Emotional profit – what is it and how can it be measured?

I recently chatted with Alex Bailey from Bailey & French – Consulting about my concept of emotional profit and how firms can measure it.

Bailey & French deliver learning and development solutions to support organisations with their people challenges. Through their recruitment and development services, they help individuals thrive so that organisations can become more successful. They are a Brighton-based consultancy but have a team of 100 coaches, facilitators, recruiters, trainers, and psychologists, around the world who all share a passion for fostering growth in themselves and others.

We all know what financial profit is, and as a firm of accountants and financial engineers, we are well versed in monitoring and reporting financial performance and profit for their clients. But…

What is Emotional profit?

One intangible asset that is particularly valuable to companies and at the same time very difficult to measure is brand. We also know the importance of brand equity and the value a company gains when its brand or product is recognised and an admired name.

Whilst there has been a long-standing need for accountants and marketers to better understand and measure the financial value of a brand, the general concept of brand equity can be calculated as the price premium or added value above what a consumer would pay for a product versus an unbranded or more generic product. In the case of an acquisition, the price of the acquired company can be used for brand valuation.

If calculating brand equity is a knotty subject between accountants and marketers, then the concept of emotional profit is likely to provide even more of a challenge.

There is no denying that the way people feel about an organisation, or a brand can and will impact its bottom line but something else has shifted over the past two and a half years.

The pandemic caused people around the world to readdress how they balance work and life, what is important, and what impact we have on each other and the planet. The pandemic also created a shift in the way we look at our lives and our purpose, and consequently, people have become more socially and morally conscious of the world than ever before.

Increasingly organisations, political parties, institutions, and many more are beginning to realise the power of consumer or public emotions. The Lionesses winning the UEFA European Women’s Championship is a perfect example of this. It is no longer just about financial profit, emotional profit has a direct impact as people invest their time, energy, and money into products, services, and causes that align with their own moral values and those that will satisfy their emotional well-being.

How does this feed into emotional profit? The more morally conscious consumers become, the more they expect people and brands around them to hold themselves to a higher standard, and they will shift loyalty to brands very quickly, if they have behaved immorally, and will be more likely to support brands that have similar values to themselves.

So, the concept of emotional profit looks at the consumer’s perception and reality of a brand, how emotionally invested they are in that brand, and then places a value on that loyalty and perception. It considers factors like reputation, employee advocacy, diversity, accessibility, ESG, etc. and places them all under the microscope, with the expectation that brands will start to monitor and report on them with the same level of attention as they do financial profits.

Employee advocacy is an interesting example. If a product manufacturer has happy employees that love the product, it is very likely that those employees will become brand ambassadors and will endorse the product, both in and outside of work. They will also advocate for the business which can help them to attract talent, who may also be advocates for the product. More advocates can create more demand, more staff will help increase output, which means they can meet demand/sell more, which will impact their bottom line.

How to report emotional profit

Emotional profit provides organisations with a way to monitor, measure, and report those non-tangible factors that contribute to a brand’s financial success. But putting emotional profit into a box and using a financial formula or a process to measure it is too limiting.

And it was about 15 months ago that I had a eureka moment – to monitor, measure, and report an emotional profit as a series of colours, rather than traditional numbers. Quite a bold and unique idea for a traditional accountant when I have worked with numbers and financials for over 30 years. But Warren House is far from a traditional accounting firm. As financial engineers, we look beyond the numbers, we look at our clients as people, and we work with them to help influence their financial future. My idea to use a series of colours to represent the different aspects of emotional profit creates a more visual concept for organisations and consumers to engage with that will be more impactful.

What’s next?

Well, watch my interview with Alex to find out more about emotional profit and the concept of colour to measure it. Of course, I’d like to thank Alex at Bailey and French for giving me the opportunity to discuss emotional profit, something I am very passionate about as an accountant and financial engineer.

And watch this space for more in the coming months, as I put pen to paper and develop my concept of emotional profit further, and how it will help firms to develop a measurement framework for emotional profit as part of the wider ESG reporting.

Now I just need to find the time to sit down and write my book … I’d love to hear your thoughts on the subject, so please feel free to call me to on 01444 716946 to discuss it further.