Brand valuation was one of the “chapters” in my presentation to the Thunderbird MBA students yesterday so I took the opportunity to revisit the analysis of the 2011 brand value league tables from Brand Finance, Interbrand and Millward Brown, plus the new kid on the block – the European Brand Institute.

The picture is not a pretty one if you are hoping for convergence in the estimates of the value of brand value between these four providers.  First of all, only 9 brands are common between the four top 30 lists.  And only 28 brands make it onto all four top 100 lists.  The aggregate value of those 28 common brands ranges from a low of $595 billion (Brand Finance) to a high of $1,040 billion (Millward Brown) – a difference of 75%.

At the individual brand level, the differences in the valuations are even more pronounced – the minimum and maximum values differ by a factor of more than 5 for Apple; more than 4 for Shell; more than 3 McDonald’s and Nissan; and more than 2 for Google, IBM, Coca-Cola, Intel, Amazon, UPS, HSBC, Cisco, Nokia and Citibank.

This is a depressing result given that each of the agencies enjoys high standing in the market, and uses a reputable methodology for arriving at their estimates of brand value.  It is important to realize that the divergences in their estimate of brand value are not due to technical factors – they reflect differences in their assumptions about the relative importance of brands in generating future cash flow.  In other words, the differences illustrate how highly subjective the practice of brand valuation is currently.

This means that using brand valuation for the purposes of demonstrating marketing accountability is a fool’s errand.

It is ill-conceived for two reasons:

• First, it produces a number that no-one can justify
• Second, it leads to a dysfunctional situation in which marketers try to lay exclusive claim to a certain proportion of the value of the business.  This flies in the face of the reality that marketing is about leveraging the other assets of the business to present a compelling offer in the market place

A much more productive approach to demonstrating the economic significance of brands is to show how they accelerate and magnify the cash flows that the business would otherwise generate.  In other words, the focus should be on overall business valuation, not just brand valuation.

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Natalie Mizik of the Kenan-Flagler Business School at UNC is putting together a conference next April that takes a multi-disciplinary approach to branding.  Hallelujah!  This is exactly the kind of broad thinking that marketing needs.

Her conference will include academics and practitioners that deal with brands from the accounting, business, legal, marketing and business perspectives.  I am very optimistic about the prospects for some innovative thinking coming out of an event that brings together so many different viewpoints on branding.  I expect that the event will be something of a “reality check” for marketers to understand how their discipline is viewed from outside – and will encourage them to develop more effective ways to communicate the strategic contribution of brands.  The current obsession with ROI and brand valuation does not seem to be addressing the root cause of the problem – namely the lack of comprehension about the business benefits that marketing delivers.

I am particularly interested in learning about the accounting profession’s latest thinking about brands and intangible assets more broadly.  On the one hand, there is an acceptance that the current approach to “transaction based” balance sheet accounting is not providing the desired insight into the true resource base of a company; but on the other hand, the ongoing financial crisis is not an environment in which anyone is minded to make bold moves.  The whole “mark to market” idea was so good in theory, but proved a bust in practice because it permitted such a high level of subjectivity in valuation.

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I am delighted to see that a second European firm has entered the fray to be the publisher of the definitive annual ranking of the world’s most valuable brands.  This means we now have two US-headquartered contestants (Interbrand and Millward Brown) and two European-based contestants (Brand Finance and, as of last week, the European Brand Institute).

The European Brand Institute launched its inaugural list of the world’s top 100 brands on October 12 and it is a charmingly eclectic list.

Two things in particular caught my eye:

• The inclusion of a far greater number of European companies (including Bayer, BASF, Bertelsmann, Bosch, Dior, Fiat, Rewe, Sanofi-Aventis, Vivendi), many of whom have not previously appeared in the top 100 brand lists
• The inclusion of corporate brands (AB InBev, Bertelsmann, Daimler, Diageo, Exxon-Mobil, J&J, LVMH, McKesson, P&G, Pfizer, Philip Morris, Unilever) rather than their better known product brands such as Budweiser, Louis Vuitton, Marlboro, Mercedes or Smirnoff

The effect of these inclusions is, of course, the exclusion of some perennial members of the top 100 list – you will look in vain for Canon, Dell, eBay, Porsche, Santander or Siemens on the European Brand Institute’s list.

The consequence of this is that there only 30 brands are common to all four top 100 lists for 2011.

Nonetheless, I am pleased to see another well-intentioned and thoughtful approach being taken to the topic of brand valuation.  As a rookie player, the European Brand Institute should be commended on an impressive debut.

That is not to say that the list is devoid of some “head scratchers” - CNP? McKesson? Rewe? Seriously??

As the European Brand Institute prepares their 2012 rankings, there is one big issue that I would like them to ponder:  is the purpose of their list to measure brand value at the corporate level (the NPV of all brand-related profits earned across all owned brands) or at the individual brand level (whether that brand is a corporation or not)?

The 2011 list contains a mix of corporates that have “a house of brands” strategy (Daimler, Diageo, Inditex, Philip Morris, Pfizer, Unilever) and corporates with a “branded house” strategy (Apple, H&M, Honda, Microsoft).  It is hard to tell whether the intent of the list is to identify the largest brand owners – or the largest brands?

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According to my web analytics provider, this blog is now attracting over 5,500 unique visitors a month.  My question to you is “are you getting the value you want from this blog?”

The remit for this Marketing Finance blog is deliberately broad – anything to do with the business impact of marketing.  Because of my background in strategy and finance, my personal bias is to focus on the question “does marketing contribute to the creation of a business asset?” as this allows me to explore the topics of brand equity, customer value, brand valuation, and intangible value more broadly.

As regular readers of this blog will know, I do not spend that much time on Marketing ROI as it is traditionally defined (in terms of return on individual – or even integrated - marketing programs).  There are many other bloggers who provide more detailed insight on this topic.

I define my target audience in two ways:

1. Those who are interested in making the strategic case for marketing
2. Those who are not interested in marketing per se, but who are fascinated by how customers perceive value

My goal is to be a source of insight to you on a number of topics that are core to your interests.  Currently, my mental list comprises the following topics:

• Brand equity
• Brand valuation
• Corporate reputation
• Customer value
• Intangible value
• Marketing accountability
• Merger branding

Are certain of these more interesting to you than others?  Are there additional topics you want me to cover?  Send me an email at j.knowles@type2consulting.com to let me know..

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Just because we desperately wish for something to be true does not make it so.  This applies to the tooth fairy (sorry kids) and it applies to brand valuation.

Many people believe that opportunity to list brand value on the balance sheet is the panacea that will usher in a new era of respect for the business contribution of marketing.

This is wishful thinking that betrays a fundamental ignorance about the function of the balance sheet and a rosy optimism about the credibility of brand valuation.  Oh, and did I mention that nothing is stopping companies from reporting on the financial value of their brands in the notes to their financial accounts – yet only a tiny fraction choose to do so?

The function of a balance sheet is NOT to be an exhaustive inventory of the assets of a company (I wish it was – and accounting reform is aimed at moving in this direction).  For now, the balance sheet serves as the record of the cumulative total of all the transactions that the company has undertaken.  No transaction, no right to be on the balance sheet.  That is why brands that were acquired can appear on the balance sheet, but not those that are home grown.

For those who have a rosy optimism regarding the credibility of brand valuation as a business discipline, I would simply encourage you to review how the financial value attributed to some of the world’s leading brands differs wildly across surveys.  Despite each using legitimate valuation approaches, the numbers produced by Interbrand, Millward Brown and Brand Finance often vary by a factor of 2 or more.  This does not generate confidence with CFOs and anyone else who is legally required to vouch for the accuracy of the financial accounts.

The crusade to have brands recognized on the balance sheet is at best a distraction, and at worst an impediment to the greater appreciation of the business value of marketing.   I bitterly regret that a lot of effort is being wasted on this fool’s errand that could have been spent on more productive ends.

Analysts and investors have consistently said that they want better disclosure about the level and nature of marketing spending – they have no appetite for a brand valuation number, the credibility of which it will be impossible for them to verify.  Any marketer who is serious about improving the understanding of the financial impact of marketing should devote their efforts to achieving harmonization in the definition of marketing activities and common standards for their reporting, rather than to brand valuation.

As regular readers of this blog will know, I am a passionate believer in the strategic importance of marketing, and of fostering greater collaboration between marketing and finance.  In my career, I have valued literally hundreds of brands for a variety of technical and management purposes.

I know that putting brands on the balance sheet appears like a seductive alternative to daily grind of demonstrating marketing accountability but then wishing on a star seems like a more attractive route than the daily discipline of trying to realize your dream.

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I was fortunate to be invited to present today to the Strategists’ Summit of MarketShare Partners on the topic of measuring and valuing brand equity.

It would be hard to imagine a more perfect group with which to have a detailed discussion about the business impact of branding.  These folk live and breathe marketing mix modeling, channel optimization and other forms of modeling designed to enhance the effectiveness and efficiency of marketing spend.  They are therefore well versed in the challenges of constructing the business case for marketing investment in ways that are both rigorous and intuitively appealing.  We observed that the majority of the money being spent currently is relatively short-term in its focus (designed to answer questions such as “how do I optimize my spending across channels?”) because there was such opportunity for revenue acceleration and/or enhancement of the efficiency of spend.  But a straw poll of the group revealed that they were universally enthusiastic about the opportunity to apply the same rigor to the measurement of marketing asset creation.

My only regret was that the hour passed so fast.  Given half a day with these folk, I believe we could have pushed the peanut forwards in a material way.

For now, I think that there are two areas in which we can make progress independently:

1. The creation of the high-level “air cover” for the economic significance of marketing (the work I have done on intangible value measurement, and the characterization of brands as economic assets fall into this category)
2. The gradual expansion of the elements that go into a marketing mix model that would enable the model to be more insightful about the factors that are driving changes in baseline sales

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I spoke this evening as a guest lecturer on an MBA marketing elective at NYU’s Stern School of Business.  The course title (also the title of this post) gives you a good sense of the subject material that the students were interested in discussing.  And, my, were they interested in discussing it!  Rarely have I been in front of a more engaged audience.  I think it took me over 10 minutes to get past the title slide of my presentation…

I left the class feeling really optimistic about the future of marketing, and the ability of marketing to contribute to business performance, and to create economic surplus more broadly.  This was an audience that obviously embraced measurement (or they would not have chosen this elective!) but they were hungry for the story behind the numbers, not the numbers per se.  They clearly had a view of marketing as the growth engine of business and recognized the need for appropriate methodologies to measure how marketing was adding to customer value.  The quality of the questions was exceptional and ranged from questioning the validity of comparing market value to book value, to the relative importance of brand across different industries, to the impact of network effects on brand strength…

I stayed for their class presentations about the prevalence of marketing metrics in the 10Ks of five major companies.  There was some excellent analysis of the Google, Microsoft, Disney, McDonalds and Coca-Cola financial statements – all of which highlighted the relative paucity of the marketing data included in the financial reports.  This provoked a great discusion around the notion of “if marketing is so important, why is there so little data on marketing in the financial reports?”  I will return to this topic in a future post.

For now, NYU Stern partipants in tonight’s marketing elective (and Profesor Dawn Lesh – whose guest I was), thank you for a fabulous evening!

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I was privileged to present to a group of eight senior corporate marketers who together represented over $400 billion in market value.  The topic was “best practices in marketing measurement and valuation.”  We focused primarily on the measurement of brand equity and the uses (and misuses) of brand valuation.

It was a fascinating insight into the state of corporate brand management as practiced at some of the leading B2B companies in the US and Europe. To a person, the members of the group were smart, articulate, credible and… frustrated by the inherent difficulty in proving the contribution that corporate branding makes to the value of their respective businesses.

I hope that I was able to offer up a couple of different approaches for framing the role of corporate branding, and estimating the scale of brand value across different industries.  I shared relevant data from my recent analyses of intangible value and of brand value so as to equip them with some financial parameters to use when engaging with their CFOs.

The interesting thing for me was how clearly the group segmented between those who were in sales-dominant cultures, and those who were in companies in which there was an inherent belief in the importance of relationships, not just sales.  In the first culture, there is no mileage to be had in trying to argue about the importance of branding other than as a means to super-charge the sales funnel.  In the second culture, there is a readiness to ackowledge the importance of the brand, but still the challenge of identifying the metrics that best capture the strength of the brand franchise AND how effectively that potential is being translated into sales.

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I thought I would round out the 2010 brand league table season with a little retrospective on the past 4 years.  Why 4 years?  Because it is only since 2007 that we have had the luxury of three competing versions of the top 100 most valuable brands in the world:

• Interbrand has produced a world’s most valuable brands list since 1999 – their initial list had 62 brands; increasing to 74 in 2000; finally hitting the 100 mark in 2001 (purportedly representing the entire universe of brands with a value of over $1bn)
• Millward Brown entered the fray in 2006 following the establishment of Millward Brown Optimor (their specialist brand valuation unit), and has published annually since then.  Given the upheavals this summer in the Optimor unit, it remains to be seen whether they will continue to publish in 2011
• Brand Finance began publishing a list of the world’s most valuable brands in 2007 – their initial list featured 250 brands; subsequent lists have featured 500 brands

The Brand Finance list comes out in January; the Millward Brown list is published in April; and the Interbrand list is typically published in the first week in August (but was delayed until mid September this year reflecting their loss of BusinessWeek as a media sponsor).

Brand Finance typically self publishes its lists but runs special excerpts in banking and retail magazines;  Millward Brown has had the FT as their media partner;  Interbrand’s early lists were published in the FT but appeared as major features in BusinessWeek from 2001 to 2009.  As noted above, Interbrand had to self publish this year.

Over the 4 years that all three lists have been published, a total of 220 brands have made at least one appearance on one of the top 100 lists.  29 brands have achieved the distinction of appearing on each of the three lists in each of the 4 years. [FYI 24 brands have the distinction of having appeared on all 19 of the top 100 lists - the Interbrand top 100 list for all 10 years, the Millward Brown list for all 5 years, and the Brand Finance list for all 4 years.]

As I noted in yesterday’s post, there is a worrying lack of consistency across the three providers.  Over the past 4 years, the number of brands that were common to all three lists in a single year has never exceeded 46 (in 2007) and was as few as 33 (in 2009).  Within any given year, the maximum number of brands common to any two of the lists hit a high of 70 (between the 2007 lists for Millward Brown and Brand Finance) and a low of 46 (between the 2009 lists for Interbrand and Brand Finance).  In any given year, the number of brands common to any two of the top 100 lists is typically no more than 60.  Over the past 4 years, the Brand Finance and Millward Brown lists have averaged 66 common brands each year, while the Brand Finance and Interbrand lists have averaged only 52 common brands.  [This is a curious result since Millward Brown and Interbrand both report using the "earnings split" approach to brand valuation, while Brand Finance uses the "relief from royalty" approach.  One might therefore have expected that the Millward Brown and Interbrand results would have been the most similar.]

The consistency within the lists from each provider are, as would be expected, far greater than across the three providers:

• 81 brands are common to the last 4 Interbrand lists, with 59 brands appearing on all 10 lists published since 2001
• 71 brands are common to the last 4 Millward Brown lists, with 64 brands appearing on all 5 of their lists since 2006
• 70 brands are common to the 4 Brand Finance lists published since 2007

With that, I believe that I have concluded my analysis of the 2010 lists of the world’s most valuable brands!  Unless you have any further questions you want me to address, I plan to enjoy the 3 month hiatus until the 2011 Brand Finance list comes out….

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Now that Interbrand’s 2010 list of the world’s most valuable brands has been published (September 15), I have spent some time analyzing the data across the Interbrand, Millward Brown and Brand Finance lists for 2010 to see what wisdom can be gleaned.

The first point to note is that the three lists are remarkably different.  Here are some of the ways they differ:

• The brands are different – there are a total of 172 brands across the three lists, with greatest degree of overlap between the Brand Finance and Millward Brown top 100 lists (64 brands in common) and the least overlap is between the Interbrand and Brand Finance lists (only 50 in common); only 39 of the 172 brands are common to all three lists
• The individual brand values are different – among the 39 common brands, the value ascribed to 16 of the brands differs by more than a factor of 2 (Banco Santander is the most egregious case with the brand value calculated by Brand Finance being over 5x the brand value calculated by Interbrand); brands with more than a 3x difference between the minimum and the maximum value on the three lists include Shell, Apple, Google and McDonalds
• The aggregate brand value is different – the total value of the 100 brands on the Interbrand list is $1.2 trillion versus $1.5 trillion for the Brand Finance 100, and $2.0 trillion for the Millward Brown 100.  The minimum value required to make it onto each list in the #100 slot is $3.4 billion for the Interbrand list, $7.5 billion for the Millward Brown list, and $7.9 billion for the Brand Finance list

As regular readers of this blog will know, I think the single most important statistic to be calculated from these lists is the proportion that brand value represents of the market value of the parent companies.  Here are a number of versions of this statistic:

• The aggregate brand value of the 97 brands on the 2010 Interbrand list that belong to publicly traded companies (Armani, IKEA and Zara are private companies) represented 12% of the market value of their 93 parent companies (Coca-Cola, Diageo, L’Oreal, LVMH, Nestle and Yum Brands each had 2 brands in the Interbrand 100); the equivalent number for the Millward Brown and Brand Finance lists were 18% and 13% respectively
• For the 160 brands across the three lists that belong to publicly traded companies, the aggregate brand value represented 22% of the aggregate market value of their parent companies (for brands that appeared on more than one list, I used the average of the brand values)
• For the 39 brands that are common to all three 2010 lists, the brand value as calculated by Interbrand represented 24% of the market value of their parent companies; the percentage based on the Millward Brown brand value estimates was 27%; and the percentage based on the Brand Finance brand value estimates was 19%

This data suggests that mega brands (those that make it onto all three lists) represent more than 20% of the market value of their parent companies while, for the economy more broadly, brand value probably represents around 10% to 15% of market value.

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I am always intrigued by the arrivals and departures from the list of the top 100 brands.

The 2010 league table sees 10 new arrivals, with Sprite entering the list at #62 and a brand value of $5.6bn.  It is the only true new entrant as of the other 9 brands, two (3M and Heinken) have appeared on Interbrand’s list in previous years, and the other seven have already featured on the Millward Brown or Brand Finance lists (Banco Santander, Barclays, Corona, Credit Suisse, Jack Daniel’s, Smirnoff, and Zurich Insurance).

The adios brands are a more interesting bunch.  Gone from the 2010 list are some that would be expected (BP and Burger King) and a number of recession-hit luxury brands (Chanel, Lexus, Prada, Rolex) and some that may simply have just missed the cut (Duracell, Polo, Puma).  The disappearance of Wrigley’s from the list (#51 in the 2009 list with a brand value of $6.7bn) presumably reflects the difficulty of getting adequate financial data now that Wrigley’s is part of the privately held Mars group.

The relatively unexciting nature of the departures and arrivals (BP aside) reinforces the impression that the past year was not one for breakout branding.  As I noted in my earlier post, the top 20 brands were the same in both the 2010 and 2009 Interbrand lists and saw a modest 4% increase in their aggregate value.  By happy coincidence, the top 50 brands were also identical across the two lists, with an identical increase of 4% in aggregate brand value.  Rounding out the “no big changes” is the news that the aggregate brand value of the 90 brands common to the 2009 and 2010 lists is also 4%.

In my view, the biggest story in all of this data is how the aggregate value of the 100 brands on the Interbrand list ($1.2 trillion since you ask) compares to the aggregate market value of the S&P 500 ($10.6 trillion).  So when you are next asked “how much of business value can be attributed to brands?” you now have the data to support an answer of “about 11%”

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Tomorrow sees the publication of Interbrand’s 2010 league table of the world’s 100 most valuable brands.

Whatever the fortunes of the brands themselves (something I will comment on tomorrow), 2010 has not been a good year for the providers of brand league tables.  For the first time since their league table was first published in 1999, Interbrand does not appear to have been able to secure a media sponsor (BusinessWeek had published it since 2002, and the Financial Times prior to that), and Millward Brown Optimor has been significantly restructured, raising questions about whether we will see a 2011 most valuable brand league table from them.  Only Brand Finance’s league table – that has had the lowest profile of the three – has been spared a major shake up (at least, as best I know).

Whatever the imprecision in the methodology behind these league tables and consequent inconsistency of the results across the providers, the league tables at least provided an indication of the scale of the economic importance of brands.  It saddens me to see their profile so diminished.

But hope springs eternal.  Given the persistence of management interest in the topic of intangible assets, I would not be surprised if Bloomberg BusinessWeek had plans to create their own league table.

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I had a chance last night to update my comparison of the most recent brand valuation surveys by Millward Brown (May 2010), Brand Finance (January 2010) and Interbrand (September 2009) to review what can be said about the value of brands at the aggregate and individual levels.

Historically these surveys have shown aggregate brand value to fall within the range of 15% to 20% of the market value of their parent companies.  However, the last two surveys by Millward Brown have been a lot more aggressive – showing aggregate brand value of the top 100 brands in the range 30% to 35% of market value of their parent companies.  Brand Finance and Interbrand’s data is still closer to 20%.

The divergence of opinion between the three surveys is particularly evident at the individual brand level:

• There are only 8 brands common across the three top 20 lists (Apple, Coca-Cola, GE, Google, HP, IBM, McDonald’s and Microsoft) and only 40 brands common across the three top 100 lists
• Within the top 20 brands that were common to all three lists, the valuation attributed to individual brands was greater than a factor of 2x in 50% of the cases
• The high/low estimates of brand value were particularly marked for Apple (high/low estimates differed by 5.4x), Amazon and Google (3.5x), McDonald’s (3.3x), HSBC (2.7x), IBM (2.6x), Microsoft, Nokia and UPS (2.3x)
• Within these top 20 common brands, Millward Brown’s estimate of the value of the individual brands was highest for 10 of the brands and the lowest for 5 of the brands;  Interbrand’s estimate was highest for 8 and lowest for 7;  Brand Finance’s was highest for 2 and lowest for 8

I am grateful to these three agencies for having the courage to publish their estimates.  What are the chances that they could be persuaded to get in a room together with the goal of thrashing out a “consensus estimate” for the value of each of the brands?

Tagged as: Brand Valuation, Marketing Finance, Measure Value

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Today saw the release of Millward Brown’s 2010 survey of the 100 most valuable brands in the world.  Their press release focused on the strong performance of technology companies in the list, and the fact that the aggregate value of the 100 brands exceeded $2 trillion for the first time and was 4% higher than in 2009. 

A more accurate comparison is the 91 brands that appeared in the top 100 list in both years – these had an aggregate value of $1.92 trillion - up 2% from 2009.

The 63 brands that belonged to publicly traded companies accounted for $1.51 trillion in brand value, up 1% from their aggregate brand value in 2009.

For me, the interesting statistic is that the market value of these 62 companies (P&G has two brands in the the top 100) rose by 34% over the past year – and the S&P 500 by 36%.

This suggests that the companies with strong brands actually lagged the broader market by a small margin and contradicts Millward Brown’s conclusion that “strong brands proved their resilience in a recession” (that message was relevant to the 2009 survey which had shown brand value rising to 41% of market value).  The quotes in the press release about how the data demonstrates the growing importance of brands is contradicted by the fact that brand value fell as a percentage of market value from 41% to 31% of market value over the past year (or from 29% to 24% of total economic value). 

I applaud Millward Brown’s effort to generate these estimates of brand value but I wish that their interest in promoting the power of brands did not cloud their interpretation of the data, nor blind them to some obviously implausible results.  To wit:

• Marlboro has a brand value that exceeds the total enterprise value of its parent (Altria) by 10% (implying that all of Altria’s assets – including the Virginia Slims, Parliament and Skoal brands – have no financial value)
• Google is again #1 with a brand value estimated at an implausible 80% of Google’s $140 billion in total enterprise value (meaning that all Google’s patents and other intellectual property represent less than 20% of the company’s value)
• Similar story at Accenture where the brand value is over 60% of the total enterprise value (leaving relatively little value to be attributed to the intellectual property and business processes for which the company is famous)

Once again, I find that the information in the aggregate data is more interesting (and, perhaps, reliable) than the specific value attributed to individual brands. 

While each of the main brand league tables does a good job of internal consistency from year to year, it is hard not to notice the very significant diferences between the values that Interbrand, Brand Finance and Millward Brown ascribe to individual brands.  Here are some of the more egregious examples from the 2010 league table:

• Apple is given a brand value over 5x what Brand Finance and Interbrand estimated the brand to be worth
• Shell and BP (added to Millward Brown’s list for the first time this year) are valued 4x higher than they were in the Interbrand list 6 months ago
• Google and McDonalds are valued at more than 3x what Brand Finance and Interbrand considered these brand to be worth
• Amazon and Oracle receive valuations twice as high as those given by Interbrand and Brand Finance
• Samsung, the brand with the largest increase in brand value (up 80% versus the 2009 Millward Brown survey), is still valued at 40% below what both Brand Finance and Interbrand believe the brand to be worth

My take on all of this is that brand valuation is still in its infancy as a discipline.  The levels of subjectivity are still frighteningly high concerning individual brands and even industry sectors (Millward Brown is clearly bullish on the role of brand in oil and gas, while Brand Finance is bullish on brand’s role in financial services).  My conclusion is that we should use the data from these league tables to make general points about the economic siginificance of brands but we should be very wary about the individual data points.

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I am tired of hearing marketers say “it is impossible to assign a precise value to brands.”  I agree.  But I do not accept that marketers are therefore absolved from any responsibility for putting some financial parameters around the signficance of brands.

Perfection and precision may be impossible but this is a topic on which I am certain that being “roughly right” is a worthy goal to aim for.

The tragic irony is that the same marketers who maintain that brands cannot be accurately valued are often the same people who insist on saying that ”brand are assets.”  I say “show me the money” – literally.  Because for finance folk (and particularly accountants) an asset is defined as “a resource controlled by the corporation and from which future economic benefits are expected to flow.”  Our bluff has been called.  We have a choice:

• We can either acknowledge that we are just using the term “asset” in a loosey-goosey way (a.k.a “marketing speak”); or
• We can try to say something concrete about the future economic benefits that flow from brands

One small step in the right direction is to develop some “rules of thumb” for the range of value added that brands provide across different industry categories.  Analysis of the Interbrand, Millward Brown and Brand Finance league tables shows that brands may represent less than 5% of the market value of one of the oil & gas majors, around 10% for a bank or insurer, around 15% for a telco, but 35% or more of the market value of a consumer goods company.

Does this give a “precise numeric valuation” for a brand?  No – but it does give finance folk a compelling reason why they might want to pay greater attention to brands. 

Let’s not let the “tyranny of perfection” be an excuse for not making any effort at all.

Tagged as: Brand Valuation, Business Value, Measure Value

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Such a seemingly simple question.  But when the [X] is marketing, branding or social media, it is best to consider what the motive is behind the question.  My experience is that the question is actually about one of three issues:

• The first is alignment – are marketers serious about trying to make a contribution to the success of the business?
• The second is relevance – how significant a business asset is brand/identity?
• The third is measurement – how should the effectiveness of marketing be measured?

 As a rule of thumb, at least 80% of the time, it is the first two issues that lie behind the request for demonstrating the ROI on marketing spend, or for a brand valuation.  Responding to the request at face value is therefore a mistake because a ROI or valuation model will not address the underlying concern about marketing’s lack of alignment with business strategy, and skepticism about the significance of the impact that brand/identity can exert on overall business value.

 Finance people are not being deliberately difficult when they ask the question – they are genuinely unsure about whether marketing, branding and identity matter.  They inhabit a Vulcan world of rational economic maximization in which all decisions are based on a sober assessment of functional performance and price.  They therefore have real difficulty in understanding why all this talk about positioning, identity and brand essence is relevant to the business.

 In many cases, therefore, the best response to the Value/ROI question is to draw an influence diagram to illustrate the ways in which identity, branding and marketing add to the value of the business.  This turns the conversation into a productive, strategic discussion about the sources of customer value and the role of identity, branding and marketing in enhancing the perceived attractiveness of the company’s products and services.

 In a minority of cases, the Value/ROI question genuinely is a question the third issue – measurement – and therefore requires a numeric response.  But before you can determine what kind of measurement is relevant, I believe you need to further clarify the question on two dimensions:

• Are we looking for quantification in terms of customer value or financial value?
• Are we primarily interested in the short term or the longer term?

 If the interest is short term and financial, then you genuinely do need to measure ROI.  If it is long term and financial, you need to perform some kind of valuation.  But if the interest is in the extent of the customer preference we enjoy, then your answer should not involve financial numbers at all – your numbers should be to do with client acquisitions, engagement scores, average purchase frequency, willingness to recommend, brand equity and a host of other measures of customer preference and behavior.

 There are multiple motives that can provoke the question “what is the Value/ROI of/on [X] ?” and a formal valuation is only an effective response in a minority of the cases.

Tagged as: Customer Value, Marketing Finance, Marketing Performance, Measure Value

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Why are school teachers paid less than bankers?  Is it that their work is less valuable?  Is it that their skills are less unique?  Or is it that it is harder to prove the connection between their work and the value that is generated?

Why are designers paid less then management consultants?  Is it that identity is less valuable than strategy?  Is it that design skills are less unique than consulting skills?  Or is it that it is harder to prove the connection between identity and business value than between consulting advice and business value?

Being a reformed finance person, I like to think about these issues in terms of the drivers of financial value – profit, growth, risk and time frame.   The market likes profits – and it likes them to be growing; and it likes them to be certain; and it likes them to be generated sooner rather than later.

This casts some light on why, in my schoolteacher/designer vs. banker/management consultant analogy, the problem might not actually be with an insufficient value is placed on what school teachers and designers deliver.   The problem may be that the outcome of their work is too variable, occurs too far into the future, and is too difficult to link specifically to their work.  Any one of these factors causes the discount rate on your work to rise, and therefore its market value to fall.  The fact that all three problems affect the work of school teachers and designers is a good explanation for why the salaries they command are relatively low.

Turning to the title of this post, the issue with valuing identity is that the judgement of its effectiveness is currently rather subjective; the impact of changes in identity may take a while to show up; and it may be hard to demonstrate the causal relationship in a definitive way.  

So the likely scenario is that the market will place a low value on identity.  Currently the design community focuses on arguing about the scale of the value they deliver (profit).  Maybe they should focus more on shortening the time frame and reducing the perceived riskiness of the impact of their work?  That would increase its market value.

Tagged as: Business Value, Creating Value, Measure Value

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The statement that “our brand is our most valuable asset” appears almost as frequently as the statement “our people are our most valuable asset.”  But they cannot both be right, surely?

Many people dismiss both statements as pure pablum – soothing words uttered by senior management without meaningful content.  In some ways I am tempted to agree.  If the statements could be re-phrased as “people would not buy our products/do business with us if they thought we were untrustworthy” and “this company would fail if our employees did not show up for work,” then their utter banality would be revealed.

However, the popularity of the statements makes me believe that, at least some of the time, something more profound is being said.  In an environment in which the majority of business value is represented by intangible assets (that is, things other than bricks and mortar, inventory and cash), understanding the nature of those assets is a critically important business issue.

“People are our most valuable asset” is self-evidently true for companies that are talent-driven (professional services firms, research-based companies, sports teams, media properties).  It is the ingenuity of a small group of people that truly drives the value of the business (think Steve Jobs or Larry Fink) .

So, in what sense – and in which industries – might it be true that “brands are our most valuable assets” ?

The sense in which the phrase is insightful is when “brand” is used to mean “our perceived uniqueness in the minds of our customers” and not simply “reputation.”   This was the meaning that John Stuart, chairman of Quaker, had in mind when he made his famous remark that “if this company was split up, I would give you the land and bricks and mortar, and I would take the brands and trade marks, and I would fare better than you.”

The industries in which “perceived uniqueness in the minds of customers” is truly the most important asset of the business are consumer industries (alcohol, cars, electronics, entertainment, fashion, retail) in which brands are a form of self expression for consumers; or “distress purchase” industries (insurance, financial services, medical products, certain technology products) in which consumer preference is driven by loss aversion. 

It is hard to think of a B2B industry in which it is true that “brand is our most important asset.”  Possibly certain types of professional services?  Suggestions welcome.

Tagged as: Business Strategy, Causal Model, Intangible Value, Intellectual Property

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I am just getting round to reviewing Brand Finance’s 2010 list of the world’s 500 most valuable brands that they published in mid February.

As always, I appreciate the extra depth that Brand Finance provides in its report versus those of Interbrand and Millward Brown – the list covers the top 500 brands (vs. 100); provides data on market value of the parent companies: and gives explicit information on the perceived riskiness of each brand (via the brand rating score).

The headline summary is as follows:

• The brand value of the top 100 brands rose by 23% to reach $1.50 trillion, driven by a resurgence in the brand values of many financial services companies
• You now need a brand value of over $7.9 billion to make it into Brand Finance’s top 100 brands (up from $6.2 billion last year)
• WalMart still tops the Brand Finance list (it does not even feature in Interbrand’s top 100)
• The next five brands are common to the Interbrand and Millward Brown lists – Google, Coca-Cola, IBM, Microsoft and GE
• Based on Brand Finance’s data (I have yet to replicate this), the total economic value of the parent companies of the top 100 brands fell by 4% to $8.51 trillion so brand value now represents 17.6% of total economic value (up from 13.7% last year)
• Based on the data for all 500 brands, brand value represented 15.4% of the total economic value of their parent companies (up from 14.2% last year)

As always, I find the aggregate data a very helpful reminder of the economic significance of brands.   I will report back with more observations at the sector level in a future post – as in previous years, Brand Finance seems to be believe in a highly influential role for brands in financial services.

Tagged as: Brand Valuation, Marketing Finance, Measure Value

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While going through my research archives looking for something else, I rediscovered a piece of McKinsey research from late 1996 with this title.  It was a meta-study of 27 individual studies that examined the importance of brand as a driver of purchase behavior across a number of business categories.

Their finding was that, on average across the B2B and B2C markets studied, brand accounted for 18% of the total purchase decision.  The figure ranged from 3-12% for consumer purchases of computers (3 US studies) to 36-39% for consumer purchases of computers (3 European studies).

Their research also revealed that, in 17 of the 27 studies, there was a “brand loyal” segment for whom brand was the determinant factor in their purchase decision.  The size of this segement varied from 10% in retail banking to 35% in telecoms, with an average of 21% across the 17 studies.

It is interesting that similar results about the economic significance of brands are produced by a variety of different approaches.

Tagged as: Brand Valuation, Marketing Finance, Measure Value

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Perhaps recognizing that ”the world’s most valuable brands” theme is becoming over-worked, CoreBrand released a brand league table this week with a twist: their league table contains only corporate brands, and ranks them according to the percentage of market capitalization represented by the corporate brand, not by actual value. 

It is a potentially interesting approach.  Leaving aside the methodological challenges inherent in separating out the value of Coca-Cola the corporate brand from Coca-Cola the product brand (the majority of the companies on the list are monobrands – meaning that the product brand and the corporate brand are the same), it would be fascinating to see some data on the extent to which branding at the corporate level is adding value above and beyond what is being done at the product level.  And whether the scale of this contribution varies by industry.

Unfortunately CoreBrand list consists of nothing more than the ordinal ranking of 100 corporate brands on two bases:

• By the percentage of market capitalization represented by the corporate brand
• By the dollar value of the corporate brand

There is no data on either the actual dollar value of the corporate brands or on the actual percentage of market capitalization that the value of the corporate brand represents.   Readers are left to guess whether corporate brand value is 3% or 30% of overall market capitalization.

It is a missed opportunity to add meaningfully to the debate about brand valuation.  This is a shame since the CoreBrand list is based on two interesting premises:

• First, that corporate brands matter
• Second, that it is not so much the absolute value of brands that matters as the proportion that they contribute to overall corporate value

I, for one, would have loved to see some data on the relative importance of corporate brands.  Or some data on how this varies by industry (it is self evident that product brands matter more in certain industries than others – but is this true at the corporate brand level?)

Instead, I am left to scan the list for interesting snippets, such as:

• Is the Hershey corporate brand (ranked #1) really adding proportionately more value than the Home Depot corporate brand (ranked #39)? 
• Is the Yahoo corporate brand (ranked #40) really working that much harder than the Google corporate brand (ranked #88)? 
• And are those corporate communicators at P&G (ranked #54) really contributing proportionately less than their counterparts at Colgate-Palmolive, Estee Lauder and Avon (ranked at #6, #19 and #43 respectively)?

I suspect that most readers will fail to realize that this is a ranking of corporate brand contribution to overall value, not overall brand value.  Any list that includes Hershey, Coca-Cola, Harley, Campbells and Kelloggs as its top 5 can easily be mistaken for just another brand valuation league table.

Tagged as: Brand Equity, Marketing Finance, Marketing Performance, Measure Value

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I am bothered by the discrepancy in the value of individual brands across the Interbrand, Millward Brown and Brand Finance lists.  I am particularly perplexed as to why the differences between Interbrand and Millward Brown lists (both of whom use the “earnings split” method) are greater than the differences between Interbrand and Brand Finance lists (who use different approaches – Brand Finance uses relief from royalty).

I am grateful to Gabi Salinas’ “International Brand Valuation Manual” for casting some light on the reasons why this might be so – her book documents 16 variants of the “earnings split” approach, making it entirely plausible that variances within the application of a single approach might be greater than variances across different approaches.

Tagged as: Brand Valuation, Marketing Finance, Measure Value

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Gabi Salinas (with whom I had the pleasure of working at Brand Finance), now global brand manager at Deloitte Touche Tohmatsu, has just published her magnum opus on the topic of brand valuation.

The book is very thorough and a surprisingly easy read – a testament to Gabi’s ability to focus on the essential details of what is potentially a very dense topic.  It removes much of the mystery that currently surrounds the topic of brand valuation by outlining the core concepts and profiling the different methodologies in use.

Gabi’s obvious passion for the topic shines through.  Most other authors might baulk at the prospect of comparing and contrasting 40 different brand valuation techniques from more than 60 providers – but Gabi has painstakingly collected all this information and spends 180 pages (nearly half the book) reviewing and commenting on each model.

This dogged perseverence gives immense credibility to the other sections of the book in which she provides a higher level summary of the topic.  I would recommend the following three chapters in particular:

• Chapter 1 – the definition and economic relevance of brands
• Chapter 4 – summary of the main approaches to brand valuation
• Chapter 6 - classification of the 40 models reviewed

The book is a hugely valuable resource to anyone with a professional interest in brand valuation (and that is a wide set of audiences).   Despite the worrying frequency of equations with greek letters, the style is very light and the narrative very simple to follow.

For me, the one thing missing from the book is a clearer sense of how brand valuation fits into the broader topic of marketing accountability.  As it says in its title, the book is a “Manual” – it begins from the assumption that brand valuation is a valid goal to pursue, and provides the roadmap for achieving that goal.

Readers of this blog will know that my strong belief is that brand valuation is, with rare exceptions, a false trail for marketers to follow.  It does not provide definitive proof of the value of marketing, and it involves treating the brand as a separable asset of the business (an assumption entirely at odds with marketing’s goal of getting the brand embedded into all aspects of the business).  The uses of brand valuation are technical in nature, and few fall within the purview of marketing.

To be fair, Gabi did not conceive her mandate to be “brand valuation – what’s it for?” – she defines her remit as “brand valuation – how’s it done?”  She has produced a comprehensive overview of the topic and has documented in admirable detail the specifics of the various approaches and models.

Tagged as: Brand Valuation, Marketing Finance, Measure Value

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I led the brand valuation section of the day-long seminar on marketing measurement today.  The seminar was run by Alan Middleton, the pre-eminent marketing professor in Canada and a true force of nature.  It was a huge pleasure to collaborate with someone who is so passionate about his subject, and so voracious in his appetite for new information and perspectives.

The seminar participants were all from the agency side – and all motivated by the desire to upgrade the quality of their interactions with clients so as to evolve from “vendors” into genuine business partners. 

They asked some very perceptive questions – but the defining point of my session was the reaction by one of the participants to the process for performing a brand valuation based on the earnings split approach.  He looked at the matrix we had just created of the drivers of the customer purchase decision and the extent to which they were influenced by brand, thought for a while, then commented ”this all seems rather squishy to me.”   Exactly.  And in a single word, he articulated the huge concern over the subjective nature of brand valuation.

Tagged as: Brand Valuation, Marketing Finance, Measure Value

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Another day, another city, but the song remains the same. 

I am presenting at the Schulich Executive Education Center at York University in Toronto tomorrow.  I tried to define the remit of my presentation as brand and customer equity measurement but was asked to focus more narrowly on brand valuation.

Readers of this blog will be familiar with the approach I will take to the topic, and the caution I will sound about thinking of brand valuation as anything other than fodder for cocktail party conversations or a specialist tool to support limited and well-defined transactional needs (most of them having nothing to do with marketing).

Given that the participants are all marketers, I thought I would prepare a workbook that will allow us to generate in class a brand valuation based on the earnings split approach.  It should be a great way to illustrate the variables to which a brand valuation is most sensitive.  I will report back.

Tagged as: Brand Valuation, Marketing Finance, Measure Value

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I have now had the chance to look at the latest Interbrand list in some detail.  The results seem plausible - double digit rises in the brand value of Google and Apple, halving of the brand value of Citi and UBS.  Some brands ekeing out gains in value of less than 5%, but many showing declines in the 5 to 10% range.  Net result:  a 5% decline in the aggregate brand value of the top 100 brands to $1.16 trillion.

So far, so good.  The worrying development is the increase in the inconsistency between the Interbrand list and those published by Millward Brown and Brand Finance earlier in the year:

•  There are only 33 brands that appear on all three top 100 lists this year, down from 45 last year and 46 in 2007
• The three providers only agree on the direction of the sign change in the value of 6 of the top 20 brands versus their value in 2008
• The inconsistencies are as great versus the Millward Brown list (compiled using the same “earnings split” methodology as Interbrand) as they are versus the Brand Finance list (compiled using the “relief from royalty” methodology)

On balance, I am glad that these brand league tables exist – they help to highlight the economic significance of brands, even if in the process they also demonstrate that brand valuation is a discipline in its infancy.

Tagged as: Brand Valuation, Marketing Finance, Measure Value

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Interbrand has now released its 2009 league table.  The data shows a very modest decline in the aggregate value of the top 100 brands from $1.22 trillion in 2008 to $1.16 trillion.  The 5% decline contrasts with a 25% decline in the market value of the parent companies and results in a jump in the proportion of brand value to market value from 18% in 2008 to 23% this year.

93 brands are common to the 2009 and 2008 lists – notable departures from the list this year are Merrill Lynch, AIG and ING which together represented over $20 billion of brand value. 

86 brands are common to the last 4 years, of which 76 belonged to publicly quoted companies.  Using just this sample set, aggregate brand value was down 4% in absolute dollar terms versus 2008 but rose from 20% to 25% as a proportion of aggregate market value.

Interbrand scores well for internal consistency across the years – each movement in brand value is accompanied by an apparently plausible thumbnail explanation for the rise/decline.

What continues to cause doubt about the reliability of the numbers is the lack of consistency across the three main publishers of brand valuation league tables.  There are only 33 brands that are common to the three lists of the top 100 brands!  25 brands that appear on both the Millward Brown and Brand Finance lists do not feature on the Interbrand list, while Interbrand chooses to include 32 brands that do not appear on either the Millward Brown and Brand Finance lists.

Hence my advice to marketers – use these league tables to support a general assertion about the economic value of brands BUT beware of making any strong assertions about the value of individual brands.  Otherwise you will find yourself explaining why the brand values of Amazon, Apple, BlackBerry, Google, Marlboro and UPS differ by a factor of 2 or more – and why it requires a brand value of “only” $3 billion to crack the Interbrand top 100 list but over $6 billion to make it into either the Millward Brown or Brand Finance top 100.

Tagged as: Brand Valuation, Marketing Finance, Measure Value

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Interbrand will shortly be publishing its 2009 ranking of the world’s most valuable brands. Unlike Millward Brown and Brand Finance who published their 2009 rankings in the midst of the market meltdown in March, Interbrand has the benefit of publishing at a time of relative market stability (the S&P 500 traded in the range of 900 to 1,000 between May and August) and may therefore attract a little more media attention.

The publication of these league tables is helpful to marketers as it serves to highlight the importance of brands as economic assets.  Despite their obvious flaws (notably the lack of consistency between the values ascribed to individual brands by different providers), the sheer scale of the numbers is impressive – the aggregate value of the top 100 brands is over $1 trillion according to Interbrand and Brand Finance (nearly $2 trillion if you believe Millward Brown) and represents close to 20% of the aggregate market value of their parent companies.

Given that net tangible book value for the S&P 500 represents only 21% of market value, it is nice for marketers to be able to make the sweeping generalization that, in aggregate, brands represent as large a proportion of market value as tangible assets.

As I have noted before, this generalization masks a huge variation in the individual brand values (2% of market value for BP and Shell vs. upwards of 80% for Gucci, Puma and Burberry).

Tagged as: Brand Valuation, Marketing Finance, Measure Value

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I am in the process of responding to another RFP that stipulates that brand valuation is one of the deliverables.  Given the context,  it is clear that the client does not mean valuation in its financial sense.  What they appear to want is a methodology for brand evaluation.

I hate to pick nits but it is a source of considerable confusion when a term that has a specific meaning to a financial audience is used in a much broader sense by marketers.  Marketers are often guilty of using financial terminology to describe anything that involves measurement - they overlook the fact that many forms of measurement are non-financial (such as awareness levels, repurchase rates, willingness to recommend and so on).

For that reason, I have found it useful to make the distinction between two forms of brand measurement:

• Brand evaluation is the discipline of developing a quantitative (but non-financial) understanding of the strengths of a brand on multiple dimensions and with multiple audiences.  The focus of brand evaluation is understanding the level of customer value that the brand generates;
• Brand valuation is the discipline of determining the proportion of overall business value that is solely due to the impact of the brand on the behavior of key audiences.  The focus of brand valuation is on measuring the level of shareholder value that the brand generates.

 Brand evaluation is a discipline that should be embraced by any organization that wants to understand what is driving customer preference and internal engagement.  Brand valuation is a specialist discipline that is of particular value when an organization is contemplating a merger or licensing transaction, or when it is engaged in a trademark dispute.

Despite the popularity of league tables of the world’s most valuable brands produced by Interbrand, Millward Brown and Brand Finance or of the world’s most powerful non-profit brands produced by Cone, the managerial applications of brand valuation are surprisingly limited.  A brand does not become more valuable simply as a result of measuring it.  What actually makes a brand more valuable is when an organization is able to enhance the preference for the brand among its existing audiences, and how to promote the brand to new audiences.  The financial value of a brand is determined by the behavior of its audiences.

Brand evaluation is about strategy and management.  Brand valuation is about accounting.  My beef with brand valuation is that it distracts clients from the more productive task of identifying and measuring the sources of their brand’s value to customers, partners, and employees (brand evaluation) and on generating ideas for how this value can be increased.

Tagged as: Brand Valuation, Marketing Finance, Measure Value

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I am co-hosting a webinar next Tuesday (May 26) on brand valuation as part of the ANA’s Marketing Accountability series so forgive me as I rehearse my position on this topic.

For me, the key points are that brand valuation:

• Involves valuing the brand as if it were an independent asset of the business
• Is a specialist discipline with considerable value added to specific commercial contexts
• Is – contrary to popular belief – NOT a very effective mechanism for demonstrating marketing accountability
• Is often commissioned for reasons of corporate ego, not business insight

One of the exhibits I am creating for the webinar is “What does it take to get onto the list of the top 100 brands in the world?”  If you believe Interbrand’s data, you need a brand that is worth $3bn to crack the top 100. If you believe Millward Brown and Brand Finance, you need a brand that is worth $6bn (I have pointed out the inconsistency between the agencies in earlier posts so will not dwell on this now…)

For fun, I have decided to work out what kind of a revenue base you require in different industry sectors in order to have your brand appear in the global 100.   The ratio of brand value to revenue depends on two key factors:

• The relationship between market value and revenue for that sector
• The proportion of brand value as a percentage of market value for that sector

Using these two variables and a target brand value of $6bn, this is what I found to be the qualifying revenue levels per industry sector:

• IT – $30bn
• Healthcare – $34bn
• Consumer Staples/Durables – $36bn
• Financials – $77bn
• Industrials – $130bn
• Utilities – $175bn
• Energy – $190bn

Truly it is harder for a camel to pass through the eye of a needle than for an energy company’s brand to make it onto the list of 100 top global brands…

Tagged as: Brand Valuation, Marketing Finance, Measure Value

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I am still really bothered by the inconsistency of the latest brand valuation reports from Brand Finance and Millward Brown (see my post of two days ago). In theory, brand valuation should enhance the credibility of marketing and provide the basis for closer collaboration with strategy, finance and sales. In practice, it appears to do neither.

I have already commented on how the credibility of marketing is undermined by the huge variability in the values ascribed to individual brands in the different league tables. My focus today is on why brand valuation fails to promote effective collaboration between the disciplines.

In my experience, brand valuation exercises inevitably prompt the following questions:

• Are you defining “brand” to include the product itself? Or just as the “moreness” above and beyond the functional product?
• How exactly are you measuring the proportion of the purchase decision that is solely due to the brand?
• What is the contribution that Sales makes to the process?
• How can the value of the brand be rising when the value of the business is falling?
• If the brand represents a higher proportion of the value of the business, then which of our other assets are getting less valuable?

In my view, the problems all derive from the artificiality of the exercise of valuing a brand separately from the products, services, company or experiences that it embodies. If you believe that strong business performance is a result of the interplay between a number of valuable resources – a good product offer, effective production and distribution systems, strong channel partnerships, motivated salespeople and, yes, a strong brand – does it make sense to value any one of these components in isolation from the others?

The answer is “only under very specific circumstances.” These include acquisitions/disposals, legal disputes, licensing and securitization (for more information, please read my article  “Don’t waste time with brand valuation”). Outside of these contexts, brand valuation rarely delivers the expected benefits.

Tagged as: Brand Valuation, Marketing Finance, Measure Value

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Last week two brand valuation agencies released their 2009 league tables of the 100 most valuation brands in the world. It is depressing to see that only 58 brands are common to the two lists.  How are we meant to take the topic of brand valuation seriously when two of the prominent agencies in this field disagree so widely about which are the most valuable brands in the world?

My general stance is to applaud anyone who tries to put financial or other business parameters around brands as a way to communicate the significance of their contribution to business performance. But I have to wonder whether the topic of brand valuation is not actually doing a disservice to the cause of marketing accountability by revealing such a lack of consistency in the results.

This inconsistency is everywhere – which brands make it into the top 100 list; what the value is of a specific brand (for 15 brands, this differs by a factor of more than 2 between the two lists); even whether the value of a brand has gone up or down over the past 12 months (for 21 brands, the two lists disagree about whether brand value increased or decreased).

The good news is that brand valuation is largely irrelevant to the issue of marketing accountability – see my earlier post on “Measurement is not the same as Accountability.”

Tagged as: Brand Valuation, Marketing Finance, Measure Value

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