Please make the brand valuation humiliation stop
I went to see my doctor last week and he told me I had contracted a venereal disease. Somewhat taken aback, I visited a different doctor for a second opinion. He ran a series of tests and came back with mixed news. I was free from any sexually transmitted diseases but, unfortunately, his tests showed that I was in the late stages of dengue fever and had only six weeks to live. With my head in a spin I spoke to a good friend who is a GP. He ran me through a battery of tests and then pronounced me in amazing health for someone in their 40s, with absolutely nothing to worry about.
By Mark Ritson
Okay, I made all that up, but if these consultations had actually happened you might imagine I’d be feeling pretty confused. The three wildly different diagnoses would leave me none the wiser about my general health, but provide certainty that the medical profession was utterly unreliable.
That’s pretty much how the world of business must now be thinking about brand valuation. Last week Interbrand published its seminal 2012 league table of the top 100 most valuable brands. I used to look at this ranking, along with the competing valuations published by Millward Brown’s BrandZ ranking and that of Brand Finance, but it is becoming clear the whole business of ranking brands by their financial brand equity is becoming a disaster.
If you look across the three valuation tables you see an absence of uniformity in a number of cases.
For example, take Intel. It’s hardly a new company and, thanks to its component brand nature, possibly one of the easiest to put a value on. And yet despite that, the world’s best regarded brand valuation firms variously rate Intel as the 8th, 20th and 49th biggest brand. The estimated value of Intel’s brand equity is either $15bn (BrandZ), $22bn (Brand Finance) or $39bn (Interbrand). See what I mean? One thinks Intel’s brand is worth more than twice what another has calculated. How can that be right?
Even more striking is Hermès, the French luxury brand. Depending on who you listen to Hermès is either the 32nd, 63rd or 321st biggest brand in the world. You can choose from a valuation of $3bn, $6bn or $19bn. Eh? $16bn is a big difference of opinion.
All this is a great shame because these league tables are pretty much the only thing a lot of influential finance and senior executives ever see of branding. The minute they look at two league tables, executives will, like the hapless patient in the hypothetical medical case above, conclude the whole business of branding is a load of old bollocks and remain completely in the dark with respect to which brands are more valuable.
There’s a reason most C Suite executives think marketers are fluffy. It’s because we are. And our league tables of brand valuation prove the point.
Dumb marketers keep banging on about getting “marketing into the boardroom”. Are they insane? We can’t even agree within a HUNDRED BILLION DOLLARS what the value of the world’s biggest brand is. BrandZ says Apple is worth $182bn, while Interbrand claims it’s only worth $76bn. Clearly, there will always be differences in valuation caused by methodology or base assumptions. But ONE HUNDRED BILLION DOLLARS? Come on! It’s a joke.
So here’s my two-point plan for fixing this public and important aberration that brings shame on anyone who believes in brand management. First, never look at anything by Superbrands ever again. I think this ranking is crazy and every time I see one of its league tables a little piece of me dies inside. In its latest Consumer Superbrands league table, it has Royal Doulton as being “more super” than Apple. Fuck me. This nonsense makes all of us involved in brand management look bad. No more pain, please.
Second, we need the marketing equivalent of a cage fight to work out who is the most accurate valuation firm. You’ll note that I am being deliberately ambivalent about all three big valuation firms because maybe one of them is much more accurate than the other two. Perhaps they look inaccurate because the other two are way off. The only way to find out which is more on the money is to wait for an actual acquisition to take place and then compare the price paid with the one predicted by the firms.
Third, if this does not happen (or, more likely, if the value of the brand equity is not revealed publicly in the purchase price), we should arbitrarily select one of the three firms and strangle the other two. Pick the famous one – Interbrand. Pick the one with all the consumer data – BrandZ. Or the one with the accounting credentials – Brand Finance. Just don’t continue the pain of these divergent, hugely embarrassing valuations any more.
Because the only value I’m certain about these days is the amount of damage that these wildly different reports are doing to the profession of brand management.
