I admire Millward Brown for its efforts to “talk the language of business” by trying to link brand equity and brand value to overall business value. But sometimes these efforts merely illustrate a lack of understanding for what constitutes a credible case. For example, when the estimate for brand value exceeds the market value of a company (as was the case with Google, Starbucks and a couple of other brands in their 2009 survey), anyone half proficient in valuation is led to question how much of a “reality check” was done on the data. For brand value to exceed market value, the aggregate value of all of the assets of the company other than the brand would have to be negative…
The latest example is the announcement that “Millward Brown Shows Stronger Brands Recover From Recession Faster” at the end of September. The basis for this statement was a comparison of the performance of a portfolio of companies for which “brand contributes more than 30% of earnings” versus the overall market.
The problem is that the data does not prove the claim (any more than if the claim had been that “companies beginning with letters in the first half of the alphabet outperformed the market”). The 30% criterion means that the Millward Brown portfolio is heavily skewed towards consumer industries (such as food, retailing, consumer electronics) – and these industries have outperformed the overall market. Therefore much of the outperformance of the Millward Brown portfolio is likely due to sector exposure, not branding.
To deliver a robust analysis about whether stronger brands recover faster, Millward Brown would have to show that its portfolio of strongly branded companies outperformed a portfolio of companies in the same industries, not the overall market.
