Futurebrand’s London office has opened a ‘brand analytics’ practice this week, which will offer the group’s own take on the increasingly competitive and often contentious business of measuring brand value.
The five-strong team is led by Lauren Henderson, hired earlier this year from Interbrand, and provides what she calls a ‘shareholder value-based approach to brand strategy’, replicating a service already offered by FutureBrand in New York.
Efforts to quantify the economic worth of brands, in keeping with other tangible assets, have since gained currency since Interbrand pioneered the discipline in the late 1980s. The consultancy’s annual Top 100 table, which claims to express the net present value of the world’s leading brands, has become a significant part of its marketing activities and attracts much press attention.
But accountants and brand experts are divided on its application, with some questioning the merit of putting a single figure on a brand’s value.
‘Interbrand’s chart is a bit rough and ready, like most league tables,’ says Tim Heberden, managing director of valuation agency Brand Finance. ‘It’s useful and interesting as a way of getting people to talk about the economic value of brands, but [any given rating] is no more than a headline number.’
Landor Associates marketing director Alec Rattray says ‘point-in-time’ valuations like Interbrand’s Top 100 are good at generating ‘boardroom gossip’, but they are ultimately ‘bogus and worthless’ inasmuch as what companies actually need.
The demand from clients is ‘not to value a brand [per se], but to evaluate the contribution it makes to a business’, he says. ‘Return on investment is king, but that’s not the same as saying my brand is worth figure X.’
Interbrand associate director Alistair Cunningham says its approach is ‘consistent with the accepted principles of corporate valuation’. This in turn provides ‘a strong set of starting principles for assessing ROI for all areas of brand investment,’ he adds.
According to Henderson, ‘brand analytics’ goes further than conventional notions of brand valuation to ‘link strategic decisions and marketing executions to shareholder value’. The aim is to assess how ‘every consumer interaction with the brand is linked back to the financials’.
Brand valuation is only ‘one tool’, she adds, in a raft of techniques to evaluate brand performance, including competitive benchmarking, customer driver analysis and option modelling.
While their nomenclature may differ by degrees, most groups involved in brand valuation in a general sense are making the economic case for investing in brands. However, many economists suggest that a brand’s value is only truly revealed when it is sold.
‘It’s clear that brands do have a value as they’re sometimes traded,’ says Diane Coyle, founder of Enlightenment Economics.
‘[However,] successful companies have a range of intangible assets, all hard to value individually and often related to each other. For all its flaws, market capitalisation is the best measure we have of intangible value.’