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Cashing in On Brands, Literally.

A brand contributes to its owner in two ways: One, it helps in selling products at a premium, and two, generating cash flow quickly. The second aspect is technically known as Cash Conversion Cycle (CCC) - the length of time it takes for the business to convert its investment (towards resources, infrastructure, etc) into revenue.

A business may have a beautiful logo, adline, celebrity endorsement. It may splash out on advertising campaigns. But still it may not have become a brand yet. Brand is built by making promises and keeping them (that's another story).

Companies with brands sell even before they produce - i.e they get paid in advance. That way, CCC is a good indicator of the invisible presence of a powerful brand. Examine the CCCs of the following two companies:

Going by the length of the CCC, we can infer the power of brands the companies have. In this example, Company B has a shorter CCC. But the CCC of Company A is longer - it takes 27 more days for Company A to sell its products when compared to Company B. So the brand power of Company B is more than that of Company A.

We know that building a brand pays off but CCC can be great way to find how it does exactly.

Tagged in : Processes,

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