Brand Equity: what does it mean for charities and what are its key components?

That the brand is one of the most important assets that a charity has been widely recognised not only by experts but also by the charity sector itself.

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That the brand is one of the most important assets that a charity has been widely recognised not only by experts but also by the charity sector itself. Now more than ever charities are increasingly taking responsibility for devoting more and more resources to the process of building strong brands.

As a study conducted among UK charities by RSM Robson Rhodes suggests, 93% of charities consider building a brand to be important, with 66% considering it ‘very important’. In recent years, we have seen many examples of charities engaging in re-branding by changing their visual aspect, their positioning and even their name. The same study suggests that between 2004 and 2006, 32% of charities in the UK resorted to rebranding as a strategy to broaden their appeal and secure more support1 .

A strong brand is likely to gain the interest and commitmentof donors and volunteers, to secure high value partnerships with both the public and private sector, to attract and motivate high quality employees. The stronger the brand and the awareness of its value within an organisation, the higher the chances that enough resources will be allocated to this process which will strengthen the brand in turn.

In the private sector, the notion of brand equity is often used when referring to the commercial value of a brand. The fact that a monetary measure of the value of a brand exists and that can be used to compare the value of brands across organisations clearly strengthens the case for investing in the process of building strong brand for private companies. Although strictly speaking the same notion of brand equity is not so easily applicable to the charity sector and, indeed, even controversial, it is one that is crucial for non-profit organisations to take into account given the ’non-experiential’ nature of the services that they are offering.

The next sections of this document explore what is meant by the notion of brand equity and how useful this is for the charity sector compared to the private sector. Drawing on insights from nfpSynergy’s research we look at what the key drivers of the value of a brand are likely to be for charities and how the notion of trust in a brand acquires a particular importance in the context of charity brands.

The value of the notion of brand equity in the private and charity sectors

In its most general definition, brand equity is the financial value to an organisation of the ‘intangible’ asset of the brand. For a private (for-profit) company, at a ‘micro’ level brand equity is reflected in the premium that consumers are willing to pay when purchasing a product carrying a particular brand compared to one that doesn’t. When I go shopping in Tesco’s, I may be prepared to pay 50p more for a box of Kellogg’s cereal compared to a Tesco’s basics (unbranded) box which may contain exactly the same type of corn flakes but lacks the trust and quality guarantee that in the consumer’s mind is attached to the Kellogg’s brand.

At a ‘macro’ level, the impact of brand equity is directly reflected on the balance-sheet of a company as the portion of a company’s worth that is not accounted for by tangible assets (e.g. physical capital such as plants, machinery etc).

When thinking about the role of brand equity in the private sector versus the charity sector, it is important to take into account a few fundamental differences in the objectives, reasons for existence and nature of the strategy of the organisations working in these sectors. In the case private companies, the value of the brand directly feeds into their objectives of maximising profit and shareholder’s value by impacting on the valuation of the company itself. There is no doubt that the $70,452 million valuation of the Coca Cola brand in 2010 represents a tremendous asset for the corporation2.

But one of the fundamental reasons why brand equity in the private sector is valuable lies in the fact thatit is adequately reflected and systematically accounted for within market valuations of companies which, in turn, form a universal system through which performance can be assessed and benchmarked by investors. It is because of this that we are able to say that – for example- in 2010 the Coca Colabrand had a value of $70,452 million compared to Google at $43,557 or Nokia at $29,4952.

So in the private sector brand equity is synonym of value because it creates value that can be universally compared and benchmarked. In this sense, one could argue that, by being inextricably linked with the core objective of profit maximisation, the objective of building a brand is likely to be more systematically taken care of in the private sector.

In the charity sector the same straightforward system of benchmarking of the value of brands that is provided by the market in the private sector doesn’t necessarily exist or where it has been created (e.g. Interbrand’s calculation of brand equity in the non-profit sector based on the discounted value of future income net of expenses) is not systematically and widely used.

The positive correlation between brand awareness of charities (one of the components of the value of a brand) and income (particularly voluntary income) points at the fact that the value of the brand and income go hand in hand.Intuitively and anecdotally we know that a strong charity brand can go a long way towards attracting more funds from the public, more grants from statutory sources, more corporate partnerships, more volunteers. That said, because the process of assessing and comparing the ‘commercial’ value of a charity brand is not as straightforward as in the case of the private sector, the task of justifying investment on the brand is clearly more difficult for charities than it is for private companies.

But building a brand is no less important for charities than it is for private companies and there is no doubt that charities are taking responsibility for the importance of this process. One could even argue that – because of the nature of charities compared to private companies- the case for devoting resources to building a brand for charities may be even stronger than in the case of private companies.

As already observed by the recent nfpSynergy report ‘It’s competition but not as we know it’, there is a fundamental difference between the benefits delivered by companies to consumers and those delivered by charities to their donors. In the first case, the terms of the exchange between the two parties are clear since the benefits are clear and experienced directly by both sides, particularly by the consumer who, for example, gains satisfaction from eating that cereal bar or drinking that bottle of smoothie. In the case of a donor giving money to charity, the nature of the benefit to the donor remains intangible and indirect.

The social return created by the charity through the funds donated and their contribution towards fulfilling the mission of a charity - one of the key factors against which this benefit could potentially be measured – is not experienced directly from the donor and –crucially– is not easily quantifiable, let alone universally compared or benchmarked. In this sense, everything else being equal, a strong brand can play a crucial role in acting as a shortcut for donors in their decision to allocate their funds to a particular charityand can potentially become one of the most important assets that charities have.

Awareness is a necessary but not a sufficient component of the value of a brand

Perhaps one of the necessary components of brand equity for both charity brands and private companies is awareness of the brand. However, it is easy to see how brand awareness alone does not imply brand equity. As a consumer, I may be aware of McDonald’s but perceive them to be unethical and be a million miles away from even considering buying one of their meals. If these perceptions were so wide spread to outweigh positive ones, the brand may even be said to have ‘negative’ equity. So brand awareness is a necessary but not sufficient condition for building brand equity.

In the case of charities, data from nfpSynergy’s Charity Awareness Monitor suggests that there is a positive correlation between measures of brand awareness and brand’s income, particularly voluntary income. The correlation suggests that there may be a two-way relationship between these two variables, whereby a higher level of brand awarenesstranslates into more donations thereby having a positive impact on brand equity; but also a higher level of income means that more resources can be allocated towards building the brand, particularly awareness of it.

Prompted awareness -measuring the proportion of people who have heard of a certain brand name- is the broadest, yet one of the key measures of awareness that are likely to contribute to the value of a brand. Longstanding brand names such as The Salvation Army and the RSPCA are likely to carry potential for considerable brand equity, simply because these organisations are part of the fabric of society and awareness of their brand stretches from the oldest generations through to the youngest groups.

However, while preserving the value that a particular brand name is likely to be carrying may be key to some organisations, abandoning a historical name and adopting a new one may be just as important for others when it comes to ensuring that the brand is constantly kept fresh, relevant and is understood by relevant stake holders . The experienced of NCH changing its name to Action for Children and, more recently RNID, changing its name to ‘Action for Hearing Loss’ are examples of this .

If prompted awareness is necessary to build brand equity, the ability of a brand to be at the public’s top of mind when it comes to a specific area of work such as Children or Cancer isa further step in building brand equity. More than that, this is not just about making sure that a brand is associated with a particular area of work but that the area of work itself is unequivocally associated with the charity brand; it is about the charity brand ‘owning’ the area of work. For instance, just like the category of cola drinks is almost universally and uniquely associated with Coca Cola, the area of emergency relief is owned by the Red Cross which is spontaneously associated with emergency relief by almost one in three members of the general public.

Although in a crowded market place this may not necessarily be a synonymous for brand distinctiveness (i.e. the knowledge of specific differences between what a particular charity does and what those charities operating in the same area work do) it is a first step towards ensuring that the brand becomes a short cut for those who wish to choose between different organisations working in the same sub-sector.

The ability of a brand to be uniquely associated with an area of work and vice versa is by no means something which is set in stone and data from nfpSynergy’s Charity Awareness Monitor suggests that brand leadership within a sector can be built over time, as many organisations -such as for instance Macmillan and WaterAid in the Cancer Care and Water and Sanitation arena respectively- have proved in recent years.

Brand attributes: what does the public expect from charities?

In its strictest sense, brand equity does not coincide with stakeholder’s perceptions of a brand. Not the least, because, as already observed, brand equity needs a monetary valuation; but perceptions of the brand and of its imputed personality are likely to be an important determinant of the value of a brand, as they may influence the likelihood of donors deciding to enter a relationship with the brand.

However, knowing what attributes key stakeholders associate to a particular brand may mean very little if we do not know what the public is expecting an ideal charity brand to look like.
Among the general public in the UK, traits related to the notion of Care/Support but also traits that refer the charity’s ability to guarantee good levels of service delivery (helpful, responsive, practical etc.) and attention to service users (approachable, friendly, welcoming etc.) are all key components to the ideal charity blueprint3.

However, the ideal charity blueprint is not universal; in particular, the public associates ideal charity brands working in different sectors are with different traits. For instance trust and honesty – despite scoring high as ideal attributes for charity brands working across all sectors- tend to be more associated with an ideal charity brand working with children and young people or in the field of health; this is most likely because of the vulnerable nature of the beneficiaries in the case of charities working with children and/or young people and because of the nature of the services provided by health organisations.

Cost-effectiveness tends to be more associated with an ideal brand working in international development, most probably due to the widespread perception of corruption in developing countries which may be thought to be a substantial barrier for funds to be effectively allocated towards the cause. Similarly, the attribute ‘campaigning’ is considered to be important for ideal charity brands working in environment/conservation compared to an ideal brand working in other sectors, again most probably reflecting the perceived importance of influencing governments and other key players within the work of charities working in this sector.

Needless to say, these differences have profound implications for the blueprint against which different charities should be evaluating public perceptions of their brand. The vision and mission of a charity should shape the values that the brand stands for and communicates, but the awareness of what key stakeholders expects from a brand working in a particular sector should also be informing this process.

Trust as a key component of the value of a charity brand

Despite cross sector differences, the notion of trust remains the most important trait of an ideal charity brand according to the general public3.

Because, as already observed in earlier paragraphs, donors do not have direct experience of the benefit generated by their giving; trust in the brand becomes a crucial aspect of the relationship between them and the charity. Just as we might trust Interflora to deliver a high quality bouquet of fresh flowers to some distant relative on an important occasion, a donor may be trusting that her contributions to a charity working to alleviate poverty overseas also reach the greatest number of beneficiaries through the delivery of a high quality service. Although in the case of the bouquet of flowers you may hear back from the recipient, in the case of the donation this is much less likely. This is why trust becomes a key component in the perception of a charity brand and in turn, by driving stakeholder’s propensity to donate, is likely to be a determinant of its value.

In the case of a charity brand, trust unfolds on two levels. On one level it is the simple belief that the charity is providing the best possible services given its budget constraint (or minimising its costs for a certain level of services).

Evidence that donors are more and more likely to require to know how charities spend their money is undeniable– as a director of fundraising and marketing of a large charity brand working in environment and conservation concisely put it ‘ In the 1980s you could raise money and get away with a thank-you letter. Today donors want to know what we are doing with the funds we raise'4. Savvy donors – just like savvy consumers- want to be able to make informed decisionsabout how best to allocate their contributions and - most crucially- to have the perception that they are doing so.

On another level, trust in a charity brand is the belief that the quality of these services will remain consistent over time, for every donation made and – implicitly- that the brand acts as a guarantee of that quality of those services of which donors do not have a direct experience.

In general, when it comes to trust in the ability to deliver particular types of services, compared to other institutions such as the Central Government, Local Authorities or private companies, charities tend to score high in those areas of service provision dominated by charity brands that have a high profile among the general public in terms of top of mind awareness - particularly the areas of Cancer (e.g. Cancer Research UK, Macmillan) and International Development (e.g. Oxfam, Red Cross), a sign that trust and strong brands go hand in hand.

But the standards that the public sets for charities when it comes to trust are high. Findings from the latest wave of nfpSynergy’s Brand Attributes Monitor show that on average, compared to those of private companies, charity brands are more likely to be described by the public as ‘trustworthy’.A ranking of trust in a selected mix of corporate and NGO brands conducted by Edelman Public Relations showed that in 2003 the four most trusted brands in Europe were global NGO brands (Amnesty International and WWF at 62%, Greenpeace at 51% and Oxfam at 49%)4.

Yet, as data from our Brand Attributes Monitor also shows, for most charity brands, matching the public’s blueprint for an ideal charitywhen it comes to the notion of trustworthiness is hard. This is a sign that the public has high standards when it comes to trust in charities and once again this is likely to be due to the nature of the relationship between donors and charities in which the benefit of the exchange remains intangible to donors.

What are the key ingredients of trust? The brand as a vehicle for a two way relationship

There are potentially a number of factors that are likely to drive people’s trust in charity brands and, consequently, contributing to the value of the brand. Data from nfpSynergy’s Charity Awareness Monitor suggests that familiarity with the brand through previous direct or indirect contact is one of the reasons that is most likely to encourage people to trust a particular charity with almost one in two people believing so. Familiarity with the charity also implies awareness of the brand, which in itself is another driver of trust identified by one in three people among the general public.

Longevity – the fact that the charity has been in place for a long time- is also a factor that is likely to increase people’s trust and that – once again- is likely to imply awareness and familiarity with the brand. A brand and its associated value take time to be built and often – although not always- some of the most high profile brands in the UK charity market are also the ones that have been in the market for a long time.

However, it is also important to remember that trust may go beyond the donor’s perception of the charity brand and that the brand itself becomes a vehicle for a two-way relationship, where the second dimension is the perception that the donor think the charities has of them.

As Max Blackston from Research International elegantly puts this in his essay ‘Beyond Brand Personality: Building Brand Relationships’5, trust in a brand is not only directly proportional to the credibility that a brand has in the eyes of the consumer (i.e. its perceived ability to deliver quality services) but also directly proportional to the perceived ‘intimacy’ that an individual has with a brand, which in turn depends on the organisations’ ability to establish a personal link with the individual. A vivid quote by the owner of a successful real estate business in Blackston’s essay about one of their main utility suppliers illustrates how the lack of ‘intimacy’ can negatively impact on the perception of a brand and be detrimental to its value: ‘I spend $ 5,000 a month with them and the only thing that even knows my name there is the billing computer’. It is easy to see how the same two-way relationship can apply to a charity brand and its donors and how the ability of the charity brand to be close to its supporters may impact on their perception of the brand.

Five key points to remember

In the previous sections we have argued that the brand is one of the most valuableassets that a charity has; in considering the definition of brand equity and its role in relation to charities, its driving factors and the importance ofthe notion of trust in the mix, the following are five key points that we would like our readers to take away:

  1. Although not systematically measured and therefore harder to justify, the process of building the value of charity brand is no less important to charities than it is to private companies.
  2. The intangible nature of the benefits of donations to supporters is likely to make the process of building the value of a brand even more important to charities, for which the element of trust in the brand is likely to become a crucial aspect of the relationship with supporters.
  3. Brand awareness is a necessary but not sufficient component of the process of building the value of a brand.
  4. Perceptions of the brand’s ‘personality’ are likely to be important drivers of the value of a brand as they determine the extent to which donors may or may not decide to enter a relationship with it; while the need for brand values to be driven by the vision and mission of a charity is clear, it is also important that these values are fine tuned to take into account what the public expects an ideal charity brand to look like, particularly in relation to different areas of work.
  5. When it comes to brand image and how that impacts of trust, it is important to remember that perceptions of the brand are made up of what supporters think the charity thinks of them as much as what they think of the brand. The notion of brand as a vehicle for a two-way relationshipstresses the importance for a charity brand to be able to establish a personal link with its supporters sealing that relationship of trust.
  • 1. RSM Robson Rhodes, 2006. UK Charities Marketing Survey. Analysis Summary.
  • 2. a. b. Interbrand Top Brands in 2010, available at: www.interbrand.com.
  • 3. a. b. nfpSynergy, 2011. Brand Attributes Monitor.
  • 4. a. b. Quelch, J.A., and Laidler-Kylander,N., 2006. The New Global Brands.
  • 5. AAker, D. A., and Biel, A. L., 1993. Brand Equity and Advertising. Advertising's Role in Building Strong Brands.
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Brand Equity: what does it mean for charities and what are its key components?

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