, preference, or assessment of quality), that difference is your brand equity. It is not marketing "fluff"; it is a proprietary asset that ensures your product is evaluated not just on its specs, but on the accumulated value of your market reputation.
The Revenue Premium Mechanism
How does this "differential effect" translate into cash? It is not just about awareness; it is about unit economics.
A meta-analysis of brand equity studies identifies specific Functional Consequences of high CBBE, specifically Brand Performance and (Re)Purchase Intention. Strong brand equity acts as a financial multiplier through two distinct mechanisms:
1. The Quality Heuristic: In the absence of perfect information, buyers use the brand as a heuristic (mental shortcut) for quality. This allows high-equity industrial firms to charge a price premium—known as Willingness to Pay. Research confirms that strong brand equity creates economic value for customers, directly increasing the margin they are willing to surrender for the security of your solution.
2. Volume & Velocity: High CBBE correlates strongly with (Re)Purchase Intention. This means that distinct from the technical specifications of your hardware, the brand itself drives higher sales volume and revenue premiums.
When a manufacturer ignores brand equity, they are forced to compete strictly on "Value-in-Exchange"—the price tag. When they build CBBE, they unlock higher gross profits independent of their technical specs.
Risk Mitigation as a Valuation Multiplier
For CFOs and investors, the most critical function of an industrial brand is not attraction, but risk mitigation.
Industrial markets are characterized by asymmetric information—the seller knows more about the machine’s reliability than the buyer does. This creates high anxiety in the procurement process. According to Signaling Theory, a strong brand acts as a credible signal that reduces Perceived Risk and search costs for the buyer.
Academic research demonstrates a moderate negative correlation between CBBE and Perceived Risk,. In simple terms, a strong brand "de-risks" the purchase.
• For the Buyer: It reduces the fear of downtime or implementation failure, effectively increasing their expected utility.
• For the Investor: It creates predictable, stable demand. By lowering the customer's perceived risk, you secure long-term contracts and reduce churn.
When evaluating an industrial company for exit or investment, a brand that effectively lowers customer risk commands a higher valuation multiple because it promises stable future cash flows, regardless of short-term market volatility.
References
Aaker, D. A. (1991). Managing Brand Equity. FreePress.
Ailawadi, K. L., Lehmann, D. R., & Neslin, S. A. (2003).Revenue Premium as an Outcome Measure of Brand Equity. Journal of Marketing,67(4), 1–17.
Erdem, T., & Swait, J. (1998). Brand Equity as aSignaling Phenomenon. Journal of Consumer Psychology, 7(2),131–157.
Farrokhi, M. (2020). Working Together toward a BetterBrand: Customer-Based Brand Equity and Co-Creation of Value with Consumers(Doctoral thesis). University of Calgary, Calgary, Canada.
Keller, K. L. (1993). Conceptualizing, Measuring, and Managing Customer-Based Brand Equity. Journal of Marketing, 57(1),1–22.
