Perspectives on Brand Valuation
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.
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!