Step nearer to brand valuation ‘perfection’

It’s tempting to view brand valuation methodologies in the same light as alchemy. There’s certainly science in them, but also much which appears speculative and irritatingly esoteric to any but the cognoscenti. Yet, we are compelled to give th

It’s tempting to view brand valuation methodologies in the same light as alchemy. There’s certainly science in them, but also much which appears speculative and irritatingly esoteric to any but the cognoscenti. Yet, we are compelled to give them the benefit of the doubt because they supply the best shot at fulfilling an undoubted need. Successful brands though they undeniably pump up the value of the companies that own them are maddeningly intangible. Without some guiding principle of measurement, management is exceedingly difficult. Equally, investors need the best available insight into what they are buying.

Just as the study of alchemy eventually transmuted into the scientific revolution of the Enlightenment, so the study of brand valuation is engaged in a quest for perfectibility. The latest significant challenger in the field, the BrandZ system devised by WPP subsidiary Millward Brown Optimor, heralds itself as just such an improvement on the Interbrand model (owned by Omnicom) – long regarded as the global benchmark to beat.

Core to BrandZ’s offering is the suggestion that it goes beyond the Interbrand system by marrying an extra ingredient, proprietary consumer research, to the publicly available financial data underpinning the Interbrand league tables. Not surprisingly, this has met with derision in Interbrand circles. Global managing director Jan Lindemann, for example, accuses Millward Brown of creating “a statistical black box” that is “financially unsound”. Well, he would say that wouldn’t he? And yet there are plenty of more objective commentators who will share his scepticism.

So what are the demonstrable strengths of BrandZ? Despite the huffing and puffing over methodology, the global rankings of the rival systems look, at first sight, remarkably similar. All right, the brand valuations may be different, but at the top of the table we have the same old suspects, such as Microsoft and Coca-Cola.

It is when we look at the UK league table that the assets of the BrandZ system become more apparent. It’s not altogether surprising that Google has come out top. But look at some of the other brands in the top ten: Pret A Manger (2); Café Direct (3); First Direct (5) and Tresemmé (10). Stella Artois (11) is a useful reminder that BrandZ measures standalone brands as well as the companies that own them. Also interesting is Porsche (6), way ahead of the more conventionally successful BMW (21). This brings us to the key point. BrandZ is really focused on the future potential for growth – what it calls “voltage” – rather than present size and power.

This emphasis may create some embarrassing blunders: high growth companies are not necessarily there for the long term. But it is also shrewd. Professional investors know that making money on the stock market is much more about reading the runes two or three years out than picking over the popular heroes of today.

Love it or distrust it, the BrandZ system is an important entrant to the market. It provides WPP with a valuable business development tool that reaches well beyond the normal confines of marketing services. It gives investors and marketers a new point of reference with which to benchmark brand values. And, let’s not underestimate this, Sir Martin Sorrell a new stick to beat John Wren with.

Stuart Smith, EditorCover story, page 22

Latest from Marketing Week

NOT REGISTERED? IT'S FREE, QUICK AND EASY!

Access Marketing Week’s wealth of insight, analysis and opinion that will help you do your job better.

Register and receive the best content from the only UK title 100% dedicated to serving marketers' needs.

We’ll ask you just a few questions about what you do and where you work. The more we know about our visitors, the better and more relevant content we can provide for them. And, yes, knowing our audience better helps us find commercial partners too. Don't worry, we won't share your information with other parties, unless you give us permission to do so.

Register now

THE BEST CONTENT

Our award winning editorial team (PPA Digital Brand of the Year) ask the big questions about the biggest issues on everything from strategy through to execution to help you navigate the fast moving modern marketing landscape.

THE BIGGEST ISSUES

From the opportunities and challenges of emerging technology to the need for greater effectiveness, from the challenge of measurement to building a marketing team fit for the future, we are your guide.

PERSONAL AND PROFESSIONAL DEVELOPMENT

Information, inspiration and advice from the marketing world and beyond that will help you develop as a marketer and as a leader.

Having problems?

Contact us on +44 (0)20 7292 3711 or email subscriptions@marketingweek.com

If you are looking for our Jobs site, please click here