Getting the measure of brand valuation

What is a brand worth? It’s a fair question when you look at how the volatile stock markets have behaved over the past few weeks. Companies have seen stocks plunge ever since the US as a nation was downgraded by analyst Standard & Poor’s from a triple A rating to an AA+.

If you’re wondering what this means, it basically signifies a loss of confidence. It says there has been a small perceived increase in the risk that the US could one day fail to repay what it owes. Brand America has lost some of its value.

Yet our new columnist Wally Olins is wholly unconvinced by the world of brand valuation. In his first article for Marketing Week, Olins argues that a brand can only be valued as “whatever it’s worth to you at any given moment”. Because someone’s interest in a brand may rise and fall, its value is ever-changeable.

“You bought that dress for £900. You loved the label. You wore it once but now you don’t like it. The label isn’t so fashionable anymore. You’ve gone off the designer. For you, it’s worthless,” says Olins.

Olins, currently chair of brand consultancy Saffron, has a forthrightness that has doubtless won over many a marketer. But I find it hard to agree with him when he says that brand valuation metrics are “hot air”.

Brand valuation takes the individual values people hold in their heads concerning brands and gives them a financial meaning

He is right that brand value is in the eye of the beholder. But this does not discredit what brand valuation tries to do, which is to take all the individual values people hold in their heads concerning brands and give them a financial meaning.

Brand valuation as a process is flawed. It can only measure the brand as something intangible and as yet, we can’t get in people’s heads to see how they feel about different marques (whatever neuroscientists try to claim).

It is not an entirely useless process, however. By valuing brands through formulae showing tangible and intangible assets, we can see which companies are turning the impressions in people’s heads into sales. If lots of people stop buying a dress at once, both the brand and business value drop. It’s a blunt tool, for sure, but it tells us something.

Brand valuation could improve its reputation following the publication of its International Standard framework ISO 10668 last year. This sets out a standardised approach to valuing brands that should make it easier for companies to find real meanings in the equations.

So I’m not a cynic like Wally Olins. I can see that current valuation methods don’t always add up to the true complex nature of brands. But at a time when budgets are questioned, I believe marketers need to prove their value to businesses more than ever. And I believe that trying to use financial terms to demonstrate the worth of marketing is better than not doing so at all. Let us know your view.

Ruth Mortimer, associate editor

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