Brand valuation: The debate

Following a recent column from Marketing Week columnist Mark Ritson calling into question the validity of brand valuations, three of the largest valuation companies joined him on the B2B stage at The Festival of Marketing last week to defend the process and its link in getting marketers into the boardroom.

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In his “What is the point of brand valuations if those doing the valuing are so off target?” column about brand valuation for Marketing Week earlier this year, Ritson argued that if the industry experts can’t agree on the value of something within $100bn then “it’s time to declare the value of valuation to be nil”.

He found that the average brand valuation was as likely to overstate a brand’s value by more than 500% than it was to get within 20% of the actual price paid.

Ritson’s analysis, in particular, focused on the valuation for Apple – the world’s most valuable brand, according to the three firms. Interbrand say that Apple is worth $170bn, compared to BrandZ’s $247bn and the $128bn valuation from Brand Finance.

Brand Finance, Interbrand and Millward Brown joined Ritson on stage to argue their case for why there are such major differences in their valuations.

All three also explained why the delegates in the room should ignore Ritson’s analysis as putting a value on a brand is vital for the marketing industry to be seen to drive business growth.

Why there are differences in valuation

Doreen Wang, global head of BrandZ at Millward Brown, said that in the academic world people draw from multiple research methodologies and asked: “why in the marketing world are we so narrow minded that we have to stick with one methodology on brand valuation?”

Wang also said that marketing and brand valuation is “not just a number” and that it’s more important to look at the reasons behind growth and decline, and the reasons behind change.

David Haigh, founder and CEO of Brand Finance, said that it’s the methodologies that create difference, giving the example of the difference between assumptions and opinions. He explained: “For example, will Apple get into the TV market, will it crucify the watch market? We might take different points of view on that, it could be one of the reasons why our values are so different.”

However Michael Rocha, global director of brand valuation at Interbrand, conceded that the industry “could do more to explain why there are such big differences.”

All three companies said they are prepared to explain to clients the rationale behind the huge differences between their valuations.

“In the public domain as competitors we don’t want to say why we have a different view,” added Haigh. “But if a client or CEO asks you have got to be prepared to explain why you are up or down and I’m sure that all three of us would do that.”

Ritson’s view

Ritson didn’t denounce brand valuations in their entirety but instead called “bullshit” on the three annual valuation league tables, including Interbrand’s best global brand, Brand Finance Global 500 and Millward Brown’s BrandZ ranking.

He clarified: “I believe in brand equity, I teach it to my MBA students, I work on building it and protecting it for clients. The theory of placing a financial value upon brand equity and saying what is a brand worth to a company is in theory something I believe in.

“I believes in brand valuation in theory but it just doesn’t work in practice and that is the problem”.

Getting marketers into the boardroom

“Brand valuation is going to bring every one of you into the board room,” added Millward Brown’s Wang. “It’s going to increase our share of voice as marketers.”

She told delegates that at the end of the year, CFO’s often ask marketers how much marketing work is contributing to their business. “Brand valuation is giving you that dollar value to measure everything you are doing and how much it is contributing to the stock market.

“The value of valuation is to connect marketing with the business and connect what you are doing with the boardroom.”

Rocha added that brand valuations continue to be “the only way” to get branding into the boardroom. He concluded: “The rankings that we all publish reinforce an essential point, that brands are highly valuable business assets.

“Understanding the mechanics of that brand and communicating it to your senior leadership is highly effective way of securing the time and investment you need to build your brand and shift the conversation away from the next ad campaign and onto financial impact.”



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