Madness in methodology of calculating brand value
There are some subjects that divide opinion among human beings, from medical research to political strategy, but brand valuation shouldn’t be one of them.
Yet it is. Millward Brown’s BrandZ most valuable global brands named Apple as the world’s most valuable brand, published in Marketing Week earlier this year, with Google and IBM following it up in second and third places. The rival Interbrand list, out this week, instead puts Coca-Cola at the top of the pile, with Apple and IBM in the number two and three slots.
How can there be such a difference between the two lists? It all comes down to methodology. Each different business uses a proprietary technique to calculate equity. Many businesses have been working together to try to create a global consensus when it comes to measuring equity – which resulted in the creation of the ISO 10668 standard for brand valuation in 2010 – but this remains a highly subjective area.
Different valuers use a multitude of techniques to measure brand value. Among other approaches, there is the ‘firm level’ valuation, the ‘royalty relief’ method, the ‘product level’ and even the ‘consumer level’ version. It is a very, very complex area. Marketing Week chooses to publish the BrandZ table each year as we believe this best fits what our readers need to know.
This methodology controversy does have drawbacks for the whole industry though. A number of chief executives have told me recently they don’t consider brand valuation worth their time. One said: “Who cares what the brand value is? It is totally down to how you do the sums, rather than any financial truth.”
I believe those CEOs are wrong. Brand valuation may not always have all the answers, but it’s vital that firms do this sort of analysis to really understand what their brand is contributing. As long as you understand the method, you are better informed than you would be without valuation.
Knowledge is, after all, power. I am hoping to educate myself at our sister brand Econsultancy’s JUMP event next week on the 10 October about digital marketing. For those of you who can’t make it out of the office, tune into our website to see the fourth part of our video series in partnership with Quadrangle on segmentation, where I discuss the uses of research with Gill Barr of the Co-op and esteemed academic Patrick Barwise.
