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Chris Bolman – Apr 24th, 2015

[Spoiler alert: The short answer is no, Harvard didn’t, but a contributor to Harvard Business Review likely did. This post explains why.]

A recent essay published on HBR.org takes a negative stance on the future of branding: because customers can easily access the information they need to make purchasing decisions, brands themselves will become less relevant. This ultimately leads the authors to conclude that, “The value of ‘brand’ or ‘brand image’ as an entity distinct from the offering itself, we think, will diminish.” Instead, the article argues, what matters is customer relationships.

The core case for the rise of customer relationships over branding in the article comes from a set of M&A data from 6,000 mergers and acquisitions between 2003 and 2013. With it, the authors show acquirers are paying more for “customer relationships” (something that’s not well defined in the article but is assumed to represent known receivables, recurring revenue and average customer lifetime value), and lower valuation multiples for brand value (intangible or goodwill assets like individual brands, trademarks and product names).

Brand value versus customer value in Harvard Business Review

The problem with the author extending that data to argue branding is in decline overall is that stronger brands capture higher customer value. The most recognized brands also receive higher customer loyalty rates. That’s not a hypothesis, it’s been proven by researchers over decades of time and hundreds of businesses. Customer relationships and ‘brand value’ aren’t two independent variables — they’re both interconnected byproducts of a brand’s strength and market share.

To show this more clearly, let’s walk through some research.

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