Brand Valuation is not a Synonym for Brand Strength

June 17, 2015

In what is generally a very helpful article about how B2B marketers can enhance their impact on the business (“The Key to Deciphering Brand Value“), Julia Cupman falls prey to the error of using “valuation” as a synonym for “brand strength”.  This error is the source of endless grief for marketers because it leads them to believe that proving that the brand is well regarded by customers is the same thing as asserting that the brand has an easily provable financial value.

There are two errors in this logic:

  1. The first is that is ignoring that customer attitudes necessarily translate into behavior
  2. The second is believing that brands should be thought of as standalone financial assets like a building or a piece of machinery

Let me elaborate on each:

Brand strength is generally measured on a self reported, attitudinal basis like a Net Promoter Score or some other metric of preference.  The links between attitudes and behaviors, and between behavior and firm value, are fraught with caveats.  Despite the grandiose claims made by Fred Reichheld and Satmetrix about NPS, academic researchers have failed to establish a reliable relationship between NPS and financial value.  There are too many other factors in the mix – such as whether NPS is predictive of actual consumer behavior and, if it does, whether that behavior has significant financial value.

The process of establishing the strength of the franchise that a brand enjoys among customers is the starting point for the valuation process, but it is naive for marketers to claim that a NPS score of X equates to a Brand Value of Y.

The second error is the belief by marketers that brand valuation is the holy grail of accountability.  In my experience, debates around brand valuation usually degenerate into discussions around the design of the financial model rather than around how marketing is helping drive the value of the overall business.  Marketers find a more receptive senior audience when they frame their contribution in terms of accelerating/magnifying the value of the business rather creating a standalone asset.  This is particularly true in the B2B context where the business typically uses the corporate brand.  Under this scenario, it makes no sense to talk as if the brand could be separated from the business.

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