A brand's real value is nothing, except in the eye of the beholder
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Tear up the top 100 brand lists and ditch the value metrics there can never be a formula to sum up what your brand is worth.
Every so often The Economist writes about marketing. It sometimes even writes about branding, quite often metaphorically holding its nose. A few months ago it published the results of a study carried out by a couple of researchers in the Netherlands which seems to prove what most of us know already that we don’t only buy designer labels like Tommy Hilfiger or Lacoste because we like the look and feel of them but also because of the status they confer on us.
The research (2 April 2011, p86 Science & Technology section) is entertaining but hardly groundbreaking. It will be published shortly in Evolution and Human Behavior a US scientific magazine. But what is interesting about it is that it reopens that can of worms we’d do far better to keep shut: what is the value of the brand?
Research companies, agencies and publications including Marketing Week would have it believed that every brand has an objective value that can be derived from mathematical formulae, and that based on these we can rank brands from top to bottom. What rubbish.
The Economist says: “A work of art’s value can change radically, depending on who is believed to have created it, even though the artwork itself is unchanged. And people will willingly buy counterfeit goods, knowing that they are knock-offs, if they bear the right label.”
In other words, brands matter and what you are prepared to pay for them is what you perceive they are worth.
It’s just a grander way of saying people are prepared to pay much more for the T-shirt that says ’Made in Italy’ than the one that says ’Made in Turkey’. Or more for a T-shirt with a crocodile label than another with a polo pony on it, even if nobody can spot differences in quality. Status is transferred, as The Economist puts it, to the label.
So when it comes to deciding how much a label is worth and how much you should pay for it, the answer is: whatever it’s worth to you at any given moment.
There can’t be an objective value to something so personal. You bought that dress for £900. You loved the label. You wore it once and now you don’t like it. The label isn’t so fashionable anymore. You’ve gone off the designer. For you, the brand is now worthless.
There can’t be an objective value to something so personal. You bought that dress for £900. You loved the label. You wore it once and now you don’t like it. The label isn’t so fashionable anymore. You’ve gone off the designer. For you, the brand is now worthless.
The brand’s value, in other words, is entirely in the eye of the beholder.
Yet, a number of organisations claim to be able to give accurate measurements of the value of a brand often of a corporate brand using complex and, to me, entirely incomprehensible but, apparently, objective econometric measurements.
Not only, they say, can they tell you what the corporate brand is worth today compared with yesterday but they can also calculate your brand’s value over the years compared with others, frequently in areas of activity that are entirely unrelated to each other.
All this stuff must be extremely comforting for those organisations whose main value resides in their brand or brands and other intangibles; it makes their balance sheet look healthy and it gives their senior executives a feeling of relaxed self-confidence when they talk to investors. But I’m afraid to say it’s just a lot of hot air.
What do these numbers, these so-called metrics, actually mean in real life? Anything can affect share price the Eurozone financial problems, US political problems, shifty behaviour from senior executives, phone hacking in a newspaper you happen to own, a blow-out in an oil field, a batch of nasty stuff in soft drinks anything. The current financial crisis is a pertinent reminder of that.
And what that means is that the value of a brand, be it a corporate or a product brand, is both volatile and subjective and it embraces a whole world of uncertainties political, social, cultural, economic, financial and physical.
The fundamental issue is whether quantification based on a level of apparent certainty represents any kind of reality or whether it just makes you feel comfortable.
I believe that many people are deluded by the information that numbers attempt to convey. Numbers like these attempt to quantify the unquantifiable, to give the illusion of certainty to something that is fundamentally uncertain the way we all think, feel, react and emote.
So don’t trust so-called objective brand valuation and remember, a brand is worth only what you are prepared to pay for it. That applies to a T-shirt, a painting or, as we found out a few years ago, to Lehman Brothers.
It’s worth bearing in mind that it was the Gaussian copula function (if you want to know more about this, read John Lanchester’s ’Whoops! Why everyone owes everyone and no one can pay’), the precise formula worked out by the then mathematical geniuses who worked for the hedge funds, that killed Wall Street just a few years ago. The theory was that nothing could go wrong because the formula was so precise and foolproof. But, as it subsequently turned out, it wasn’t.
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Readers' comments (11)
Keith Trivitt | Wed, 24 Aug 2011 9:24 pm
While I respect the value of your fundamental point, I worry that it takes us back to the days when we couldn't provide clients with a realistic or objective perspective on the value of their brand. At least from the PR perspective, we have been spent years developing global measurement standards that can provide an objective reading of a brand campaign and of a brand's PR and reputation value. And we're only just now at the point where we can say, Yes, we have achieved great progress and can demonstrably and objectively measure a brand's PR value.
I recognize that value is in the eye of the beholder, but I don't think we should be so cavalier as to tell clients that, No, their brands really don't have any actual, measurable value. After all, without some type of value assessment, what can we measure success against?
Keith Trivitt
Associate Director of PR
Public Relations Society of America
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Ashish Deodhar | Thu, 25 Aug 2011 1:03 pm
I agree with Wally to the extent that an objective brand value doesn't mean anything if the buyer is not willing to pay that amount. Having said that, the brand owners also need to know what is the right price to sell the brand at. And, in my opinion, that's where an objective brand value helps.
Sure, the valuation methodologies may be flawed and the numbers that they come up with are not necessarily set in stone. I think the smart thing to do is to use these valuations as an approximate worth of the brand for the purposes of negotiations with buyers, lenders, investors etc. At the end of the day, the real value of the brand is the price the seller is happy to sell at and the buyer is willing to buy at.
It's almost like valuing a property in many ways.
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jez cook | Thu, 25 Aug 2011 2:15 pm
But surely the point of the article is that these measures aren't necessarily accurate or reliable?
Obviously it is incredibly difficult to be objective about something which is so subjective, but we shouldn't be trying to convince clients we have the answers when we don't?
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Lois Thomas | Fri, 26 Aug 2011 2:09 pm
I totally agree with Jez and to Keith's comment "...we have been spent years developing global measurement standards that can provide an objective reading of a brand campaign and of a brand's PR and reputation value. And we're only just now at the point where we can say, Yes, we have achieved great progress and can demonstrably and objectively measure a brand's PR value..."
The question has to be what is it actually you are measuring? ?
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joão Albuquerque | Tue, 30 Aug 2011 4:51 pm
I am again going with Wally its like one having to realize what is his true value around people, it's all but subjective.
It keeps coming to my mind a childhood Donald comic book where him and his nephews had travelled to this lost lost Valley where civilization stood still and much simpler on its values, well they interacted as the plot developed and eventually left... but leaving behind a single jacket button that grew to become the most wanted and valued item on the entire place.
This was way before the famous coca-cola bottle that made so notorious an african tribe.
Sorry about the walkabout but all of those mentioned global measurement standards that took years to develop in the end are worth exactly what Wally says, no formula will contain people changeable will and if we are to believe so we are just wearing a nice coat to be regarded and respected, although it might be a good one cause it bears a croc. Its still just a coat.
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Erich Posselt | Thu, 1 Sep 2011 1:48 pm
The brand. Miracle or device? Two positions that fight each other since the development of the concept "brand".
These two positions do have difficulties finding their roles. But it is a simple as that:
You take a hell of a complicated model, you put a lot of parameters in there and you try to forecast something. You might get close to reality, but you just can't be 100% sure.
Sounds familiar? Well it is the same with the weather forecast. There are a lot of models trying to forecast the weather. But then, in real life, there is only one weather.
We all know and accept, there are too many parameters to exactly forecast the position of the sunshine and clouds on the next day.
Forecasting the condition can't say anything about your personal value anyway.
It is the same with brand value measurement. It can't make brands, it can't value personal likes or dislikes. But it can, on a grand scale, try to indicate what the brand's actual position is.
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James Surridge | Fri, 2 Sep 2011 12:36 pm
Both Wally and Ruth have a point! Wally is right in that there is no way of measuring a brand value with a single 'currency'. That said, without metrics/KPIs, you cannot provide benchmarks for success or improvement. The secret is to identify the right components and metrics, set your desired standards AND also demonstrate the risks of non-conformance.
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Kate Naylor | Fri, 2 Sep 2011 1:16 pm
I wholeheartedly agree with Wally. While they're useful for baseline comparison where everyone uses the same metric to create a rough relative picture, brand value assumptions are completely spurious. Embarrassingly so.
The last thing our much-derided industry needs is pseudo-science.
And by the way, neuroscientists do not claim to be able to 'get inside people's heads'. They have more sense. It's the media that puts out rubbish like that, to scientists' endless dismay.
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Rogers Beetlestone | Fri, 2 Sep 2011 2:35 pm
It would be absurd to suggest a business manager doesn't want to know the value of his brand in the context of business ideas. Of course it has different values to different people. IBM isn't very valuable in the cat food business! The value is to do with the potential influences on the business. Get measuring or perish but know what to measure!
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Chris Bauer | Sat, 3 Sep 2011 2:29 pm
Some years ago I attended a brand evaluation session with one of the leading corporate design agencies.
The main point in defining a brand's value is that this value Is explicitlly detached from any other tangible or intangible asset. But still the evaluation process claims to be objective and relevant.
In my opinion, this way of assigning a price tag to an entity dismantled from any actual asset is - exactly as Wally puts it - nonsense.
The only funny result is, that if you apply the same "metrics" to a set of brands you actually do get some kind of comparabilty between the choosen entities. But so what? The results only work in the face of the specific method applied and do not correspond to any "real" value.
Basically, the idea behind brand evaluation resembles very much those methods used by financial coroorations when they come up with the newest product or tool that finally only serves one single purpose: making money whithin a game completely gone bonkers.
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