Why certifications are the bedrock of intangible assets

Businessman or notary public stamping approved stamp on document in meeting

We’re surrounded by very particular kind of brand all day, but just can’t see it. This brand is on each can of Coke, on all the vegetables in our sandwich and on every single step leading up from the local bus station.

Brand is a strange concept. You probably don’t know precisely why you prefer a product. You just do. Something about its colour makes it more trustworthy, or perhaps it was the ingredient your mother used in her chocolate pudding. Brand is ethereal and “hand-wavy,” and it can be hard to get your head around it.

But brand becomes real when God himself comes down from his heavenly perch and blesses it with a nice round number or the giant capitalised letter ‘A.’ At that divine moment, with the right symbols, the consumer can be convinced to buy the benighted product – often at a significant premium.

The name of this God is certifications. And it is the bedrock of all intangible assets, including brand.

Now, don’t get this wrong. Certifications don’t come from God. While the Almighty does seem to care about food standards, God isn’t the one who checks the supply chain of an organic fruit company or verifies the ingredients of your vegan sandwich. That responsibility is firmly on the shoulders of mortal humans.

Third-party certifiers follow a defined set of rules. They must physically drive to a manufacturing plant or a farm and handle random samples with their fleshy fingers. Their testing methods are written in public for any consumer or business owner to read.  There is no magic in this process.

Yet a certification can have a magical effect on a product or service. Seeing a stamp on the back of a bag of apples can often be as if God himself was standing behind the consumer as they peruse the shelves of a supermarket. Certifications create trust, which is one of the most powerful outcomes of good intangible asset management.

Brand is a consumer shortcut that helps reduce the anxiety of choice by differentiating one product from another. But brand alone isn’t enough to clinch the sale. Only with certifications does consumer anxiety drop to almost zero and pushes them over the line to buy. In fact, certifications can transform a normal shopping trip into a profound experience for many people.

This is because, in an uncertain world, a certification guarantees that someone has checked the claims made by a product. If those claims weren’t true – if the apple was not organic after all – then the product wouldn’t have received the certification. Without that stamp of approval, all the consumer has is the untrustworthy claims of the company. It’s impossible to trust a business in the same way you might trust a farmer. This gap is neatly filled by a certification.

The reason certifications are powerful markers of trust is that they are generally backed by government legislation. Governments require all food preparation to meet certain standards, for instance, and it is the job of a third-party certifiers to verify that those standards are being met.

This means the power of the certification comes from the authority of the government.

Just like God, no one can see “the government.” A lot of people seem to work for the government in very large buildings which have physical street addresses. But “the government” isn’t an object. It’s barely even a subject. The government is both everywhere and nowhere. You can only see it when people who work on behalf of the government act in some way, such as when they are issuing certifications.

Because certifications represent the authority and trust of the government, when you notice them, you are immediately filled with a reassurance that the product must be “safe.” After all, the government has allowed it to exist, which means it has met the standards set by the most powerful – and neutral – authority in the land. Certification is the brand of the government.

That’s’ why certifications aren’t a “nice to have” for businesses. They are critical for any company – big or small, organic or non-organic.

We like to think we are rational beings, but we aren’t. There are far too many options and variables in life for us to check everything on our own. Humans need shortcuts like brand and certifications because making irrational choices is part of normal everyday life.

For example, you might walk unthinkingly up a set of stairs after getting off the bus. As you do this, you are trusting that each step is the same height and depth as the one before it, which allows for a walking rhythm that reduces your risk of stumbling. You irrationally trust that those steps will be uniform because the government – and the certification bodies that represent it – would not allow the steps to exist otherwise. The steps exist; therefore, they must be safe.

Without certifications proving that some external authority (the government) has verified the height of the steps, you are quite literally on your own. Nothing can be trusted. Everything must be verified with your own tape measure. Life would be unbearably complex and nerve-wracking.

Consumers wouldn’t know where to begin with your product. The bag of apples might say the contents are “95% organic” but how can the buyer know for sure? These are just frivolous words written by a company that is incentivised to use the cheapest possible ingredients to boost its profit margin. There is no practical way of knowing the truth about the apples without testing them for yourself. Since this is impossible, certifications cut through the noise to send a message from the highest authority that the apples are organic.

Just by existing, a certified organic apple screams to the consumer “this is safe.” In a way, there is no such thing as an atheist consumer. Everyone acts as if God himself has checked each raisin, chip, nail and apple. Our collective trust in the government gives us the confidence to buy things from the store.

This is how the marketplace has always worked. There is no getting around it. All companies are in the certification business, whether they want to be or not. The difference between a successful company and an also-ran is if the company has learnt the mechanism of why – and how – certifications can add value to its brand, products and services.

By going through the process to certify that a bag of apples is organic, a company must allow an independent third-party to verify its entire supply chain, ingredients and planting techniques. Although the company could already be trusted since it has a business license (there’s that authority of the government again), an organic certification adds a extra layer of trust. And that trust is worth something.

Indeed, a certified organic apple can command a premium of between 35%-270% above the price of non-organic apples. Now that’s power!

Certifications aren’t smoke and mirrors or even tricks of marketing. They measure the quality of real products in the real world based on real standards. Nevertheless, certifications ultimately represent the very deep metaphysical concept of consumer trust which is directly tied to the quality of a given government and the confidence citizens have in that government. In a way, certifications are the bedrock of intangible assets because they go all the way down to the foundations holding society together in the first place.

Without certifications, a consumer is like a babe in the woods, completely at the mercy of their inability to test everything all the time. “Is this product or service safe for me to buy?” That is the core information every consumer wants to know. Certifications are valuable because they offer a guarantee that everything will be ok.

You can see why a good certification might can be worth a 35%-270% boost to the price of a product or service.

Recommended Reads

Thinking smarter about data and customer trust in the age of AI

“Don’t follow the crowd” is great advice in theory, but devilishly difficult in practice when…

Scarcity: The ultimate reward for a strong intangible asset base

Few things annoy a wealthy person more than being placed on a waiting list. But…

Why certifications are the bedrock of intangible assets

We’re surrounded by very particular kind of brand all day, but just can’t see it.…

How to see the wood for the trees in company valuations

It’s a law of physics that no tree can ever grow into the stratosphere. At…

Without non-competes, how can you protect your intangible assets?

Non-compete clauses may soon be a relic of the past if the US Supreme Court…

Free 1hr Consultation

Intangible assets are a company’s greatest source of hidden value and hidden risk. Make the valuable visible in your organisation.

Sign-up for a free 1-hour consultation today.

Subscribe to Newsletter