Brand valuation a board issued?
by Clive Webster
Few would argue against the notion that ‘Brand Value’ exists. Indeed it is widely acknowledged that not all brands are equal, yet there is no general agreement as to how one might quantify this value. Far from keeping them awake at night though, the issue is one that most seem happy to leave unresolved.
Perhaps it’s time that the Board gets involved.
We look at the issued from the perspectives of both the marketing and accounting disciplines.
The marketer is the custodian of the brand and therefore responsible for ensuring that it retains or, better still, increases its value. The chief financial officer in turn should be responsible for quantifying that value. Two different skill sets; two different responsibilities. The Board’s responsibility then is to motivate this issue and ensure that the Brand Value is quantified.
We maintain that successful brands are satisfiers of the needs/wants of consumers, while a brand’s life span is dependent on its ability to continue to satisfy in the quantity that makes it viable to continue its production.
The value of a brand lies in its ability to satisfy in the future in a competitive market. This has little to do with its past, its history.
If you need proof of this, look at the examples of such well known but defunct brands as Trust Bank, UBS, Lion Lager and Saambou. To have placed a value on these brands based on their history would certainly have produced numbers, but what kind of numbers?
That said, older brands do have a certain momentum which propels them into the future and this factor must be taken into account when measuring brand value.
So, at any given time, seven key factors have an impact on the value of a Rand. They are:
- The supplier’s ability to continue to supply the brand at a competitive price;
- The supplier’s attitude/desire to support the brand, i.e. its allocation of real resources to this task;
- The continuing existence of consumers for the brand in question;
- Consumers’ perceptions of the brand’s ability to satisfy their needs/wants relative to their alternative options in a changing environment;
- The influence of the economy on disposable income;
- The momentum of the brand; and
When valuing a brand, all of these factors must be investigated. Current realities must be quantified, whether they are physical resources or human perceptions, and the future realities projected. The measurement done, the result can be quantified.
Aside from the obvious business benefit of valuing a brand for balance sheet purposes, there is another advantage:
The additional significance of establishing a value for a brand is that it is necessary thereafter to continue to measure the effect on brand value of all future marketing efforts. This ability to measure the return on your investments into marketing, advertising and PR efforts, is a priceless means to keeping your marketing on track.
- Clive Webster is founder and senior partner of Objectivity, a leading perception measurement and management firm. He can be contacted by telephone on +27 (011) 465-7160