brandknewmag.com
22
On March 8, KKR made a $3.74 billion bid for Gardner
Denver. In case you haven’t heard of Gardner Denver
before, they are the go-to guys when it comes to all kinds
of pumps, compressors, blowers, loading arms, and fuel
systems. As Mercedes is to cars, Gardner Denver is to pumps.
The company is so well regarded in its field, in fact, that its
latest annual report calculated 43 percent of its value to be
goodwill and other intangible assets.
That’s a number any company could feel good about. In fact,
by that measure, the Philadelphia company has more value
tied up in its brand than Procter & Gamble PG +1.2%, whose
goodwill represents about 40 percent of its asset value.
And Gardner Denver is not atypical. While B-to-B brands
don’t get as much press, they are very valuable and often,
as a percentage of assets, more valuable than their betterknown B-to-C cousins. Some analysts estimate that B-to-B
brands may be worth well over $100 billion.
Brands drive profits
Brands of even less well-known companies such as Gardner
Denver can be valuable because B-to-B purchases arguably
matter more than B-to-C ones: buy the wrong toothpaste,
and you can always change brands when the tube runs out.
Buy the wrong turbine and you could hurt your company’s
earnings for years – and find yourself looking for another
job.
All this translates into more profit for the B-to-B supplier.
B-to-B companies with brands that are perceived as strong
generate a higher EBIT margin than others. In 2012, strong
brands outperformed weak brands by 20 percent, up from
13 percent in 2011. Decision makers are willing to pay a
premium for strong brands because established brands
make their lives easier. They aggregate information and
reduce risk. Strong supplier brands may even aid companies
in building their own reputation by association.
Brands have a strong influence on
purchase decisions
Business marketers have traditionally believed that the key
to differentiation in a B-to-B market is to provide service,
availability, pricing, and quality. Obviously, these things
matter. But in our 2012 study in which we surveyed more
than 700 executives with substantial influence on supplier
selection in the United States, Germany, and India, we found
that as with consumers, business buyers’ purchase decisions
tend to be a lot less value-driven than they like to think. Like
consumers, professional buyers use the vendor’s reputation
as a short cut that reduces risk and simplifies the evaluation
process.
In fact, our survey found that B-to-B purchasing decision
makers consider the brand as a central rather than a marginal
element of a supplier’s value proposition. Our survey found
that decisio