Brand value is all the buzz these days, thanks to the recent release of Interbrand’s Best Global Brands report.  I preempted the action with a post a few weeks ago called “The Problem with Brand Valuation.”  In it I took issue with a specific aspect of most valuation methodologies — a factor to account for the impact of brand on purchase decision which gets applied on a category basis to each company’s market value.

This is just a quick follow-up to pass along 2 additional perspectives that I thought you might find interesting:

1.  2010 Best Global Brands – The Stock Market & Risk — a post on the blog of digital agency Sparxoo by David Capece.  The piece does a deep dive into the market performance of the “best” brands to answer some really important questions about the real, uh, value of brand valuation:

• Do changes in brand value predict changes in stock value, or merely reflect information that is already priced in?   Apparently they have in all of the past 10 years except 2010.
• Do the brands with the strongest momentum hold up in recessions? The answer to this question is a little more involved:  Yes, the largest brands tend to retain their brand value over time.  But it also appears that those brands that had the strongest momentum leading up to a peak are the very ones which performed the poorest immediately into the recession.
• Can the Best Global Brands report provide insight into the broader market? David makes some really interesting observations about what the relationship between past brand performance and value indicates about the current market.

Check out the entire post — it’s really informative.

2.  Interbrand’s Rankings Are Nonsense — a post by brand strategist, author, and speaker Jonathan Salem Baskin.

While I have to respectfully disagree with some of Jonathan’s more provocative statements like “brands don’t exist” and “there are no brands, just constant acts of branding,” the post offers up a very compelling alternative model for measuring brand value.  It incorporates measures like:

• efficiency — a company’s ability to create things not just faster, but more economically than lesser-known names
• risk — a company’s ability to produce lower insurance exposure and higher business performance expectations, and
• sustainability – a company’s ability to endure a product failure, corporate crime, or other negative impact.

I find a lot of merit in this way of thinking about brand value.

I hope you get as much out of reading different perspectives on brand valuation as I do.  Please share the resources you have on the topic on the comments here!

related posts:

• the problem with brand valuation
• best global brands dos and don’ts
• brand value creation — financial

Recently Ad Age published a list of what it considered to be “America’s Hottest Brands.”   The list featured 40 brands that are “setting the pace for innovation — and getting results – right now.”  Although their selection criteria wasn’t clear and I can’t say I agree with all of the choices, I did find some instructive insights in the write-up. 

There seem to be some things the “hottest” brands have in common:

1.     They’ve been at it for quite awhile.
The success of many of the brands can be attributed to efforts that were initiated many years ago:

•    Jameson, the Irish whiskey brand – they’ve been running a word-of-mouth effort since the 1990’s – and that fueled the success of the larger multi-media campaign they launched this year

•   Pabst Blue Ribbon – for over 5 years they’ve been growing steadily by targeting the “retro, nonconformist crowd” with an under-the-radar campaign

•    Zipcar – their strategy of using street teams to target very specific neighborhoods was put in place nearly 5 years ago as well

•    Kettle Foods, the maker of cravable chips – they’ve been engaging their customers for input on new flavor combinations for more than 5 years and have developed a loyal fanbase of snackers

2.    They’re targeted to a specific segment of customers.
These brands don’t try to be all things to all people – they’re very specific about who they’re trying to appeal to and they’ve employed unique insights about that group:

•    5-Hour Energy – they set out to target working adults (vs. the teenage boys who historically have driven most of the energy drink business) who have quite functional needs for the energy boost

•    Bolt Bus, a new line of buses from  Greyhound – they targeted young, professional travelers who are looking for more affordable alternatives to air travel but who are not willing to sacrifice any of the comforts and conveniences

•    Bonobos, the online retailer of “better-fitting” men’s pants – with an average first-visit check of $200, this brand isn’t for everyone – they’re focused on solving the two main issues facing athletically-built men who hate to shop:  fit and convenience

•    Zico, a coconut water brand – they know yogis and their students are great ambassadors for the natural sports drink, so they target hot yoga studios whenever they enter a new market

3.    Their innovations delivered brand differentiation.
Some innovations launched new categories, so by definition, they’re differentiated offerings. And in mature categories, some of the “hottest brands” introduced innovations that clearly differentiate their brands from existing options:

•    Virgin America – they set out to “reinvent the entire travel experience” and “get consumers psyched about flying again.”  With in-flight Wi-Fi, spacious leather seats, mood lighting, and in-seat food and beverage ordering, Virgin created a truly differentiated customer experience

•    Off!, the insect repellent brand – they launched the Off! Clip-On fan, a wearable product that doesn’t require skin application – and in doing so, moved their brand from a functional product to a lifestyle solution

•    Tria Beauty, the brand behind the $795 home laser hair-removal product – essentially they’ve created a new category that has huge potential, so they have the enviable distinction of a leadership brand position

•    Subaru of America – they’ve put significant mileage between their brand and their declining competitors’ brands by engaging in programs that appeal to their “active, pet-owning, environmentally aware, socially-involved customers”

It will be interesting to see how many of these brands are still hot next year, or the year after that.  But I’m pretty sure these distinguishing characteristics will continue to define hot brands for years to come.

(image above from Ad Age by Tony Pettinato)

Now that everyone has had a chance to digest BusinessWeek/Interbrand’s Best Global Brands report, I thought I’d offer some suggestions for how to use the results. There’s a risk that if someone doesn’t know what brand valuation really means or what it’s useful for, the conclusions and implications drawn from the report could be off.

And while I’m in no way an expert on brand valuation, I have spent quite a few years using the results of the BusinessWeek/Interbrand study, as well as similar rankings from Brand Finance, Millward Brown’s Optimor, and others.

This is what I’ve learned:

DO:  use brand valuation as a way of proving that brands create shareholder value. When a finance-oriented executive questions the need to invest in brand-building, relaying the reports from well-respected organizations like BusinessWeek helps.  These studies provide empirical evidence of the value to stockholders of a firm’s brand-building activities.  And their methodologies are usually very similar to the way other corporate assets are valued — that is, on the basis of how much the brand is likely to earn for the company in the future (see BusinessWeek/Interbrand’s methodology).  So brand valuation allows you to make a rational, quantitative argument for the value of brands and brand building.

DON’T:  focus on brand valuation as the sole measure of the value which brands create. Although a brand’s role in shareholder value creation is impressive, it also creates other financial value – increased sales, market share, and price premium.  And a brand’s value extends beyond numbers to:

• value for customers by simplifying and facilitating purchase decisions (see brand value creation – customer)
• value in internal business processes by optimizing product development, supply chain management, and customer relationship management – and the resources that drive each of these processes (see brand value creation – internal business process)
• value in company learning and growth by increasing an organization’s ability to change and improve (see brand value creation – learning & growth)

It’s important to remember (and measure and manage) these outcomes of brand-building in addition to shareholder value.

DO:  use brand valuation to evaluate M&A and other business strategy decisions. A brand’s value is definitely a factor when valuing an acquisition:  The folks at Coca-Cola paid $4.1BB to acquire Energy Brands, Inc. when the actual business was worth a fraction of that – why?  Because of the Vitamin Water brand.  Coke wanted access to the enhanced water and energy beverage market and what better way to get it than with a solid brand like Vitamin Water.  While brands don’t currently show up as a line item on balance sheets, the intangible value of a brand is certainly an important consideration in corporate planning moves.

DON’T:  use brand valuation to evaluate marketing efforts. Certainly marketing and promotion have a tremendous impact on the strength – and therefore, the value – of a brand.  However, there are too many variables that impact brand valuation for a direct correlation to be drawn between it and marketing effectiveness.  I’ll comment more on these variables in a moment, so the point here is simply that brand valuation is a macro, business metric that’s useful for assessing corporate value, not ROI on marketing.

Instead marketing efforts should be evaluated by marketing measurements according to how well they fulfilled marketing objectives.  For example, if a marketing campaign was launched to introduce a new product, then a consumer research study to measure awareness and trial is an appropriate evaluation.  Or if a promotion is engaged to increase retention, then analysis of CRM data would yield an appropriate assessment.

DO:  use brand valuation primarily on a category-specific basis. Steve McKee, of the book When Growth Stalls and the just-launched FindYourNerve project, best explains it:  “…while the relative value of non-competing brands is fascinating (e.g. IBM is worth more than Toyota), it’s not terribly relevant to either company. And while the absolute value of any one brand–especially those with values in the tens of billions of dollars–is stunning, the most significant measure is how one brand stacks up relative to its competitors in a given category. If a brand is losing ground while its competitors are gaining, then it has something to worry about.” (emphasis added)

DON’T:  confuse brand valuation with brand strength. Company size, distribution/penetration, amount of brand-building investment, etc. affect brand value.  In fact, BusinessWeek/Interbrand doesn’t include airline brands in their rankings because they say “it’s too hard to separate their brands’ impact on sales from factors such as routes and schedules.”  While I don’t agree with the decision to exclude airlines, it does seem to indicate that brand value is inherently linked to business size and scope. So a small company may not rate highly in the rankings despite having a strong brand.  A better measure of brand power, therefore, is the Brand Asset Valuator or other similar tool.

I hope these thoughts are helpful to you.  Feedback is always welcome.

related content:

• brand value creation – financial, part 1
• brand value creation – financial, part 2
• how strong is your brand

Last week, Interbrand Design Forum the retail arm of the global consultancy of the same name released The Most Valuable U.S. Retail Brands 2009 report and it is a must-read for anyone who wants insights into the retail sector.

The actual most valuable brand rankings in the report are, as with all brand valuation lists, a bit misleading as the list omits privately-held companies, so retail gold-standards like Apple stores, Trader Joe’s, and REI aren’t ranked.  But the reason to read the report is all the supplementary content.  In addition to a brief analysis of each of the top 50 retail brands, the report includes educational and provocative research and editorial on a range of brand topics.

Some excerpts:

• from “Lessons from the Most Valuable Brands“:  Initiatives will always need to be built around shopper frequency, loyalty, margin, relevant assortment and top-and-bottom line growth. The notion that’s new to most [retail] companies is that brand — one great idea that generates value — drives them all. An overarching retail brand strategy can align these initiatives, making them more effective in total.

• from “Where are the Department Stores?“:  The [department store] format is still distinguished by a high level of departmentalization, which presents a challenge to the brand experience.  Its functional and merchandise specialization needs to be guided by the master brand to prevent a muddle of sameness between competitors, and to halt the loss of brand equity.

• from “The Misnomer of Specialty Apparel“:  Fashion retail presents great opportunity and great risk — the ability to generate high margins with the uncertainty of the duration of trends.  However, the lack of differentiation among the top brands suggest that the field is suffering from risk avoidance.

• from “Scale Alone Does Not Make a Grocery Brand“:  Traditional grocery earned the weakest customer loyalty scores.  Over-reliance on discounts, rewards and promotions undermines any move towards a meaningful proposition and results in low brand strength…As long as their vendors continue to pay for play, supermarkets may see no need to understand and serve the shoppers in their stores.  Brand thinking begins with the idea that addressing shopper needs increases frequency and basket size.  Without it, a store is simply a box full of other makers’ brands, and a master of none.

• from “Every Brand Tells a Story“:  According to our research, about half the population does not believe retail experiences are delivering against the promises made by the brand advertising.  They find innovation in both merchandise and experience is lacking across all retail…Shoppers will always need a reason to buy, but a branded shopping experience can help build long-term equity that will matter in an up or down economy.

• and the best points of the report (from “The Curious Case of Walmart“):  There’s a difference between “selling” and “branding.”   Selling is putting great deals on the shelf and promoting them.  Branding puts an idea into the customer’s heart and mind by selecting great deals that are relevant to people’s needs and desires…You can’t just out-operationalize the competition anymore.  Now that the low-price bar has been set, an emotional connection is the strongest bond a retail brand can have today.

Matsushita Electric Industrial Co. has officially changed its name to Panasonic Corp (see release.)  The company also ditched its National brand, which has been in use for over 80 years for white goods in Japan, and intends to have all of its products carry the Panasonic brand, which has long been the firm’s brand name abroad and for audiovisual appliances sold in Japan, by the end of March 2010.

The change is reported to be costing the company 40.0 billion yen ($380.0MM US) — a hefty investment given that the company’s ad spend was only $50MM last year, excluding online, per Nielsen Monitor-Plus.

Moving to a single brand yields efficiencies in marketing and simplicity in communication — and in Matsushita’s case, adopting a brand name with the stronger awareness should bolster equity with consumers as well as other stakeholders (suppliers, distributors, investors, etc.).  Further it facilitates equity sharing across product lines, so established attributes in one product category can provide a positive halo in others.

However tying all of the company’s activities more closely together does come with some downsides.  One is exposure to risk — if one product experiences a recall, for example, all of the company’s products are associated with that quality issue.  Likewise, it may hinder expansion into new categories or markets if the limits of the brand’s elasticity cannot be stretched — consumers may not give Panasonic “permission” to get into productivity devices, for example, because the brand is too closely associated with entertainment.

Apparently the company’s leadership felt the trade-offs were acceptable.   In making the move, the company says it is “bringing the achievements accumulated through the three different names of Matsushita, National, and Panasonic under the one single name of Panasonic to enhance its brand value.”

Panasonic’s current brand value is $4,281BB according to BusinessWeek’s Best Global Brands list (based on analysis by Interbrand) — so it’s #78 on the list.  Other electronics brands are more valuable:

• Samsung — $17,689BB/#21
• Sony — $13,583BB/#25
• Canon — $10,876BB/#36
• Nintendo — $8,772BB/#40
• Philips — $8,325BB/#43

So the brand certainly lags these days.  It will be interesting to see whether the change yields the brand value payoff the company is seeking.

In preparing to launch my blog, I researched a lot of existing ones to get a sense of what works and what doesn’t.  As a brand person, I was particularly interested in whether or not brands themselves had blogs.  I looked at a sampling of the brands from BusinessWeek’s list of top 10 global brands — here’s what I found:

Coke has Coca-Cola Conversations, a blog moderated by Phil Mooney who has been the historian/archivist for the company for 30 years.  The blog started in January of this year and focused primarily on Coke history and trivia – recent posts include “When Coke Bottling Began” (1899, in case you’re wondering) and “Urban legends, Coca-Cola and the Pharaohs.”

There are about a million blogs about Microsoft – but none of them, it seems, are what I would consider a brand blog.  I’m told Robert Scoble became famous with his blog for the Seattle firm, so perhaps his was more of what I expected, but that was before my time in the blogosphere.  Now there’s Todd Bishop’s Microsoft blog, a Seattle reporter’s coverage of the company; Microsoft Community Blogs, which is a collection of blogs by Microsoft employees about their various products and technologies; and Microsoftblog, the Unofficial Pro Microsoft blog, written by folks who are “in Microsoft’s pocket” (their words, not mine.)

McDonald’s has opted to go the podcast route.  Most of their recent podcasts are corporate in nature (earnings announcements, analyst calls, etc.), but they have a series called “The McDonald’s You Didn’t Know” which features insider stories about the company.

The Disney Blog is a blog “by fans, for fans” of the happiest place on earth.  It clearly states it is in no way affiliated with the company but the content is pretty much a comprehensive resource for the brand.  Now 4 years old, the blog promotes new releases from Disney’s production companies, profiles Disney Imagineers (creative staffers), and comments on various experiences people have had with Disney.

All in all, I can’t say I was overly impressed with the results of my big brand blog investigation.  I wonder why companies haven’t taken advantage of what seems like a great way to engage the public with what they’re brand is all about.  Perhaps smaller, more interesting brands are more into blogs – stay tuned for that investigation.